<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, 2001

                                      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, 2001, 39,408,216 shares of the Registrant's common stock were
outstanding.

                                      -1-
<PAGE>

                                Microtune, Inc.

                                   FORM 10-Q
                                March 31, 2001

                                     INDEX
<TABLE>
<CAPTION>
                                                                                                           Page
                                                                                                           ----
Part I Financial Information
<S>                                                                                                          <C>
 Item 1. Financial Statements..............................................................................   3

     Consolidated Balance Sheets at March 31, 2001 and December 31, 2000 (unaudited).......................   3
     Consolidated Statements of Operations for the Three Months Ended March 31, 2001 and 2000 (unaudited)..   4
     Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2001 and 2000 (unaudited)..   5
     Notes to Consolidated Financial Statements (unaudited)................................................   6

 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations.............  12

 Item 3. Qualitative and Quantitative Disclosure About Market Risk                                           16
     Factors Affecting Future Operating Results and Stock Price............................................  17

Part II Other Information

 Item 1. Legal Proceedings.................................................................................  28

 Item 2. Changes In Securities and Use of Proceeds.........................................................  28

 Item 4. Submission of Matters to a Vote of Security Holders...............................................  28

 Item 6. Exhibits and Reports on Form 8-K..................................................................  28

Signatures.................................................................................................  29
</TABLE>

                                      -2-
<PAGE>

                         PART I Financial Information

Item 1. Financial Statements

                                Microtune, Inc.
                          Consolidated Balance Sheets
                                (in thousands)
                                  (unaudited)
<TABLE>
<CAPTION>
                                   Assets                                     March 31, 2001   December 31, 2000
                                                                              ---------------  ------------------
<S>                                                                           <C>              <C>
Current assets:
   Cash and cash equivalents................................................        $ 71,763            $ 77,650
   Accounts receivable, net of allowance for doubtful accounts of $524 at             11,190
    March 31, 2001 and $456 at December 31, 2000............................                              12,301

   Inventories..............................................................          17,169              16,389
   Deferred income taxes....................................................           1,207                 552
   Other current assets.....................................................           1,057                 770
                                                                                    --------            --------
     Total current assets...................................................         102,386             107,662

Property and equipment, net:................................................          17,570              15,179
Intangible assets, net of accumulated amortization of $2,837 at March 31,
 2001 and $2,481 at December 31, 2000.......................................           5,687               6,054

Goodwill, net of accumulated amortization of $6,980 at March 31, 2001 and
 $5,570 at December 31, 2000................................................          21,296              22,706

Deferred income taxes.......................................................             622                 484
Other assets and deferred charges...........................................           1,057                 946
                                                                                    --------            --------
        Total assets........................................................        $148,618            $153,031
                                                                                    ========            ========

                    Liabilities and Stockholders' Equity
Current liabilities:
   Accounts payable.........................................................        $  5,468            $  6,763
   Accrued expenses.........................................................           7,994               8,110
   Accrued compensation.....................................................           2,014               1,888
                                                                                    --------            --------
     Total current liabilities..............................................          15,476              16,761

Deferred income taxes.......................................................           2,904               2,966
Other noncurrent liabilities................................................           1,187               1,197
Commitments.................................................................               -                   -

Stockholders' equity:
 Preferred stock, $0.001 par value
   Authorized shares - 25,000 at March 31, 2001 and December 31, 2000.......               -                   -
 Common stock, $0.001 par value
   Authorized shares - 150,000 at March 31, 2001 and December 31, 2000;
   Issued and outstanding shares - 39,261 at March 31, 2001 and 38,547 at                 39                  39
    December 31, 2000.......................................................
 Additional paid-in capital.................................................         182,484             180,661
 Loans receivable from stockholders.........................................            (123)               (788)
 Accumulated other comprehensive loss.......................................            (988)               (988)
 Accumulated deficit........................................................         (52,361)            (46,817)
                                                                                    --------            --------
     Total stockholders' equity.............................................         129,051             132,107
                                                                                    --------            --------
        Total liabilities and stockholders' equity..........................        $148,618            $153,031
                                                                                    ========            ========

See accompanying notes.
</TABLE>

                                      -3-
<PAGE>

                                Microtune, Inc.

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

<TABLE>
<CAPTION>
                                                                                    Three Months Ended
                                                                                         March 31,
                                                                                ---------------------------
<S>                                                                             <C>                <C>
                                                                                   2001              2000
                                                                                 -------           --------
Net revenues........................................................             $17,659           $ 13,896
Cost of revenues....................................................              14,088             10,071
                                                                                 -------           --------
Gross margin........................................................               3,571              3,825
Operating expenses:
  Research and development:
     Stock option compensation......................................                 340                267
     Other..........................................................               3,954              2,584
                                                                                 -------           --------
                                                                                   4,294              2,851
  Acquired in-process research and development......................                   -             12,692
  Selling, general and administration:
     Stock option compensation......................................                 614                522
     Other..........................................................               3,869              3,302
                                                                                 -------           --------
                                                                                   4,483              3,824
  Amortization of intangible assets and goodwill....................               1,802              2,178
                                                                                 -------           --------
     Total operating expenses.......................................              10,579             21,545
                                                                                 -------           --------
Loss from operations................................................              (7,008)           (17,720)
Other income:
  Interest income...................................................               1,058                276
  Foreign currency translation and transaction gains (losses), net..                  55                877
  Other.............................................................                  44                171
                                                                                 -------           --------
Loss before income taxes............................................              (5,851)           (16,396)
Income tax expense (benefit)........................................                (307)               364
                                                                                 -------           --------
Net loss............................................................             $(5,544)          $(16,760)
                                                                                 =======           ========

Basic and diluted loss per common share.............................             $ (0.14)          $  (2.21)
                                                                                 =======           ========
Weighted-average shares used in computing basic and diluted loss
 per common share...................................................              38,841              7,571
                                                                                 =======           ========
</TABLE>
See accompanying notes.

                                      -4-
<PAGE>

                                Microtune, Inc.

                     Consolidated Statements of Cash Flows
                                (in thousands)
                                  (unaudited)
<TABLE>
<CAPTION>
                                                                                     Three Months Ended March 31,
                                                                                     ---------------------------
                                                                                      2001                2000
                                                                                     -------            --------
<S>                                                                                  <C>                <C>
Operating activities:
 Net loss...................................................................         $(5,544)           $(16,760)
 Adjustments to reconcile net loss to cash used in operating activities,
   net of effects of business combination:
   Depreciation.............................................................           1,655               1,017
   Amortization of intangible assets and goodwill...........................           1,802               2,178
   Allowance for doubtful accounts..........................................              68                 509
   Acquired in-process research and development.............................               -              12,692
   Foreign currency translation and transaction gains (losses), net.........             (55)               (877)
   Stock option compensation................................................             954                 789
   Deferred income taxes....................................................            (758)               (144)
   Changes in operating assets and liabilities:
      Accounts receivable...................................................           1,043                (779)
      Inventories...........................................................            (779)               (336)
      Other assets..........................................................            (402)                585
      Accounts payable......................................................          (1,296)              1,066
      Accrued expenses......................................................            (219)               (815)
      Accrued compensation..................................................             126              (3,292)
                                                                                     -------            --------
         Net cash used in operating activities..............................          (3,405)             (4,167)
Investing activities:
 Net cash acquired in acquisition of HMTF Acquisition.......................               -               3,550
 Purchases of property and equipment........................................          (4,087)             (1,950)
 Sale of property and equipment.............................................              29                  28
 Purchase of intangible assets..............................................             (26)               (825)
                                                                                     -------            --------
         Net cash provided by (used in) investing activities................          (4,084)                803
Financing activities:
 Proceeds from issuance of common stock upon the exercise of options........             869                  39
 Proceeds from loans receivable from stockholders...........................             665                 387
                                                                                     -------            --------
         Net cash provided by financing activities..........................           1,534                 426
Effect of foreign currency exchange rate changes on cash....................              68                 312
                                                                                     -------            --------
Net decrease in cash and cash equivalents...................................          (5,887)             (2,626)
Cash and cash equivalents at beginning of period............................          77,650              20,129
                                                                                     -------            --------
Cash and cash equivalents at end of period..................................         $71,763            $ 17,503
                                                                                     =======            ========
</TABLE>
See accompanying notes.

                                      -5-
<PAGE>

                                Microtune, Inc.

                   Notes to Consolidated Financial Statements

                                 March 31, 2001

                                  (unaudited)

1.   Basis of Presentation

General

The accompanying unaudited financial statements as of and for the three months
ended March 31, 2001 and 2000 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, 2000.

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, 2001 have been made. Results of operations for the three months
ended March 31, 2001, 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.

Foreign Currency Translation

Through June 30, 2000, the Company used the U.S. Dollar as its functional
currency, except that the German Mark was used as its functional currency for
Microtune GmbH & Co. KG (Microtune KG) and its subsidiaries (collectively, the
Subsidiaries). Foreign currency exchange gains and losses resulting from the
translation of financial statements denominated in German Marks of Microtune KG
into U.S. Dollars through June 30, 2000, were included as a component of
stockholders' equity. Foreign currency exchange gains and losses resulting from
the remeasurement of financial statements not denominated in German Marks of
Microtune KG outside of Germany into German Marks were recognized currently in
the Company's results of operations as a component of foreign currency gains and
losses.

Effective July 1, 2000, the Company changed the functional currency of the
Subsidiaries to the U.S. Dollar from the German Mark to reflect the manner in
which the Subsidiaries are now managed and operated. Subsequent to June 30,
2000, the financial statements of the Subsidiaries are remeasured into the U.S.
Dollar. The impact from the remeasurement of financial statements not
denominated in U.S. Dollars is recognized currently in the Company's results of
operations as a component of foreign currency gains and losses.

Adoption of New Accounting Pronouncement

Effective January 1, 2000, the Company adopted SFAS No. 133, Accounting for
Derivatives and Hedging Activities. SFAS No. 133 requires that all derivatives
be recognized at fair value on the balance sheet and that related gains and
losses be included in net income or comprehensive income depending on the nature
of the hedging relationship. Currently, the Company has not entered into
contracts that will be classified as derivative financial instruments under SFAS
No. 133. However, the Company may enter into contracts that are classified as
derivative financial instruments in the future. Adoption of SFAS No. 133 did not
have an impact on the results of operations or financial position of the
Company. However, management cannot estimate its impact on future results of
operations and financial position.

                                      -6-
<PAGE>

2.   Completion of Initial Public Offering

On August 4, 2000, the Company completed its initial public offering. The
Company issued 4.6 million shares of its common stock resulting in net proceeds
of approximately $66.8 million. Upon the completion of the initial public
offering, all then outstanding convertible preferred stock converted into an
aggregate of 23.1 million shares of common stock and all outstanding warrants
were automatically exercised for 2.2 million shares of common stock.

3.   Acquisition of HMTF Acquisition (Bermuda), Ltd.

On January 10, 2000, the Company combined with HMTF Acquisition (Bermuda), Ltd.
(HMTF Acquisition), the ultimate parent company of Temic Telefunken
Hochfrequenztechnik GmbH (Temic), in a transaction accounted for as a purchase
business combination. HMTF Acquisition acquired Temic on December 22, 1999.
Temic is now called Microtune KG. The consideration in the combination consisted
of 3,318,513 shares of Series E Preferred Stock and warrants to purchase up to
2,212,342 shares of common stock at an exercise price of $0.001 per share. The
results of operations of HMTF Acquisition are included in the results of the
Company from the date of acquisition. The components of the aggregate cost of
the combination were as follows (in thousands, except share data):


<TABLE>
<S>                                                                                      <C>
Fair market value of 3,318,513 shares of Series E Preferred Stock.................       $55,548
Fair market value of warrants to purchase 2,212,342 shares of the
         Company's common stock...................................................         7,411
Transaction costs.................................................................           185
                                                                                         -------
Total combination cost............................................................       $63,144
                                                                                         =======
</TABLE>

The fair values of the Series E Preferred Stock and the warrants were based on
the estimated fair value of the Company's common stock at the date of the
combination and the cash purchase price paid by HMTF Acquisition for Microtune
KG on December 22, 1999 of $60.0 million.

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):


<TABLE>
<S>                                                                                 <C>
Working capital...................................................................       $11,206
Property and equipment............................................................         6,118
Intangible assets.................................................................         8,037
Goodwill..........................................................................        28,276
Acquired in-process research and development costs charged to expense.............        12,692
Deferred income taxes.............................................................        (1,914)
Other assets and liabilities, net.................................................        (2,283)
Loans receivable from stockholders................................................         1,012
                                                                                         -------
Total combination cost............................................................       $63,144
                                                                                         =======
</TABLE>

                                      -7-
<PAGE>

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 Microtune KG. 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 acquired in-process
research and development projects were assessed, analyzed and valued using the
exclusion approach articulated by the Securities and Exchange Commission. 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 acquired in-process technology relates to the development of new tuners and
modules for cable modem, set-top box, multimedia and automotive applications,
focusing on increased functionality, cost effectiveness and size reduction,
while maintaining a low level of power consumption. The estimated percentage
completion of the development projects as of the acquisition date was
approximately 70%, 50%, 70% and 60% for projects in the cable modem, set-top
box, multimedia and automotive product groups, respectively. There have been no
significant changes in estimates of costs required to complete the development
efforts since the acquisition date. During 2000, the development projects as of
the acquisition date in the cable modem, set-top box and multimedia product
groups were completed at a cost of approximately $335,000, $50,000 and $340,000,
respectively. As of March 31, 2001, the amount expended toward completing the
development projects in the automotive group as of the acquisition date was
approximately $1,620,000. As of March 31, 2001, the estimated cost of completion
of the development projects in the automotive product group is approximately
$430,000 and the projects are expected to be completed by December 2002.

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 for the next ten years, including costs to complete the development of
the technology and the future revenues to be earned upon release of the
products. The rate utilized to discount the net cash flows to present value was
22% 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. Projected net cash flows from such
products are based on estimates of revenues and operating profit related to such
products. Management expects that the purchased research and development
projects generally will be successfully developed into commercially viable
products. However, there can be no assurance that commercial viability or timely
release of these products will be achieved.

4.   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.

                                      -8-
<PAGE>

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

                                                        Three Months Ended
                                                             March 31,
                                                     -------------------------
                                                      2001                2000
                                                     -----              ------
Preferred stock convertible into common stock.....       -              22,297
Stock options.....................................   7,779               7,790
Warrants..........................................       -               2,253
Restricted common stock...........................     180                 466
Employee stock purchase plan......................      28                   -
                                                     -----              ------
Total anti-dilutive securities excluded...........   7,987              32,806
                                                     =====              ======

5.  Cash and 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. The Company considers highly liquid investments
with original maturities of three months or less to be cash equivalents.

6.   Inventories

Inventories consists of the following (in thousands):

                                               March 31,          December 31,
                                                  2001                2000
                                              -----------         ------------
Finished goods.........................         $ 5,019              $ 4,978
Work in process........................           2,353                2,085
Raw materials..........................           9,797                9,326
                                                -------              -------
                                                $17,169              $16,389
                                                =======              =======

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.
In the three months ended March 31, 2001, $1.7 million in inventory determined
to be in excess of demand was charged to cost of revenues.

7.  Property and Equipment

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

                                               March 31,          December 31,
                                                 2001                 2000
                                               --------           ------------
Leasehold improvements...................       $ 1,553              $ 1,227
Manufacturing equipment..................        16,290               13,702
Other equipment..........................         3,365                3,039
Furniture and fixtures...................         1,395                1,127
Computer software........................         2,030                1,834
                                                -------              -------
Total property and equipment.............        24,633               20,929
Less accumulated depreciation............         7,063                5,750
                                                -------              -------
                                                $17,570              $15,179
                                                =======              =======

                                      -9-
<PAGE>

8.  Accrued Expenses

Accrued expenses consists of the following (in thousands):

                                              March 31,            December 31,
                                                2001                  2000
                                              --------             -----------
Accrued warranty obligation.............       $  649                 $  711
Accrued income taxes....................        2,305                  2,145
Deferred income taxes...................          466                    373
Other...................................        4,574                  4,881
                                               ------                 ------
                                               $7,994                 $8,110
                                               ======                 ======

9.   Income Taxes

Prior to our combination with Microtune KG, we had not recognized any provision
for income taxes. We have a net operating loss carryforward for U.S. federal
income tax purposes of approximately $26.0 million as of December 31, 2000. In
addition, we have unutilized research and development tax credits of $1.0
million. Due to the uncertainty of our ability to utilize these deferred tax
assets, they have been fully reserved.

The benefit for the three months ended March 31, 2001, and the provision for the
three months ended March 31, 2000, consists of foreign income taxes and U.S.
state franchise 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%.

10.  Commitments and Contingencies

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. The
lawsuit is in the initial phases of discovery.

11.  Stock Plans

During 1999 through July 2000, the Company issued stock options that were deemed
to have been issued at less than fair market value at the date of grant and
recorded $16.5 million and $3.2 million in 2000 and 1999, respectively, for
deferred stock compensation. This deferred stock compensation is being
recognized over the respective vesting periods of the stock options, which range
from one to six years. As of March 31, 2001, and December 31, 2000, unamortized
deferred stock compensation was $13.7 million and $14.6 million, respectively.

                                      -10-
<PAGE>

12.  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,
Korea, Taiwan and Hong Kong. The Company also has a systems application design
center in Germany and two manufacturing facilities in the Philippines. Revenues
by geographical area are summarized below (in thousands):

                                                   Three Months Ended March 31,
                                                     2001                 2000
                                                   -------              -------
North America.............................         $10,003              $ 6,410
Europe....................................           3,678                3,206
Asia Pacific..............................           3,896                3,792
Other.....................................              82                  488
                                                   -------              -------
                                                   $17,659              $13,896
                                                   =======              =======

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 DaimlerChrysler, ATI Technologies and
Motorola/General Instruments accounted for approximately 26%, 10% and 10%,
respectively, of consolidated net revenues for the three months ended March 31,
2000.

                                      -11-
<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 containing the words "believes,"
"anticipates," "estimates," "expects," "intends," and words of similar import,
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 and to the risk factors set out in our Annual Report
filed on Form 10-K for fiscal year 2000, which describe factors that could cause
actual events to differ from those contained in any forward looking statements.

Overview

     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
(Temic) 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, Temic converted to a KG and changed its name to Microtune GmbH & Co.
KG, referred to as Microtune KG, in August 2000.

     Financial Information

     We are a radio frequency silicon and systems company, specializing in high-
performance radio frequency tuners, amplifiers and transceivers to the broadband
communications markets. We design, develop and sell highly integrated broadband
gateway radio frequency integrated circuits and modules for use in cable modems,
PC/TVs, set-top boxes, cable telephony, digital TV, automotive entertainment and
other consumer electronics devices.

     Since inception we have incurred significant losses, and as of March 31,
2001, we had an accumulated deficit of approximately $52.4 million. As a result
of our combination with Microtune KG, our primary activities have expanded to
include the design, manufacture and sale of radio frequency modules. In March
2000, we began shipment of our single chip silicon tuner and in December 2000,
we began shipment of our silicon upstream amplifier. To date, substantially all
of our revenues have been derived from sales of our tuner modules rather than
from our modules containing our silicon chips, known as MicroModules, or our
single chip silicon products. These tuner modules were primarily developed,
manufactured and marketed by Microtune KG prior to the combination. 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 report and the risk factors set out in our Annual Report
filed on Form 10-K for the fiscal year 2000, 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.

                                      -12-
<PAGE>

     We recognize revenues from our products upon shipment to a customer or upon
notification of customer receipt, depending on the contract terms. We provide at
least a one year warranty on all products and record a related provision for
estimated warranty costs at the date of sale.

     We have invested heavily in research and development of our radio frequency
integrated circuits and systems technology. We expect to increase our investment
in these areas in absolute dollars to further develop our radio frequency
products. This investment will include the continued recruitment of radio
frequency 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 and x-FAB to manufacture our wafers and Amkor to assemble our
radio frequency integrated circuits. We perform final testing, packing and
shipping of our radio frequency integrated circuits at our facility in Plano,
Texas, and overseas at Amkor. With respect to our tuner modules, we perform all
of our assembly and calibration functions in our factories in Manila,
Philippines. Test functions are performed in our factories in Manila,
Philippines, and at our facility in Huntsville, Alabama. As a result of our
combination, we have recently experienced a period of rapid growth and
expansion. To manage this growth and any future growth effectively, we intend to
enhance our existing operational and financial systems. We also moved our U.S.
corporate headquarters to a new facility in Plano, Texas, during September 2000.

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:


<TABLE>
<CAPTION>
                                                                Three Months Ended March 31,
                                                                2001                    2000
                                                                ----                    ----
<S>                                                             <C>                     <C>
Net revenues..............................................       100%                    100%
Cost of revenues..........................................        80                      72
                                                                ----                    ----
Gross margin..............................................        20                      28
Operating expenses:
  Research and development:
     Stock option compensation............................         2                       2
     Other................................................        22                      19
                                                                ----                    ----
                                                                  24                      21
  Acquired in-process research and development............         -                      91
  Selling, general and administration:
     Stock option compensation............................         3                       4
     Other................................................        22                      24
                                                                ----                    ----
                                                                  25                      28
  Amortization of intangible assets and goodwill..........        10                      16
                                                                ----                    ----
     Total operating expenses.............................        59                     156
                                                                ----                    ----
Loss from operations......................................       (39)                   (128)
Other income..............................................         6                      10
                                                                ----                    ----
Loss before income tax expense (benefit)..................       (33)                   (118)
Income taxes..............................................        (2)                      3
                                                                ----                    ----
Net loss..................................................       (31)%                   (121)%
                                                                ====                    ====
</TABLE>

                                      -13-
<PAGE>

Comparison of the Three Months Ended March 31, 2001 and 2000.

Net Revenues

     Revenues are recorded net of a provision for returns. Our net revenues
increased $3.8 million, or 27%, to $17.7 million in the three months ended March
31, 2001, from $13.9 million in the three months ended March 31, 2000. The
increase is primarily due to the growth in the cable modem market segment of our
business. However, our industry has recently experienced a buildup of
inventories which has negatively impacted current demand for our products in the
three months ended March 31, 2001. We expect softness in demand and increasing
pressure to reduce the selling prices of our cable modem products in the near
future as the industry completes its inventory correction. However, we expect to
see increasing revenues due to gains in market shares for our set-top box
products and cable telephony 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. In many cases, we do not have written commitments
from our suppliers for guaranteed supply. Our cost of revenues in the three
months ended March 31, 2001 were $14.1 million or 80% of net revenues compared
to $10.1 million, or 72% of net revenues, in the three months ended March 31,
2000. Cost of revenues for the three months ended March 31, 2001, includes a
charge for inventory determined to be in excess of projected demand of $1.7
million, or 10% of net revenues. Excluding this adjustment, cost of revenues as
a percentage of net revenues decreased to 70% for the three months ended March
31, 2001. Gross margins have improved primarily due to our strategy of adding
increased functionality to our radio frequency tuner modules, increased
efficiencies in our manufacturing facilities and the change in our product mix
with increased focus in the cable modem market. In the near future, we believe
gross margins may improve due to increased efficiencies in our factories and
increasing levels of silicon in our product mix partially impacted 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 we expect will be offset 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 expenses increased 51% from $2.9 million, or 21% of net revenues, in
the three months ended March 31, 2000, to $4.3 million, or 24% of net revenues,
in the three months ended March 31, 2001. The increase in research and
development expenses reflects 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 $0.3
million in the three months ended March 31, 2000 and 2001, but does not affect
our total stockholders' equity or cash flows.

                                      -14-
<PAGE>

Acquired In-Process Research and Development

     As a result of our combination with Microtune KG, we recorded acquired in-
process research and development costs of $12.7 million for the three months
ended March 31, 2000. Amounts allocated to acquired in-process research and
development were expensed at the date of combination, because the purchased
research and development had not reached technological feasibility based on the
status of design and development activities that required further refinement and
testing. Acquired in-process research and development did not affect our cash
flows from operations.

Selling, General and Administration

     Selling, general and administration expenses include our personnel-related
expenses for administrative, financial, 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 increased in absolute dollars 17% from $3.8 million in the three months
ended March 31, 2000, to $4.5 million in the three months ended March 31, 2001.
Selling, general and administrative expenses decreased as a percentage of net
revenues from 28% in the three months ended March 31, 2000, to 25% in the three
months ended March 31, 2001. The increase in absolute dollars in the three
months ended March 31, 2001, primarily reflects additional sales and
administrative personnel and an increase in certain professional fees. The
effects of these increases were partially offset by a reduction in discretionary
overhead spending. Stock option compensation related to selling, general and
administration was $0.5 million and $0.6 million in the three months ended March
31, 2000 and 2001, respectively, but does not affect our total stockholders'
equity or cash flows.

Amortization of Intangible Assets and Goodwill

     Amortization of intangible assets and goodwill of $1.8 million in the three
months ended March 31, 2001, results principally from our combination with
Microtune KG. The combination has been accounted for using the purchase method
of accounting. The purchase price allocated to intangible assets of $8.0 million
is being amortized over the estimated useful lives of the related assets of one
to five years. Goodwill resulting from the transaction totaled $28.3 million and
is being amortized over five years.

Other Income

     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 increased 283% from $0.3 million in the three months ended
March 31, 2000, to $1.1 million in the three months ended March 31, 2001, due to
the investment of proceeds from our initial public offering on August 4, 2000.

     The foreign currency translation and transaction gain (loss), net relates
to the operations of Microtune KG and its subsidiaries. We used the German Mark
as the functional currency for Microtune KG's and its subsidiaries' financial
statements through June 30, 2000. Foreign currency exchange gains and losses
resulting from the remeasurement of financial statements not denominated in
German Marks of Microtune KG and its subsidiaries outside of Germany into German
Marks were recognized in the statements of operations as a component of foreign
currency gains and losses through June 30, 2000. Foreign currency exchange gains
and losses resulting from the translation of financial statements denominated in
German Marks of Microtune KG and its subsidiaries into U.S. Dollars were
included as a component of stockholders' equity through June 30, 2000.

                                      -15-
<PAGE>

     Starting July 1, 2000, we use the U.S. Dollar as the functional currency
for Microtune KG's and its subsidiaries' financial statements. The functional
currency was changed to the U.S. Dollar from German Marks for these entities as
a result of the manner in which these entities are now managed and operated.
Foreign currency exchange gains and losses resulting from the remeasurement of
financial statements not denominated in U.S. dollars of Microtune KG and its
subsidiaries into U.S. Dollars are recognized currently in the statement 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. We have a net operating loss carryforward for U.S.
federal income tax purposes of approximately $26.0 million as of December 31,
2000. In addition, we have unutilized research and development tax credits of
$1.0 million. Due to the uncertainty of our ability to utilize these deferred
tax assets they have been fully reserved.

     The benefit from income taxes in the three months ended March 31, 2001, is
primarily due to the benefit of losses in the Philippines which more than offset
taxes incurred in Germany and U.S. state franchise taxes. The provision for
income taxes in the three months ended March 31, 2000, consists of foreign
income taxes on the income of Microtune KG and its subsidiaries and U.S. state
franchise taxes.

Liquidity and Capital Resources

     Prior to our combination with Microtune KG, we funded our operations
primarily through the issuance of convertible preferred stock which generated
net cash proceeds of approximately $44.2 million. On August 4, 2000, we issued
4.6 million common stock shares in our initial public offering that raised net
proceeds of approximately $66.8 million. As of March 31, 2001, we had net
working capital of $86.9 million, including $71.8 million of cash and cash
equivalents.

     At March 31, 2001, Microtune KG had a credit agreement with a bank that
provides for borrowings of up to $2.4 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 7.25% at March 31,
2001. At March 31, 2001, no borrowings were outstanding under this credit
agreement.

     Investments in property and equipment were $4.1 million and $2.0 million in
the three months ended March 31, 2001 and 2000, respectively. We expect capital
expenditures to remain consistent with the levels experienced in 2000. Other
uses of cash include the funding of operating activities, which were $3.4
million and $4.2 million in the three months ended March 31, 2001 and 2000,
respectively.

     We believe that our current cash balance will provide adequate liquidity to
fund our operations and meet our other cash requirements for at least the next
24 months. 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 that type of a financing. We cannot be sure that financing will be
available on reasonable terms, or at all, when and if required. 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 Disclosure 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.

                                      -16-
<PAGE>

     Following our combination with Microtune KG, we now transact both sales and
purchases in multiple foreign currencies, including Euros, German Marks and
Philippine Pesos. Due to the volatile nature of the currency markets, there is a
potential risk of foreign currency translation losses, as well as gains. We
currently do not use derivative financial instruments to hedge our balance sheet
exposures against future movements in exchange rates. However, we are
consistently 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, 2001 was $47.3 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 $4.7 million.

     On January 1, 1999, 11 European Union member states (Germany, France, the
Netherlands, Austria, Italy, Spain, Finland, Ireland, Belgium, Portugal and
Luxembourg) adopted the Euro as their common national currency. Until January 1,
2002, either the Euro or a participating country's national currency will be
accepted as legal tender. Beginning on January 1, 2002, Euro-denominated bills
and coins will be issued, and by July 1, 2002, only the Euro will be accepted as
legal tender. We do not expect future balance sheets, statements of operations
or statements of cash flows to be materially 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. The Company's 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 RF silicon products or our modules that incorporate
our RF silicon products, our operating results could be harmed.

     Currently, substantially all of our revenues are from the sale of our tuner
modules using discrete, third-party components. Our future success will depend
on our ability to successfully migrate our customers from our modules that use
discrete components to our RF silicon products, or MicroModules containing the
MicroTuner and 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 have not completed our integration with Microtune KG's operations and we may
be unable to do so effectively.

     We have recently combined with Microtune KG and we are still in the process
of integrating Microtune KG's German and Philippines 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 functions. For example,
our accounting functions utilize different software programs, and Microtune KG's
consolidated financial statements have historically been prepared based on
German generally accepted accounting principles. We may not be able to complete
this integration on a timely and cost-effective basis.

                                      -17-
<PAGE>

As a result of the Microtune KG acquisition, we have recorded $36.3 million of
goodwill and acquired intangibles, the amortization of which will negatively
affect our net profits.

     As a result of the Microtune KG acquisition, we have recorded $36.3 million
of goodwill and acquired intangibles which will be amortized over one to five
years. This will increase our net loss or decrease our net income by
approximately $7.1 million in each of 2001 through 2004. To the extent we do not
generate sufficient cash flow to recover the amount of the investment recorded,
the investment could be considered impaired and could be subject to earlier
write-off. In such event, our net income or net loss in any given period could
be lower or greater, respectively, than anticipated and the market price of our
stock could decline.

We are dependent upon third parties, some of which 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
are dependent 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 did not receive our expected allocation
of components from several significant sole-source suppliers which constrained
our ability to meet customer demand. We expect to 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.

                                      -18-
<PAGE>

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 will depend 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 will be limited until the time that we introduce radio
frequency integrated circuits with the power requirements that conform 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 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 successfully penetrate all of our target markets 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 markets are intensely
competitive. We expect competition to continue to increase in the future 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, and with semiconductor companies such
as Anadigics, Analog Devices, Broadcom and Maxim, and potentially with companies
such as Conexant and Silicon Wave. 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; and
     .    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.

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

                                      -19-
<PAGE>

     Consolidation by industry participants, including in some cases,
acquisitions of some of our customers or suppliers by our competitors, or vice
versa, could 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 from
operations.

If we do not anticipate and adapt to evolving industry standards in the radio
frequency tuner and broadband communications 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 applications generally are based on
industry standards that are continuously evolving. In some cases, the
development of these standards takes longer than was originally anticipated. For
example, both the OpenCable standard for set-top boxes and the PacketCable
standard for cable telephony have recently experienced delays in development. We
have directed our development toward producing radio frequency products that
comply with the evolving standards. The slowness of the 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 the continued use of proprietary technologies. The continued delay in the
development of the standards could result in fewer manufacturers purchasing our
radio frequency products in favor of continuing to use the proprietary
technologies designed by our competitors. Either of the aforementioned effects
would result in diminished revenues and consequently harm our business. Further,
if new industry standards emerge, our products or our customers' products could
become unmarketable or obsolete. We may also have to incur substantial
unanticipated costs to comply with these new standards.

     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
market 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.

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 and new product
introductions. 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.

     In addition, we will seek to increase the sales of our higher margin
products. However, our sales, product and process development efforts may not be
successful, and our new products or processes may not achieve market acceptance.
To the extent that our cost reductions and emphasis on higher margin products do
not occur in a timely manner, our results of operations could suffer.

                                      -20-
<PAGE>

We expect our quarterly operating results to fluctuate.

     Our quarterly results of operations have fluctuated 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;
     .    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;
     .    slowdown in customer demand and related industry wide buildup of
          inventories;
     .    our inability to predict our customers' demand for our products;
     .    changes in our product and customer mix between quarters; and
     .    quality problems with our radio frequency tuners that result in
          significant returns.

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.

     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. DaimlerChrysler, ATI
Technologies and Motorola/General Instrument accounted for approximately 26%,
10% and 10%, respectively, of our net revenues for the three months ended March
31, 2000, DaimlerChrysler, Com21 and Ericsson accounted for approximately 20%,
14% and 10%, respectively, of our 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 91% of
total sales for the three months ended March 31, 2001. We 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.

                                      -21-
<PAGE>

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 tuners through
          a purchase order, which does not require them to purchase a minimum
          amount of our radio frequency tuners;
     .    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 tuners;
     .    some of our customers or potential customers offer or may offer
          products that compete with our radio frequency tuners; 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, as well as sales, marketing and management efforts on our part.
This process becomes more complex as we simultaneously qualify our products with
multiple customers.


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.
Generally, our purchase orders 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.

                                      -22-
<PAGE>

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
substantial unsaleable inventory occurs, our financial condition would be
harmed.

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 different non-radio frequency based
broadband communications technologies, including digital subscriber line
technology. Many of these technologies will 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.

We depend on the continued growth of the broadband communications market
generally, and the radio frequency product market specifically, for our success.

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

     .    intense competition;
     .    rapid technological change; and
     .    short product life cycles, especially in the consumer electronics
          markets.

     Although the broadband communications market, in general, has grown rapidly
in the last few years, it may not continue to grow or a significant slowdown in
this market 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 or at all. Because of the uncertainty of the level of competition
and the strength of competitors in the broadband communications market, the
unproven technology of many products addressing this market 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 market. In addition, the
broadband communications market is 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 market
is partially dependent upon the market acceptance of products and technologies
addressing the broadband communications market, and we cannot assure you that
the radio frequency technologies upon which our products are based will be
accepted by the market. 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.

                                      -23-
<PAGE>

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 increasing prices and reducing product availability.

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, in
particular, 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.

We primarily depend on a single third-party wafer foundry to manufacture all of
our integrated circuit products, which reduces our control over the integrated
circuit manufacturing process.

     We do not own or operate a semiconductor fabrication facility. We primarily
rely on IBM, an outside foundry, to produce most of our integrated circuit radio
frequency products, although we are in the process of qualifying x-FAB for
manufacturing our newer integrated circuit products. We do not have a long-term
supply agreement with IBM and instead obtain manufacturing services on a
purchase order basis. IBM has 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 this foundry, and IBM may reallocate
capacity to other customers even during periods of high demand for our
integrated circuits. If IBM 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 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, including x-FAB, we may be exposed
to increased risk of capacity shortages due to our dependence on IBM.

We depend on a single third-party subcontractor for integrated circuit packaging
which reduces our control over the integrated circuit packaging process

     Our integrated circuit products are packaged by a sole independent
subcontractor, Amkor, using facilities located in South Korea. We do not have
long-term agreements with Amkor and typically obtain services from them on a
purchase order basis. Our reliance on Amkor 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 is unable or unwilling to continue to provide packaging 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.

We may be unable to integrate operations that we may acquire in the future.

     From time to time, we expect to continue to evaluate acquisitions and may
make additional acquisitions in the future.  Our acquisition of Microtune KG was
our first acquisition of a business. Accordingly, 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. If in the future we acquire technologies or businesses, we
could have difficulty integrating acquired technology into our product offerings
or integrating our technology with an acquired company's products. We could also
have difficulty coordinating and integrating overall business strategies,
controls, procedures and policies, as well as sales and marketing and research
and development efforts. Assimilating employees into our corporate culture and
coordinating operations across geographically dispersed locations could prove to
be difficult or time consuming. Moreover, we currently do not know and cannot
predict the accounting treatment of any future acquisition, in part because we
cannot be certain what accounting

                                      -24-
<PAGE>

regulations, conventions or interpretations may prevail in the future. These
difficulties could disrupt our ongoing business, distract our management and
employees and increase our expenses. Furthermore, we may have to incur debt or
issue equity securities to pay for any future acquisitions, and those issuances
could be dilutive to our existing stockholders.

Our inability to generate revenues from international sales could harm our
financial results.

     For the three months ended March 31, 2001, 43% 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. 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, Hong Kong, Taiwan and Korea, may be negatively affected by actions
taken or events that occur in countries over which we have no control.

     We currently have facilities and suppliers located outside of the U.S.,
including research and development operations in Ingolstadt, Germany, and two
manufacturing facilities in Manila, Philippines, and sales offices in Hong Kong,
Taiwan and Korea. 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 in that country.

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

     We may acquire or open 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 the necessary regulatory approval, or in
complying with applicable regulations in those countries or, if such approvals
are obtained or such regulations are complied with, that we will be able to
continue to comply with these regulations.

                                      -25-
<PAGE>

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.

Our manufacturing operations could be jeopardized and our production decreased
if our labor unions cause labor slowdowns or shutdowns at our union facility.

     One of our manufacturing facilities is covered by union representation.
This facility currently manufactures a significant portion of our tuner module
products. If we experience labor slowdowns or shutdowns at this facility due to
actions by the labor union, our manufacturing output, and consequently our
revenues, could be diminished.

We must manage our growth.

     If we fail to manage our growth, our reputation and results of operations
could be harmed. Since March 31, 2000, our total number of employees has grown
from 125 to 171 as of March 31, 2001, excluding manufacturing personnel in
Manila, Philippines, largely as a result of our acquisition of Microtune KG. In
addition, as of March 31, 2001, we had 1,328 manufacturing personnel, in the
Philippines. The resulting 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 or 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.

                                      -26-
<PAGE>

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 or 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 or 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, in the past, we have been
notified of a claim against one of our PC/TV tuner customers for which the
customer made a claim for indemnification from us. The underlying claim has not
been resolved; however, we do not believe that our tuner infringes on the
intellectual property that is the subject of the underlying claim. We are not,
nor have we ever been, a party to this lawsuit. However, if the litigation
results 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 tuners 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 a 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.

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

     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. 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.

The products of our customers are subject to governmental regulation.

     Governmental regulation could place constraints on our customers and
consequently minimize our customers' need or desire 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, it is possible that
demand for our radio frequency products will decrease if equipment incorporating
our products fails to comply with FCC emissions specifications.

                                      -27-
<PAGE>

                           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 BCM 3415
microchip infringes our U.S. patent no. 5,737,035. In our compliant, 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. The lawsuit is in the initial phases of
discovery.

Item 2.   Changes In Securities and Use of Proceeds

     From the time of receipt through March 31, 2001, we have applied our net
proceeds from the offerings toward funding capital expenditures. Net cash used
from our stock offerings for capital expenditures totaled $9.6 million through
March 31, 2001. The Company is currently investing the remainder of the proceeds
in interest-bearing, investment grade securities for future use.

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, 2001.

Item 5.   Other Information

     Not applicable.

Item 6.   Exhibits and Reports on Form 8-K

          There were no Form 8-K's filed during the quarter ended March 31,
          2001.

                                      -28-
<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: April 14, 2001


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

                                      -29-