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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549



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FORM 10-Q



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



For the
quarterly period ended March 27, 2004



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



For the Transition Period from
 to



Commission File Number 0-27026



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Pericom Semiconductor Corporation

(Exact Name of Registrant as Specified in Its Charter)



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|                                                               |  |                                     
|-------------------------------------------------------------- |  | ------------------------------------
|California                                                     |  | 77-0254621                          
|(State or Other Jurisdiction of Incorporation or Organization) |  | (I.R.S. Employer Identification No.)



3545 North First
Street

San Jose, California 95134

(408) 435-0800

(Address of Principal Executive Offices and

Issuer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 during the preceding 12
months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  x    No ̈



Indicate by check mark whether the Registrant is an accelerated filer (as defined in Exchange Act Rule
12b-2):    Yes  x    No ̈



As of May 5, 2004 the Registrant had outstanding 26,399,300 shares of Common Stock.



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##### Table of Contents

Pericom Semiconductor Corporation



Form 10-Q for the Quarter Ended March 31, 2004



INDEX



|                              |  |         |  |                                                                                                             |  |   
|----------------------------- |  | ------- |  | ----------------------------------------------------------------------------------------------------------- |  | --
|                              |  | Page   
|PART I.
FINANCIAL INFORMATION |  |        
|                              |  |         | 
|                              |  | Item 1: |  | Condensed Consolidated Financial Statements (Unaudited)                                                     |  |   
|                              |  |         | 
|                              |  |         |  | Condensed Consolidated Balance Sheets as of March 31, 2004 and June 30, 2003                                |  | 3 
|                              |  |         | 
|                              |  |         |  | Condensed Consolidated Statements of Operations for the three and nine months ended March 31, 2004 and 2003 |  | 4 
|                              |  |         | 
|                              |  |         |  | Condensed Consolidated Statements of Cash Flows for the nine months ended March 31, 2004 and 2003           |  | 5 
|                              |  |         | 
|                              |  |         |  | Notes to Condensed Consolidated Financial Statements                                                        |  | 6 
|                              |  |         | 
|                              |  | Item 2: |  | Managements Discussion and Analysis of Financial Condition and Results of Operations                       |  | 13
|                              |  |         | 
|                              |  | Item 3: |  | Quantitative and Qualitative Disclosures about Market Risk                                                  |  | 29
|                              |  |         | 
|                              |  | Item 4: |  | Controls and Procedures                                                                                     |  | 29
|                              | 
|PART II.
OTHER INFORMATION    |  |        
|                              |  |         | 
|                              |  | Item 6: |  | Exhibits and Reports on Form 8-K                                                                            |  | 30
|                              |  |         | 
|                              |  |         |  | Signatures                                                                                                  |  | 31



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##### Table of Contents

PART I. FINANCIAL INFORMATION

Item 1: Condensed Consolidated Financial Statements



Pericom Semiconductor Corporation

Condensed Consolidated Balance Sheets

(In thousands, except share data)

(Unaudited)



|                                                                                                          |  |               |         |               |   |        
|--------------------------------------------------------------------------------------------------------- |  | ------------- | ------- | ------------- | - | -------
|                                                                                                          |  | March 31 2004 |         | June 30, 2003
|ASSETS                                                                                                    |  |               |         |               |   |        
|Current assets:                                                                                           |  |               |         |               |   |        
|Cash and cash equivalents                                                                                 |  | $             | 13,956  |               | $ | 9,705  
|Short-term investments                                                                                    |  |               | 129,273 |               |   | 139,285
|Accounts receivable:                                                                                      |  |               |         |               |   |        
|Trade (net of allowances of $3,582, and $3,546)                                                           |  |               | 7,187   |               |   | 2,502  
|Other receivables                                                                                         |  |               | 2,105   |               |   | 1,800  
|Inventories                                                                                               |  |               | 15,288  |               |   | 9,963  
|Prepaid expenses and other current assets                                                                 |  |               | 1,855   |               |   | 1,301  
|Deferred income taxes                                                                                     |  |               | 1,796   |               |   | 1,401  
|                                                                                                          |  |               |         |               |   |        
|Total current assets                                                                                      |  |               | 171,460 |               |   | 165,957
|Property and equipment  net                                                                              |  |               | 6,283   |               |   | 6,305  
|Investment in and advances to joint venture                                                               |  |               | 5,466   |               |   | 5,181  
|Goodwill                                                                                                  |  |               | 1,325   |               |   | 1,325  
|Deferred income taxes  noncurrent                                                                        |  |               | 3,411   |               |   | 1,085  
|Loans to SaRonix, LLC                                                                                     |  |               |        |               |   | 6,703  
|Building held for sale                                                                                    |  |               | 1,532   |               |   |       
|Intangible assets  net                                                                                   |  |               | 2,998   |               |   |       
|Other assets                                                                                              |  |               | 3,942   |               |   | 3,681  
|                                                                                                          |  |               |         |               |   |        
|Total                                                                                                     |  | $             | 196,417 |               | $ | 190,237
|                                                                                                          |  |               |         |               |   |        
|LIABILITIES AND SHAREHOLDERS EQUITY                                                                      |  |               |         |               |   |        
|Current liabilities:                                                                                      |  |               |         |               |   |        
|Accounts payable                                                                                          |  | $             | 8,535   |               | $ | 4,170  
|Accrued liabilities                                                                                       |  |               | 5,571   |               |   | 3,125  
|Current portion of long-term debt                                                                         |  |               | 1,291   |               |   |       
|                                                                                                          |  |               |         |               |   |        
|Total current liabilities                                                                                 |  |               | 15,397  |               |   | 7,295  
|Long term liabilities                                                                                     |  |               | 113     |               |   | 619    
|Shareholders equity:                                                                                     |  |               |         |               |   |        
|Common stock, 60,000,000 shares authorized; Shares outstanding: March 31, 26,291,197; June 30, 25,765,177 |  |               | 141,196 |               |   | 139,401
|Accumulated other comprehensive income                                                                    |  |               | 689     |               |   | 1,129  
|Retained earnings                                                                                         |  |               | 39,022  |               |   | 41,793 
|                                                                                                          |  |               |         |               |   |        
|Total shareholders equity                                                                                |  |               | 180,907 |               |   | 182,323
|                                                                                                          |  |               |         |               |   |        
|Total                                                                                                     |  | $             | 196,417 |               | $ | 190,237
|                                                                                                          |  |               |         |               |   |        



See notes to condensed
consolidated financial statements.



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##### Table of Contents

Pericom Semiconductor Corporation

Condensed Consolidated Statements of Operations

(In thousands, except per share amounts)

(Unaudited)



|                                                          |  |                              |        |   |                             |   |        |      |  |   |        |   |  |   |        |  
|--------------------------------------------------------- |  | ---------------------------- | ------ | - | --------------------------- | - | ------ | ---- |  | - | ------ | - |  | - | ------ | -
|                                                          |  | Three Months Ended March 31, |        |   | Nine Months Ended March 31, |  
|                                                          |  | 2004                         |        |   | 2003                        |   |        | 2004 |  |   | 2003   |  
|Net revenues                                              |  | $                            | 18,466 |   |                             | $ | 11,492 |      |  | $ | 46,388 |   |  | $ | 33,452 |  
|Cost of revenues                                          |  |                              | 12,275 |   |                             |   | 8,028  |      |  |   | 32,391 |   |  |   | 23,441 |  
|                                                          |  |                              |        |   |                             |   |        |      |  |   |        |   |  |   |        |  
|Gross profit                                              |  |                              | 6,191  |   |                             |   | 3,464  |      |  |   | 13,997 |   |  |   | 10,011 |  
|                                                          |  |                              |        |   |                             |   |        |      |  |   |        |   |  |   |        |  
|Operating expenses:                                       |  |                              |        |   |                             |   |        |      |  |   |        |   |  |   |        |  
|Research and development                                  |  |                              | 3,451  |   |                             |   | 2,758  |      |  |   | 10,648 |   |  |   | 8,476  |  
|Selling, general and administrative                       |  |                              | 4,277  |   |                             |   | 2,673  |      |  |   | 11,084 |   |  |   | 8,630  |  
|Restructuring charges                                     |  |                              |       |   |                             |   |       |      |  |   | 784    |   |  |   | 1,431  |  
|                                                          |  |                              |        |   |                             |   |        |      |  |   |        |   |  |   |        |  
|Total                                                     |  |                              | 7,728  |   |                             |   | 5,431  |      |  |   | 22,516 |   |  |   | 18,537 |  
|                                                          |  |                              |        |   |                             |   |        |      |  |   |        |   |  |   |        |  
|Loss from operations                                      |  |                              | (1,537 | ) |                             |   | (1,967 | )    |  |   | (8,519 | ) |  |   | (8,526 | )
|Equity in net income (loss) of investee                   |  |                              | 148    |   |                             |   | (169   | )    |  |   | 285    |   |  |   | (839   | )
|Interest income                                           |  |                              | 1,020  |   |                             |   | 1,193  |      |  |   | 3,008  |   |  |   | 4,020  |  
|Other-than-temporary recovery (decline) in investments    |  |                              | 4      |   |                             |   | (1     | )    |  |   | (5     | ) |  |   | (1,142 | )
|                                                          |  |                              |        |   |                             |   |        |      |  |   |        |   |  |   |        |  
|Loss before income taxes                                  |  |                              | (365   | ) |                             |   | (944   | )    |  |   | (5,231 | ) |  |   | (6,487 | )
|Income tax benefit                                        |  |                              | (269   | ) |                             |   | (313   | )    |  |   | (2,460 | ) |  |   | (2,530 | )
|                                                          |  |                              |        |   |                             |   |        |      |  |   |        |   |  |   |        |  
|Net loss                                                  |  | $                            | (96    | ) |                             | $ | (631   | )    |  | $ | (2,771 | ) |  | $ | (3,957 | )
|                                                          |  |                              |        |   |                             |   |        |      |  |   |        |   |  |   |        |  
|Basic and diluted loss per share                          |  | $                            | (0.00  | ) |                             | $ | (0.02  | )    |  | $ | (0.11  | ) |  | $ | (0.15  | )
|                                                          |  |                              |        |   |                             |   |        |      |  |   |        |   |  |   |        |  
|Shares used in computing basic and diluted loss per share |  |                              | 26,166 |   |                             |   | 25,717 |      |  |   | 25,970 |   |  |   | 25,726 |  
|                                                          |  |                              |        |   |                             |   |        |      |  |   |        |   |  |   |        |  



See notes to condensed
consolidated financial statements.



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Pericom Semiconductor Corporation

Condensed Consolidated Statements of Cash Flows

(In thousands)

(Unaudited)



|                                                                              |  |                             |          |   |      |   |          |  
|----------------------------------------------------------------------------- |  | --------------------------- | -------- | - | ---- | - | -------- | -
|                                                                              |  | Nine Months Ended March 31, |         
|                                                                              |  | 2004                        |          |   | 2003 |  
|CASH FLOWS FROM OPERATING ACTIVITIES:                                         |  |                             |          |   |      |   |          |  
|Net loss                                                                      |  | $                           | (2,771   | ) |      | $ | (3,957   | )
|Adjustments to reconcile net loss to net cash used in operating activities:   |  |                             |          |   |      |   |          |  
|Depreciation and amortization                                                 |  |                             | 3,227    |   |      |   | 2,975    |  
|Purchased in-process technology                                               |  |                             | 360      |   |      |   |         |  
|Other-than-temporary decline in investment                                    |  |                             | 5        |   |      |   | 1,142    |  
|(Gain) loss on sale or disposal of assets                                     |  |                             | 143      |   |      |   | (21      | )
|Equity in net (income) loss of investee                                       |  |                             | (285     | ) |      |   | 839      |  
|Deferred income taxes                                                         |  |                             | (2,538   | ) |      |   |         |  
|Changes in assets and liabilities, net of effects of purchase of SaRonix LLC: |  |                             |          |   |      |   |          |  
|Accounts receivable                                                           |  |                             | (1,293   | ) |      |   | 1,246    |  
|Inventories                                                                   |  |                             | (2,271   | ) |      |   | (794     | )
|Prepaid expenses and other current assets                                     |  |                             | (316     | ) |      |   | (417     | )
|Accounts payable                                                              |  |                             | 2,386    |   |      |   | (18      | )
|Accrued liabilities                                                           |  |                             | (441     | ) |      |   | 1,366    |  
|                                                                              |  |                             |          |   |      |   |          |  
|Net cash provided by (used in) operating activities                           |  |                             | (3,794   | ) |      |   | 2,361    |  
|                                                                              |  |                             |          |   |      |   |          |  
|CASH FLOWS FROM INVESTING ACTIVITIES:                                         |  |                             |          |   |      |   |          |  
|Additions to property and equipment                                           |  |                             | (2,099   | ) |      |   | (1,101   | )
|Proceeds from sale of property and equipment                                  |  |                             | 83       |   |      |   | 101      |  
|Purchase of short-term investments                                            |  |                             | (114,720 | ) |      |   | (150,598 | )
|Maturities of short-term investments                                          |  |                             | 124,083  |   |      |   | 151,038  |  
|Cash received from SaRonix acquisition, net of transaction costs              |  |                             | 518      |   |      |   |         |  
|Loan to SaRonix                                                               |  |                             | (1,197   | ) |      |   | (5,203   | )
|Increase in other assets                                                      |  |                             | (356     | ) |      |   | (1,486   | )
|                                                                              |  |                             |          |   |      |   |          |  
|Net cash provided by (used in) investing activities                           |  |                             | 6,312    |   |      |   | (7,249   | )
|                                                                              |  |                             |          |   |      |   |          |  
|CASH FLOWS FROM FINANCING ACTIVITIES:                                         |  |                             |          |   |      |   |          |  
|Sale of common stock                                                          |  |                             | 1,795    |   |      |   | 1,180    |  
|Principal payments on long-term debts and capital leases                      |  |                             | (88      | ) |      |   |         |  
|Repurchase of common stock                                                    |  |                             |         |   |      |   | (1,777   | )
|                                                                              |  |                             |          |   |      |   |          |  
|Net cash provided by (used in) financing activities                           |  |                             | 1,707    |   |      |   | (597     | )
|EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS                  |  |                             | 26       |   |      |   |         |  
|                                                                              |  |                             |          |   |      |   |          |  
|NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS                          |  |                             | 4,251    |   |      |   | (5,485   | )
|CASH AND CASH EQUIVALENTS:                                                    |  |                             |          |   |      |   |          |  
|Beginning of period                                                           |  |                             | 9,705    |   |      |   | 12,656   |  
|                                                                              |  |                             |          |   |      |   |          |  
|End of period                                                                 |  | $                           | 13,956   |   |      | $ | 7,171    |  
|                                                                              |  |                             |          |   |      |   |          |  
|SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:                             |  |                             |          |   |      |   |          |  
|Cash received (paid) during the period for:                                   |  |                             |          |   |      |   |          |  
|Income taxes                                                                  |  | $                           | (33      | ) |      | $ | 2,120    |  
|                                                                              |  |                             |          |   |      |   |          |  
|Interest                                                                      |  | $                           | (42      | ) |      |   |         |  
|                                                                              |  |                             |          |   |      |   |          |  
|SUPPLEMENTAL DISCLOSURE OF NONCASH INVESTING AND FINANCING ACTIVITIES:        |  |                             |          |   |      |   |          |  
|Fair value of SaRonix, LLC assets acquired                                    |  | $                           | 14,053   |   |      | $ |         |  
|Acquisition related costs                                                     |  |                             | (1,731   | ) |      |   |         |  
|Loans forgiven                                                                |  |                             | (7,900   | ) |      |   |         |  
|                                                                              |  |                             |          |   |      |   |          |  
|Liabilities assumed                                                           |  | $                           | 4,422    |   |      | $ |         |  
|                                                                              |  |                             |          |   |      |   |          |  



See notes to condensed
consolidated financial statements.



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Pericom Semiconductor Corporation

Notes To Condensed Consolidated Financial Statements

(Unaudited)



1. Basis of Presentation



The financial
statements have been prepared by Pericom Semiconductor Corporation (Pericom or the Company) pursuant to the rules and regulations of the Securities and Exchange Commission. In the opinion of management, these unaudited
financial statements include all adjustments, consisting only of normal recurring adjustments and accruals, necessary for a fair presentation of the Companys financial position as of March 31, 2004, the results of operations for the three and
nine-month periods ended March 31, 2004 and 2003 and cash flows for the nine months ended March 31, 2004 and 2003. This unaudited quarterly information should be read in conjunction with the audited financial statements of Pericom and the notes
thereto incorporated by reference in the Companys Annual Report on Form 10-K as filed with the Securities and Exchange Commission.



The preparation of the interim condensed consolidated financial statements in conformity with accounting principles generally accepted in the United States of America
requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities as of the date of the interim condensed consolidated financial statements and the
reported amounts of revenue and expenses during the period. Actual amounts could differ from these estimates. The results of operations for the three and nine-month periods ended March 31, 2004 are not necessarily indicative of the results to be
expected for the entire year.



The Companys fiscal periods in the
accompanying financial statements have been shown as ending on June 30 and March 31. The Companys fiscal year 2003 ended on June 28, 2003. The three and nine-month periods in fiscal years 2004 and 2003 ended on March 27, 2004 and March 29,
2003, respectively, and each period included 13 and 39 weeks, respectively. Certain reclassifications have been made to conform prior year amounts to the current years presentation.



The Company participates in a dynamic high technology industry and believes that changes in any of the following areas could have a material
adverse effect on the Companys future financial position or results of operations: advances and trends in new technologies; competitive pressures in the form of new products or price reductions on current products; changes in the overall
demand for products offered by the Company; changes in customer relationships; acquisitions and the subsequent integration of the acquired entity with the company; litigation or claims against the Company based on intellectual property, patent,
product, regulatory or other factors; risks associated with changes in domestic and international economic and/or political conditions or regulations; availability of necessary components; and the Companys ability to attract and retain
employees necessary to support its growth.



These condensed consolidated
financial statements include the accounts of Pericom Semiconductor Corporation and its three wholly owned subsidiaries, SaRonix, Inc., Pericom Semiconductor (HK) Limited and Pericom Taiwan Limited Corporation. SaRonix, Inc. was formed in September,
2003 to purchase substantially all the assets and related liabilities of SaRonix, LLC effective October 1, 2003. (see Note 2) All significant intercompany balances and transactions are eliminated in consolidation.



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Stock Based Compensation



Had the Company amortized to expense the computed fair values of the awards under the 1990 Stock Option Plan, 1995 Stock Option Plan, 2001
Stock Option Plan, and 2000 Employee Stock Purchase Plan, for the three and nine-month periods ended March 31, 2004 and 2003, the Companys net loss and loss per share would have been as follows (in thousands, except per share data):



|                                                                                                                                            |  |                              |        |   |                             |   |        |      |  |   |        |   |  |   |        |  
|------------------------------------------------------------------------------------------------------------------------------------------- |  | ---------------------------- | ------ | - | --------------------------- | - | ------ | ---- |  | - | ------ | - |  | - | ------ | -
|                                                                                                                                            |  | Three Months Ended March 31, |        |   | Nine Months Ended March 31, |  
|                                                                                                                                            |  | 2004                         |        |   | 2003                        |   |        | 2004 |  |   | 2003   |  
|Net loss, as reported                                                                                                                       |  | $                            | (96    | ) |                             | $ | (631   | )    |  | $ | (2,771 | ) |  | $ | (3,957 | )
|Deduct: Total stock-based employee compensation expense determined under fair value based method for all awards, net of related tax
effects |  |                              | (1,142 | ) |                             |   | (1,534 | )    |  |   | (3,289 | ) |  |   | (4,803 | )
|                                                                                                                                            |  |                              |        |   |                             |   |        |      |  |   |        |   |  |   |        |  
|Pro forma net loss                                                                                                                          |  | $                            | (1,238 | ) |                             | $ | (2,165 | )    |  | $ | (6,060 | ) |  | $ | (8,760 | )
|                                                                                                                                            |  |                              |        |   |                             |   |        |      |  |   |        |   |  |   |        |  
|Loss per share:                                                                                                                             |  |                              |        |   |                             |   |        |      |  |   |        |   |  |   |        |  
|Basic and diluted loss per share, as reported                                                                                               |  | $                            | (0.00  | ) |                             | $ | (0.02  | )    |  | $ | (0.11  | ) |  | $ | (0.15  | )
|                                                                                                                                            |  |                              |        |   |                             |   |        |      |  |   |        |   |  |   |        |  
|Basic and diluted loss per share, pro forma                                                                                                 |  | $                            | (0.05  | ) |                             | $ | (0.08  | )    |  | $ | (0.23  | ) |  | $ | (0.34  | )
|                                                                                                                                            |  |                              |        |   |                             |   |        |      |  |   |        |   |  |   |        |  



2. Business Combinations



Acquisition of Assets of SaRonix, LLC.



On October 1, 2003 the Company, acting through its wholly-owned subsidiary SaRonix, Inc.,
exercised its option to acquire substantially all the assets and related liabilities of privately-held SaRonix, LLC (SaRonix). Total consideration paid was approximately $7,900,000 in the form of the cancellation of previously advanced loans
pursuant to the terms of a Secured Loan Agreement. The Company also incurred approximately $1,731,000 in acquisition related costs, for a total purchase price of approximately $9,631,000. SaRonix designs, manufactures and distributes
industry-standard and custom frequency control products (FCP) including Crystal and Surface Acoustic Wave Oscillators, Quartz Crystals, and Timing Modules. The Company acquired SaRonix for this complementary portfolio of timing solutions.



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The results of operations of SaRonix, Inc. from the date of acquisition have been included in the Companys
consolidated financial statements. The assets acquired and liabilities assumed at the date of the acquisition were recorded at estimated fair values. Fair values of intangible assets acquired are based on an independent valuation prepared using
estimates and assumptions provided by management. Fair value of tangible assets acquired and liabilities assumed were determined by management using estimates of current replacement cost, present value of amounts to be collected in the future, and
other techniques. The purchase price has been allocated as follows (in thousands):



|                                                  |  |   |        |  
|------------------------------------------------- |  | - | ------ | -
|Current assets                                    |  | $ | 7,005  |  
|Property and equipment                            |  |   | 1,173  |  
|Building held for sale                            |  |   | 1,532  |  
|Other assets                                      |  |   | 616    |  
|Other intangible assets subject to amortization : |  |   |        |  
|Customer backlog                                  |  |   | 320    |  
|Core developed technology                         |  |   | 1,189  |  
|In-process research and development               |  |   | 360    |  
|Supplier relationship                             |  |   | 901    |  
|Trade name                                        |  |   | 957    |  
|                                                  |  |   |        |  
|Total assets acquired                             |  |   | 14,053 |  
|Current liabilities                               |  |   | (4,422 | )
|                                                  |  |   |        |  
|Total liabilities assumed                         |  |   | (4,422 | )
|                                                  |  |   |        |  
|Net assets acquired                               |  | $ | 9,631  |  
|                                                  |  |   |        |  



The Company amortized customer backlog
over the three months ended December 31, 2003. Supplier relationship and trade name will not be amortized, but will be reviewed at least annually for impairment. Core developed technology will be amortized over its estimated useful life of ten
years. Amortization expense for the three months ended March 31, 2004 was $20,000. Amortization for the remainder of fiscal 2004 will be approximately $40,000, and amortization for each fiscal year through 2012 will be $119,000 per year and
amortization for 2013 will be $32,000.



Approximately $360,000 of the purchase
price was allocated to the estimated fair value of in-process research and development projects. At the date of acquisition, these projects had not reached technological feasibility and had no future alternative minimum use. Accordingly, the value
allocated to these projects was immediately expensed in research and development on the acquisition date.



The following unaudited pro forma information shows the results of operations for the year ended June 30, 2003 and the three months ended September 30, 2003 as if the SaRonix acquisition occurred on the first day of
fiscal year 2003, with the exception that the purchase accounting adjustments were estimated based on the closing date of the SaRonix acquisition.



The pro forma information is presented for illustrative purposes only and is not necessarily indicative of the operating results that would have occurred if the
acquisition had been consummated at the beginning of the earliest period presented, nor is it necessarily indicative of future operating results.



|                                 |  |                            |        |   |      |   |         |  
|-------------------------------- |  | -------------------------- | ------ | - | ---- | - | ------- | -
|                                 |  | Nine Months EndedMarch 31, |       
|Unaudited pro-forma information: |  | 2004                       |        |   | 2003 |  
|Net revenues                     |  | $                          | 50,120 |   |      | $ | 45,946  |  
|                                 |  |                            |        |   |      |   |         |  
|Net loss                         |  | $                          | (4,723 | ) |      | $ | (11,157 | )
|                                 |  |                            |        |   |      |   |         |  
|Basic and diluted loss per share |  | $                          | (0.18  | ) |      | $ | (0.43   | )
|                                 |  |                            |        |   |      |   |         |  



8



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##### Table of Contents

3. Loss Per Share



Basic loss per share is based upon the weighted average number of common shares outstanding. Diluted loss per share reflects the additional potential dilution that could
occur if securities or other contracts to issue common stock were exercised or converted into common stock.



Basic and diluted loss per share for the three and nine-month periods ended March 31, 2004 and 2003 are computed as follows (in thousands, except for per share data):



|                                                                   |  |                             |        |   |                            |   |        |      |  |   |        |   |  |   |        |  
|------------------------------------------------------------------ |  | --------------------------- | ------ | - | -------------------------- | - | ------ | ---- |  | - | ------ | - |  | - | ------ | -
|                                                                   |  | Three Months EndedMarch 31, |        |   | Nine Months EndedMarch 31, |  
|                                                                   |  | 2004                        |        |   | 2003                       |   |        | 2004 |  |   | 2003   |  
|Net loss                                                           |  | $                           | (96    | ) |                            | $ | (631   | )    |  | $ | (2,771 | ) |  | $ | (3,957 | )
|Computation of common shares outstanding  basic loss per share:   |  |                             |        |   |                            |   |        |      |  |   |        |   |  |   |        |  
|Weighted average shares of common stock                            |  |                             | 26,166 |   |                            |   | 25,717 |      |  |   | 25,970 |   |  |   | 25,726 |  
|                                                                   |  |                             |        |   |                            |   |        |      |  |   |        |   |  |   |        |  
|Shares used in computing basic loss per share                      |  |                             | 26,166 |   |                            |   | 25,717 |      |  |   | 25,970 |   |  |   | 25,726 |  
|                                                                   |  |                             |        |   |                            |   |        |      |  |   |        |   |  |   |        |  
|Basic loss per share                                               |  | $                           | (0.00  | ) |                            | $ | (0.02  | )    |  | $ | (0.11  | ) |  | $ | (0.15  | )
|                                                                   |  |                             |        |   |                            |   |        |      |  |   |        |   |  |   |        |  
|Computation of common shares outstanding  diluted loss per share: |  |                             |        |   |                            |   |        |      |  |   |        |   |  |   |        |  
|Weighted average shares of common stock                            |  |                             | 26,166 |   |                            |   | 25,717 |      |  |   | 25,970 |   |  |   | 25,726 |  
|Dilutive options using the treasury stock method                   |  |                             |       |   |                            |   |       |      |  |   |       |   |  |   |       |  
|                                                                   |  |                             |        |   |                            |   |        |      |  |   |        |   |  |   |        |  
|Shares used in computing diluted loss per share                    |  |                             | 26,166 |   |                            |   | 25,717 |      |  |   | 25,970 |   |  |   | 25,726 |  
|                                                                   |  |                             |        |   |                            |   |        |      |  |   |        |   |  |   |        |  
|Diluted loss per share                                             |  | $                           | (0.00  | ) |                            | $ | (0.02  | )    |  | $ | (0.11  | ) |  | $ | (0.15  | )
|                                                                   |  |                             |        |   |                            |   |        |      |  |   |        |   |  |   |        |  



For the three and nine-month periods
ended March 31, 2004, options to purchase 5,429,138 shares of common stock were not included in the computation of diluted net loss per share because the Company had a net loss for these periods and those options would be anti-dilutive. For the
three and nine-month periods ended March 31, 2003, options to purchase 5,238,258 shares of common stock were not included in the computation of diluted net loss per share because the Company had a net loss for these periods and those options would
be anti-dilutive.



4. Inventories



Inventories consist of (in thousands):



|                |  |                |        |               |   |      
|--------------- |  | -------------- | ------ | ------------- | - | -----
|                |  | March 31, 2004 |        | June 30, 2003
|Raw materials   |  | $              | 5,932  |               | $ | 5,452
|Work in process |  |                | 3,859  |               |   | 2,486
|Finished goods  |  |                | 5,497  |               |   | 2,025
|                |  |                |        |               |   |      
|                |  | $              | 15,288 |               | $ | 9,963
|                |  |                |        |               |   |      



9



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##### Table of Contents

5. Accrued Liabilities



Accrued liabilities consist of (in thousands):



|                                          |  |                |       |               |   |      
|----------------------------------------- |  | -------------- | ----- | ------------- | - | -----
|                                          |  | March 31, 2004 |       | June 30, 2003
|Accrued compensation                      |  | $              | 2,087 |               | $ | 1,240
|External sales representative commissions |  |                | 970   |               |   | 632  
|Restructuring accrual                     |  |                | 1,127 |               |   | 653  
|Other accrued expenses                    |  |                | 1,387 |               |   | 600  
|                                          |  |                |       |               |   |      
|                                          |  | $              | 5,571 |               | $ | 3,125
|                                          |  |                |       |               |   |      



6. Long Term Debt



Bank Loan



As part of the acquisition of SaRonix (see Note 2), the Company assumed a loan from a bank. The loan has a variable interest rate of 2.5%
over the 30 day LIBOR rate (1.1% at March 31, 2004) and was payable in monthly installments of principal and interest in Irish Pounds for ten years. This loan was amended twice, with the latest amendment effective in September 2003, to modify the
payment terms to require interest only payments until October 31, 2004. This loan is secured by a building owned by the Company in Ireland, which is classified as held for sale at March 31, 2004. At March 31, 2004, the Company had $1,291,000
outstanding under this loan classified as a current liability based on the Companys intent to pay off this loan in connection with the sale of the building.



Capital Lease Obligations



As part of the acquisition of SaRonix (see Note 2), the Company assumed various capital leases with interest rates ranging from 6% to 16%. These leases were paid in full
as of March 31, 2004.



7. Investments and Loans to SaRonix LLC



The Company has investments in certain privately held companies, which it
accounts for under the cost method. The carrying amount of such investments was approximately $2.9 million and $10.0 million at March 31, 2004 and June 30, 2003, respectively, and these amounts are recorded in other assets and loans to SaRonix LLC
(see Note 2).



8. Restructuring



During the quarter ended December 31, 2002, the Company revised its estimate of a previous
restructuring charge for an unused portion of its San Jose, California facility. The Company recorded a restructuring charge of $1.4 million related to this facility. This charge represents the future lease payments and estimated utility and
maintenance costs for the remainder of the lease, which expires in May 2005. The Company received notice that a sublessee would move from this facility and the Company estimated that it will not be able to sublease the facility due to the excess
available real estate in the San Jose, California area. Due to the continued depression in the Companys business, the Company determined that this portion of the facility will not be utilized over the remaining lease term.



During the quarter ended December 31, 2003, the Company recorded an additional restructuring
charge of $784,000 when it moved out of this facility and into a new corporate headquarters. There were no restructuring charges recorded in the quarter ended March 31, 2004.



10



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##### Table of Contents

The following table sets forth the activity of the restructuring accrual as of March 31, 2004 (in thousands):



|                          |  |   |       |  
|------------------------- |  | - | ----- | -
|Balance at June 30, 2003  |  | $ | 1,272 |  
|Additional reserves       |  |   | 784   |  
|Payments                  |  |   | (816  | )
|                          |  |   |       |  
|Balance at March 31, 2004 |  | $ | 1,240 |  
|                          |  |   |       |  



The Company has classified $113,000
and $619,000 of this accrual in long-term liabilities and $1,127,000 and $653,000 in current accrued liabilities in the accompanying balance sheets as of March 31, 2004 and June 30, 2003, respectively.



9. Industry and Segment Information



Statement of Financial Accounting Standards (SFAS) No. 131, Disclosures
about Segments of an Enterprise and Related Information established annual and interim reporting standards for an enterprises business segments and related disclosures about its products, services, geographical areas and major customers.
The Company operates and tracks its results in one reportable segment. The Company designs, develops, manufactures and markets a broad range of interface integrated circuits and frequency control products.



The following table sets forth significant customers for the three and nine-month periods
ended March 31, 2004 and 2003.



There were no direct customers that
individually accounted for more than 10% of net sales in the three months ended March 31, 2004. In the nine months ended March 31, 2004 there was one direct customer that accounted for 12% of net sales. In the three months ended March 31, 2003,
there were three direct customers that individually accounted for 12%, 11% and 10% of net sales. In the nine months ended March 31, 2003 there were two direct customers that individually accounted for 14% and 11% of net sales. The majority of the
Companys property and equipment is located within the United States.



The
following table sets forth net revenues by country as a percentage of total net revenues for the three and nine-month periods ended March 31, 2004 and 2003.



|                           |  |                              |   |  |                             |   |  |       |   |  |       |  
|-------------------------- |  | ---------------------------- | - |  | --------------------------- | - |  | ----- | - |  | ----- | -
|                           |  | Three Months Ended March 31, |   |  | Nine Months Ended March 31, |  
|                           |  | 2004                         |   |  | 2003                        |   |  | 2004  |   |  | 2003  |  
|United States              |  | 29.8                         | % |  | 29.8                        | % |  | 28.5  | % |  | 33.1  | %
|China                      |  | 17.6                         | % |  | 16.6                        | % |  | 18.8  | % |  | 15.9  | %
|Taiwan                     |  | 16.5                         | % |  | 19.5                        | % |  | 19.1  | % |  | 17.4  | %
|Singapore                  |  | 11.1                         | % |  | 11.1                        | % |  | 10.9  | % |  | 14.0  | %
|Other (less than 10% each) |  | 25.0                         | % |  | 23.0                        | % |  | 22.7  | % |  | 19.6  | %
|                           |  |                              |   |  |                             |   |  |       |   |  |       |  
|Total                      |  | 100.0                        | % |  | 100.0                       | % |  | 100.0 | % |  | 100.0 | %
|                           |  |                              |   |  |                             |   |  |       |   |  |       |  



11



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##### Table of Contents

10. Comprehensive Income



SFAS No. 130, Reporting Comprehensive Income requires an enterprise to report, by major components and as a single total, the change in net assets during
the period from non-owner sources. For the three and nine-month periods ended March 31, 2004 and 2003, comprehensive income, which was comprised of the Companys net loss for the periods and changes in cumulative unrealized gain/(loss) on
short-term investments net of tax was as follows:



|                                     |  |                              |     |   |                             |   |      |      |  |   |        |   |  |   |        |  
|------------------------------------ |  | ---------------------------- | --- | - | --------------------------- | - | ---- | ---- |  | - | ------ | - |  | - | ------ | -
|                                     |  | Three Months Ended March 31, |     |   | Nine Months Ended March 31, |  
|                                     |  | 2004                         |     |   | 2003                        |   |      | 2004 |  |   | 2003   |  
|Net loss                             |  | $                            | (96 | ) |                             | $ | (631 | )    |  | $ | (2,771 | ) |  | $ | (3,957 | )
|Unrealized gain (loss) on investment |  |                              | 82  |   |                             |   | 51   |      |  |   | (575   | ) |  |   | 885    |  
|Translation gain (loss)              |  |                              | 109 |   |                             |   |     |      |  |   | 133    |   |  |   |       |  
|                                     |  |                              |     |   |                             |   |      |      |  |   |        |   |  |   |        |  
|Comprehensive income (loss)          |  | $                            | 95  |   |                             | $ | (580 | )    |  | $ | (3,213 | ) |  | $ | (3,072 | )
|                                     |  |                              |     |   |                             |   |      |      |  |   |        |   |  |   |        |  



11. Stock Repurchase Program



On October 22, 2001 the Companys Board of Directors authorized a
stock repurchase program to repurchase up to 2,000,000 shares of Pericoms common stock. Purchases may be made in the open market or in privately negotiated transactions from time to time at managements discretion. The Company began
repurchasing shares of Pericoms stock on July 23, 2002. No shares were repurchased in the three months ended March 31, 2004. The Company has purchased a total of 274,500 shares at a total cost of approximately $2.2 million as of March 31,
2004.



12. Commitments



In October 2003, the Company entered into a lease for a new corporate headquarters for a
period of ten years with two consecutive options to extend for an additional five years each. The future minimum operating lease commitments, including leases on abandoned facilities (see Note 8), at March 31, 2004 are as follows (in thousands):



|                         |  |                             |     |      |   |       |  |      |       |      |   |            |  |   |     |  |   |      
|------------------------ |  | --------------------------- | --- | ---- | - | ----- |  | ---- | ----- | ---- | - | ---------- |  | - | --- |  | - | -----
|                         |  | Fiscal Year Ending June 30, |     |     
|Fiscal Year              |  | 2004(1)                     |     | 2005 |   | 2006  |  | 2007 |       | 2008 |   | Thereafter
|Operating lease payments |  | $                           | 712 |      | $ | 1,733 |  | $    | 1,089 |      | $ | 966        |  | $ | 963 |  | $ | 5,831

---

|(1) | Represents remaining three months of fiscal year
|--- | ------------------------------------------------



12



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##### Table of Contents

Item 2: Managements Discussion and Analysis

of Financial Condition and Results of Operations



Pericom Semiconductor Corporation



The following information should be read in conjunction with the unaudited financial
statements and notes thereto included in Part 1 - Item 1 of this Quarterly Report and the audited financial statements and notes thereto and Managements Discussion and Analysis of Financial Condition and Results of Operations contained in the
Companys Annual Report on Form 10-K (the Form 10-K).



Significant Events



On October 1, 2003, Pericom Semiconductor
Corporation, acting through its wholly-owned subsidiary SaRonix, Inc. (SaRonix), exercised its option to acquire substantially all of the assets and related liabilities of SaRonix, LLC (see Note 2 to the condensed consolidated financial
statements). Beginning with the three months ended December 31, 2003, the Companys operating results include the operations of SaRonix.



Critical Accounting Policies



Our consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America. The preparation of
such statements requires us to make estimates and assumptions that affect the reported amounts of revenues and expenses during the reporting period and the reported amounts of assets and liabilities as of the date of the financial statements. Our
estimates are based on historical experience and other assumptions that we consider to be reasonable given the circumstances. Actual results may vary from our estimates.



We consider the following accounting policies to be critical as defined by the Securities and Exchange Commission, in that they
are both highly important to the portrayal of our financial condition and results, and require us to make difficult judgements and assumptions about matters that are inherently uncertain. We also have other important policies that are discussed in
Note 1 to the Consolidated Financial Statements in our Form 10-K.



Revenue
Recognition.We recognize revenue from the sale of our products upon shipment, provided title and risk of loss has passed to the customer, the fee is fixed and determinable and collection of the revenue is reasonably assured. A provision for
estimated future returns and other charges against revenue is recorded at the time of shipment. For the three months ended March 31, 2004 approximately 57% of our sales were to distributors. We have agreements for price protection and stock rotation
programs with our distributors. The revenue we record for sales to our distributors is net of estimated provisions for these programs. When determining this net revenue, we must make significant judgments and estimates. Our estimates are based on
historical experience rates, inventory levels in the distribution channel, current trends and other related factors. However, because of the inherent nature of estimates, there is a risk that there could be significant differences between actual
amounts and our estimates. Our financial condition and operating results depend on our ability to make reliable estimates and we believe that our estimates are reasonable.



Inventories.Inventories are recorded at the lower of standard cost (which generally approximates actual cost on a first-in,
first-out basis) or market value. We adjust the carrying value of inventory for excess and obsolete inventory based on inventory age, shipment history and our forecast of demand over a specific future period of time. The semiconductor markets that
we serve are volatile and actual results may vary from our forecast or other assumptions, potentially impacting our inventory valuation and resulting in material effects on our gross margin.



13



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##### Table of Contents

Investments.As required by SFAS No. 142, Goodwill and Other Intangible Assets, which we adopted in
fiscal 2002, we ceased amortizing goodwill with a net carrying value of $1.3 million that resulted from our investment in Pericom Technology, Inc. SFAS No. 142 also requires that goodwill be tested for impairment at least annually. We determined
that no impairment of this goodwill existed in fiscal 2003, and we will continue to evaluate such goodwill at least annually.



We have also made other investments including loans, bridge loans convertible to equity or asset purchases as well as direct equity investments. These loans and
investments are made with strategic intentions and have been in privately held technology companies, which by their nature are high risk. These investments are included in other assets in the balance sheet and are carried at the lower of cost, or
market if the investment has experienced an other-than-temporary decline in value. We monitor these investments quarterly and make appropriate reductions in carrying value if a decline in value is deemed to be other than temporary.



Deferred Tax Assets



Our deferred income tax assets represent temporary differences between the financial statement carrying amount and the tax basis of existing
assets and liabilities that will result in deductible amounts in future years, including net operating loss carryforwards. Based on estimates, the carrying value of our net deferred tax assets assumes that it is more likely than not that we will be
able to generate sufficient future taxable income in certain tax jurisdictions. Our judgments regarding future profitability may change due to future market conditions, changes in U.S. or international tax laws and other factors. If these estimates
and related assumptions change in the future, we may be required to increase our valuation allowance against the deferred tax assets resulting in additional income tax expense.



Results of Operations



The following table sets forth certain statement of operations data as a percentage of net revenues for the periods indicated.



|                                           |  |                             |    |  |                            |    |  |       |    |  |       |   
|------------------------------------------ |  | --------------------------- | -- |  | -------------------------- | -- |  | ----- | -- |  | ----- | --
|                                           |  | Three Months EndedMarch 31, |    |  | Nine Months EndedMarch 31, |   
|                                           |  | 2004                        |    |  | 2003                       |    |  | 2004  |    |  | 2003  |   
|Net revenues                               |  | 100.0                       | %  |  | 100.0                      | %  |  | 100.0 | %  |  | 100.0 | % 
|Cost of revenues                           |  | 66.5                        | %  |  | 69.9                       | %  |  | 69.8  | %  |  | 70.1  | % 
|                                           |  |                             |    |  |                            |    |  |       |    |  |       |   
|Gross profit                               |  | 33.5                        | %  |  | 30.1                       | %  |  | 30.2  | %  |  | 29.9  | % 
|                                           |  |                             |    |  |                            |    |  |       |    |  |       |   
|Operating expenses:                        |  |                             |    |  |                            |    |  |       |    |  |       |   
|Research and development                   |  | 18.7                        | %  |  | 24.0                       | %  |  | 23.0  | %  |  | 25.3  | % 
|Selling, general and administrative        |  | 23.1                        | %  |  | 23.3                       | %  |  | 23.9  | %  |  | 25.8  | % 
|Restructuring charge                       |  | 0.0                         | %  |  | 0.0                        | %  |  | 1.7   | %  |  | 4.3   | % 
|                                           |  |                             |    |  |                            |    |  |       |    |  |       |   
|Total                                      |  | 41.8                        | %  |  | 47.3                       | %  |  | 48.6  | %  |  | 55.4  | % 
|                                           |  |                             |    |  |                            |    |  |       |    |  |       |   
|Loss from operations                       |  | (8.3                        | )% |  | (17.2                      | )% |  | (18.4 | )% |  | (25.5 | )%
|Equity in net income (loss) of investee    |  | 0.8                         | %  |  | (1.5                       | )% |  | 0.6   | %  |  | (2.5  | )%
|Interest income                            |  | 5.5                         | %  |  | 10.4                       | %  |  | 6.5   | %  |  | 12.0  | % 
|Other-than-temporary decline in investment |  | 0.0                         | %  |  | 0.0                        | %  |  | 0.0   | %  |  | (3.4  | )%
|                                           |  |                             |    |  |                            |    |  |       |    |  |       |   
|Loss before income taxes                   |  | (2.0                        | )% |  | (8.3                       | )% |  | (11.3 | )% |  | (19.4 | )%
|Income tax benefit                         |  | (1.5                        | )% |  | (2.7                       | )% |  | (5.3  | )% |  | (7.6  | )%
|                                           |  |                             |    |  |                            |    |  |       |    |  |       |   
|Net loss                                   |  | (0.5                        | )% |  | (5.6                       | )% |  | (6.0  | )% |  | (11.8 | )%
|                                           |  |                             |    |  |                            |    |  |       |    |  |       |   



14



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##### Table of Contents

Net Revenues



The following table sets forth our revenues and the customer concentrations with respect to such revenues for the periods indicated.



|                                                                            |  |                              |        |   |                             |   |        |         |  |      |      |  |   |        |   |  |         |        |   |  |      |  
|--------------------------------------------------------------------------- |  | ---------------------------- | ------ | - | --------------------------- | - | ------ | ------- |  | ---- | ---- |  | - | ------ | - |  | ------- | ------ | - |  | ---- | -
|                                                                            |  | Three Months Ended March 31, |        |   | Nine Months Ended March 31, |  
|(In thousands)                                                              |  | 2004                         |        |   | 2003                        |   |        | %Change |  |      | 2004 |  |   | 2003   |   |  | %Change |       
|Net revenues                                                                |  | $                            | 18,466 |   |                             | $ | 11,492 |         |  | 60.7 | %    |  | $ | 46,388 |   |  | $       | 33,452 |   |  | 38.7 | %
|Percentage of net sales accounted for by top 5 direct customers (1)         |  |                              | 40.4   | % |                             |   | 48.1   | %       |  |      |      |  |   | 41.2   | % |  |         | 45.7   | % |  |      |  
|                                                                            |  |                              |        |   |                             |   |        |         |  |      |      |  |   |        |   |  |         |        |   |  |      |  
|Number of direct customers that each account for more than 10% of net sales |  |                              | 0      |   |                             |   | 3      |         |  |      |      |  |   | 1      |   |  |         | 2      |   |  |      |  
|                                                                            |  |                              |        |   |                             |   |        |         |  |      |      |  |   |        |   |  |         |        |   |  |      |  
|Percentage of gross sales accounted for by top 5 end customers (2)          |  |                              | 29.2   | % |                             |   | 37.3   | %       |  |      |      |  |   | 30.1   | % |  |         | 40.2   | % |  |      |  
|                                                                            |  |                              |        |   |                             |   |        |         |  |      |      |  |   |        |   |  |         |        |   |  |      |  
|Number of end customers that each account for more than 10% of gross sales  |  |                              | 0      |   |                             |   | 0      |         |  |      |      |  |   | 0      |   |  |         | 2      |   |  |      |  

---

|(1) | Direct customers purchase products directly from the Company. These include distributors and contract manufacturers that in turn sell to many end customers as well as OEMs that also
purchase directly from the Company.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(2) | End customers are OEMs whose products include the Companys products. End customers may purchase directly from the Company or from distributors or contract manufacturers. We
rely on the end customer data provided by our direct distribution and contract manufacturing customers.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



On October 1, 2003, the Company exercised its option to acquire SaRonix LLC of Menlo Park, California. Beginning with the quarter ended December 31, 2003, the
Companys revenues included revenues for the three and nine-month periods ended March 31, 2004 of $5.0 million and $9.7 million, respectively, from sales of SaRonix products.



The rapid semiconductor industry downturn that began in fiscal 2001 caused an over-supply of inventories in the global distribution and
contract manufacturing channels. This inventory imbalance pushed order rates down, caused a corresponding drop in backlog, and caused the percentage of net sales represented by orders placed and shipped in the same quarter to grow. These orders are
called turns orders. Even with the recovery that is currently taking place, there is still significant reliance on turns orders. With such a reliance on turns orders, it is difficult for the Company to predict future revenue levels.



Net revenues consist of product sales, which are recognized upon shipment,
less an estimate for returns and allowances. The increase in revenues for the three and nine-month periods ended March 31, 2004 as compared with the same periods in the prior year is primarily attributable to the acquisition of SaRonix. The increase
in revenues is also attributable to the recovery currently taking place in the end markets the Company serves and to customer acceptance of the Companys new product offerings. The recovery has resulted in an increase in unit volumes shipped in
our core integrated circuit business and, along with favorable changes to product mix, a slight improvement in average selling price.



15



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##### Table of Contents

The following table sets forth net revenues by country as a percentage of total net revenues for the three and nine-month
periods ended March 31, 2004 and 2003.



|                           |  |                             |   |  |                            |   |  |       |   |  |       |  
|-------------------------- |  | --------------------------- | - |  | -------------------------- | - |  | ----- | - |  | ----- | -
|                           |  | Three Months EndedMarch 31, |   |  | Nine Months EndedMarch 31, |  
|                           |  | 2004                        |   |  | 2003                       |   |  | 2004  |   |  | 2003  |  
|United States              |  | 29.8                        | % |  | 29.8                       | % |  | 28.5  | % |  | 33.1  | %
|China                      |  | 17.6                        | % |  | 16.6                       | % |  | 18.8  | % |  | 15.9  | %
|Taiwan                     |  | 16.5                        | % |  | 19.5                       | % |  | 19.1  | % |  | 17.4  | %
|Singapore                  |  | 11.1                        | % |  | 11.1                       | % |  | 10.9  | % |  | 14.0  | %
|Other (less than 10% each) |  | 25.0                        | % |  | 23.0                       | % |  | 22.7  | % |  | 19.6  | %
|                           |  |                             |   |  |                            |   |  |       |   |  |       |  
|Total                      |  | 100.0                       | % |  | 100.0                      | % |  | 100.0 | % |  | 100.0 | %
|                           |  |                             |   |  |                            |   |  |       |   |  |       |  



For the three months ended March 31,
2004, as compared with the same period in the prior year, the effect of the ongoing shift of contract manufacturing production from North America to Asia on our net revenues was largely offset by the SaRonix acquisition which has a higher
concentration of sales in North America. For the nine-month period ended March 31, 2004 as compared with the same period in the prior year the percentage of our net revenues derived from sales to China, Taiwan and Singapore combined increased
slightly and the percentage derived from sales to the United States decreased. These changes were primarily driven by the ongoing shift of contract manufacturing production from North America to Asia which was partially offset by the SaRonix
acquisition.



Gross Profit



|                                                            |  |                             |        |   |      |   |        |                            |  |      |      |  |   |        |   |  |         |        |   |  |      |  
|----------------------------------------------------------- |  | --------------------------- | ------ | - | ---- | - | ------ | -------------------------- |  | ---- | ---- |  | - | ------ | - |  | ------- | ------ | - |  | ---- | -
|                                                            |  | Three Months EndedMarch 31, |        |   |      |   |        | Nine Months EndedMarch 31, |  |      |      | 
|(In thousands)                                              |  | 2004                        |        |   | 2003 |   |        | %Change                    |  |      | 2004 |  |   | 2003   |   |  | %Change |       
|                                                            |  |                             |       
|Net revenues                                                |  | $                           | 18,466 |   |      | $ | 11,492 |                            |  | 60.7 | %    |  | $ | 46,388 |   |  | $       | 33,452 |   |  | 38.7 | %
|Gross profit                                                |  |                             | 6,191  |   |      |   | 3,464  |                            |  | 78.7 | %    |  |   | 13,997 |   |  |         | 10,011 |   |  | 39.8 | %
|Gross profit as a percentage of net revenues (gross margin) |  |                             | 33.5   | % |      |   | 30.1   | %                          |  |      |      |  |   | 30.2   | % |  |         | 29.9   | % |  |      |  



The increase in gross profit in the
three and nine-month periods ended March 31, 2004, as compared with the same periods in the prior year was primarily due to an increase in the sales of our core integrated circuit products, which in turn is a result of the current semiconductor
industry recovery, which benefits gross profit by increasing unit volume sold, and, to a lesser extent, the gross profit provided by SaRonix. The improvement in gross margin for the three months ended March 31, 2004, as compared with the same period
in the prior year, is due to the increase in sales of our core integrated circuit products, to a somewhat improved pricing environment, and to an improved mix of our integrated circuit products. The slight improvement in gross margin for the nine
months ended March 31, 2004, as compared with the same period in the prior year, is due to the increase in sales of our core integrated circuit products offset in part by lower gross margins from the sale of inventory acquired from SaRonix that was
written up by $573,000 to fair value in connection with the acquisition and to severance costs of $107,000 related to a November 2003 reduction in workforce. Future gross profit and gross margin are highly dependent on the level and product mix of
net revenues. Accordingly, we are not able to predict future gross profit levels or gross margins with certainty.



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##### Table of Contents

Research and Development



|                                    |  |                             |  |         |  |                            |  |         |  |         |  |        
|----------------------------------- |  | --------------------------- |  | ------- |  | -------------------------- |  | ------- |  | ------- |  | -------
|                                    |  | Three MonthsEnded March 31, |  |         |  | Nine MonthsEnded March 31, |  |        
|(In thousands)                      |  | 2004                        |  | 2003    |  | %Change                    |  | 2004    |  | 2003    |  | %Change
|Net revenues                        |  | $18,466                     |  | $11,492 |  | 60.7%                      |  | $46,388 |  | $33,452 |  | 38.7%  
|Research and development            |  | 3,451                       |  | 2,758   |  | 25.1%                      |  | 10,648  |  | 8,476   |  | 25.6%  
|R&D as a percentage of net revenues |  | 18.7%                       |  | 24.0%   |  |                            |  | 23.0%   |  | 25.3%   |  |        



Research and development expenses
consist primarily of costs related to personnel and overhead, non-recurring engineering charges, and other costs associated with the design, prototyping, testing, manufacturing process support and customer applications support of our products. The
expense increase in the three and nine-month periods ended March 31, 2004 as compared to the same periods in the previous year was primarily due to the acquisition of SaRonix. Research and development costs of SaRonix were $490,000 and $1,354,000,
respectively for the three and nine months ended March 31, 2004. In addition, $360,000 of in-process research and development acquired from SaRonix was written off during the nine month period ended March 31, 2004. Other factors that contributed to
the expense increase were costs of $116,000 and $414,000 in the three and nine-month periods ended March 31, 2004, respectively, that were associated with Pericom Taiwan Ltd. which commenced operations in June 2003.



The Company believes that continued spending on research and development to develop new
products and improve manufacturing processes is critical to the Companys success and, consequently, expects to increase research and development expenses in future periods over the long term. In the short term, the Company intends to continue
to focus on cost control as business conditions warrant. If business conditions deteriorate or the rate of improvement does not meet plan, the Company may implement further cost-cutting actions.



Selling, General and Administrative



|                                      |  |                              |        |   |      |   |        |                             |  |      |      |  |   |        |   |  |         |        |   |  |      |  
|------------------------------------- |  | ---------------------------- | ------ | - | ---- | - | ------ | --------------------------- |  | ---- | ---- |  | - | ------ | - |  | ------- | ------ | - |  | ---- | -
|                                      |  | Three Months Ended March 31, |        |   |      |   |        | Nine Months Ended March 31, |  |      |      | 
|(In thousands)                        |  | 2004                         |        |   | 2003 |   |        | %Change                     |  |      | 2004 |  |   | 2003   |   |  | %Change |       
|Net revenues                          |  | $                            | 18,466 |   |      | $ | 11,492 |                             |  | 60.7 | %    |  | $ | 46,388 |   |  | $       | 33,452 |   |  | 38.7 | %
|Selling, general and administrative   |  |                              | 4,277  |   |      |   | 2,673  |                             |  | 60.0 | %    |  |   | 11,084 |   |  |         | 8,630  |   |  | 28.4 | %
|S,G&A as a percentage of net revenues |  |                              | 23.2   | % |      |   | 23.3   | %                           |  |      |      |  |   | 23.9   | % |  |         | 25.8   | % |  |      |  



Selling, general and administrative
expenses consist primarily of personnel and related overhead costs for sales, marketing, finance, administration, human resources and general management. The expense increase in the three and nine-month periods ended March 31, 2004 as compared to
the same periods in the prior year was primarily due to the acquisition of SaRonix. Costs of $969,000 and $2.4 million relate to the operations of SaRonix for the three and nine months ended March 31, 2004, respectively. In addition, customer
backlog acquired from SaRonix, with a fair value of $320,000 was amortized during the nine-month period ended March 31, 2004.



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##### Table of Contents

The Company anticipates that selling, general and administrative expenses will increase in future periods over the long
term due to increased staffing levels, particularly in sales and marketing, as well as increased commission expense to the extent the Company achieves higher sales levels. In the short term, costs associated with Sarbanes-Oxley section 404
compliance may increase selling, general and administrative expenses. The Company intends to continue to focus on controlling costs until business conditions improve. If business conditions deteriorate or the rate of improvement does not meet our
goals, the Company may implement further cost-cutting actions.



Restructuring Charge



|                     |  |                              |  |                             |  |      |     |      |   |      
|-------------------- |  | ---------------------------- |  | --------------------------- |  | ---- | --- | ---- | - | -----
|                     |  | Three Months Ended March 31, |  | Nine Months Ended March 31,
|(In thousands)       |  | 2004                         |  | 2003                        |  | 2004 |     | 2003
|Restructuring charge |  |                             |  |                            |  | $    | 784 |      | $ | 1,431



In the three months ended December 31,
2002 a $1.4 million restructuring charge related to an unused portion of a leased facility was recorded. The restructuring accrual is expected to be fully depleted in the fourth quarter of fiscal 2005, when the lease terminates. In the three months
ended December 31, 2003 a $784,000 restructuring charge related to another leased facility was recorded when the Company vacated that facility completely and moved to a new corporate headquarters. This restructuring accrual is expected to be fully
depleted in the first quarter of fiscal 2005, when the lease terminates. On March 31, 2004, the remaining balance of the restructuring accrual was $1.2 million.



Equity in Net Income (Loss) of Investee



|                                        |  |                              |     |                             |   |      |        |  |      |     |      |   |     |        |   |      |   |  |   |      
|--------------------------------------- |  | ---------------------------- | --- | --------------------------- | - | ---- | ------ |  | ---- | --- | ---- | - | --- | ------ | - | ---- | - |  | - | -----
|                                        |  | Three Months Ended March 31, |     | Nine Months Ended March 31,
|(In thousands)                          |  | 2004                         |     | 2003                        |   |      | Change |  | 2004 |     | 2003 |   |     | Change
|Equity in net income (loss) of investee |  | $                            | 148 |                             | $ | (169 | )      |  | $    | 317 |      | $ | 285 |        | $ | (839 | ) |  | $ | 1,124



Equity in net income (loss) of
investee is the Companys allocated portion of the net income or losses of Pericom Technology, Inc. (PTI), a British Virgin Islands corporation based in Shanghai, Peoples Republic of China. PTI was formed by Pericom and
certain Pericom shareholders in 1994 to develop and market semiconductors in China and certain other Asian countries. The Companys allocated portion of PTIs results improved to a gain for the three and nine-month periods ended March 31,
2004 from a loss for the comparable periods in the prior year due to improving conditions in the China markets that PTI serves and increasing market acceptance of PTIs new product offerings.



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##### Table of Contents

Interest Income



|                |  |                              |       |      |   |         |                             |       |      |  |      |       |         |   |       |  |       |   
|--------------- |  | ---------------------------- | ----- | ---- | - | ------- | --------------------------- | ----- | ---- |  | ---- | ----- | ------- | - | ----- |  | ----- | --
|                |  | Three Months Ended March 31, |       |      |   |         | Nine Months Ended March 31, |       |      | 
|(In thousands)  |  | 2004                         |       | 2003 |   | %Change |                             |       | 2004 |  | 2003 |       | %Change |  
|Interest income |  | $                            | 1,020 |      | $ | 1,193   |                             | (14.5 | )%   |  | $    | 3,008 |         | $ | 4,020 |  | (25.2 | )%



The decrease in interest income for
the three and nine-month periods ended March 31, 2004 as compared to the comparable prior year periods was due to a combination of less invested capital, lower interest rates as older higher yielding investments matured and were reinvested at
current rates and reduced capital gains as certain investments were sold at a profit in the prior years three and nine-month periods.



Provision for Income Taxes



|                   |  |                              |      |   |      |   |      |                             |  |       |      |  |   |        |   |  |         |        |   |  |       |   
|------------------ |  | ---------------------------- | ---- | - | ---- | - | ---- | --------------------------- |  | ----- | ---- |  | - | ------ | - |  | ------- | ------ | - |  | ----- | --
|                   |  | Three Months Ended March 31, |      |   |      |   |      | Nine Months Ended March 31, |  |       |      | 
|(In thousands)     |  | 2004                         |      |   | 2003 |   |      | %Change                     |  |       | 2004 |  |   | 2003   |   |  | %Change |       
|Pre-tax loss       |  | $                            | (365 | ) |      | $ | (944 | )                           |  | (61.3 | )%   |  | $ | (5,231 | ) |  | $       | (6,487 | ) |  | (19.4 | )%
|Income tax benefit |  |                              | (269 | ) |      |   | (313 | )                           |  | (14.1 | )%   |  |   | (2,460 | ) |  |         | (2,530 | ) |  | (2.8  | )%
|Effective tax rate |  |                              | 73.7 | % |      |   | 33.2 | %                           |  |       |      |  |   | 47.0   | % |  |         | 39.0   | % |  |       |   



Our effective tax rate, which is a
benefit, is 47% for the nine-month period ended March 31, 2004. The income tax benefit in the three months ended March 31, 2004 is the result of an adjustment required to achieve a 47% year to date rate. The income tax benefit in fiscal 2003 was the
result of the carry back of the net loss to prior fiscal years. The income tax benefit in fiscal 2004 is the result of a deferred tax asset being recorded to carry forward the net loss to future years. The provision for income taxes differed from
the federal statutory rate primarily due to state income taxes, the utilization of research and development tax credits and a change in the deferred tax asset valuation allowance.



Liquidity and Capital Resources



|                                                    |  |                             |        |   |      |   |        |        |  |   |        |  
|--------------------------------------------------- |  | --------------------------- | ------ | - | ---- | - | ------ | ------ |  | - | ------ | -
|                                                    |  | Nine Months Ended March 31, |        |   |      |  
|(In thousands)                                      |  | 2004                        |        |   | 2003 |   |        | Change | 
|Net cash provided by (used in) operating activities |  | $                           | (3,794 | ) |      | $ | 2,361  |        |  | $ | (6,155 | )
|Net cash provided by (used in) investing activities |  |                             | 6,312  |   |      |   | (7,249 | )      |  |   | 13,561 |  
|Net cash provided by (used in) financing activities |  |                             | 1,707  |   |      |   | (597   | )      |  |   | 2,304  |  



As of March 31, 2004, the
Companys principal sources of liquidity included cash, cash equivalents and short-term investments of approximately $143.2 million as compared with $149.0 million as of June 30, 2003.



The Companys net cash used in operating activities of $3.8 million in the nine months
ended March 31, 2004 was primarily due to net losses of $2.8 million, a $2.5 million increase in deferred income taxes, a $1.3 million increase in accounts receivable and a $2.3 million increase in inventories partially offset by



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depreciation and amortization of $3.2 million and an increase to accounts payable of $2.4 million. These are net of the
fair value of the assets acquired and liabilities assumed of SaRonix LLC described in Note 2 to the condensed consolidated financial statements. The Companys cash provided by operating activities of $2.4 million in the nine months ended March
31, 2003 was primarily due to net losses of $4.0 million offset by depreciation and amortization of $3.0 million, and other-than-temporary decline in investment of $1.1 million, a $1.2 million decrease in accounts receivable and a $1.4 million
increase to accrued liabilities.



The Companys cash provided by investing
activities of $6.3 million for the nine months ended March 31, 2004 is primarily due to maturities of short-term investments exceeding purchases by $9.4 million partially offset by loans to SaRonix of $1.2 million and purchases of property and
equipment of $2.1 million. The Companys cash used in investing activities of $7.2 million for the nine months ended March 31, 2003 is primarily due to $1.1 million of purchases of property and equipment, loans provided to SaRonix of $5.2
million and an investment of $2.0 million in the common stock of a private company.



The Companys cash provided by financing activities in the nine months ended March 31, 2004 of $1.7 million was primarily due to the sale of common stock from the Companys employee stock plans. The Companys cash used in
financing activities in the nine months ended March 31, 2003 was $597,000 due to the repurchase of common stock by the Company of $1.8 million, which was offset by proceeds received from the sale of common stock from the Companys employee
stock plan of $1.2 million.



The Companys Board of Directors has approved
the repurchase of up to 2,000,000 shares of the Companys common stock. As of March 31, 2004, the Company has repurchased 274,500 shares at a cost of approximately $2.2 million. The Company did not repurchase any shares during the nine months
ended March 31, 2004. The Company intends to continue repurchasing shares under this program over time depending upon price and share availability.



A portion of our cash may be used to acquire or invest in complementary businesses or products or to obtain the right to use complementary technologies. From time to
time, in the ordinary course of business, we may evaluate potential acquisitions of such businesses, products or technologies.



Management believes that existing cash balances and cash generated from operations will be sufficient to fund necessary purchases of capital equipment and to provide
working capital at least through the next twelve months. However, future events may require the Company to seek additional capital sooner. If the Company determines that it needs to seek additional capital, the Company may not be able to obtain such
additional capital on terms acceptable to it.



Contractual Obligations and
Commitments



The Company leases certain facilities under operating leases
with termination dates on or before December 2013. Generally, these leases have multiple options to extend for a period of years upon termination of the original lease term or previously exercised option to extend.



The future minimum operating lease commitments at March 31, 2004 are as follows (in
thousands):



|                         |  |                        |        |                  |   |             |  |             |       |            |   |       |  |   |      
|------------------------ |  | ---------------------- | ------ | ---------------- | - | ----------- |  | ----------- | ----- | ---------- | - | ----- |  | - | -----
|                         |  | Payments Due by Period
|Fiscal Year              |  | Total                  |        | Less than 1 Year |   | 1  3 Years |  | 4  5 Years |       | Thereafter
|Operating lease payments |  | $                      | 11,305 |                  | $ | 1,954       |  | $           | 2,241 |            | $ | 1,935 |  | $ | 5,175
|                         |  |                        |        |                  |   |             |  |             |       |            |   |       |  |   |      



As part of the acquisition of SaRonix
(see Note 2), the Company assumed a loan from a bank. This loan is secured by a building owned by the Company in Ireland, which is classified as held for sale at March 31, 2004. The Companys intent is to pay off this loan in connection with
the sale of the building.



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##### Table of Contents

Factors That May Affect Operating Results



This Quarterly Report on Form 10-Q includes forward-looking statements within
the meaning of Section 27A of the Securities Act and Section 21E of the Exchange Act. All statements other than statements of historical fact are forward-looking statements for purposes of these provisions, including any statements
regarding: projections of revenues, expenses or other financial items; the plans and objectives of management for future operations; the Companys tax rate; the adequacy of allowances for returns, price protection and other concessions;
proposed new products or services; the sufficiency of cash generated from operations and cash balances; the Companys exposure to interest rate risk; future economic conditions or performance; plans to focus on cost control; plans to seek
intellectual property protection for the Companys technologies; expectations regarding export sales and net revenues; the expansion of sales efforts; acquisition prospects; the results of our acquisition of SaRonix and our other possible
future acquisitions and assumptions underlying any of the foregoing. In some cases, forward-looking statements can be identified by the use of terminology such as may, will, expects, plans,
anticipates, estimates, potential, or continue, or the negative thereof or other comparable terminology. Although the Company believes that the expectations reflected in the forward-looking statements
contained herein are reasonable, there can be no assurance that such expectations or any of the forward-looking statements will prove to be correct, and actual results could differ materially from those projected or assumed in the forward-looking
statements. The Companys future financial condition and results of operations, as well as any forward-looking statements, are subject to risks and uncertainties, including but not limited to the factors set forth (i) below, (ii) in the
Companys Form 10-K under the heading Risk Factors; Factors That May Affect Future Results, and (iii) in Note 1 to the Notes to Condensed Consolidated Financial Statements. All forward-looking statements and reasons why results may
differ included in this Quarterly Report are made as of the date hereof, and the Company assumes no obligation to update any such forward-looking statement or reason why actual results may differ.



If we do not develop products that our customers and end-users design into their products,
or if their products do not sell successfully, our business and operating results would be harmed.



We have relied in the past and continue to rely upon our relationships with our customers and end-users for insights into product development strategies for emerging system requirements. We generally incorporate new
products into a customers or end-users product or system at the design stage. However, these design efforts, which can often require significant expenditures by us, may precede product sales, if any, by a year or more. Moreover, the
value to us of any design win will depend in large part on the ultimate success of the customers or end-users product and on the extent to which the systems design accommodates components manufactured by our competitors. If we fail
to achieve design wins or if the design wins fail to result in significant future revenues, our operating results would be harmed. If we have problems developing or maintaining our relationships with our customers and end-users, our ability to
develop well-accepted new products may be impaired.



The markets for our
products are characterized by rapidly changing technology, and our financial results could be harmed if we do not successfully develop and implement new manufacturing technologies or develop, introduce and sell new products.



The markets for our products are characterized by rapidly changing technology, frequent new
product introductions and declining selling prices over product life cycles. We currently offer a comprehensive portfolio of silicon and quartz based products. Our future success depends upon the timely completion and introduction of new products,
across all our product lines, at competitive price and performance levels. The success of new products depends on a variety of factors, including the following:



| |  | product performance and functionality;
| | - | --------------------------------------



| |  | customer acceptance;
| | - | --------------------



| |  | competitive cost structure and pricing;
| | - | ---------------------------------------



| |  | successful and timely completion of product development;
| | - | --------------------------------------------------------



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| |  | sufficient wafer fabrication capacity; and
| | - | ------------------------------------------



| |  | achievement of acceptable manufacturing yields by our wafer suppliers.
| | - | ----------------------------------------------------------------------



We may also experience delays, difficulty in procuring adequate fabrication capacity for the development and manufacture of new products or other difficulties in
achieving volume production of these products. Even relatively minor errors may significantly affect the development and manufacture of new products. If we fail to complete and introduce new products in a timely manner at competitive price and
performance levels, our business would be significantly harmed.



Intense
competition in the semiconductor industry may reduce the demand for our products or the prices of our products, which could reduce our revenues and gross profits.



The semiconductor industry is intensely competitive. Our competitors include Analog Devices, Cypress Semiconductor Corporation, Fairchild
Semiconductor, Intl., Hitachi, Integrated Circuit Systems, Inc., Integrated Device Technology, Inc., Intel Corp., Maxim Integrated Products, Inc., Motorola, On Semiconductor Corp., Tundra Semiconductor Corp., PLX Technology,
STMicroelectronics, Texas Instruments, Inc and Toshiba. Most of those competitors have substantially greater financial, technical, marketing, distribution and other resources, broader product lines and longer-standing customer relationships than we
do. We also compete with other major or emerging companies that sell products to certain segments of our markets. Competitors with greater financial resources or broader product lines may have a greater ability to sustain price reductions in our
primary markets in order to gain or maintain market share.



We believe that our
future success will depend on our ability to continue to improve and develop our products and processes. Unlike us, many of our competitors maintain internal manufacturing capacity for the fabrication and assembly of semiconductor products. This
ability may provide them with more reliable manufacturing capability, shorter development and manufacturing cycles and time-to-market advantages. In addition, competitors with their own wafer fabrication facilities that are capable of producing
products with the same design geometries as ours may be able to manufacture and sell competitive products at lower prices. Any introduction of products by our competitors that are manufactured with improved process technology could seriously harm
our business. As is typical in the semiconductor industry, our competitors have developed and marketed products that function similarly or identically to ours. If our products do not achieve performance, price, size or other advantages over products
offered by our competitors, our products may lose market share. Competitive pressures could also reduce market acceptance of our products, reduce our prices and increase our expenses.



We also face competition from the makers of ASICs and other system devices. These devices may include interface logic functions, which may
eliminate the need or sharply reduce the demand for our products in particular applications.



Our results of operations have been adversely affected by the global economic slowdowns in the past.



In the past, the global economy has experienced economic slowdowns that were due to many factors, including decreased consumer confidence, unemployment, the threat of
terrorism, and reduced corporate profits and capital spending. These unfavorable conditions have resulted in significant declines in our new customer order rates. Any future global economic slowing may materially and adversely affect our business,
financial condition and results of operations.



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Downturns in the semiconductor industry, rapidly changing technology, accelerated selling price erosion and evolving
industry standards can harm our operating results.



The semiconductor
industry has historically been cyclical and periodically subject to significant economic downturnscharacterized by diminished product demand, accelerated erosion of selling prices and overcapacityas well as rapidly changing technology
and evolving industry standards In the future, we may experience substantial period-to-period fluctuations in our business and operating results due to general semiconductor industry conditions, overall economic conditions or other factors. Our
business is also subject to the risks associated with the effects of legislation and regulations relating to the import or export of semiconductor products.



Our acquisition of SaRonix, and other potential future acquisitions may not be successful because we have not made acquisitions in the past.



On October 1, 2003 we exercised our option to acquire substantially all the assets and
related liabilities of SaRonix LLC of Menlo Park, CA. This was our first acquisition. Prior to this, we have depended on internal growth and not made any acquisitions.



The SaRonix acquisition and other potential future acquisitions could result in the following:



| |  | large one-time write-offs;
| | - | --------------------------



| |  | diversion of managements attention from other business concerns;
| | - | -----------------------------------------------------------------



| |  | risks of entering geographic and business markets in which we have no or limited prior experience and potential loss of key employees of acquired organizations.
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  | potentially dilutive issuances of equity securities;
| | - | ----------------------------------------------------



| |  | the incurrence of debt and contingent liabilities or amortization expenses related to intangible assets; and
| | - | ------------------------------------------------------------------------------------------------------------



| |  | difficulties in the assimilation of operations, personnel, technologies, products and the information systems of the acquired companies;
| | - | ----------------------------------------------------------------------------------------------------------------------------------------



We are not certain that we will be able to integrate the SaRonix business or any other
businesses, products, technologies or personnel that may be acquired in the future. Our failure to do so could seriously harm our business.



As part of our business strategy, we expect to seek other acquisition prospects, in addition to SaRonix, that would complement our existing product offerings, improve our
market coverage or enhance our technological capabilities. Although we are evaluating acquisition and strategic investment opportunities on an ongoing basis, we may not be able to locate suitable acquisition or investment opportunities. In addition,
from time to time, we invest in other companies, without actually acquiring them, and such investments involve many of the same risks as are involved with acquisitions. For example, we previously made a bridge loan investment to a start up, high
technology company, and we subsequently had to write off this loan in light of the financial condition of that company.



The trading price of our common stock and our operating results are likely to fluctuate substantially in the future.



The trading price of our common stock has been and is likely to continue to be highly
volatile. Our stock price could fluctuate widely in response to factors some of which are not within our control, including:



| |  | general conditions in the semiconductor and electronic systems industries;
| | - | --------------------------------------------------------------------------



| |  | quarter-to-quarter variations in operating results;
| | - | ---------------------------------------------------



| |  | announcements of technological innovations or new products by us or our competitors; and
| | - | ----------------------------------------------------------------------------------------



| |  | changes in earnings estimates by analysts; and price and volume fluctuations in the overall stock market, which have particularly affected the market prices of many high technology
companies.
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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In the past, our quarterly operating results have varied significantly and are likely to fluctuate in the future.



A wide variety of factors affect our operating results. These factors
might include the following:



| |  | general conditions in the semiconductor industry;
| | - | -------------------------------------------------



| |  | changes in our product mix;
| | - | ---------------------------



| |  | a decline in the gross margins of our products;
| | - | -----------------------------------------------



| |  | the operating results of SaRonix, LLC, which we acquired on October 1, 2003;
| | - | ----------------------------------------------------------------------------



| |  | expenses incurred in obtaining, enforcing, and defending intellectual property rights;
| | - | --------------------------------------------------------------------------------------



| |  | the timing of new product introductions and announcements by us and by our competitors;
| | - | ---------------------------------------------------------------------------------------



| |  | customer acceptance of new products introduced by us;
| | - | -----------------------------------------------------



| |  | delay or decline in orders received from distributors;
| | - | ------------------------------------------------------



| |  | growth or reduction in the size of the market for interface ICs;
| | - | ----------------------------------------------------------------



| |  | the availability of manufacturing capacity with our wafer suppliers;
| | - | --------------------------------------------------------------------



| |  | changes in manufacturing costs;
| | - | -------------------------------



| |  | fluctuations in manufacturing yields;
| | - | -------------------------------------



| |  | disqualification by our customers for quality or performance related issues;
| | - | ----------------------------------------------------------------------------



| |  | the ability of customers to pay us; and
| | - | ---------------------------------------



| |  | increased research and development expenses associated with new product introductions or process changes.
| | - | ---------------------------------------------------------------------------------------------------------



All of these factors are difficult to forecast and could seriously harm our operating results. Our expense levels are based in part on our
expectations regarding future sales and are largely fixed in the short term. Therefore, we may be unable to reduce our expenses fast enough to compensate for any unexpected shortfall in sales. Any significant decline in demand relative to our
expectations or any material delay of customer orders could harm our operating results. In addition, if our operating results in future quarters fall below public market analysts and investors expectations, the market price of our common
stock would likely decrease.



Product price declines and fluctuations may
cause our future financial results to vary.



Historically, selling prices
in the semiconductor industry generally, as well as for our products, have decreased significantly over the life of each product. We expect that selling prices for our existing products will continue to decline over time and that average selling
prices for our new products will decline significantly over the lives of those products. Declines in selling prices for our products, if not offset by reductions in the costs of producing these products or by sales of new products with higher gross
margins, would reduce our overall gross margins and could seriously harm our business.



The demand for our products depends on the growth of our end users markets.



Our continued success depends in large part on the continued growth of markets for the products into which our semiconductor products are incorporated. These markets include the following:



| |  | computers and computer related peripherals;
| | - | -------------------------------------------



| |  | data communications and telecommunications equipment;
| | - | -----------------------------------------------------



| |  | electronic commerce and the Internet; and
| | - | -----------------------------------------



| |  | consumer electronics equipment.
| | - | -------------------------------



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Any decline in the demand for products in these markets could seriously harm our business, financial condition and
operating results. These markets have also historically experienced significant fluctuations in demand. We may also be seriously harmed by slower growth in the other markets in which we sell our products.



Our contracts with our wafer suppliers do not obligate them to a minimum supply or set
prices. Any inability or unwillingness of our wafer suppliers generally, and Chartered Semiconductor Manufacturing Ltd. in particular, to meet our manufacturing requirements would delay our production and product shipments and harm our business.



Typically Chartered Semiconductor Manufacturing Ltd. produces more than
50% of our wafer requirements. In the first nine months of fiscal 2004 only four other suppliers manufactured the remainder of our wafers. In fiscal 2003 only three other suppliers manufactured the remainder of our wafers. Our reliance on
independent wafer suppliers to fabricate our wafers at their production facilities subjects us to possible risks such as:



| |  | lack of adequate capacity;
| | - | --------------------------



| |  | lack of available manufactured products;
| | - | ----------------------------------------



| |  | lack of control over delivery schedules; and
| | - | --------------------------------------------



| |  | unanticipated changes in wafer prices.
| | - | --------------------------------------



Any inability or unwillingness of our wafer suppliers generally, and Chartered in particular, to provide adequate quantities of finished wafers to meet our needs in a
timely manner would delay our production and product shipments and seriously harm our business. In March 2004, Chartered shut down one of their production facilities that is used to manufacture our products. We have transitioned the production of
these products to different facilities. This was a major project requiring significant technological coordination between Chartered and Pericom. The transfer of production of our products to other facilities subjects us to the above listed risks as
well as potential yield or other production problems which could arise as a result of the change.



At present, we purchase wafers from our suppliers through the issuance of purchase orders based on our rolling six-month forecasts. The purchase orders are subject to acceptance by each wafer supplier. We do not have
long-term supply contracts that obligate our suppliers to a minimum supply or set prices. We also depend upon our wafer suppliers to participate in process improvement efforts, such as the transition to finer geometries. If our suppliers are unable
or unwilling to do so, our development and introduction of new products could be delayed. Furthermore, sudden shortages of raw materials or production capacity constraints can lead wafer suppliers to allocate available capacity to customers other
than us or for the suppliers internal uses, interrupting our ability to meet our product delivery obligations. Any significant interruption in our wafer supply would seriously harm our operating results and our customer relations. Our reliance
on independent wafer suppliers may also lengthen the development cycle for our products, providing time-to-market advantages to our competitors that have in-house fabrication capacity.



In the event that our suppliers are unable or unwilling to manufacture our key products in required volumes, we will have to identify and
qualify additional wafer foundries. The qualification process can take up to six months or longer. Furthermore, we are unable to predict whether additional wafer foundries will become available to us or will be in a position to satisfy any of our
requirements on a timely basis.



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We depend on single or limited source assembly subcontractors with whom we do not have written contracts. Any
inability or unwillingness of our assembly subcontractors to meet our assembly requirements would delay our product shipments and harm our business.



We primarily rely on foreign subcontractors for the assembly and packaging of our products and, to a lesser extent, for the testing of finished products. Some of these
subcontractors are our single source supplier for some of our new packages. In addition, changes in our or a subcontractors business could cause us to become materially dependent on a single subcontractor. We have from time to time experienced
difficulties in the timeliness and quality of product deliveries from our subcontractors and may experience similar or more severe difficulties in the future. We generally purchase these single or limited source components or services pursuant to
purchase orders and have no guaranteed arrangements with these subcontractors. These subcontractors could cease to meet our requirements for components or services, or there could be a significant disruption in supplies from them, or degradation in
the quality of components or services supplied by them. Any circumstance that would require us to qualify alternative supply sources could delay shipments, result in the loss of customers and limit or reduce our revenues.



We may have difficulty accurately predicting revenues for future periods.



Our expense levels are based in part on anticipated future revenue levels, which can be
difficult to predict. Our business is characterized by short-term orders and shipment schedules. We do not have long-term purchase agreements with any of our customers, and customers can typically cancel or reschedule their orders without
significant penalty. We typically plan production and inventory levels based on forecasts of customer demand generated with input from customers and sales representatives. Customer demand is highly unpredictable and can fluctuate substantially. If
customer demand falls significantly below anticipated levels, our gross profit would be reduced.



We compete with others to attract and retain key personnel, and any loss of, or inability to attract, key personnel would harm us.



To a greater degree than non-technology companies, our future success will depend on the continued contributions of our executive officers
and other key management and technical personnel. None of these individuals has an employment agreement with us and each one would be difficult to replace. We do not maintain any key person life insurance policies on any of these individuals. The
loss of the services of one or more of our executive officers or key personnel or the inability to continue to attract qualified personnel could delay product development cycles or otherwise harm our business, financial condition and results of
operations.



Our future success also will depend on our ability to attract and
retain qualified technical, marketing and management personnel, particularly highly skilled design, process and test engineers, for whom competition can be intense. During strong business cycles, we expect to experience difficulty in filling our
needs for qualified engineers and other personnel.



Our limited ability to
protect our intellectual property and proprietary rights could harm our competitive position.



Our success depends in part on our ability to obtain patents and licenses and preserve other intellectual property rights covering our products and development and testing tools. In the United States, we hold 76
patents covering certain aspects of our product designs and have at least 23 additional patent applications pending. Copyrights, mask work protection, trade secrets and confidential technological know-how are also key to our business. Additional
patents may not be issued to us or our patents or other intellectual property may not provide meaningful protection. We may be subject to, or initiate, interference proceedings in the U.S. Patent and Trademark Office. These proceedings can consume
significant financial and management resources. We may become involved in litigation relating to alleged infringement by us of others patents or other intellectual property rights. This type of litigation is frequently expensive to both the
winning party and the losing party and takes up significant amounts of managements time and attention. In addition, if we



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lose such a lawsuit, a court could require us to pay substantial damages and/or royalties or prohibit us from using
essential technologies. For these and other reasons, this type of litigation could seriously harm our business. Also, although we may seek to obtain a license under a third partys intellectual property rights in order to bring an end to
certain claims or actions asserted against us, we may not be able to obtain such a license on reasonable terms or at all.



Because it is important to our success that we are able to prevent competitors from copying our innovations, we intend to continue to seek patent, trade secret and mask
work protection for our technologies. The process of seeking patent protection can be long and expensive, and we cannot be certain that any currently pending or future applications will actually result in issued patents, or that, even if patents are
issued, they will be of sufficient scope or strength to provide meaningful protection or any commercial advantage to us. Furthermore, others may develop technologies that are similar or superior to our technology or design around the patents we own.



We also rely on trade secret protection for our technology, in part through
confidentiality agreements with our employees, consultants and third parties. However, these parties may breach these agreements. In addition, the laws of some territories in which we develop, manufacture or sell our products may not protect our
intellectual property rights to the same extent as do the laws of the United States.



The process technology used by our independent foundries, including process technology that we developed with our foundries, can generally be used by them to produce their own products or to manufacture products for other companies
including our competitors. In addition, we may not have the right to implement key process technologies used to manufacture some of our products with foundries other than our present foundries.



We may not provide adequate allowances for exchanges, returns and concessions.



We recognize revenue from the sale of products when shipped, less an
allowance based on future authorized and historical patterns of returns, price protection, exchanges and other concessions. We believe our methodology and approach are appropriate. However, if the actual amounts we incur exceed the allowances, it
could decrease our revenue and corresponding gross profit.



The complexity
of our products makes us highly susceptible to manufacturing problems, which could increase our costs and delay our product shipments.



The manufacture and assembly of our products are highly complex and sensitive to a wide variety of factors, including:



| |  | the level of contaminants in the manufacturing environment;
| | - | -----------------------------------------------------------



| |  | impurities in the materials used; and
| | - | -------------------------------------



| |  | the performance of manufacturing personnel and production equipment.
| | - | --------------------------------------------------------------------



In a typical semiconductor manufacturing process, silicon wafers produced by a foundry are cut into individual die. These die are assembled into individual packages and
tested for performance. Our wafer fabrication suppliers have from time to time experienced lower than anticipated yields of suitable die. In the event of such decreased yields, we would incur additional costs to sort wafers, an increase in average
cost per usable die and an increase in the time to market for our products. These conditions could reduce our net revenues and gross margin and harm our customer relations.



We do not manufacture any of our products. Therefore, we are referred to in the semiconductor industry as a fabless producer.
Consequently, we depend upon third party manufacturers to produce semiconductors that meet our specifications. We currently have third party manufacturers that can produce semiconductors that meet our needs. However, as the industry continues to
progress to smaller manufacturing and design geometries, the complexities of producing semiconductors will increase. Decreasing geometries may



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introduce new problems and delays that may affect product development and deliveries. Due to the nature of the industry
and our status as a fabless semiconductor company, we could encounter fabrication-related problems that may affect the availability of our products, delay our shipments or increase our costs.



A large portion of our revenues is derived from sales to a few customers, who may cease
purchasing from us at any time.



A relatively small number of customers
have accounted for a significant portion of our net revenues in each of the past several fiscal years. With the addition of SaRonix, Inc. the concentration of top customers has been reduced as the top customers of SaRonix, Inc. are somewhat
different than those of our core integrated circuit business. In general we expect this trend to continue for the foreseeable future. There were no direct customers that individually accounted for more than 10% of net revenues during the three month
period ended March 31, 2004. In the nine months ended March 31, 2004 one direct customer accounted for more than 10% of net revenues. In the three and nine-month periods ended March 31, 2003 the number of direct customers that individually accounted
for more than 10% of net revenues were three and two, respectively. As a percentage of net revenues, sales to our top five direct customers for the three and nine-month periods ended March 31, 2004 declined from the same periods in the prior year
primarily due to the acquisition of SaRonix, Inc. There were no end-user customers that individually accounted for more than 10% of our gross revenues in the three or nine months ended March 31, 2004. There were no end-user customers that
individually accounted for more than 10% of our gross revenues in the three months ended March 31, 2003. Two end-user customers individually accounted for more than 10% of our gross revenues in the nine-month period ended March 31, 2003. This
decline, as well as the decline in percentage of gross sales accounted for by our top five end-user customers in the same periods, was also primarily due to the SaRonix acquisition. We expect this trend of less concentration in our sales to
end-customers to continue as a result of the SaRonix acquisition.



We do not
have long-term sales agreements with any of our customers. Our customers are not subject to minimum purchase requirements, may reduce or delay orders periodically due to excess inventory and may discontinue purchasing our products at any time. Our
distributors typically offer competing products in addition to ours. For the three months ended March 31, 2004 sales to our distributors were approximately 57% of net revenues as compared to 51% of net revenues in the three months ended December 31,
2003. The increase in percentage of sales to our distributors in the three months ended March 31, 2004 was primarily a result of the current recovery. The loss of one or more significant customers, or the decision by a significant distributor to
carry the product lines of our competitors, could decrease our revenues.



Almost all of our wafer suppliers and assembly subcontractors are located in Southeast Asia, which exposes us to the problems associated with international operations.



Almost all of our wafer suppliers and assembly subcontractors are located in Southeast Asia, which exposes us to risks associated with
international business operations, including the following:



| |  | disruptions or delays in shipments;
| | - | -----------------------------------



| |  | changes in economic conditions in the countries where these subcontractors are located;
| | - | ---------------------------------------------------------------------------------------



| |  | currency fluctuations;
| | - | ----------------------



| |  | changes in political conditions;
| | - | --------------------------------



| |  | potentially reduced protection for intellectual property;
| | - | ---------------------------------------------------------



| |  | foreign governmental regulations;
| | - | ---------------------------------



| |  | import and export controls; and
| | - | -------------------------------



| |  | changes in tax laws, tariffs and freight rates.
| | - | -----------------------------------------------



In particular, there is a potential risk of conflict and further instability in the relationship between Taiwan and the Peoples Republic of China. Conflict or
instability could disrupt the operations of one of our principal wafer suppliers and several of our assembly subcontractors located in Taiwan.



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Because we sell our products to customers outside of the United States, we face foreign business, political and
economic risks that could seriously harm us.



In the nine months ended
March 31, 2004, approximately 60% of our net revenues derived from sales in Asia and approximately 7% from sales in Europe. We expect that export sales will continue to represent a significant portion of net revenues. We intend to expand our sales
efforts outside the United States. This expansion will require significant management attention and financial resources and further subject us to international operating risks. These risks include:



| |  | tariffs and other barriers and restrictions;
| | - | --------------------------------------------



| |  | unexpected changes in regulatory requirements;
| | - | ----------------------------------------------



| |  | the burdens of complying with a variety of foreign laws; and
| | - | ------------------------------------------------------------



| |  | delays resulting from difficulty in obtaining export licenses for technology.
| | - | -----------------------------------------------------------------------------



We are also subject to general geopolitical risks in connection with our international operations, such as political and economic instability and changes in diplomatic
and trade relationships. In addition, because our international sales are denominated in U.S. dollars, increases in the value of the U.S. dollar could increase the price in local currencies of our products in foreign markets and make our products
relatively more expensive than competitors products that are denominated in local currencies. Regulatory, geopolitical and other factors could seriously harm our business or require us to modify our current business practices.



Our operations and financial results could be severely harmed by natural disasters.



Our headquarters and some of our major suppliers manufacturing
facilities are located near major earthquake faults. One of the foundries we use is located in Taiwan, which suffered a severe earthquake during fiscal 2000. We did not experience significant disruption to our operations as a result of that
earthquake. However, if a major earthquake or other natural disaster were to affect our suppliers, our sources of supply could be interrupted, which would seriously harm our business.



Item 3. Quantitative and Qualitative Disclosures about Market Risk



At March 31, 2004, our investment portfolio consisted of investment-grade fixed income securities, excluding those classified as cash equivalents, of $129.3 million. These securities are subject to interest rate risk
and will decline in value if market interest rates increase. For example, if market interest rates were to increase immediately and uniformly by 10% per annum from levels as of March 31, 2004, the fair market value of the portfolio would decrease.
However, we do not believe that such a decrease would have a material effect on our results of operations over the next fiscal year. Due to the short duration and conservative nature of these instruments, we do not believe that we have a material
exposure to interest rate risk.



Item 4. Controls and Procedures.



|A) | We carried out an evaluation, under the supervision and with the participation of our management, including our President and Chief Executive Officer along with our Chief Financial
Officer, of the effectiveness of the design and operation of our disclosure controls and procedures as of the end of our third fiscal quarter of 2004 pursuant to Exchange Act Rule 13a-15(b). Based upon that evaluation, our President and Chief
Executive Officer along with our Chief Financial Officer concluded that our disclosure controls and procedures are effective in timely alerting them to material information relating to Pericom (including its consolidated subsidiaries) required to be
included in our periodic SEC filings.
|-- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|B) | There have been no changes in our internal control over financial reporting identified in connection with our evaluation that occurred during our third fiscal quarter of 2004 that
have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
|-- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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PART II. OTHER INFORMATION



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



| | a. | Exhibits
| | -- | --------



|               |  |                                                                                                                          
|-------------- |  | -------------------------------------------------------------------------------------------------------------------------
|Exhibit Number |  | Description                                                                                                              
|               | 
|31.1           |  | Certification of Alex C. Hui, Chief Executive Officer, pursuant to Section 302 of the Sarbanes-Oxley Act of 2002         
|               | 
|31.2           |  | Certification of Michael D. Craighead, Chief Financial Officer, pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
|               | 
|32.1           |  | Certification of Alex C. Hui, Chief Executive Officer, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002         
|               | 
|32.2           |  | Certification of Michael D. Craighead, Chief Financial Officer, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002



| | b. | Reports on Form 8-K.
| | -- | --------------------



| | 1) | On January 27, 2004 Pericom filed a report on Form 8-K that was regarding the quarterly results press release issued the same day.
| | -- | ----------------------------------------------------------------------------------------------------------------------------------



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SIGNATURES



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



Pericom Semiconductor Corporation

(Registrant)

|                   |  |     |  |                                                   
|------------------ |  | --- |  | --------------------------------------------------
|                   |  |    
|Date: May 11, 2004 |  | By: |  | /s/ Alex C. Hui                                   
|                   |  |     |  | Alex C. Hui                                       
|                   |  |     |  | Chief Executive Officer                           
|                   |  |    
|Date: May 11, 2004 |  | By: |  | /s/ Michael D. Craighead                          
|                   |  |     |  | Michael D. Craighead                              
|                   |  |     |  | Chief Financial Officer (Chief Accounting Officer)



31