##### Table of Contents



SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549

FORM 10-Q



|[x] |  | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
|--- |  | ---------------------------------------------------------------------------------------
|   
|    |  | For the quarterly period ended September 29, 2002                                      

OR



|[  ] |  | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
|---- |  | ----------------------------------------------------------------------------------------
|    
|     |  | For the transition period from      to                                                  

Commission File Number 0-9653

XICOR, INC.

(Exact name of registrant as specified in its charter)


|                                                                          |  |                                               
|------------------------------------------------------------------------- |  | ----------------------------------------------
|California
(State or other jurisdiction of
incorporation or organization) |  | 94-2526781
(I.R.S.Employer
Identification No.)

|                                                                                  |  |                 
|--------------------------------------------------------------------------------- |  | ----------------
|1511 Buckeye Drive, Milpitas, California
(Address of principal executive offices) |  | 95035
(Zip Code)

Registrants telephone number, including area code: (408) 432-8888

Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.

Yes [x] No [   ]

NUMBER OF SHARES OUTSTANDING AT SEPTEMBER 29, 2002
23,630,151





---



##### Table of Contents



XICOR, INC.

FORM 10-Q

QUARTER ENDED SEPTEMBER 29, 2002

INDEX

|                              |                                                                    |                                                         |                                                             |    |      |  | 
|----------------------------- | ------------------------------------------------------------------ | ------------------------------------------------------- | ----------------------------------------------------------- | -- | ---- |  | 
|                              |                                                                    |                                                         |                                                             |    | Page
|                              |                                                                    |                                                         |                                                             |    |     
|Part I: FINANCIAL INFORMATION |                                                                    |                                                         |                                                             |   
|                             
|                             
|                             
|                             
|                              | Item 1. Financial Statements                                       |                                                         |                                                             |    |     
|                             
|                             
|                             
|                             
|                              |                                                                    | Consolidated Balance Sheets at September 29, 2002       |                                                             |    | 1    | 
|                             
|                             
|                             
|                             
|                              |                                                                    |                                                         | and December 31, 2001                                       |    |      |  | 
|                             
|                             
|                             
|                             
|                              |                                                                    | Consolidated Statements of Operations for the three and |                                                             |    | 2    | 
|                             
|                             
|                             
|                             
|                              |                                                                    |                                                         | nine months ended September 29, 2002 and
September 30, 2001 |    |      |  | 
|                             
|                             
|                             
|                             
|                              |                                                                    | Consolidated Statements of Cash Flows for the nine      |                                                             |    | 3    | 
|                             
|                             
|                             
|                             
|                              |                                                                    |                                                         | months ended September 29, 2002 and
September 30, 2001      |    |      |  | 
|                             
|                             
|                             
|                             
|                              |                                                                    | Notes to Consolidated Financial Information             |                                                             |    | 4    | 
|                             
|                             
|                             
|                             
|                              | Item 2. Managements Discussion and Analysis of Financial          |                                                         |                                                             | 7  |     
|                             
|                             
|                             
|                             
|                              |                                                                    |                                                         | Condition and Results of Operations                         |    |      |  | 
|                             
|                             
|                             
|                             
|                              | Item 3.
Quantitative and Qualitative Disclosures About Market Risk |                                                         |                                                             | 21 |     
|                             
|                             
|                             
|                             
|                              | Item 4.
Controls and Procedures                                    |                                                         |                                                             | 21 |     
|                             
|                             
|                             
|                             
|Part II: OTHER INFORMATION    |                                                                    |                                                         |                                                             |   
|                             
|                             
|                             
|                             
|                              | Item 5. Other Information                                          |                                                         |                                                             | 22 |     
|                             
|                             
|                             
|                             
|                              | Item 6. Exhibits and Reports on Form 8-K                           |                                                         |                                                             | 22 |     
|                             
|                             
|                             
|                             
|SIGNATURES                    |                                                                    |                                                         | 23                                                          |   

i



---

TABLE OF CONTENTS



|                              |                                                                                                |                                             |  |  |  |  |  | 
|----------------------------- | ---------------------------------------------------------------------------------------------- | ------------------------------------------- |  |  |  |  |  | 
|Part I: FINANCIAL INFORMATION
|                              | Item 1. Financial Statements.                                                                 
|                              |                                                                                                | CONSOLIDATED BALANCE SHEETS                
|                              |                                                                                                | CONSOLIDATED STATEMENTS OF OPERATIONS      
|                              |                                                                                                | CONSOLIDATED STATEMENTS OF CASH FLOWS      
|                              |                                                                                                | NOTES TO CONSOLIDATED FINANCIAL INFORMATION
|                              | Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations.
|                              | Item 3. Quantitative and Qualitative Disclosures About Market Risk                            
|                              | Item 4. Controls and Procedures.                                                              
|PART II: OTHER INFORMATION   
|                              | Item 5. Other Information.                                                                    
|                              | Item 6. Exhibits and Reports on Form 8-K.                                                     
|SIGNATURES                   
|CERTIFICATIONS               
|EXHIBIT INDEX                
|EXHIBIT 10.1                 
|EXHIBIT 10.2                 
|EXHIBIT 99.1                 



---



##### Table of Contents






Part I: FINANCIAL INFORMATION




Item 1. Financial Statements.




XICOR, INC.
CONSOLIDATED BALANCE SHEETS
(Unaudited)
(In thousands)

|                                                                     |                                                                               |                                            |        |               |        |              |        |          |        | 
|-------------------------------------------------------------------- | ----------------------------------------------------------------------------- | ------------------------------------------ | ------ | ------------- | ------ | ------------ | ------ | -------- | ------ | 
|                                                                     |                                                                               |                                            |        | September 29, |        | December 31,
|                                                                     |                                                                               |                                            |        | 2002          |        | 2001        
|                                                                     |                                                                               |                                            |        |               |        |             
|ASSETS                                                               |                                                                               |                                            |        |               |        |              |        |         
|                                                                    
|                                                                    
|                                                                    
|                                                                    
|Current assets:                                                      |                                                                               |                                            |        |               |        |              |        |         
|                                                                    
|                                                                    
|                                                                    
|                                                                    
|                                                                     | Cash and cash equivalents                                                     |                                            | $      | 38,056        |        |              | $      | 56,367   |       
|                                                                    
|                                                                    
|                                                                    
|                                                                    
|                                                                     | Short-term investments                                                        |                                            |        | 1,857         |        |              |        |         |       
|                                                                    
|                                                                    
|                                                                    
|                                                                    
|                                                                     | Accounts receivable                                                           |                                            |        | 3,938         |        |              |        | 3,501    |       
|                                                                    
|                                                                    
|                                                                    
|                                                                    
|                                                                     | Inventories                                                                   |                                            |        | 5,377         |        |              |        | 9,404    |       
|                                                                    
|                                                                    
|                                                                    
|                                                                    
|                                                                     | Prepaid expenses and other current assets                                     |                                            |        | 515           |        |              |        | 192      |       
|                                                                     |                                                                               |                                            |        |               |        |              |        |         
|                                                                     |                                                                               | Total current assets                       |        |               | 49,743 |              |        |          | 69,464 | 
|                                                                    
|                                                                    
|                                                                    
|                                                                    
|Long-term investments                                                |                                                                               |                                            | 2,495  |               |        |              |       |         
|                                                                    
|                                                                    
|                                                                    
|                                                                    
|Property, plant and equipment,
at cost less accumulated depreciation |                                                                               |                                            | 3,581  |               |        |              | 5,223  |         
|                                                                    
|                                                                    
|                                                                    
|                                                                    
|Goodwill                                                             |                                                                               |                                            | 10,762 |               |        |              |       |         
|                                                                    
|                                                                    
|                                                                    
|                                                                    
|Purchased intangible assets, net                                     |                                                                               |                                            | 2,318  |               |        |              |       |         
|                                                                    
|                                                                    
|                                                                    
|                                                                    
|Other assets                                                         |                                                                               |                                            | 2,922  |               |        |              | 5,764  |         
|                                                                     |                                                                               |                                            |        |               |        |              |        |         
|                                                                     |                                                                               | Total assets                               |        | $             | 71,821 |              |        | $        | 80,451 | 
|                                                                     |                                                                               |                                            |        |               |        |              |        |         
|LIABILITIES AND SHAREHOLDERS EQUITY                                 |                                                                               |                                            |        |               |        |              |        |         
|                                                                    
|                                                                    
|                                                                    
|                                                                    
|Current liabilities:                                                 |                                                                               |                                            |        |               |        |              |        |         
|                                                                    
|                                                                    
|                                                                    
|                                                                    
|                                                                     | Accounts payable                                                              |                                            | $      | 6,942         |        |              | $      | 9,646    |       
|                                                                    
|                                                                    
|                                                                    
|                                                                    
|                                                                     | Accrued expenses                                                              |                                            |        | 6,361         |        |              |        | 7,867    |       
|                                                                    
|                                                                    
|                                                                    
|                                                                    
|                                                                     | Deferred income on shipments to distributors                                  |                                            |        | 6,325         |        |              |        | 10,465   |       
|                                                                    
|                                                                    
|                                                                    
|                                                                    
|                                                                     | Deferred gain on sale of fab assets                                           |                                            |        |              |        |              |        | 2,082    |       
|                                                                    
|                                                                    
|                                                                    
|                                                                    
|                                                                     | Current portion of long-term obligations                                      |                                            |        | 581           |        |              |        | 841      |       
|                                                                     |                                                                               |                                            |        |               |        |              |        |         
|                                                                     |                                                                               | Total current liabilities                  |        |               | 20,209 |              |        |          | 30,901 | 
|                                                                    
|                                                                    
|                                                                    
|                                                                    
|Convertible subordinated notes                                       |                                                                               |                                            | 32,353 |               |        |              | 31,896 |         
|                                                                    
|                                                                    
|                                                                    
|                                                                    
|Long-term obligations                                                |                                                                               |                                            | 536    |               |        |              | 738    |         
|                                                                     |                                                                               |                                            |        |               |        |              |        |         
|                                                                     |                                                                               | Total liabilities                          |        |               | 53,098 |              |        |          | 63,535 | 
|                                                                     |                                                                               |                                            |        |               |        |              |        |         
|Shareholders equity:                                                |                                                                               |                                            |        |               |        |              |        |         
|                                                                    
|                                                                    
|                                                                    
|                                                                    
|                                                                     | Preferred stock; 5,000 shares authorized                                      |                                            |        |              |        |              |        |         |       
|                                                                    
|                                                                    
|                                                                    
|                                                                    
|                                                                     | Common stock; 200,000 shares authorized;
23,630 and 22,339 shares outstanding |                                            |        | 148,901       |        |              |        | 137,775  |       
|                                                                    
|                                                                    
|                                                                    
|                                                                    
|                                                                     | Accumulated deficit                                                           |                                            |        | (130,178      | )      |              |        | (120,859 | )     
|                                                                     |                                                                               |                                            |        |               |        |              |        |         
|                                                                     |                                                                               | Total shareholders equity                 |        |               | 18,723 |              |        |          | 16,916 | 
|                                                                     |                                                                               |                                            |        |               |        |              |        |         
|                                                                     |                                                                               | Total liabilities and shareholders equity |        | $             | 71,821 |              |        | $        | 80,451 | 
|                                                                     |                                                                               |                                            |        |               |        |              |        |         

See accompanying notes to consolidated financial information

1



---



##### Table of Contents






XICOR, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(In thousands, except per share amounts)

|                                       |                                             |   |                    |        |                   |   |                |        |                |   |        |        |   |   |        |        |  
|-------------------------------------- | ------------------------------------------- | - | ------------------ | ------ | ----------------- | - | -------------- | ------ | -------------- | - | ------ | ------ | - | - | ------ | ------ | -
|                                       |                                             |   | Three Months Ended |        | Nine Months Ended
|                                       |                                             |   |                    |        |                  
|                                       |                                             |   | Sept. 29, 2002     |        | Sept. 30, 2001    |   | Sept. 29, 2002 |        | Sept. 30, 2001
|                                       |                                             |   |                    |        |                   |   |                |        |               
|Net sales                              |                                             | $ | 9,651              |        |                   | $ | 15,167         |        |                | $ | 29,232 |        |   | $ | 58,321 |       
|                                      
|                                      
|                                      
|                                      
|Cost of sales                          |                                             |   | 4,392              |        |                   |   | 7,642          |        |                |   | 14,219 |        |   |   | 39,250 |       
|                                       |                                             |   |                    |        |                   |   |                |        |                |   |        |        |   |   |        |       
|                                       | Gross profit                                |   |                    | 5,259  |                   |   |                | 7,525  |                |   |        | 15,013 |   |   |        | 19,071 |  
|                                       |                                             |   |                    |        |                   |   |                |        |                |   |        |        |   |   |        |       
|Operating expenses:                    |                                             |   |                    |        |                   |   |                |        |                |   |        |        |   |   |        |       
|                                      
|                                      
|                                      
|                                      
|                                       | Research and development                    |   |                    | 3,440  |                   |   |                | 3,184  |                |   |        | 9,637  |   |   |        | 10,845 |  
|                                      
|                                      
|                                      
|                                      
|                                       | Selling, general and administrative         |   |                    | 2,750  |                   |   |                | 4,087  |                |   |        | 8,622  |   |   |        | 14,953 |  
|                                      
|                                      
|                                      
|                                      
|                                       | Restructuring charge                        |   |                    |       |                   |   |                |       |                |   |        | 758    |   |   |        | 3,205  |  
|                                      
|                                      
|                                      
|                                      
|                                       | Amortization of purchased intangible assets |   |                    | 263    |                   |   |                |       |                |   |        | 483    |   |   |        |       |  
|                                      
|                                      
|                                      
|                                      
|                                       | In-process research and development         |   |                    |       |                   |   |                |       |                |   |        | 1,800  |   |   |        |       |  
|                                       |                                             |   |                    |        |                   |   |                |        |                |   |        |        |   |   |        |       
|                                       |                                             |   | 6,453              |        |                   |   | 7,271          |        |                |   | 21,300 |        |   |   | 29,003 |       
|                                       |                                             |   |                    |        |                   |   |                |        |                |   |        |        |   |   |        |       
|Income (loss) from operations          |                                             |   | (1,194             | )      |                   |   | 254            |        |                |   | (6,287 | )      |   |   | (9,932 | )     
|                                       |                                             |   |                    |        |                   |   |                |        |                |   |        |        |   |   |        |       
|Interest expense                       |                                             |   | (813               | )      |                   |   | (45            | )      |                |   | (2,451 | )      |   |   | (121   | )     
|                                      
|                                      
|                                      
|                                      
|Interest income                        |                                             |   | 186                |        |                   |   | 246            |        |                |   | 625    |        |   |   | 1,001  |       
|                                      
|                                      
|                                      
|                                      
|Other income and (expense), net        |                                             |   | 894                |        |                   |   |               |        |                |   | (1,206 | )      |   |   |       |       
|                                       |                                             |   |                    |        |                   |   |                |        |                |   |        |        |   |   |        |       
|                                       |                                             |   | 267                |        |                   |   | 201            |        |                |   | (3,032 | )      |   |   | 880    |       
|                                       |                                             |   |                    |        |                   |   |                |        |                |   |        |        |   |   |        |       
|Income (loss) before income taxes      |                                             |   | (927               | )      |                   |   | 455            |        |                |   | (9,319 | )      |   |   | (9,052 | )     
|                                      
|                                      
|                                      
|                                      
|Provision for income taxes             |                                             |   |                   |        |                   |   | 23             |        |                |   |       |        |   |   | 118    |       
|                                       |                                             |   |                    |        |                   |   |                |        |                |   |        |        |   |   |        |       
|Net income (loss)                      |                                             | $ | (927               | )      |                   | $ | 432            |        |                | $ | (9,319 | )      |   | $ | (9,170 | )     
|                                       |                                             |   |                    |        |                   |   |                |        |                |   |        |        |   |   |        |       
|Net income (loss) per common share:    |                                             |   |                    |        |                   |   |                |        |                |   |        |        |   |   |        |       
|                                      
|                                      
|                                      
|                                      
|                                       | Basic                                       |   | $                  | (0.04  | )                 |   | $              | 0.02   |                |   | $      | (0.40  | ) |   | $      | (0.42  | )
|                                       |                                             |   |                    |        |                   |   |                |        |                |   |        |        |   |   |        |       
|                                       | Diluted                                     |   | $                  | (0.04  | )                 |   | $              | 0.02   |                |   | $      | (0.40  | ) |   | $      | (0.42  | )
|                                       |                                             |   |                    |        |                   |   |                |        |                |   |        |        |   |   |        |       
|Shares used in per share calculations: |                                             |   |                    |        |                   |   |                |        |                |   |        |        |   |   |        |       
|                                      
|                                      
|                                      
|                                      
|                                       | Basic                                       |   |                    | 23,625 |                   |   |                | 21,905 |                |   |        | 23,126 |   |   |        | 21,679 |  
|                                       |                                             |   |                    |        |                   |   |                |        |                |   |        |        |   |   |        |       
|                                       | Diluted                                     |   |                    | 23,625 |                   |   |                | 24,542 |                |   |        | 23,126 |   |   |        | 21,679 |  
|                                       |                                             |   |                    |        |                   |   |                |        |                |   |        |        |   |   |        |       

See accompanying notes to consolidated financial information

2



---



##### Table of Contents






XICOR, INC.CONSOLIDATED
STATEMENTS OF CASH FLOWS(Unaudited)(In thousands)

|                                                     |                                                |                                                                             |                                                            |                                              |        |                   |        |                |        |        |        |  
|---------------------------------------------------- | ---------------------------------------------- | --------------------------------------------------------------------------- | ---------------------------------------------------------- | -------------------------------------------- | ------ | ----------------- | ------ | -------------- | ------ | ------ | ------ | -
|                                                     |                                                |                                                                             |                                                            |                                              |        | Nine Months Ended
|                                                     |                                                |                                                                             |                                                            |                                              |        |                  
|                                                     |                                                |                                                                             |                                                            |                                              |        | Sept. 29, 2002    |        | Sept. 30, 2001
|                                                     |                                                |                                                                             |                                                            |                                              |        |                   |        |               
|Cash flows from operating activities:                |                                                |                                                                             |                                                            |                                              |        |                   |        |               
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     |                                                | Net loss                                                                    |                                                            | $                                            | (9,319 | )                 |        | $              | (9,170 | )     
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     |                                                | Adjustments to reconcile net loss to cash provided
by operating activities: |                                                            |                                              |        |                   |        |                |        |       
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     |                                                |                                                                             | Depreciation                                               |                                              |        | 2,091             |        |                |        | 3,054  |       
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     |                                                |                                                                             | Amortization of fab gain                                   |                                              |        | (2,082            | )      |                |        | (1,889 | )     
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     |                                                |                                                                             | Amortization of debt issuance costs and warrants           |                                              |        | 911               |        |                |        |       |       
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     |                                                |                                                                             | Amortization of purchased intangibles                      |                                              |        | 482               |        |                |        |       |       
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     |                                                |                                                                             | Write off of purchased in-process research and development |                                              |        | 1,800             |        |                |        |       |       
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     |                                                |                                                                             | Loss on impairment of investment                           |                                              |        | 2,500             |        |                |        |       |       
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     |                                                |                                                                             | Non-cash restructuring charge                              |                                              |        |                  |        |                |        | 1,249  |       
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     |                                                |                                                                             | Changes in assets and liabilities:                         |                                              |        |                   |        |                |        |        |       
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     |                                                |                                                                             |                                                            | Accounts receivable                          |        |                   | (300   | )              |        |        | 4,590  |  
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     |                                                |                                                                             |                                                            | Inventories                                  |        |                   | 4,027  |                |        |        | 6,670  |  
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     |                                                |                                                                             |                                                            | Prepaid expenses and other current assets    |        |                   | (323   | )              |        |        | 412    |  
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     |                                                |                                                                             |                                                            | Other assets                                 |        |                   | (112   | )              |        |        | 3      |  
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     |                                                |                                                                             |                                                            | Accounts payable and accrued expenses        |        |                   | (4,527 | )              |        |        | (1,830 | )
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     |                                                |                                                                             |                                                            | Deferred income on shipments to distributors |        |                   | (4,140 | )              |        |        | (2,728 | )
|                                                     |                                                |                                                                             |                                                            |                                              |        |                   |        |               
|Net cash provided by (used in) operating activities  |                                                |                                                                             | (8,992                                                     | )                                            |        |                   | 361    |               
|                                                     |                                                |                                                                             |                                                            |                                              |        |                   |        |               
|Cash flows from investing activities:                |                                                |                                                                             |                                                            |                                              |        |                   |        |               
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     | Purchase of short-term investments             |                                                                             |                                                            | (1,857                                       | )      |                   |        |               |       
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     | Purchase of long-term investments              |                                                                             |                                                            | (2,495                                       | )      |                   |        |               |       
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     | Investments in plant and equipment, net        |                                                                             |                                                            | (449                                         | )      |                   |        | (221           | )     
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     | Investment in Standard MEMS, Inc.              |                                                                             |                                                            |                                             |        |                   |        | (2,500         | )     
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     | Acquisition of Analog Integration Partners LLC |                                                                             |                                                            | (5,000                                       | )      |                   |        |               |       
|                                                     |                                                |                                                                             |                                                            |                                              |        |                   |        |               
|Net cash used in investing activities                |                                                |                                                                             | (9,801                                                     | )                                            |        |                   | (2,721 | )             
|                                                     |                                                |                                                                             |                                                            |                                              |        |                   |        |               
|Cash flows from financing activities:                |                                                |                                                                             |                                                            |                                              |        |                   |        |               
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     | Repayments of long-term obligations            |                                                                             |                                                            | (462                                         | )      |                   |        | (705           | )     
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     | Net proceeds from sale of common stock         |                                                                             |                                                            | 944                                          |        |                   |        | 1,345          |       
|                                                     |                                                |                                                                             |                                                            |                                              |        |                   |        |               
|Net cash provided by financing activities            |                                                |                                                                             | 482                                                        |                                              |        |                   | 640    |               
|                                                     |                                                |                                                                             |                                                            |                                              |        |                   |        |               
|Decrease in cash and cash equivalents                |                                                |                                                                             | (18,311                                                    | )                                            |        |                   | (1,720 | )             
|                                                    
|                                                    
|                                                    
|                                                    
|Cash and cash equivalents at beginning of year       |                                                |                                                                             | 56,367                                                     |                                              |        |                   | 29,121 |               
|                                                     |                                                |                                                                             |                                                            |                                              |        |                   |        |               
|Cash and cash equivalents at end of period           |                                                | $                                                                           | 38,056                                                     |                                              |        | $                 | 27,401 |               
|                                                     |                                                |                                                                             |                                                            |                                              |        |                   |        |               
|Supplemental information:                            |                                                |                                                                             |                                                            |                                              |        |                   |        |               
|                                                    
|                                                    
|                                                    
|                                                    
|Cash paid (refunded) during the period for:          |                                                |                                                                             |                                                            |                                              |        |                   |        |               
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     | Interest expense                               |                                                                             | $                                                          | 1,067                                        |        |                   | $      | 134            |       
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     | Income taxes                                   |                                                                             |                                                            | (57                                          | )      |                   |        | (63            | )     
|                                                    
|                                                    
|                                                    
|                                                    
|Equipment acquired pursuant to long-term obligations |                                                |                                                                             |                                                           |                                              |        |                   | 969    |               
|                                                    
|                                                    
|                                                    
|                                                    
|Common stock issued for acquisition                  |                                                |                                                                             | 10,182                                                     |                                              |        |                   |       |               

See accompanying notes to consolidated financial information

3



---



##### Table of Contents






XICOR, INC.
NOTES TO CONSOLIDATED FINANCIAL INFORMATION
(Unaudited)

Note 1  The Company:

In the opinion of management, all adjustments necessary for a fair statement of
the results of the interim periods presented (consisting only of normal
recurring adjustments) have been included. These financial statements, notes
and analyses should be read in conjunction with our Annual Report on Form 10-K
for the year ended December 31, 2001 filed with the Securities and Exchange
Commission.

Note 2  Net income (loss) per share:

Basic net income (loss) per share is computed using the weighted average number
of common shares outstanding. Diluted net income (loss) per share is computed
using the weighted average number of common shares and all dilutive potential
common shares outstanding. Outstanding options to purchase 6,557,143 and
4,807,808 shares of common stock at September 29, 2002, and September 30, 2001,
respectively, were excluded from the earnings per share (EPS) computation for
the three and nine months ended September 29, 2002 and the nine months ended
September 30, 2001 as they were anti-dilutive.

Note 3  Comprehensive income (loss):

The net income (loss) for the periods reported also represented the
comprehensive income (loss) for such periods.

Note 4  Balance sheet components:

|                               |                                     |   |                |         |              |   |        |         |  
|------------------------------ | ----------------------------------- | - | -------------- | ------- | ------------ | - | ------ | ------- | -
|                               |                                     |   | September 29,  |         | December 31,
|                               |                                     |   | 2002           |         | 2001        
|                               |                                     |   |                |         |             
|                               |                                     |   | (In thousands)
|Inventories:                   |                                     |   |                |         |              |   |        |        
|                              
|                              
|                              
|                              
|                               | Raw materials and supplies          |   | $              | 140     |              |   | $      | 212     |  
|                              
|                              
|                              
|                              
|                               | Work in process                     |   |                | 3,851   |              |   |        | 7,252   |  
|                              
|                              
|                              
|                              
|                               | Finished goods                      |   |                | 1,386   |              |   |        | 1,940   |  
|                               |                                     |   |                |         |              |   |        |        
|                               |                                     | $ | 5,377          |         |              | $ | 9,404  |        
|                               |                                     |   |                |         |              |   |        |        
|Property, plant and equipment: |                                     |   |                |         |              |   |        |        
|                              
|                              
|                              
|                              
|                               | Leasehold improvements              |   | $              | 1,727   |              |   | $      | 2,725   |  
|                              
|                              
|                              
|                              
|                               | Equipment                           |   |                | 30,570  |              |   |        | 37,118  |  
|                              
|                              
|                              
|                              
|                               | Furniture and fixtures              |   |                | 251     |              |   |        | 345     |  
|                              
|                              
|                              
|                              
|                               | Construction in progress            |   |                | 2       |              |   |        | 39      |  
|                               |                                     |   |                |         |              |   |        |        
|                               |                                     |   | 32,550         |         |              |   | 40,227 |        
|                              
|                              
|                              
|                              
|                               | Accumulated depreciation            |   |                | (28,969 | )            |   |        | (35,004 | )
|                               |                                     |   |                |         |              |   |        |        
|                               |                                     | $ | 3,581          |         |              | $ | 5,223  |        
|                               |                                     |   |                |         |              |   |        |        
|Accrued expenses:              |                                     |   |                |         |              |   |        |        
|                              
|                              
|                              
|                              
|                               | Accrued wages and employee benefits |   | $              | 1,366   |              |   | $      | 1,412   |  
|                              
|                              
|                              
|                              
|                               | Accrued restructuring liabilities   |   |                | 178     |              |   |        | 691     |  
|                              
|                              
|                              
|                              
|                               | Other accrued expenses              |   |                | 4,817   |              |   |        | 5,764   |  
|                               |                                     |   |                |         |              |   |        |        
|                               |                                     | $ | 6,361          |         |              | $ | 7,867  |        
|                               |                                     |   |                |         |              |   |        |        

4



---



##### Table of Contents



Accounts receivable:

Accounts receivable at September 29, 2002 and December 31, 2001 are presented
net of an allowance for doubtful accounts of $500,000.

Restructuring:

In the first quarter of 2001, we announced our plan to exit from offering stand
alone low-density serial EEPROM memory products and complete the move to fully
outsourced test and assembly operations. Accordingly, our first quarter 2001
results included a $3.2 million restructuring charge and an $8.2 million charge
to cost of sales to write down inventories to their net realizable value. The
restructuring charge included a $2.0 million accrual consisting of $1.5 million
of severance-related costs for a reduction in our workforce of approximately 95
employees and $0.5 million of other restructuring related costs. The $1.2
million balance of the restructuring charge recorded in the first quarter of
2001 related principally to the write-off of leasehold improvements in the
facility that was vacated as a result of the restructuring plan.

Due to the ongoing weak industry conditions, we reduced our workforce by 33
additional employees during the second quarter of 2002. Accordingly, our
second quarter 2002 results included a $0.8 million restructuring charge for
the severance-related costs associated with the reduction. At September 29,
2002, the restructuring accrual of $0.2 million consisted of $0.1 million of
severance costs payable to terminated employees and $0.1 million of other costs
associated with vacated sales offices.

The following table summarizes the restructuring reserve activity for the nine
months ended September 29, 2002 (in thousands):

|                             |  |              |     |          |  |          |     |      |  |   |        |               |  |   |     | 
|---------------------------- |  | ------------ | --- | -------- |  | -------- | --- | ---- |  | - | ------ | ------------- |  | - | --- | 
|                             |  | December 31, |     |          |  |          |     |      |  |   |        | September 29,
|                             |  | 2001         |     | Expensed |  | Utilized |     | 2002
|                             |  |              |     |          |  |          |     |     
|Employee severance
and other |  | $            | 691 |          |  | $        | 758 |      |  | $ | (1,271 | )             |  | $ | 178 | 
|                             |  |              |     |          |  |          |     |      |  |   |        |               |  |   |     | 

Note 5.  Legal Proceedings:

In June 2002, we settled a patent infringement case we filed against Catalyst
Semiconductor on July 16, 2001 in Delaware Federal District Court. As part of
the overall settlement, Catalyst acknowledged the validity of our patent and
agreed to certain royalty payments in exchange for a license to manufacture the
disputed products.

Note 6.  Acquisition of Analog Integration Partners LLC:

On April 16, 2002, we acquired Analog Integration Partners, LLC (AIP), a
privately held company that designs and develops high-performance analog signal
processing and data conversion circuits. AIP implements high frequency analog
front-end technology and signal processing solutions in standard digital logic
processes. The AIP acquisition brings us analog mixed-signal design talent and
core technology on which we plan to build.

5



---



##### Table of Contents



The acquisition was accounted for using the purchase method of accounting per
Financial Accounting Standards (SFAS) No. 141. Accordingly, the estimated
fair value of the assets acquired and liabilities assumed were included in our
consolidated balance sheet as of April 16, 2002, the effective date of the
purchase. The results of operations are included in our consolidated results
of operations since the effective date of the purchase. We acquired AIP for
total consideration of $15.5 million, consisting of $10.2 million of stock
(1,012,758 shares of Xicor common stock valued at $10.05 per share, the average
closing price for the three days ended April 16, 2002), $5.0 million in cash,
and direct acquisition costs of $0.3 million for legal, appraisal and
accounting fees. The total purchase price was allocated to the estimated fair
value of assets acquired and liabilities assumed as follows based upon an
independent appraisal (in thousands):

|                                    |  |   |        | 
|----------------------------------- |  | - | ------ | 
|Current technology                  |  | $ | 2,700  | 
|                                   
|                                   
|                                   
|                                   
|Net tangible assets acquired        |  |   | 105    | 
|                                   
|                                   
|                                   
|                                   
|Professional services               |  |   | 100    | 
|                                   
|                                   
|                                   
|                                   
|Goodwill                            |  |   | 10,762 | 
|                                    |  |   |        | 
|Net assets acquired                 |  |   | 13,667 | 
|                                   
|                                   
|                                   
|                                   
|In-process research and development |  |   | 1,800  | 
|                                    |  |   |        | 
|Total consideration                 |  | $ | 15,467 | 
|                                    |  |   |        | 

The amounts allocated to current technology and professional services are being
amortized using the straight-line method over their useful lives of 3 years and
8 months, respectively. The net tangible assets acquired consist primarily of
accounts receivable, partially offset by accounts payable. None of the $10.8
million in goodwill is expected to be deductible for tax purposes, and in
accordance with SFAS No. 142 will not be amortized but instead evaluated
periodically to determine whether events or circumstances have occurred
indicating that goodwill might be impaired.

The $1.8 million of in-process research and development expensed in the second
quarter of 2002 relates to AIPs current engineering effort that is focused on
developing the analog front end for the high-end flat panel display market
using a standard digital 0.18 micron CMOS process. The value of the in-process
research and development was determined by an independent appraiser using a
discounted cash flow method that considered several factors including projected
financial results, relative risk of successful development, time value of money
and level of completion. Projected financial results were based on a number of
estimates including market growth rates, the companys competitive position,
the product roadmap, the companys cost structure, development timelines,
resource requirements and the long-term effective tax rate. The risk-adjusted
discount rate used for projected cash flows was 50%. Revenues related to
products developed under this project are planned to begin toward the end of
2003.

Note 7.  Other Income and Expense

Other income for the three and nine months ended September 29, 2002 includes
$0.7 million from a favorable sales tax audit and $0.2 million, the remaining
balance of the deferred gain on the sale of the fab, from the early termination
of a wafer foundry agreement with Standard MEMS. Other expense for the nine
months ended September 29, 2002 includes a non-cash impairment charge of $2.5
million to write-off an investment held in a private company.

6



---



##### Table of Contents



Note 8.  Subsequent Events

In the fourth quarter of 2002 we signed a lease agreement for a facility to be
used as our corporate headquarters. The lease is for eight years beginning in
December 2002 and provides for lower annual lease payments than our present
lease. We expect to abandon our current facility in fourth quarter of 2002.
Terminating our current lease and entering into the new lease will reduce our
future minimum lease commitments by approximately $0.3 million per year in 2003
through 2009. Our minimum lease commitment will increase by $1.2 million in
2010 as the new lease term is one year longer than our present facility lease
term. The relocation of our facilities is expected to result in charges in the
fourth quarter of 2002 of approximately $1 million relating to the exit costs
from our current leased facility and the non-cash abandonment of leasehold
improvements and office equipment at our current facility.

Note 9.  Recent Accounting Pronouncements

In June 2002, the Financial Accounting Standards Board (FASB) issued SFAS No.
146, Accounting for Exit or Disposal Activities (SFAS 146). SFAS 146
addresses significant issues regarding the recognition, measurement, and
reporting of costs that are associated with exit and disposal activities,
including restructuring activities that are currently accounted for under EITF
No. 94-3, Liability Recognition for Certain Employee Termination Benefits and
Other Costs to Exit an Activity (including Certain Costs Incurred in a
Restructuring). The scope of SFAS 146 includes costs related to terminating a
contract that is not a capital lease and termination benefits that employees
who are involuntarily terminated receive under the terms of a one-time benefit
arrangement that is not an ongoing benefit arrangement or an individual
deferred-compensation contract. SFAS 146 will be effective for exit or disposal
activities that are initiated after December 31, 2002 and early application is
encouraged. We plan to adopt SFAS 146 for our fiscal year beginning January 1,
2003. The provisions of EITF No. 94-3 continue to apply for an exit activity
initiated under an exit plan that met the criteria of EITF No. 94-3 prior to
the adoption of SFAS No. 146. The effect on adoption of SFAS No. 146 will
change on a prospective basis the timing of when restructuring charges are
recorded from a commitment date approach to when the liability is incurred.




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

The following discussion should be read in conjunction with the accompanying
Quarterly Financial Information and Notes thereto and our Annual Report on Form
10-K for the year ended December 31, 2001. The results of operations for the
three and nine months ended September 29, 2002 are not necessarily indicative
of results to be expected in future periods. The following discussion contains
forward-looking statements which are subject to risks and uncertainties.
Actual results could differ materially from those contained in the
forward-looking statements due to a variety of factors, including, but not
limited to, the factors identified in the Factors Affecting Future Results
section below. Also see Safe Harbor Statement under the Private Securities
Litigation Reform Act of 1995 below.

7



---



##### Table of Contents



RESULTS OF OPERATIONS

Sales

Sales for the third quarter of 2002 were $9.7 million and included $0.3 million
of non-recurring royalty revenue from licenses on mixed-signal technology.
Sales for the second quarter of 2002 were $9.5 million. Sales for the first
quarter of 2002 were $10.0 million and included a benefit of $0.4 million
resulting from putting all our global distribution partners on our fiscal
calendar. This change was made in connection with the realignment of our
distribution channel to better serve fulfillment and demand creation efforts.

Our sales are derived from two product groups, mixed-signal and memory.
Mixed-signal sales represent our core market. Memory sales comprise our legacy
businesses of serial EEPROMs, which we are in the process of exiting, and
parallel EEPROMs, which business we are retaining. Sales by product group were
(in thousands):

|                             |  |   |                    |  |                   |   |           |  |           |   |        |  |  |   |        |  | 
|---------------------------- |  | - | ------------------ |  | ----------------- | - | --------- |  | --------- | - | ------ |  |  | - | ------ |  | 
|                             |  |   | Three Months Ended |  | Nine Months Ended
|                             |  |   |                    |  |                  
|                             |  |   | Sept. 29,          |  | Sept. 30,         |   | Sept. 29, |  | Sept. 30,
|                             |  |   | 2002               |  | 2001              |   | 2002      |  | 2001     
|                             |  |   |                    |  |                   |   |           |  |          
|Mixed-signal product sales   |  | $ | 6,567              |  |                   | $ | 8,211     |  |           | $ | 17,473 |  |  | $ | 29,967 | 
|                            
|                            
|                            
|                            
|Mixed-signal royalty revenue |  |   | 280                |  |                   |   |          |  |           |   | 280    |  |  |   |       | 
|                            
|                            
|                            
|                            
|Memory product sales         |  |   | 2,804              |  |                   |   | 6,956     |  |           |   | 11,479 |  |  |   | 28,354 | 
|                             |  |   |                    |  |                   |   |           |  |           |   |        |  |  |   |        |  | 
|Total sales                  |  | $ | 9,651              |  |                   | $ | 15,167    |  |           | $ | 29,232 |  |  | $ | 58,321 | 
|                             |  |   |                    |  |                   |   |           |  |           |   |        |  |  |   |        |  | 

Overall economic and industry-wide conditions were weak in 2001, and while
mixed-signal sales were level sequentially in the first two quarters of 2001,
mixed-signal sales declined in the second half of 2001 on lower unit sales.
Sales of mixed-signal products for the first quarter of 2002 remained
relatively stable at $4.8 million compared to $5.0 million in the fourth
quarter of 2001. Mixed-signal sales increased 27% sequentially to $6.1 million
in the second quarter of 2002 on higher unit sales. Mixed-signal product sales
increased 8% sequentially to $6.6 million in the third quarter of 2002 on
higher unit sales.

As shown in the table below, memory product sales declined 60% in both the
three and nine months ended September 29, 2002 compared to the comparable prior
year periods (in thousands):

|                              |  |                    |       |                   |  |                |       |                |  |   |        |  |  |   |        | 
|----------------------------- |  | ------------------ | ----- | ----------------- |  | -------------- | ----- | -------------- |  | - | ------ |  |  | - | ------ | 
|                              |  | Three Months Ended |       | Nine Months Ended
|                              |  |                    |       |                  
|                              |  | Sept. 29, 2002     |       | Sept. 30, 2001    |  | Sept. 29, 2002 |       | Sept. 30, 2001
|                              |  |                    |       |                   |  |                |       |               
|Parallel EEPROM product sales |  | $                  | 1,849 |                   |  | $              | 4,444 |                |  | $ | 7,708  |  |  | $ | 15,288 | 
|                             
|                             
|                             
|                             
|Serial EEPROM product sales   |  |                    | 955   |                   |  |                | 2,512 |                |  |   | 3,771  |  |  |   | 13,066 | 
|                              |  |                    |       |                   |  |                |       |                |  |   |        |  |  |   |        | 
|Total memory product sales    |  | $                  | 2,804 |                   |  | $              | 6,956 |                |  | $ | 11,479 |  |  | $ | 28,354 | 
|                              |  |                    |       |                   |  |                |       |                |  |   |        |  |  |   |        | 

Serial EEPROM product sales have declined, and are expected to continue to
decline, as we continue our exit from that business. Parallel EEPROM product
sales decreased year over year

8



---



##### Table of Contents



principally due to lower unit shipments. Furthermore, we believe that the
fourth quarter of 2002 will be challenging for our mixed-signal business as the
difficult industry conditions experienced in 2001 and 2002 to date are expected
to continue. As a result, we expect total sales for the fourth quarter of 2002
to be significantly below the fourth quarter of 2001 and anticipate incurring a
loss in the fourth quarter of 2002.

Cost of Sales and Gross Profit

The third quarter 2002 gross profit percentage, including royalty revenue was
54%. The gross profit percentage on product sales for the quarter was 53%
compared to 50% in the third quarter of 2001. Gross profit as a percentage of
sales was 51% for the nine months ended September 29, 2002 compared to 33% for
the comparable 2001 period. As discussed below, cost of sales for the first
quarter of 2001 included an $8.2 million charge to write down inventories.
Excluding the inventory write-down, gross profit as a percentage of sales was
47% for the nine months ended September 30, 2001.

The gross profit percentage in the third quarter and nine months ended
September 29, 2002 benefited from a shift in the product mix to a larger
percentage of higher margin mixed-signal and parallel EEPROM sales and a
smaller percentage of lower margin serial EEPROM sales, the quarterly
amortization of $0.6 million of the deferred gain on the sale of the fab assets
over a lower sales level and lower manufacturing costs. The gross profit
percentage for the nine months ended September 29, 2002 also benefited from
lower costs associated with the shift to fully outsourced manufacturing. These
benefits were partially offset by lower absorption of fixed costs as
manufacturing volumes were reduced in 2002 due to the weak industry-wide
economic conditions.

The gross profit percentage on product sales increased from 49% in the second
quarter of 2002 to 53% in the third quarter of 2002. The gross profit
percentage improvement in the third quarter of 2002 was primarily the result of
lower manufacturing costs and increased production volumes. The gross profit
percentage is expected to fluctuate from quarter to quarter as a result of
changes in product mix, product costs and average selling prices. Excluding
the $0.6 million quarterly benefit from the amortization of the deferred gain
on the sale of our wafer fabrication assets which ended in the third quarter of
2002 due to the early termination of a wafer foundry agreement with Standard
MEMS, the third quarter gross profit percentage on product sales was 46%
compared to 43% in the second quarter of 2002. We currently anticipate our
gross profit percentage in the fourth quarter of 2002 will improve slightly
from 46% (third quarter of 2002 product gross profit percentage excluding
amortization benefit) on reduced manufacturing costs and increased unit output.

Research and Development

Research and development expenses amounted to $3.4 million or 36% of sales in
the third quarter of 2002 compared to $3.2 million or 21% of sales in the third
quarter of 2001. Research and development expenses increased in the third
quarter of 2002 compared to the third quarter of 2001 primarily due to
increased personnel costs resulting from the second quarter 2002 acquisition of
AIP. The increased personnel costs were partially offset by spending controls.

9



---



##### Table of Contents



In the nine months ended September 29, 2002, research and development expenses
were $9.6 million or 33% of sales compared to $10.8 million or 19% of sales in
the nine months ended September 29, 2001. While research and development
expenses increased as a percentage of sales in the nine months ended September
29, 2002 compared to the prior year due to the lower sales level, the dollar
amount of research and development expenses decreased, primarily due to
spending controls.

Selling, General and Administrative

Selling, general and administrative expenses amounted to $2.8 million or 28% of
sales in the third quarter of 2002 compared to $4.1 million or 27% of sales in
the third quarter of 2001. In the nine months ended September 29, 2002,
selling, general and administrative expenses amounted to $8.6 million or 29% of
sales compared to $15.0 million or 26% of sales in the comparable prior year
period. The decrease in the dollar amount of selling, general and
administrative expenses in the three and nine months ended September 29, 2002
compared to the comparable periods of 2001 is primarily due to headcount
reductions and lower commission expenses related to the decreased sales in
2002.

Restructuring

In the fourth quarter of 2000, we committed to certain workforce reductions to
streamline operations and further implement our outsourced manufacturing
strategy. The related restructuring accrual balance of $2.5 million at December
31, 2000 consisted of $2.0 million of severance costs to reduce our workforce
by approximately 50 employees, primarily in administrative, manufacturing and
support groups, and $0.5 million of other restructuring related costs.

In the first quarter of 2001, we announced our plan to exit from offering stand
alone low-density serial EEPROM memory products and complete the move to fully
outsourced test and assembly operations. Accordingly, our first quarter 2001
results included a $3.2 million restructuring charge and an $8.2 million charge
to cost of sales to write down inventories to their net realizable value. The
restructuring charge included a $2.0 million accrual consisting of $1.5 million
of severance-related costs for an additional reduction in our workforce of
approximately 95 employees, primarily in manufacturing, sales and support
groups, and $0.5 million of other restructuring related costs. The $1.2
million balance of the restructuring charge recorded in the first quarter of
2001 related principally to the write-off of leasehold improvements in the
facility that was vacated as a result of our restructuring plan.

During 2001, we reduced our workforce by approximately 140 employees and
utilized $3.1 million of the restructuring reserve for related severance costs
and $0.7 million for other restructuring related costs. At December 31, 2001,
the restructuring accrual of $0.7 million consisted of $0.4 million of
severance costs (including costs to reduce our workforce by approximately 10
employees primarily in sales and administrative groups) and $0.3 million of
other costs associated with vacated sales offices.

In the three months ended March 31, 2002, we completed the previously accrued
reduction in workforce and utilized $0.3 million of the restructuring reserve
for related severance costs and $0.2 million for other restructuring related
costs.

10



---



##### Table of Contents



Due to the ongoing weak industry conditions, we reduced our workforce by 33
additional employees during the second quarter of 2002. Accordingly, our
second quarter 2002 results included a $0.8 million restructuring charge for
the severance-related costs associated with the reduction. Quarterly cost
reductions of approximately $0.7 million associated with the second quarter
2002 reduction in workforce were partially offset by increased research and
development expense. At September 29, 2002, the restructuring accrual of $0.2
million consisted of $0.1 million of severance costs payable to terminated
employees and $0.1 million of other costs associated with vacated sales
offices.

In the fourth quarter of 2002 we signed a lease agreement for a facility to be
used as our corporate headquarters. The lease is for eight years beginning in
December 2002 and provides for lower annual lease payments than our present
lease. We expect to abandon our current facility in fourth quarter of 2002.
Terminating our current lease and entering into the new lease will
significantly reduce our future minimum lease commitments. The relocation of
our facilities is expected to result in charges in the fourth quarter of 2002
of approximately $1 million relating to the exit costs from our current
leased facility and the non-cash abandonment of leasehold improvements and
office equipment at our current facility.

We continue to evaluate cost savings opportunities to align our spending with
the sales levels and industry conditions.

Acquisition of Analog Integration Partners LLC

On April 16, 2002, we acquired AIP, a privately held company that designs and
develops high-performance analog signal processing and data conversion
circuits, for total consideration of $15.5 million, consisting of $10.2 million
of stock (1,012,758 shares of Xicor common stock valued at $10.05 per share,
the average closing price for the three days ended April 16, 2002), $5.0
million in cash, and direct acquisition costs of $0.3 million for legal,
appraisal and accounting fees. The $2.7 million of the purchase price
allocated to current technology and $0.1 million allocated to professional
services are being amortized using the straight-line method over their useful
lives of 3 years and 8 months, respectively. The related amortization expense
in the three and nine months ended September 29, 2002 was $0.3 million and $0.5
million, respectively. The $10.8 million of the purchase price allocated to
goodwill is not expected to be deductible for tax purposes, and in accordance
with SFAS No. 142 will not be amortized but instead evaluated periodically to
determine whether events or circumstances have occurred indicating that
goodwill might be impaired.

The $1.8 million of the purchase price allocated to in-process research and
development expense in the second quarter of 2002 relates to AIPs current
engineering effort that is focused on developing the analog front end for the
high-end flat panel display market using a standard digital 0.18 micron CMOS
process. The value of the in-process research and development was determined by
an independent appraiser using a discounted cash flow method that considered
several factors including projected financial results, relative risk of
successful development, time value of money and level of completion. Projected
financial results were based on a number of estimates including market growth
rates, the companys competitive position, the product roadmap, the companys
cost structure, development timelines, resource requirements and the

11



---



##### Table of Contents



long-term effective tax rate. The risk-adjusted discount rate used for
projected cash flows was 50%. As of the acquisition date, the project was
estimated to be approximately 5% complete and the estimated cost to complete
the project was approximately $3 million. Revenues related to products
developed under this project are planned to begin toward the end of 2003.
Uncertainties and risks associated with completing development in a reasonable
period of time include the remaining effort to achieve technological
feasibility, rapidly changing customer markets and competition. Failure to
bring these products to market in a timely manner could adversely impact our
sales and profitability in the future and potentially impair the $10.8 million
assigned to goodwill.

Other Income and Expense

Interest expense increased in the three and nine months ended September 29,
2002 compared to the comparable prior year periods due to interest expense and
amortization resulting from our November 2001 issuance of $35 million of 5.5%
convertible subordinated notes and warrants. We anticipate that interest
expense will increase in 2002 compared to 2001 as the convertible subordinated
notes and warrants are expected to be outstanding for the full year.

Interest income decreased in the three and nine months ended September 29, 2002
compared to the comparable prior year periods primarily as a result of lower
interest rates partially offset by the increase in the average balance invested
caused primarily by funds generated from the November 2001 issuance of
convertible subordinated notes and warrants. Interest income is expected to
decrease in the fourth quarter of 2002 compared to the fourth quarter of 2001
principally due to lower interest rates.

Other income for the three and nine months ended September 29, 2002 includes
$700,000 from a favorable sales tax audit and $194,000 from the early
termination of a wafer foundry agreement with Standard MEMS. Other income for
the nine months ended September 29, 2002 also includes a $400,000 benefit
associated with the sale of our wafer fabrication facility in 2000. Other
expense for the three and nine months ended September 29, 2002 includes a
non-cash impairment charge of $2.5 million to write-off an investment held in a
private company.

Taxes

The provision for income taxes for 2001 consisted primarily of federal and
state minimum taxes, which resulted from limitations on the use of net
operating loss carryforwards, and foreign taxes. No taxes were provided in 2002
due to the net loss. Net deferred tax assets at September 29, 2002 and
December 31, 2001 were fully reserved because of the uncertainty regarding the
ultimate realization of these assets.

LIQUIDITY AND CAPITAL RESOURCES

At September 29, 2002, we had $38.1 million in cash and cash equivalents
compared to $56.4 at the end of 2001. During the nine months ended September
29, 2002, we used $9.0 million of cash in operating activities (including $1.3
million associated with restructuring activities), $5.0 million for the
acquisition of AIP, $2.5 million to purchase long-term investments, $1.9
million to purchase short-term investments, $0.5 million to repay long-term
obligations and $0.4 million

12



---



##### Table of Contents



for equipment purchases. During the same time period, we generated $0.9
million from the issuance of stock under employee stock plans.

During the fourth quarter of 2002, we expect to use cash in operating
activities (including interest payments on the convertible note), to repay
long-term obligations and purchase equipment. Capital expenditures for 2002
are currently planned at less than $1.0 million and are primarily related to
product design and equipment for product test development. At September 29,
2002, we had entered into commitments for equipment purchases aggregating less
than $0.2 million. We believe that currently available cash will be adequate
to support our operations for the next twelve months.

Safe Harbor Statement under the Private Securities Litigation Reform Act of 1995

This Quarterly Report contains forward-looking statements within the meaning of
Section 27A of the Securities Act of 1933 and Section 21E of the Securities
Exchange Act of 1934, including statements regarding the belief that the fourth
quarter of 2002 will be challenging for our mixed-signal business as the
difficult industry conditions experienced in 2001 and 2002 to date are expected
to continue; the expectation of a decline in the Serial EEPROM product sales as
we continue our exit from that business; the expectation that total sales for
the fourth quarter of 2002 will be significantly below the fourth quarter of
2001 levels; the anticipation that Xicor will incur a loss in the fourth
quarter of 2002; the expectation that the gross profit percentage will
fluctuate from quarter to quarter as a result of changes in product mix,
product costs and average selling prices; the expectation that the gross profit
percentage in the fourth quarter of 2002 will improve slightly from 46% in the
third quarter on reduced manufacturing costs and increased unit output; the
plan and estimated costs to abandon our current facility and relocate to our
new corporate headquarters in the fourth quarter of 2002, as well as the
economic impact expected to result from such relocation; the plan to begin
generating revenues from products developed using the in-process research and
development acquired from AIP toward the end of 2003; the expectation that
interest expense will increase in 2002 compared to 2001 as the convertible
subordinated notes and warrants are expected to be outstanding for the full
year; the expectation that interest income will decrease in the fourth quarter
of 2002 compared to the fourth quarter of 2001 principally due to lower
interest rates, the expectation to use cash in the fourth quarter of 2002; the
projection that 2002 capital expenditures will approximate $1.0 million; and
the expectation that currently available cash will be adequate to support
operations for the next twelve months.

Except for historical information, the matters discussed in this Quarterly
Report on Form 10-Q are forward-looking statements that are subject to certain
risks and uncertainties that could cause the actual results to differ
materially from those projected. Factors that could cause actual results to
differ materially include the following; general economic conditions and
conditions specific to the semiconductor industry; fluctuations in customer
demand, including loss of key customers, order cancellations or reduced
bookings; product mix; competitive factors such as pricing pressures on
existing products and the timing and market acceptance of new product
introductions (both by us and our competitors); our ability to have available
an appropriate amount of low cost foundry production capacity in a timely
manner; our foundry partners timely ability to successfully manufacture
products for us using our proprietary technology; any disruptions of our
foundry relationships; manufacturing efficiencies; the ability to continue
effective cost reductions; currency fluctuations; the successful and timely
development and introduction of new products and submicron processes; the
timely completion of tenant

13



---



##### Table of Contents



improvements to the facility we plan to use as our new corporate headquarters
and the timely exit from our current facility; and the risk factors listed from
time to time in our SEC reports, including but not limited to the Factors
Affecting Future Results section following and Part I, Item 1. of our Annual
Report on Form 10-K for the year ended December 31, 2001. Readers are
cautioned not to place undue reliance on these forward-looking statements,
which speak only as of the date hereof. We undertake no obligation to publicly
release or otherwise disclose the result of any revision to these
forward-looking statements that may be made as a result of events or
circumstances after the date hereof or to reflect the occurrence of
unanticipated events.

Factors Affecting Future Results

The risks described below are not the only ones facing our Company. Additional
risks not presently known to us or that we currently believe are not material
may also impair our business operations.

Our operating results fluctuate significantly, and an unanticipated decline in
revenue may disappoint securities analysts or investors and result in a decline
in our stock price.

You should not use our past financial performance to predict future operating
results. We have incurred net losses in three of the last four years. Our
recent quarterly and annual operating results have fluctuated, and will
continue to fluctuate, due to the following factors, all of which are difficult
to forecast and many of which are out of our control: the cyclical nature of
both the semiconductor industry and the markets addressed by our products,
including the current severe business down cycle; competitive pricing pressures
and related changes in selling prices; new product announcements and
introductions of competing products by us or our competitors; market acceptance
and subsequent design-in of new products; unpredictability of changes in demand
for, or in the mix of, our products; the timing of significant orders including
the fact that the sales level in any specific quarter depends significantly on
orders received during that quarter; the gain or loss of significant customers;
the availability, timely deliverability and cost of products manufactured on
our behalf by third-party suppliers; product obsolescence; lower of cost or
market inventory adjustments; changes in the channels through which our
products are distributed; exchange rate fluctuations; general economic,
political and environmental-related conditions, such as natural disasters;
difficulties in forecasting, planning and managing of inventory levels; and
unanticipated research and development expenses associated with new product
introductions.

The exit from a portion of our memory business has changed our business model
and is causing a reduction in our revenues.

In the first quarter of 2001, we announced our plan to exit from offering
stand-alone low-density serial EEPROM memory products. We have been unable to
secure a buyer for the business, particularly in light of the current weak
economic conditions, and plan to substantially complete our exit from that
business in 2002.

The transition out of the serial EEPROM memory business has reduced our
revenues and is requiring us to devote significant time and expense to
transition activities at the same time we are increasing our focus on our
mixed-signal products. If our penetration of the mixed-signal market does not
increase, our operating results could be seriously harmed and our stock price
could decline. Further, as a result of the transition, we have become a
smaller company with limited

14



---



##### Table of Contents



resources and a reduced workforce. We may not be able to effectively use our
limited resources to increase new product development and build our
mixed-signal product business. This could cause a further decline in our
revenues.

The selling prices for our products are volatile and have historically declined
over the life of a product. In addition, the cyclical nature of the
semiconductor industry produces fluctuations in our operating results.

The semiconductor industry has historically been cyclical, characterized by
wide fluctuations in product supply and demand. From time to time, the
industry has also experienced significant downturns, often in connection with,
or in anticipation of, maturing product cycles and declines in general economic
conditions. Downturns are generally characterized by diminished product
demand, production over-capacity and accelerated decline of average selling
prices, and in some cases have lasted for more than one year. We are presently
experiencing an economic downturn that is harming our business. Our success
depends on a better supply and demand balance within the industry and the
various electronics industries that use semiconductors, including networking,
communications and industrial companies, returning to more normal buying
patterns.

We do not typically enter into long-term contracts with our customers and we
cannot be certain as to future order levels from our customers.

The composition of our major customer base changes as the market demand for our
customers products change. A small number of customers have accounted for a
substantial portion of our sales. A reduction, delay, or cancellation of
orders from a large customer could harm our business. The loss of, or reduced
orders by, any of our key customers could result in a significant decline in
our sales.

We depend on distributors and manufacturers representatives to generate a
majority of our sales.

Distributors serve as a channel of sale to many end users of our products. Our
distributors and manufacturers representatives could discontinue selling our
products at any time. The loss of any significant distributor or
manufacturers representative could seriously harm our operating results by
impairing our ability to sell our products.

Our backlog may not result in future revenue, which would seriously harm our
business.

Due to possible customer changes in delivery schedules and cancellations of
orders, our backlog at any particular date is not necessarily indicative of
actual sales for any succeeding period. A reduction of backlog during any
particular period, or the failure of our backlog to result in future revenue,
could harm our business.

Our markets are subject to rapid technological change and, therefore, our
success depends on our ability to develop and introduce new products.

The markets for our products are characterized by rapidly changing
technologies; evolving and competing industry standards; changing customer
needs; frequent new product introductions and enhancements; increased
integration with other functions; and rapid product obsolescence.

15



---



##### Table of Contents



To develop new products for our target markets, we must develop, gain access to
and use leading technologies in a cost-effective and timely manner and continue
to expand our technical and design expertise. In addition, we must have our
products designed into our customers future products and maintain close
working relationships with key customers in order to develop new products that
meet their rapidly changing needs.

We cannot assure you that we will be able to identify new product opportunities
successfully, develop and bring to market new products at competitive costs,
achieve design wins or respond effectively to new technological changes or
product announcements by our competitors. Furthermore, we may not be
successful in developing or using new technologies or in developing new
products or product enhancements that achieve market acceptance. Our pursuit
of necessary technological advances may require substantial time and expense.
Failure in any of these areas could harm our business, operating results and
financial condition.

Our future success depends in part on the continued services of our key design,
engineering, sales, marketing and executive personnel and our ability to
identify, recruit and retain qualified personnel.

There is significant competition for qualified personnel in the semiconductor
industry, in particular for the highly skilled engineers involved in the design
and development of our mixed-signal products. At times competition has been
especially intense in Silicon Valley, where our design, research and
development, and corporate headquarters are located. The failure to recruit
and retain key design engineers or other technical and management personnel
would likely harm our business.

Our dependence on third-party foundries to manufacture our products and on
subcontractors to sort, assemble and test our products and ship our products to
customers subjects us to a number of risks.

We out-source all manufacturing operations. Our reliance on third-party
foundries and subcontractors to manufacture, sort, assemble and test our
products and to ship our products to customers involves the following
significant risks:



| |  |  | reduced control over delivery schedules and quality;                             
| | - |  | ---------------------------------------------------------------------------------
|
| |  |  | the potential lack of adequate capacity during periods of strong demand;         
|
| |  |  | difficulties selecting and integrating new foundries and subcontractors;         
|
| |  |  | limited warranties by third-party manufacturers on products supplied to us; and  
|
| |  |  | potential increases in product costs due to capacity shortages and other factors.

These risks may lead to a possible loss of sales, increased costs, delayed
product delivery or loss of competitive advantage, which would harm our
profitability and customer relationships. Additionally, as we shift
manufacturing of existing products between foundries and third-party
subcontractors, certain customers require requalification of such products
prior to accepting

16



---



##### Table of Contents



delivery. Delays in customer qualification schedules or lack of qualification
of such products could result in the loss of sales, which could seriously harm
our operating results.

Our operating expenses are relatively fixed, and we order materials in advance
of anticipated customer demand. Therefore, we have limited ability to reduce
expenses quickly in response to any revenue shortfalls.

Our operating expenses are relatively fixed, and we therefore have limited
ability to reduce expenses quickly in response to any revenue shortfalls.
Consequently, our operating results will be harmed if our sales do not meet our
revenue projections. Revenue shortfalls can occur for any of the following
reasons: economic slowdowns in the markets we serve; significant pricing
pressures that occur because of declines in selling prices over the life of a
product; the reduction, rescheduling or cancellation of customer orders; and
sudden shortages of raw materials or fabrication, sort, test or assembly
capacity constraints that lead our suppliers to allocate available supplies or
capacity to other customers which, in turn, harms our ability to meet our sales
obligations.

In addition, we typically plan our production and inventory levels based on
internal forecasts of customer demand, which are highly unpredictable and can
fluctuate substantially. From time to time, in response to anticipated long
lead times to obtain inventory and materials from our outside suppliers and
foundries, we order materials and produce finished products in advance of
anticipated customer demand. This advance ordering and production has resulted
in, and may continue to result in, excess inventory levels or inventory
write-downs if expected orders fail to materialize or prices decrease
substantially.

We presently have minimum wafer purchase commitments with a foundry that were
made in exchange for a capacity commitment from them. Should demand for our
products be less than the capacity commitment, we may be required to make
payments for unused capacity which would cause our costs to increase.

Because our products typically have lengthy sales cycles, we may experience
substantial delays between incurring expenses related to research and
development and the generation of sales.

Due to the length of the product design-in cycle, we usually require more than
nine months to realize volume shipments after a customer first samples our
product. We first work with customers to achieve a design win, which may take
three months or longer. Our customers then complete the design, testing and
evaluation process and begin to ramp up production, a period which typically
lasts an additional six months or longer. As a result, a significant period of
time may elapse between our research and development efforts and our
realization of revenue, if any, from volume purchasing of our products by our
customers.

We face intense competition from companies with significantly greater
financial, technical and marketing resources that could adversely affect our
ability to increase sales of our products.

We compete with major semiconductor companies such as Analog Devices, Atmel
Corporation, Catalyst Semiconductor and Maxim, most of whom have substantially
greater financial, technical, marketing, distribution, and other resources than
we do and have their own facilities

17



---



##### Table of Contents



for the production of semiconductor components. In addition, our foundry
partners have the right to develop and fabricate products based on our process
technology.

From time to time, we may have to defend lawsuits in connection with the
operation of our business.

We are subject to litigation in the ordinary course of our business. If we do
not prevail in any lawsuit which may occur we could be subject to significant
liability for damages, our patents and other proprietary rights could be
invalidated, and we could be subject to injunctions preventing us from taking
certain actions. If any of the above occur, our business and financial
position could be harmed.

Our cost of sales may increase if we are required to purchase additional
manufacturing capacity in the future.

To obtain additional manufacturing capacity in the future, we may be required
to make deposits, equipment purchases and loans and enter into joint ventures,
equity investments or technology licenses in or with wafer fabrication
companies. These transactions could involve a commitment of substantial
amounts of our capital and technology licenses in return for production
capacity. We may be required to seek additional debt or equity financing in
order to secure this capacity and we may not be able to obtain such financing.

Our ability to compete successfully will depend, in part, on our ability to
protect our intellectual property rights, which we may not be able to do
successfully.

We rely on a combination of patents, trade secrets, copyright and mask work
production laws and rights, nondisclosure agreements and other contractual
provisions and technical measures to protect our intellectual property rights.
Our business, operating results and financial condition could be seriously
harmed by the failure to be able to protect our intellectual property.
Policing unauthorized use of our intellectual property, however, is difficult,
especially in foreign countries. Litigation may be necessary to enforce our
intellectual property rights, to protect our trade secrets, to determine the
validity and scope of the proprietary rights of others, or to defend against
claims of infringement or invalidity. Litigation of this type can result in
substantial costs and diversion of resources and can harm our business,
operating results and financial condition regardless of the outcome of the
litigation.

If Xicor or any of our foundries or third-party subcontractors is accused of
infringing the intellectual property rights of other parties, we may become
subject to time-consuming and costly litigation. If we lose or settle claims,
we could suffer a significant negative impact on our business and be forced to
pay royalties and damages.

Third parties have and may continue to assert that our products infringe their
proprietary rights, or may assert claims for indemnification resulting from
infringement claims against us. Any such claims may cause us to delay or
cancel shipment of our products or pay royalties and damages that could
seriously harm our business, financial condition and results of operations. In
addition, irrespective of the validity or the successful assertion of such
claims, we could incur significant costs in defending against such claims.

18



---



##### Table of Contents



We have received notices claiming infringement of patents from third parties
with respect to certain aspects of our processes and devices, and these matters
are under investigation and review. Although patent holders typically offer
licenses and we have entered into such license agreements in the past, we may
not be able to obtain licenses on acceptable terms, and disputes may not be
resolved without costly litigation.

Our business may suffer due to risks associated with international sales and
operations.

Sales outside of North America accounted for approximately 70% of total sales
in the third quarter of 2002. Our international business activities are
subject to a number of risks, any of which could impose unexpected costs on us
that would have an adverse effect on our operating results. These risks
include difficulties in complying with regulatory requirements and standards;
tariffs and other trade barriers; costs and risks of localizing products for
foreign countries; severe currency fluctuations and economic deflation;
reliance on third parties to distribute our products; longer accounts
receivable payment cycles; potentially adverse tax consequences; and burdens of
complying with a wide variety of foreign laws.

We may face interruption of production and services due to increased security
measures in response to recent and potential future terrorist activities.

Our business depends on the free flow of products and services through the
channels of commerce. During the past year, in response to terrorists
activities and threats aimed at the United States, transportation, mail,
financial and other services have at times been slowed or stopped altogether.
Further delays or stoppages in transportation, mail, financial or other
services, particularly any such delays or stoppages which harm our ability to
obtain an adequate supply of wafers and products from our foreign foundries or
contractors, could harm our business, results of operations and financial
condition. Furthermore, we may experience an increase in operating costs, such
as costs for transportation, insurance and security as a result of the
activities and potential activities. We may also experience delays in
receiving payments from customers that have been affected by the terrorist
activities and potential activities. The United States economy in general is
being adversely affected by terrorist activities and potential terrorist
activities. The economic downturn we are currently experiencing is adversely
impacting our results of operations, and may impair our ability to raise
capital or otherwise adversely affect our ability to grow our business.
Moreover, we cannot determine whether other attacks may occur in the future and
the effects of such attacks on our business could be severe.

Our November 2001 debt financing substantially increased our indebtedness which
may make it more difficult to obtain financing in the future and cause our
business to suffer.

As a result of our November 2001 sale of notes and warrants, we incurred $35
million of additional indebtedness. The level of our indebtedness, among other
things, could make it difficult for us to obtain any necessary financing in the
future for working capital, capital expenditures, debt service requirements or
other purposes; limit our flexibility in planning for, or reacting to changes
in, our business; and make us more vulnerable in the event of a downturn in our
business. If any of these risks materialize, we may be unable to successfully
execute our business plan.

19



---



##### Table of Contents



Our business could be harmed if the net proceeds from the November 2001 debt
financing are used ineffectively.

We have flexibility in applying the net proceeds of the debt financing. We
intend to use the proceeds of this offering for working capital and general
corporate purposes. We may also use the proceeds for acquisitions, including
acquisitions of intellectual property and design teams, such as our April 2002
acquisition of AIP. In addition, we may also use proceeds from the debt
financing for research, development, sales and marketing and capital
expenditures. The failure to apply these net proceeds effectively could harm
our business, results of operations and financial condition.

The conversion of our outstanding convertible debt and exercise of warrants
issued in connection with our convertible debt may result in dilution to
holders of our common stock and a reduction in the price of our common stock.

In November 2001 we issued $35 million in convertible notes and related
warrants. The convertible notes enable the holders to convert principal
amounts owed under the notes into an aggregate of approximately 3.1 million
shares of common stock at a conversion price of $11.22 per share. In
connection with the issuance of the convertible notes we also issued warrants
for the purchase of approximately one million shares of common stock that are
exercisable at a price of $12.24 per share. If the price of our common stock
exceeds the conversion price of the notes and exercise price of the warrants,
holders of the notes and warrants may convert the debt and exercise the
warrants. We may force the conversion of all or a portion of the notes and
warrants in certain circumstances. Our issuance of common stock at prices of
$11.22 per share upon conversion of the debt and $12.24 per share upon exercise
of the warrants may result in dilution to other holders of common stock and may
cause the price of our common stock to fall. In addition, if note and warrant
holders elect to sell the common stock issued upon the conversion of the debt
and exercise of the warrants, the price of our common stock may fall.

We may require additional capital in order to bring new products to market, and
the issuance of new equity securities will dilute your investment in our common
stock.

To implement our strategy of diversified product offerings, we need to bring
new products to market. Bringing new products to market and ramping up
production requires significant working capital. We may sell additional shares
of our stock or seek additional borrowings or outside capital infusions. We
cannot assure you that such financing options will be available on terms
acceptable to us, if at all. In addition, if we issue shares of our common
stock, our shareholders will experience dilution of their investment.

We may fail to successfully integrate our business and technologies with those
of the company that we recently acquired.

We completed our first acquisition, of AIP, in April 2002. If we fail to
integrate this business successfully or properly, our quarterly and annual
results may be seriously harmed. Integrating people, technology and services
with our existing business could be expensive, time-consuming and a strain on
our resources. Specific issues that we face with regard to our acquisition
include the difficulty of integrating acquired technology, the potential
disruption of our ongoing business and distraction of management, the failure
to successfully develop acquired technology resulting in the impairment of
amounts capitalized as intangible assets, unanticipated expenses related to

20



---



##### Table of Contents



technology integration and the potential unknown liabilities associated with
the acquired business.

Business interruptions could harm our business.

Our operations and those of our foundries and other manufacturing
subcontractors are vulnerable to interruption by fire, earthquake, power loss,
telecommunications failure and other events beyond our control. Our facility
in the State of California may be subject to electrical blackouts due to a
shortage of available electrical power. If these blackouts were to occur, they
could disrupt our operations. Business interruption insurance may not provide
protection due to the deductible periods or be enough to compensate us for
losses that may occur. Additionally, we have been unable to obtain earthquake
insurance of reasonable costs and limits.




Item 3. Quantitative and Qualitative Disclosures About Market Risk

We do not use derivative financial instruments in our investment portfolio. We
have an investment portfolio of fixed income securities that are classified as
available-for-sale securities. These securities, like all fixed income
instruments, are subject to interest rate risk and will fall in value if market
interest rates increase. We attempt to limit this exposure by investing
primarily in short-term securities. Due to the short duration and conservative
nature of our investment portfolio a movement of 10% by market interest rates
would not have a material impact on our operating results and the total value
of the portfolio over the next fiscal year.

We are exposed to risks associated with foreign exchange rate fluctuations due
to our international manufacturing and sales activities. We generally have not
hedged currency exposures. These exposures may change over time as business
practices evolve and could negatively impact our operating results and
financial condition. All of our sales are denominated in U.S. dollars. An
increase in the value of the U.S. dollar relative to foreign currencies could
make our products more expensive and therefore reduce the demand for our
products. Such a decline in the demand could reduce sales and/or result in
operating losses.




Item 4. Controls and Procedures.



| | (a) |  | Evaluation of disclosure controls and procedures.
| | --- |  | -------------------------------------------------

Our chief executive officer and our chief financial officer, after
evaluating our disclosure controls and procedures (as defined in Securities
Exchange Act of 1934 (the Exchange Act) Rules 13a-14(c) and 15-d-14(c)) as of
a date (the Evaluation Date) within 90 days before the filing date of this
Quarterly Report on Form 10-Q have concluded that as of the Evaluation Date,
our disclosure controls and procedures are effective to ensure that information
we are required to disclose in reports that we file or submit under the
Exchange Act is recorded, processed, summarized and reported within the time
periods specified in Securities and Exchange Commission rules and forms.



| | (b) |  | Changes in internal controls.
| | --- |  | -----------------------------

Subsequent to the Evaluation Date, there were no significant changes in
our internal controls or in other factors that could significantly affect our
disclosure controls and procedures,

21



---



##### Table of Contents



nor were there any significant deficiencies or material weaknesses in our
internal controls. As a result, no corrective actions were required or
undertaken.




PART II: OTHER INFORMATION




Item 5. Other Information.

Xicors auditors, PricewaterhouseCoopers, LLP, provide Xicor with non-audit
services in the nature of tax return preparation and tax assistance. The Audit
Committee of Xicors Board of Directors has approved the performance of such
services.




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

|    |  |                                                                                                                            |  |                                                                                      |  | 
|--- |  | -------------------------------------------------------------------------------------------------------------------------- |  | ------------------------------------------------------------------------------------ |  | 
|(a) |  | Exhibits:                                                                                                                  |  |                                                                                      |  | 
|   
|   
|   
|   
|    |  | 10.1                                                                                                                       |  | Xicor, Inc. 2002 Stock Option Plan                                                  
|   
|   
|   
|   
|    |  | 10.2                                                                                                                       |  | Building lease between WB Murphy Ranch, L.L.C. and Xicor,
Inc. dated October 8, 2002
|   
|   
|   
|   
|    |  | 99.1                                                                                                                       |  | Certification of Chief Executive Officer and Chief Financial
Officer                
|   
|(b) |  | Reports
on Form 8-K:                                                                                                      
|    |  | No reports on Form 8-K were filed with the Securities and Exchange
Commission during the quarter ended September 29, 2002.

22



---



##### Table of Contents






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.

|                             |  |  |  |                                                                                            
|---------------------------- |  |  |  | -------------------------------------------------------------------------------------------
|                             |  |  |  | XICOR, INC., a
California Corporation                                                      
|                            
|                            
|                            
|                            
|                             |  |  |  |                                                                                            
|                            
|                            
|                            
|                            
|                             |  |  |  | By /s/Louis DiNardo                                                                        
|                             |  |  |  |                                                                                            
|                             |  |  |  | Louis DiNardo
Chief Executive Officer
(Principal Executive Officer)                        
|                            
|                            
|                            
|                            
|                             |  |  |  |                                                                                            
|                            
|                            
|                            
|                            
|                             |  |  |  | By /s/Geraldine N. Hench                                                                   
|                             |  |  |  |                                                                                            
|                             |  |  |  | Geraldine N. Hench
Vice President, Finance and Administration
(Principal Financial Officer)
|                            
|                            
|                            
|                            
|                             |  |  |  |                                                                                            
|                            
|                            
|                            
|                            
|Date:      November 12, 2002 |  |  |  |                                                                                            

23



---



##### Table of Contents






CERTIFICATIONS

I, Louis DiNardo, certify that:



|1. |  | I have reviewed this quarterly report on Form 10-Q of Xicor, Inc.;                                                                                                                                                                                                                                                            
|-- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|  
|2. |  | Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to
make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by
this quarterly report;
|  
|3. |  | Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all
material respects the financial condition, results of operations and cash
flows of the registrant as of, and for, the periods presented in this
quarterly report;                   
|  
|4. |  | The registrants other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we
have:                                                                                                     



| | a) |  | designed such disclosure controls and procedures to ensure
that material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within
those entities, particularly during the period in which this
quarterly report is being prepared;
| | -- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| | b) |  | evaluated the effectiveness of the registrants disclosure
controls and procedures as of a date within 90 days prior to the
filing date of this quarterly report (the Evaluation Date); and                                                                                                  
|
| | c) |  | presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;                                                                                                                        



|5. |  | The registrants other certifying officers and I have disclosed, based on
our most recent evaluation, to the registrants auditors and the audit
committee of registrants board of directors (or persons performing the
equivalent functions):
|-- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | a) |  | all significant deficiencies in the design or operation of
internal controls which could adversely affect the registrants
ability to record, process, summarize and report financial data and
have identified for the registrants auditors any material
weaknesses in internal controls; and
| | -- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| | b) |  | any fraud, whether or not material, that involves management
or other employees who have a significant role in the registrants
internal controls; and                                                                                                                                        



|6. |  | The registrants other certifying officers and I have indicated in this
quarterly report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal
controls subsequent to the date of our most recent evaluation, including
any corrective actions with regard to significant deficiencies and
material weaknesses.
|-- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|                            |  |                                      
|--------------------------- |  | -------------------------------------
|Date:     November 12, 2002 |  | By:/s/Louis DiNardo                  
|                            |  |                                      
|                            |  | Louis DiNardo
Chief Executive Officer

24



---



##### Table of Contents



I, Geraldine N. Hench, certify that:



|1. |  | I have reviewed this quarterly report on Form 10-Q of Xicor, Inc.;                                                                                                                                                                                                                                                            
|-- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|  
|2. |  | Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to
make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by
this quarterly report;
|  
|3. |  | Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all
material respects the financial condition, results of operations and cash
flows of the registrant as of, and for, the periods presented in this
quarterly report;                   
|  
|4. |  | The registrants other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we
have:                                                                                                     



| | a) |  | designed such disclosure controls and procedures to ensure
that material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within
those entities, particularly during the period in which this
quarterly report is being prepared;
| | -- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| | b) |  | evaluated the effectiveness of the registrants disclosure
controls and procedures as of a date within 90 days prior to the
filing date of this quarterly report (the Evaluation Date); and                                                                                                  
|
| | c) |  | presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;                                                                                                                        



|5. |  | The registrants other certifying officers and I have disclosed, based on
our most recent evaluation, to the registrants auditors and the audit
committee of registrants board of directors (or persons performing the
equivalent functions):
|-- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | a) |  | all significant deficiencies in the design or operation of
internal controls which could adversely affect the registrants
ability to record, process, summarize and report financial data and
have identified for the registrants auditors any material
weaknesses in internal controls; and
| | -- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| | b) |  | any fraud, whether or not material, that involves management
or other employees who have a significant role in the registrants
internal controls; and                                                                                                                                        



|6. |  | The registrants other certifying officers and I have indicated in this
quarterly report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal
controls subsequent to the date of our most recent evaluation, including
any corrective actions with regard to significant deficiencies and
material weaknesses.
|-- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|      |  |                   |  |     |  |                                                              
|----- |  | ----------------- |  | --- |  | -------------------------------------------------------------
|Date: |  | November 12, 2002 |  | By: |  | /s/Geraldine N. Hench                                        
|      |  |                   |  |     |  |                                                              
|      |  |                   |  |     |  | Geraldine N. Hench
Vice President, Finance and
Administration

25



---



##### Table of Contents






EXHIBIT INDEX

| |  |  |      |  |  |                                                                                     
| |  |  | ---- |  |  | ------------------------------------------------------------------------------------
| |  |  | 10.1 |  |  | Xicor, Inc. 2002 Stock Option Plan                                                  
|
|
|
|
| |  |  | 10.2 |  |  | Building lease between WB Murphy Ranch, L.L.C. and Xicor,
Inc. dated October 8, 2002
|
|
|
|
| |  |  | 99.1 |  |  | Certification of Chief Executive Officer and Chief Financial
Officer                

26