##### 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 March 30, 2003

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.)

|                                                                                      |  |                 
|------------------------------------------------------------------------------------- |  | ----------------
|933 Murphy Ranch Road, 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 [  ]

Indicate by check mark whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Exchange Act). YES
[  ] NO [X]

NUMBER OF SHARES OUTSTANDING AT APRIL 21, 2003
26,810,943





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TABLE OF CONTENTS



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



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##### Table of Contents



XICOR, INC.

FORM 10-Q

QUARTER ENDED MARCH 30, 2003

INDEX

|           |                       |  |                                                                                                              |  |     
|---------- | --------------------- |  | ------------------------------------------------------------------------------------------------------------ |  | ----
|           |                       |  |                                                                                                              |  | Page
|           |                       |  |                                                                                                              |  |     
|Part I:    | FINANCIAL INFORMATION |  |                                                                                                             
|           | Item 1.               |  | Financial Statements                                                                                         |  |     
|           |                       |  | Condensed Consolidated Balance Sheets at
March 30, 2003 and December 31, 2002                                |  | 1   
|           |                       |  | Condensed Consolidated Statements of Operations
for the three months ended March 30, 2003 and
March 31, 2002 |  | 2   
|           |                       |  | Condensed Consolidated Statements of Cash Flows
for the three months ended March 30, 2003 and
March 31, 2002 |  | 3   
|           |                       |  | Notes to Condensed Consolidated Financial
Statements                                                         |  | 4   
|           | Item 2.               |  | Managements Discussion and Analysis of Financial
Condition and Results of Operations                        |  | 7   
|           | Item 3.               |  | Quantitative and Qualitative Disclosures about Market
Risk                                                   |  | 18  
|           | Item 4.               |  | Controls and Procedures                                                                                      |  | 19  
|Part II:   | OTHER INFORMATION     |  |                                                                                                             
|           | Item 6.               |  | Exhibits and Reports on Form 8-K                                                                             |  | 19  
|SIGNATURES |                       |  |                                                                                                              |  | 20  

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Part I: FINANCIAL INFORMATION




Item 1. Financial Statements.




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

|                                                                     |                                                                               |                                            |        |           |        |              |        |          |        | 
|-------------------------------------------------------------------- | ----------------------------------------------------------------------------- | ------------------------------------------ | ------ | --------- | ------ | ------------ | ------ | -------- | ------ | 
|                                                                     |                                                                               |                                            |        | March 30, |        | December 31,
|                                                                     |                                                                               |                                            |        | 2003      |        | 2002        
|                                                                     |                                                                               |                                            |        |           |        |             
|ASSETS                                                              
|Current assets:                                                      |                                                                               |                                            |        |           |        |              |        |         
|                                                                     | Cash and cash equivalents                                                     |                                            | $      | 29,543    |        |              | $      | 32,648   |       
|                                                                     | Short-term investments                                                        |                                            |        | 5,704     |        |              |        | 4,648    |       
|                                                                     | Accounts receivable                                                           |                                            |        | 3,499     |        |              |        | 4,606    |       
|                                                                     | Inventories                                                                   |                                            |        | 4,528     |        |              |        | 4,939    |       
|                                                                     | Prepaid expenses and other current assets                                     |                                            |        | 663       |        |              |        | 539      |       
|                                                                     |                                                                               |                                            |        |           |        |              |        |          |       
|                                                                     |                                                                               | Total current assets                       |        |           | 43,937 |              |        |          | 47,380 | 
|Long-term investments                                                |                                                                               |                                            | 2,001  |           |        |              | 1,085  |         
|Property, plant and equipment,
at cost less accumulated depreciation |                                                                               |                                            | 2,772  |           |        |              | 3,041  |         
|Goodwill                                                             |                                                                               |                                            | 10,762 |           |        |              | 10,762 |         
|Purchased intangible assets, net                                     |                                                                               |                                            | 1,837  |           |        |              | 2,062  |         
|Other assets                                                         |                                                                               |                                            | 2,591  |           |        |              | 2,766  |         
|                                                                     |                                                                               |                                            |        |           |        |              |        |          |       
|                                                                     |                                                                               | Total assets                               |        | $         | 63,900 |              |        | $        | 67,096 | 
|                                                                     |                                                                               |                                            |        |           |        |              |        |          |       
|LIABILITIES AND SHAREHOLDERS EQUITY                                
|Current liabilities:                                                 |                                                                               |                                            |        |           |        |              |        |         
|                                                                     | Accounts payable                                                              |                                            | $      | 6,388     |        |              | $      | 6,215    |       
|                                                                     | Accrued expenses                                                              |                                            |        | 5,803     |        |              |        | 6,136    |       
|                                                                     | Deferred income on shipments to distributors                                  |                                            |        | 3,867     |        |              |        | 5,762    |       
|                                                                     | Current portion of long-term obligations                                      |                                            |        | 339       |        |              |        | 432      |       
|                                                                     |                                                                               |                                            |        |           |        |              |        |          |       
|                                                                     |                                                                               | Total current liabilities                  |        |           | 16,397 |              |        |          | 18,545 | 
|Convertible subordinated notes                                       |                                                                               |                                            | 32,661 |           |        |              | 32,506 |         
|Long-term obligations                                                |                                                                               |                                            | 412    |           |        |              | 470    |         
|                                                                     |                                                                               |                                            |        |           |        |              |        |          |       
|                                                                     |                                                                               | Total liabilities                          |        |           | 49,470 |              |        |          | 51,521 | 
|                                                                     |                                                                               |                                            |        |           |        |              |        |          |       
|Shareholders equity:                                                |                                                                               |                                            |        |           |        |              |        |         
|                                                                     | Preferred stock; 5,000 shares authorized                                      |                                            |        |          |        |              |        |         |       
|                                                                     | Common stock; 200,000 shares authorized;
23,914 and 23,737 shares outstanding |                                            |        | 149,479   |        |              |        | 149,216  |       
|                                                                     | Accumulated deficit                                                           |                                            |        | (135,049  | )      |              |        | (133,641 | )     
|                                                                     |                                                                               |                                            |        |           |        |              |        |          |       
|                                                                     |                                                                               | Total shareholders equity                 |        |           | 14,430 |              |        |          | 15,575 | 
|                                                                     |                                                                               |                                            |        |           |        |              |        |          |       
|                                                                     |                                                                               | Total liabilities and shareholders equity |        | $         | 63,900 |              |        | $        | 67,096 | 
|                                                                     |                                                                               |                                            |        |           |        |              |        |          |       

See accompanying notes to condensed consolidated financial information

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

|                                       |                                             |   |                    |        |           |   |        |        |  
|-------------------------------------- | ------------------------------------------- | - | ------------------ | ------ | --------- | - | ------ | ------ | -
|                                       |                                             |   | Three Months Ended
|                                       |                                             |   |                   
|                                       |                                             |   | March 30,          |        | March 31,
|                                       |                                             |   | 2003               |        | 2002     
|                                       |                                             |   |                    |        |          
|Net sales                              |                                             | $ | 9,604              |        |           | $ | 10,047 |       
|Cost of sales                          |                                             |   | 4,698              |        |           |   | 5,012  |       
|                                       |                                             |   |                    |        |           |   |        |       
|                                       | Gross profit                                |   |                    | 4,906  |           |   |        | 5,035  |  
|                                       |                                             |   |                    |        |           |   |        |       
|Operating expenses:                    |                                             |   |                    |        |           |   |        |       
|                                       | Research and development                    |   |                    | 2,927  |           |   |        | 3,006  |  
|                                       | Selling, general and administrative         |   |                    | 2,499  |           |   |        | 2,996  |  
|                                       | Amortization of purchased intangible assets |   |                    | 225    |           |   |        |       |  
|                                       |                                             |   |                    |        |           |   |        |       
|                                       |                                             |   | 5,651              |        |           |   | 6,002  |       
|                                       |                                             |   |                    |        |           |   |        |       
|Income (loss) from operations          |                                             |   | (745               | )      |           |   | (967   | )     
|                                       |                                             |   |                    |        |           |   |        |       
|Interest expense                       |                                             |   | (806               | )      |           |   | (821   | )     
|Interest and other income              |                                             |   | 143                |        |           |   | 640    |       
|                                       |                                             |   |                    |        |           |   |        |       
|                                       |                                             |   | (663               | )      |           |   | (181   | )     
|                                       |                                             |   |                    |        |           |   |        |       
|Income (loss) before income taxes      |                                             |   | (1,408             | )      |           |   | (1,148 | )     
|Provision for income taxes             |                                             |   |                   |        |           |   |       |       
|                                       |                                             |   |                    |        |           |   |        |       
|Net income (loss)                      |                                             | $ | (1,408             | )      |           | $ | (1,148 | )     
|                                       |                                             |   |                    |        |           |   |        |       
|Net income (loss) per common share:    |                                             |   |                    |        |           |   |        |       
|                                       | Basic                                       |   | $                  | (0.06  | )         |   | $      | (0.05  | )
|                                       |                                             |   |                    |        |           |   |        |       
|                                       | Diluted                                     |   | $                  | (0.06  | )         |   | $      | (0.05  | )
|                                       |                                             |   |                    |        |           |   |        |       
|Shares used in per share calculations: |                                             |   |                    |        |           |   |        |       
|                                       | Basic                                       |   |                    | 23,791 |           |   |        | 22,377 |  
|                                       |                                             |   |                    |        |           |   |        |       
|                                       | Diluted                                     |   |                    | 23,791 |           |   |        | 22,377 |  
|                                       |                                             |   |                    |        |           |   |        |       

See accompanying notes to condensed consolidated financial information

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

|                                                    |                                         |                                                                                       |                                                  |                                              |        |                    |        |           |        |      |        |  
|--------------------------------------------------- | --------------------------------------- | ------------------------------------------------------------------------------------- | ------------------------------------------------ | -------------------------------------------- | ------ | ------------------ | ------ | --------- | ------ | ---- | ------ | -
|                                                    |                                         |                                                                                       |                                                  |                                              |        | Three Months Ended
|                                                    |                                         |                                                                                       |                                                  |                                              |        |                   
|                                                    |                                         |                                                                                       |                                                  |                                              |        | March 30,          |        | March 31,
|                                                    |                                         |                                                                                       |                                                  |                                              |        | 2003               |        | 2002     
|                                                    |                                         |                                                                                       |                                                  |                                              |        |                    |        |          
|Cash flows from operating activities:               |                                         |                                                                                       |                                                  |                                              |        |                    |        |          
|                                                    |                                         | Net loss                                                                              |                                                  | $                                            | (1,408 | )                  |        | $         | (1,148 | )   
|                                                    |                                         | Adjustments to reconcile net loss to cash provided
by (used in) operating activities: |                                                  |                                              |        |                    |        |           |        |     
|                                                    |                                         |                                                                                       | Depreciation                                     |                                              |        | 414                |        |           |        | 757  |       
|                                                    |                                         |                                                                                       | Amortization of fab gain                         |                                              |        |                   |        |           |        | (630 | )     
|                                                    |                                         |                                                                                       | Amortization of debt issuance costs and warrants |                                              |        | 309                |        |           |        | 303  |       
|                                                    |                                         |                                                                                       | Amortization of purchased intangibles            |                                              |        | 225                |        |           |        |     |       
|                                                    |                                         |                                                                                       | Changes in assets and liabilities:               |                                              |        |                    |        |           |        |      |       
|                                                    |                                         |                                                                                       |                                                  | Accounts receivable                          |        |                    | 1,107  |           |        |      | (214   | )
|                                                    |                                         |                                                                                       |                                                  | Inventories                                  |        |                    | 411    |           |        |      | 1,663  |  
|                                                    |                                         |                                                                                       |                                                  | Prepaid expenses and other current assets    |        |                    | (124   | )         |        |      | (332   | )
|                                                    |                                         |                                                                                       |                                                  | Other assets                                 |        |                    | 21     |           |        |      | (193   | )
|                                                    |                                         |                                                                                       |                                                  | Accounts payable and accrued expenses        |        |                    | (160   | )         |        |      | (1,928 | )
|                                                    |                                         |                                                                                       |                                                  | Deferred income on shipments to distributors |        |                    | (1,895 | )         |        |      | (2,174 | )
|                                                    |                                         |                                                                                       |                                                  |                                              |        |                    |        |           |        |     
|Net cash provided by (used in) operating activities |                                         |                                                                                       | (1,100                                           | )                                            |        |                    | (3,896 | )        
|                                                    |                                         |                                                                                       |                                                  |                                              |        |                    |        |           |        |     
|Cash flows from investing activities:               |                                         |                                                                                       |                                                  |                                              |        |                    |        |          
|                                                    | Purchase of investments                 |                                                                                       |                                                  | (1,972                                       | )      |                    |        |          |       
|                                                    | Investments in plant and equipment, net |                                                                                       |                                                  | (145                                         | )      |                    |        | (211      | )     
|                                                    |                                         |                                                                                       |                                                  |                                              |        |                    |        |           |        |     
|Net cash used in investing activities               |                                         |                                                                                       | (2,117                                           | )                                            |        |                    | (211   | )        
|                                                    |                                         |                                                                                       |                                                  |                                              |        |                    |        |           |        |     
|Cash flows from financing activities:               |                                         |                                                                                       |                                                  |                                              |        |                    |        |          
|                                                    | Repayments of long-term obligations     |                                                                                       |                                                  | (151                                         | )      |                    |        | (163      | )     
|                                                    | Net proceeds from sale of common stock  |                                                                                       |                                                  | 263                                          |        |                    |        | 334       |       
|                                                    |                                         |                                                                                       |                                                  |                                              |        |                    |        |           |        |     
|Net cash provided by financing activities           |                                         |                                                                                       | 112                                              |                                              |        |                    | 171    |          
|                                                    |                                         |                                                                                       |                                                  |                                              |        |                    |        |           |        |     
|Increase (decrease) in cash and cash equivalents    |                                         |                                                                                       | (3,105                                           | )                                            |        |                    | (3,936 | )        
|Cash and cash equivalents at beginning of year      |                                         |                                                                                       | 32,648                                           |                                              |        |                    | 56,367 |          
|                                                    |                                         |                                                                                       |                                                  |                                              |        |                    |        |           |        |     
|Cash and cash equivalents at end of period          |                                         | $                                                                                     | 29,543                                           |                                              |        | $                  | 52,431 |          
|                                                    |                                         |                                                                                       |                                                  |                                              |        |                    |        |           |        |     
|Supplemental information:                           |                                         |                                                                                       |                                                  |                                              |        |                    |        |          
|Cash paid (refunded) during the period for:         |                                         |                                                                                       |                                                  |                                              |        |                    |        |          
|                                                    | Interest expense                        |                                                                                       | $                                                | 18                                           |        |                    | $      | 38        |       
|                                                    | Income taxes                            |                                                                                       |                                                  | 10                                           |        |                    |        | (24       | )     

See accompanying notes to condensed consolidated financial information

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XICOR, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

Note 1  Interim financial information:

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, 2002 filed with the Securities and Exchange
Commission.

Note 2  Net income (loss) per share and comprehensive net income (loss):

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 7.3 million and 5.0
shares of common stock at March 30, 2003 and March 31, 2002, respectively, were
excluded from the earnings per share (EPS) computation for the three months
ended March 30, 2003 and March 31, 2002 as they were anti-dilutive.

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

Note 3  Balance sheet components:

|                               |                                     |   |                |         |              |   |        |         |  
|------------------------------ | ----------------------------------- | - | -------------- | ------- | ------------ | - | ------ | ------- | -
|                               |                                     |   | March 30,      |         | December 31,
|                               |                                     |   | 2003           |         | 2002        
|                               |                                     |   |                |         |             
|                               |                                     |   | (In thousands)
|Inventories:                   |                                     |   |                |         |              |   |        |        
|                               | Raw materials and supplies          |   | $              | 45      |              |   | $      | 49      |  
|                               | Work in process                     |   |                | 3,067   |              |   |        | 3,370   |  
|                               | Finished goods                      |   |                | 1,416   |              |   |        | 1,520   |  
|                               |                                     |   |                |         |              |   |        |         |  
|                               |                                     | $ | 4,528          |         |              | $ | 4,939  |        
|                               |                                     |   |                |         |              |   |        |         |  
|Property, plant and equipment: |                                     |   |                |         |              |   |        |        
|                               | Leasehold improvements              |   | $              | 49      |              |   | $      | 49      |  
|                               | Equipment                           |   |                | 25,238  |              |   |        | 25,319  |  
|                               | Furniture and fixtures              |   |                | 92      |              |   |        | 92      |  
|                               | Construction in progress            |   |                | 63      |              |   |        |        |  
|                               |                                     |   |                |         |              |   |        |         |  
|                               |                                     |   | 25,442         |         |              |   | 25,460 |        
|                               | Accumulated depreciation            |   |                | (22,670 | )            |   |        | (22,419 | )
|                               |                                     |   |                |         |              |   |        |         |  
|                               |                                     | $ | 2,772          |         |              | $ | 3,041  |        
|                               |                                     |   |                |         |              |   |        |         |  
|Accrued expenses:              |                                     |   |                |         |              |   |        |        
|                               | Accrued wages and employee benefits |   | $              | 967     |              |   | $      | 1,136   |  
|                               | Accrued restructuring liabilities   |   |                | 147     |              |   |        | 718     |  
|                               | Other accrued expenses              |   |                | 4,689   |              |   |        | 4,282   |  
|                               |                                     |   |                |         |              |   |        |         |  
|                               |                                     | $ | 5,803          |         |              | $ | 6,136  |        
|                               |                                     |   |                |         |              |   |        |         |  

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Accounts receivable:

Accounts receivable at March 30, 2003 and December 31, 2002 are presented net
of an allowance for doubtful accounts of $500,000.

Goodwill and intangibles:

At March 30, 2003 and December 31, 2002, goodwill resulting from the April 2002
acquisition of Analog Integration Partners LLC (AIP) amounted to $10.8 million.
The 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 of circumstances have occurred
indicating that goodwill might be impaired.

Purchased intangible assets related to the acquisition of AIP were as follows
(in thousands):

|                   |  |                |       |                   |  |          |      |              |  |   |       |  |  |   |      |  
|------------------ |  | -------------- | ----- | ----------------- |  | -------- | ---- | ------------ |  | - | ----- |  |  | - | ---- | -
|                   |  | March 30, 2003 |       | December 31, 2002
|                   |  |                |       |                  
|                   |  | Gross          |       |                   |  |          |      | Gross        |  |   |       | 
|                   |  | Carrying       |       | Accumulated       |  | Carrying |      | Accumulated 
|                   |  | Amount         |       | Amortization      |  | Amount   |      | Amortization
|                   |  |                |       |                   |  |          |      |             
|Current Technology |  | $              | 2,700 |                   |  | $        | (863 | )            |  | $ | 2,700 |  |  | $ | (638 | )
|                   |  |                |       |                   |  |          |      |              |  |   |       |  |  |   |      |  

Amortization of purchased intangible assets was $0.2 million in the first quarter of 2003. Amortization of
purchased intangible assets is expected to be $0.9 million in each of 2003 and 2004 and $0.3 million in 2005.

Restructuring:

In the three months ended March 30, 2003, we utilized $0.4 million of the
restructuring accrual for exit costs consisting primarily of rent after exiting
the facilities we vacated in the fourth quarter of 2002 and $0.2 million of the
restructuring accrual for severance costs to terminated employees. At March
30, 2003, the restructuring accrual of $0.1 million consisted primarily of
severance costs payable to terminated employees. We expect to
complete these restructuring activities in 2003.

The following table summarizes the restructuring reserve activity for the first
quarter of 2003 (in thousands):

|                             |  |               |      |            |  |               |      |       |  |   |      |  
|---------------------------- |  | ------------- | ---- | ---------- |  | ------------- | ---- | ----- |  | - | ---- | -
|                             |  | Employee      |      |            |  |               |      | Total
|                             |  | Severance and |      | Facilities |  | Restructuring
|                             |  | Other         |      | Charge     |  | Liability    
|                             |  |               |      |            |  |              
|Balance at December 31, 2002 |  | $             | 281  |            |  | $             | 437  |       |  | $ | 718  |  
|(Utilized)                   |  |               | (150 | )          |  |               | (421 | )     |  |   | (571 | )
|                             |  |               |      |            |  |               |      |       |  |   |      |  
|Balance at March 30, 2003    |  | $             | 131  |            |  | $             | 16   |       |  | $ | 147  |  
|                             |  |               |      |            |  |               |      |       |  |   |      |  

Warranties:

In accordance with industry practice, we provide a limited warranty for our
devices against defects in materials and workmanship for periods ranging from
90 days to one year. We accrue
for warranty costs based on historical trends in product failure rates and the
expected costs to

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provide warranty replacements. The following table
summarizes the activity related to the product warranty liability during the
three months ended March 30, 2003 (in thousands).

|                             |                                                  |   |        |     |  
|---------------------------- | ------------------------------------------------ | - | ------ | --- | -
|                             |                                                  |   | Amount
|                             |                                                  |   |       
|Balance at December 31, 2002 |                                                  | $ | 250    |    
|                             | Accrual for Warranties issued during the quarter |   |        | 24  |  
|                             | Warranty replacements                            |   |        | (26 | )
|                             |                                                  |   |        |    
|Balance at March 30, 2003    |                                                  | $ | 248    |    
|                             |                                                  |   |        |    

As is customary in our industry, we indemnify our customers and selected
business partners in connection with certain intellectual property infringement
claims with respect to our products. Historically, we have not incurred
significant costs related to such indemnities.

Note 4  Accounting for stock options:

In accordance with Statement of Financial Accounting Standards No. 123,
Accounting for Stock-Based Compensation (SFAS 123), we apply Accounting
Principles Board Opinion No. 25 as interpreted in Financial Accounting
Standards Board Interpretation No. 44 for purposes of accounting for employee
stock options. Because the exercise prices of our employee stock options equal
the market price of the underlying stock on the date of grant, no compensation
expense at time of grant is recognized in the financial statements. The
following table summarizes the effect on net income and earnings per share if
we applied the fair value provisions of SFAS 123 to stock-based employee
compensation.

|                     |                                                           |                       |        |                    |       |           |        |        |       |  
|-------------------- | --------------------------------------------------------- | --------------------- | ------ | ------------------ | ----- | --------- | ------ | ------ | ----- | -
|                     |                                                           |                       |        | Three months ended
|                     |                                                           |                       |        |                   
|                     |                                                           |                       |        | March 30,          |       | March 31,
|                     |                                                           |                       |        | 2003               |       | 2002     
|                     |                                                           |                       |        |                    |       |          
|Net loss as reported |                                                           | $                     | (1,408 | )                  |       | $         | (1,148 | )     
|                     | Total pro forma stock-based employee
compensation expense |                       |        | (1,286             | )     |           |        | (1,028 | )    
|                     |                                                           |                       |        |                    |       |           |        |       
|Pro forma net loss   |                                                           | $                     | (2,694 | )                  |       | $         | (2,176 | )     
|                     |                                                           |                       |        |                    |       |           |        |       
|Net loss per share:  |                                                           |                       |        |                    |       |           |        |       
|                     |                                                           | Basic  as reported   |        | $                  | (0.06 | )         |        | $      | (0.05 | )
|                     |                                                           |                       |        |                    |       |           |        |       
|                     |                                                           | Basic  pro forma     |        | $                  | (0.11 | )         |        | $      | (0.10 | )
|                     |                                                           |                       |        |                    |       |           |        |       
|                     |                                                           | Diluted  as reported |        | $                  | (0.06 | )         |        | $      | (0.05 | )
|                     |                                                           |                       |        |                    |       |           |        |       
|                     |                                                           | Diluted  pro forma   |        | $                  | (0.11 | )         |        | $      | (0.10 | )
|                     |                                                           |                       |        |                    |       |           |        |       

Note 5  Subsequent Events

In April 2003, we repurchased all $35 million of our outstanding 5.5%
convertible subordinated notes for total consideration of $27.5 million or 79
cents on each dollar of face value. The consideration consisted of $14.4
million in cash and $13.1 million of common stock (2,888,560 shares of Xicor
common stock valued at the closing price on the respective repurchase dates).
The repurchase is expected to result in a one-time gain of approximately $2.8
million that will be

6



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included as other income in our second quarter 2003
results. The repurchase of the notes will significantly reduce our interest
expense, and to a lesser extent, our interest income commencing in the second
quarter of 2003. Warrants to purchase 922,461 shares of our common stock at an
exercise price of $12.24 per share, originally issued in connection with the
convertible subordinated notes, remain outstanding subsequent to the completion
of the note repurchase.

Note 6. - Recent Accounting Pronouncements

In November 2002, the Emerging Issues Task Force (EITF) reached a consensus on
Issue No. 00-21, Revenue Arrangements with Multiple Deliverables. EITF Issue
No. 00-21 provides guidance on how to account for arrangements that involve the
delivery or performance of multiple products, services and/or rights to use
assets. The provisions of EITF Issue No. 00-21 will apply to revenue
arrangements entered into in fiscal periods beginning after June 15, 2003. We
believe that the adoption of this standard will have no material impact on our
financial statements.

In January 2003, the FASB issued FASB Interpretation No. 46, Consolidation of
Variable Interest Entities, an Interpretation of ARB No. 51 (FIN 46). FIN 46
requires certain variable interest entities to be consolidated by the primary
beneficiary of the entity if the equity investors in the entity do not have the
characteristics of a controlling financial interest or do not have sufficient
equity at risk for the entity to finance its activities without additional
subordinated financial support from other parties. FIN 46 is effective
immediately for all new variable interest entities created or acquired after
January 31, 2003. For variable interest entities created or acquired prior to
February 1, 2003, the provisions of FIN 46 must be applied for the first
interim or annual period beginning after June 15, 2003. We believe that the
adoption of this standard will have no material impact on our financial
statements.




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, 2002. The results of operations for the
three months ended March 30, 2003 are not necessarily indicative of results to
be expected in future periods. The following discussion contains
forward-looking statements that 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.

RESULTS OF OPERATIONS

Sales

Sales for the first quarter of 2003 were $9.6 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 in 2002 was made in connection with

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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 have substantially exited and parallel
EEPROMs, which business we are retaining. Sales by product group were (in
thousands):

|                           |  |                    |       |           |  |   |        | 
|-------------------------- |  | ------------------ | ----- | --------- |  | - | ------ | 
|                           |  | Three Months Ended
|                           |  |                   
|                           |  | March 30,          |       | March 31,
|                           |  | 2003               |       | 2002     
|                           |  |                    |       |          
|Mixed-signal product sales |  | $                  | 6,926 |           |  | $ | 4,802  | 
|Memory product sales       |  |                    | 2,678 |           |  |   | 5,245  | 
|                           |  |                    |       |           |  |   |        | 
|Total sales                |  | $                  | 9,604 |           |  | $ | 10,047 | 
|                           |  |                    |       |           |  |   |        | 

Mixed-signal product sales increased 44% in the first quarter of 2003 compared
to the first quarter of 2002 primarily due to higher unit sales of data
conversion products used to control the LCD brightness in cellular phone
handsets and higher unit sales of power management products. Contributing to a
lesser extent were engineering revenues generated by the Signal Processing
Group which was established in the second quarter of 2002 with the acquisition
of AIP.

Mixed-signal product sales also increased sequentially from $6.6 million in the
fourth quarter of 2002 to $6.9 million in the first quarter of 2003.
Sequential increases in power management product sales and engineering revenues
were partially offset by lower data conversion product sales to a cellular
handset customer due to their delay of the product delivery schedule.

As shown in the table below, memory product sales declined 49% in the three
months ended March 30, 2003 compared to the comparable prior year period (in
thousands):

|                              |  |                    |       |           |  |   |       | 
|----------------------------- |  | ------------------ | ----- | --------- |  | - | ----- | 
|                              |  | Three Months Ended
|                              |  |                   
|                              |  | March 30,          |       | March 31,
|                              |  | 2003               |       | 2002     
|                              |  |                    |       |          
|Parallel EEPROM product sales |  | $                  | 2,021 |           |  | $ | 3,497 | 
|Serial EEPROM product sales   |  |                    | 657   |           |  |   | 1,748 | 
|                              |  |                    |       |           |  |   |       | 
|Total Memory product sales    |  | $                  | 2,678 |           |  | $ | 5,245 | 
|                              |  |                    |       |           |  |   |       | 

Parallel EEPROM product sales decreased year over year principally due to lower
unit shipments as the overall market for these products contracted and weak
economic conditions persisted. Serial EEPROM product sales have declined, and
are expected to continue to decline, as we have substantially exited from that
business.

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Cost of Sales and Gross Profit

The first quarter 2003 gross profit percentage was 51% compared to 50% in the
first quarter of 2002. The gross profit percentage in the first quarter of
2002 benefited by $0.6 million or six percentage points from the quarterly
amortization of the deferred gain on the sale of the fab assets, which
subsequently ended in the third quarter of 2002. The gross profit percentage
in the first quarter of 2003 benefited from lower manufacturing overhead
expenses compared to the first quarter of 2002, which offset the impact of no
longer receiving a benefit from the amortization of the deferred gain on the
sale of the fab assets. Additionally, the gross profit percentage for the
first quarter of 2003 improved compared to the first quarter of 2002 due to a
product mix that consisted of increased sales of mixed-signal products and
lower sales of serial EEPROM products, partially offset by a decline in the
gross profit percentage of parallel sales resulting from a change in the
product mix towards lower density, commodity parallel parts. The net benefit
to the gross profit percentage resulting from the sale of products that had
previously been written down was less than $0.1 million in the first quarter of
2003 and less than $0.2 million in the first quarter of 2002.

The gross profit percentage also improved sequentially from 48% in the fourth
quarter of 2002 to 51% in the first quarter of 2003 primarily due to an
increase in mixed-signal product sales and an improvement in the mixed-signal
gross margin percentage due to product mix. 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.

Research and Development

Research and development expenses amounted to $2.9 million or 30% of sales in
the first quarter of 2003 compared to $3.0 million or 30% of sales in the first
quarter of 2002. The absolute dollar amount of research and development
expenses in the first quarter of 2003 was relatively consistent with the first
quarter 2002 expense level as the benefits from spending controls were largely
offset by the increased personnel costs resulting from the second quarter 2002
acquisition of our Signal Processing Group, formerly Analog Integration
Partners LLC (AIP).

Selling, General and Administrative

Selling, general and administrative expenses amounted to $2.5 million or 26% of
sales in the first quarter of 2003 compared to $3.0 million or 30% of sales in
the first quarter of 2002. The decrease in the dollar amount of selling,
general and administrative expenses in the first quarter of 2003 compared to
the comparable 2002 period is primarily due to reduced personnel expenses of
$0.2 million related to headcount reductions and spending controls.

Restructuring

In 2002, due to the ongoing weak industry conditions, we implemented two
reductions in force that affected employees in all areas of the company. In
the second quarter of 2002 we reduced our workforce by 33 employees, which
resulted in a $0.8 million restructuring charge for severance-related costs.
In the fourth quarter of 2002, we notified 16 employees that their employment
would cease which resulted in a $0.2 million restructuring charge for
severance-related costs.

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Additionally, in the fourth quarter of 2002 we entered into a lease agreement
for a facility to be used as our corporate headquarters. We vacated our prior
headquarters facility in the fourth quarter of 2002, and a third party assumed
the related lease in the first quarter of 2003. In the fourth quarter of 2002,
we also vacated our leased Bay Area sales office facility and the leased
facility that we assumed as part of the AIP acquisition and relocated the
employees to our corporate headquarters. The vacating of these facilities
resulted in a fourth quarter 2002 facilities related restructuring charge of
$0.9 million consisting of $0.5 million for the non-cash abandonment of
leasehold improvements, equipment and furniture and $0.4 million of exit costs
consisting primarily of future rent payable for periods subsequent to vacating
the facilities.

In the three months ended March 30, 2003, we utilized $0.4 million of the
restructuring accrual for exit costs from the aforementioned facilities and
$0.2 million of the restructuring accrual for severance costs to terminated
employees. At March 30, 2003, the restructuring accrual of $0.1 million
consisted primarily of severance costs payable to terminated employees.

Acquisition

In the second quarter of 2002 we established our Signal Processing Group, with
the acquisition of Analog Integration Partners, LLC (AIP), a privately held
company that designs and develops high-performance analog signal processing and
data conversion circuits. We allocated the $1.8 million of the purchase price
related to AIPs engineering effort focused on developing the analog front end
for the high-end flat panel display market using a standard digital 0.18 micron
CMOS process to in-process research and development expense. Management
determined the value of the in-process research and development based upon
various factors, including an independent appraisal. The appraisal used a
discounted cash flow method and several factors including projected financial
results, relative risk of successful development, time value of money and level
of completion. As of the acquisition date, the estimated cost to complete the
project was approximately $3 million. The project is on schedule, and revenues
related to products developed under this project are planned to begin toward
the end of 2003.

Other Income and Expense

Interest expense in the first quarter of 2003 and 2002 included $788,000 and
$782,000, respectively, of interest expense and amortization resulting from our
November 2001 issuance of $35 million of 5.5% convertible subordinated notes
and warrants. In April 2003, we repurchased all of the outstanding convertible
subordinated notes, which will substantially reduce our interest expense and
amortization commencing in the second quarter of 2003. The interest expense
and related amortization associated with the notes and warrants ceased with the
repurchase of the notes, and is expected to amount to $110,000 in the second
quarter of 2003.

Interest and other income of $640,000 for the quarter ended March 31, 2002,
included a $400,000 benefit associated with the sale of our wafer fabrication
facility in 2000 and $240,000 of interest income. First quarter 2003 interest
income of $143,000 decreased compared to the first quarter of 2002 interest
income of $240,000 primarily as a result of a decrease in the average balance
invested and, to a lesser extent, lower interest rates. The average balance
invested, and corresponding interest income, will decrease sequentially in the
second quarter of 2003 compared

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to the first quarter of 2003 due to the
repurchase of all of our outstanding convertible subordinated notes in April
2003.

Taxes

No taxes were provided in 2003 or 2002 due to the net loss. Net deferred tax
assets at March 30, 2003 and December 31, 2002 were fully reserved because of
the uncertainty regarding the ultimate realization of these assets.

LIQUIDITY AND CAPITAL RESOURCES

At March 30, 2003, we had $37.2 million in cash, cash equivalents and
short-term and long-term investments compared to $38.4 million at the end of
2002. During the three months ended March 30, 2003, we used $1.1 million of
cash in operating activities (including $0.6 million associated with
restructuring activities). Cash used in investing activities was $2.1 million
in the first quarter of 2003, consisting of net investments in cash-based,
available for sale securities of $2.0 million and $0.1 million for equipment
purchases. We generated $0.1 million of net cash from financing activities in
the first quarter of 2003, consisting of $0.3 million of cash generated from
the issuance of common stock under employee stock plans, partially offset by
$0.2 million of cash used to repay long-term capital lease obligations.

Subsequent to the first quarter of 2003, we used $14.4 million of cash as part
of the consideration paid to repurchase all of our outstanding convertible
subordinated notes and $0.8 million of cash for the related accrued interest.
Capital expenditures for 2003 are currently planned at approximately $3.6
million and are primarily related to test and product design equipment. At
March 30, 2003, we had entered into commitments for equipment purchases
aggregating less than $0.5 million. At March 30, 2003 our principal source of
liquidity was cash, cash equivalents and short-term and long-term investments.
Management believes that our existing sources of liquidity will be adequate to
support our activities for the next twelve months.

RECENT ACCOUNTING PRONOUNCEMENTS

In November 2002, the Emerging Issues Task Force (EITF) reached a consensus on
Issue No. 00-21, Revenue Arrangements with Multiple Deliverables. EITF Issue
No. 00-21 provides guidance on how to account for arrangements that involve the
delivery or performance of multiple products, services and/or rights to use
assets. The provisions of EITF Issue No. 00-21 will apply to revenue
arrangements entered into in fiscal periods beginning after June 15, 2003. We
believe that the adoption of this standard will have no material impact on our
financial statements.

In January 2003, the FASB issued FASB Interpretation No. 46, Consolidation of
Variable Interest Entities, an Interpretation of ARB No. 51 (FIN 46). FIN 46
requires certain variable interest entities to be consolidated by the primary
beneficiary of the entity if the equity investors in the entity do not have the
characteristics of a controlling financial interest or do not have sufficient
equity at risk for the entity to finance its activities without additional
subordinated financial support from other parties. FIN 46 is effective
immediately for all new variable interest entities created or acquired after
January 31, 2003. For variable interest entities created or acquired prior to
February 1, 2003, the provisions of FIN 46 must be applied for the first
interim

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or annual period beginning after June 15, 2003. We believe that the
adoption of this standard will have no material impact on our financial
statements.

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 without limitation the expectation of a
continuing decline in Serial EEPROM product sales; 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 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 and related amortization will be substantially reduced due to
the repurchase of our outstanding convertible subordinated notes in April 2003;
the expectation that interest income will decrease in the second quarter of
2003 compared to the first quarter of 2003 principally due to lower average
balance invested; the projection that 2003 capital expenditures will
approximate $3.6 million; and the expectation that existing sources of
liquidity will be adequate to support operations for the next twelve months.

Forward-looking statements 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; 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, 2002. 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.
12Table of Contents

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.

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.

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 and potentially impair the $10.8 million assigned to
goodwill.

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.

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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.

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.

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 to subcontractors located in Asia
and Europe. 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;
| | - |  | ----------------------------------------------------

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| |  |  | 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 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

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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, Linear Technology Corporation and Maxim Integrated Products, that
have substantially greater financial, technical, marketing, distribution, and
other resources than we do and have their own facilities 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 occurs, 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

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and diversion of resources and can harm our business, operating results and
financial condition regardless of the outcome of the litigation.

If we 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.

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, based upon the location to which the product
was shipped, accounted for approximately 62% of total net sales in the first
quarter of 2003. 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.

The exit from a portion of our memory business has changed our business model
and caused 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 were unable to
secure a buyer for the business, particularly in light of the current weak
economic conditions, and substantially completed our exit from that business in
2002.

The transition out of the serial EEPROM memory business has reduced our
revenues and we have become a smaller company with limited 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.

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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.

Changes in stock option accounting rules may adversely impact our operating
results prepared in accordance with generally accepted accounting principles.

Technology companies like ours have a history of using broad based employee
stock option programs to hire, incentivize and retain our workforce in a
competitive marketplace. Statement of Financial Accounting Standards No. 123,
Accounting for Stock-Based Compensation, allows companies the choice of
either using a fair value method of accounting for options which would result
in expense recognition for all options granted, or using an intrinsic value
method, as prescribed by Accounting Principles Board Opinion No. 25,
Accounting for Stock Issued to Employees (APB 25), with a pro forma
disclosure of the impact on net income (loss) of using the fair value option
expense recognition method. We have elected to apply APB 25 and accordingly we
generally do not recognize any expense with respect to employee stock options
as long as such options are granted at exercise prices equal to the fair value
of our common stock on the date of grant.

On March 12, 2003, the Financial Accounting Standards Board (FASB) announced
its plans to re-deliberate the appropriate accounting for employee stock
options with a goal to have one standard applicable to all companies. The FASB
announced its goal to have the new standard become effective sometime in 2004.
If the FASB were to require expensing of employee stock options by all
companies, our results of operations prepared in accordance with generally
accepted accounting principles would be adversely impacted.

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. 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

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

|    |  |                                                                                                                       
|--- |  | ----------------------------------------------------------------------------------------------------------------------
|(a) |  | Exhibits:                                                                                                             
|    |  |                                                                                                                       
|    |  | 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 March 30, 2003.

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SIGNATURES

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

|                     |  |                                                                                             | 
|-------------------- |  | ------------------------------------------------------------------------------------------- | 
|                     |  | 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:  May  12, 2003 |  |                                                                                            

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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:  May  12, 2003 |  | By:/s/Louis DiNardo                  
|                     |  |                                       | 
|                     |  | Louis DiNardo
Chief Executive Officer

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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:  May  12, 2003 | By:/s/Geraldine N. Hench                                     
|                     |                                                               | 
|                     | Geraldine N. Hench
Vice President, Finance and
Administration

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EXHIBIT INDEX

|                                                                              
|------------------------------------------------------------------------------
|99.1      Certification of Chief Executive Officer and Chief Financial Officer