##### Table of Contents



SECURITIES AND EXCHANGE COMMISSION

Washington, D. C. 20549




---

FORM 10-Q

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

For the quarterly period ended September 28, 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 OCTOBER 31, 2003
28,429,449





---

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 31.1                 
|EXHIBIT 31.2                 
|EXHIBIT 32.1                 



---



##### Table of Contents



XICOR, INC.

FORM 10-Q

QUARTER ENDED SEPTEMBER 28, 2003

INDEX

|                              |                                                                                               |                                                                                                                               |    |      |   | 
|----------------------------- | --------------------------------------------------------------------------------------------- | ----------------------------------------------------------------------------------------------------------------------------- | -- | ---- | - | 
|                              |                                                                                               |                                                                                                                               |    | Page
|                              |                                                                                               |                                                                                                                               |    |     
|Part I: FINANCIAL INFORMATION |                                                                                               |                                                                                                                               |    |     
|                              | Item 1. Financial Statements                                                                  |                                                                                                                               |    |      |  
|                              |                                                                                               | Condensed Consolidated Balance Sheets at September 28, 2003 and December 31, 2002                                             |    |      | 1 | 
|                              |                                                                                               | Condensed Consolidated Statements of Operations for the three and nine months ended September 28, 2003
and September 29, 2002 |    |      | 2 | 
|                              |                                                                                               | Condensed Consolidated Statements of Cash Flows for the nine months ended September 28, 2003 and
September 29, 2002           |    |      | 3 | 
|                              |                                                                                               | Notes to Condensed Consolidated Financial Statements                                                                          |    |      | 4 | 
|                              | Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations |                                                                                                                               |    | 9    |  
|                              | Item 3. Quantitative and Qualitative Disclosures about Market Risk                            |                                                                                                                               |    | 22   |  
|                              | Item 4. Controls and Procedures                                                               |                                                                                                                               |    | 23   |  
|Part II: OTHER INFORMATION    |                                                                                               |                                                                                                                               |    |     
|                              | Item 6. Exhibits and Reports on Form 8-K                                                      |                                                                                                                               |    | 23   |  
|SIGNATURES                    |                                                                                               |                                                                                                                               | 24 |     

i



---



##### Table of Contents









Part I: FINANCIAL INFORMATION
Item 1. Financial Statements.




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

|                                                                     |                                                                                             |                                            |        |               |        |              |        |          |        | 
|-------------------------------------------------------------------- | ------------------------------------------------------------------------------------------- | ------------------------------------------ | ------ | ------------- | ------ | ------------ | ------ | -------- | ------ | 
|                                                                     |                                                                                             |                                            |        | September 28, |        | December 31,
|                                                                     |                                                                                             |                                            |        | 2003          |        | 2002        
|                                                                     |                                                                                             |                                            |        |               |        |             
|ASSETS                                                               |                                                                                             |                                            |        |               |        |              |        |         
|Current assets:                                                      |                                                                                             |                                            |        |               |        |              |        |         
|                                                                     | Cash and cash equivalents                                                                   |                                            | $      | 5,619         |        |              | $      | 32,648   |       
|                                                                     | Short-term investments                                                                      |                                            |        | 13,770        |        |              |        | 4,648    |       
|                                                                     | Accounts receivable                                                                         |                                            |        | 5,298         |        |              |        | 4,606    |       
|                                                                     | Inventories                                                                                 |                                            |        | 3,052         |        |              |        | 4,939    |       
|                                                                     | Prepaid expenses and other current assets                                                   |                                            |        | 591           |        |              |        | 539      |       
|                                                                     |                                                                                             |                                            |        |               |        |              |        |         
|                                                                     |                                                                                             | Total current assets                       |        |               | 28,330 |              |        |          | 47,380 | 
|Long-term investments                                                |                                                                                             |                                            | 1,805  |               |        |              | 1,085  |         
|Property, plant and equipment,
at cost less accumulated depreciation |                                                                                             |                                            | 2,647  |               |        |              | 3,041  |         
|Goodwill                                                             |                                                                                             |                                            | 10,762 |               |        |              | 10,762 |         
|Purchased intangible assets, net                                     |                                                                                             |                                            | 1,387  |               |        |              | 2,062  |         
|Other assets                                                         |                                                                                             |                                            | 184    |               |        |              | 2,766  |         
|                                                                     |                                                                                             |                                            |        |               |        |              |        |         
|                                                                     |                                                                                             | Total assets                               |        | $             | 45,115 |              |        | $        | 67,096 | 
|                                                                     |                                                                                             |                                            |        |               |        |              |        |         
|LIABILITIES AND SHAREHOLDERS EQUITY                                 |                                                                                             |                                            |        |               |        |              |        |         
|Current liabilities:                                                 |                                                                                             |                                            |        |               |        |              |        |         
|                                                                     | Accounts payable                                                                            |                                            | $      | 3,946         |        |              | $      | 6,215    |       
|                                                                     | Accrued expenses                                                                            |                                            |        | 5,037         |        |              |        | 6,136    |       
|                                                                     | Deferred income on shipments to distributors                                                |                                            |        | 3,551         |        |              |        | 5,762    |       
|                                                                     | Current portion of long-term obligations                                                    |                                            |        | 216           |        |              |        | 432      |       
|                                                                     |                                                                                             |                                            |        |               |        |              |        |         
|                                                                     |                                                                                             | Total current liabilities                  |        |               | 12,750 |              |        |          | 18,545 | 
|Convertible subordinated notes                                       |                                                                                             |                                            |       |               |        |              | 32,506 |         
|Long-term obligations                                                |                                                                                             |                                            | 294    |               |        |              | 470    |         
|                                                                     |                                                                                             |                                            |        |               |        |              |        |         
|                                                                     |                                                                                             | Total liabilities                          |        |               | 13,044 |              |        |          | 51,521 | 
|                                                                     |                                                                                             |                                            |        |               |        |              |        |         
|Shareholders equity:                                                |                                                                                             |                                            |        |               |        |              |        |         
|                                                                     | Preferred stock; 5,000 shares authorized                                                    |                                            |        |              |        |              |        |         |       
|                                                                     | Common stock; 200,000 shares authorized;
27,299 and 23,737 shares outstanding, respectively |                                            |        | 164,145       |        |              |        | 149,216  |       
|                                                                     | Accumulated deficit                                                                         |                                            |        | (132,074      | )      |              |        | (133,641 | )     
|                                                                     |                                                                                             |                                            |        |               |        |              |        |          |       
|                                                                     |                                                                                             | Total shareholders equity                 |        |               | 32,071 |              |        |          | 15,575 | 
|                                                                     |                                                                                             |                                            |        |               |        |              |        |          |       
|                                                                     |                                                                                             | Total liabilities and shareholders equity |        | $             | 45,115 |              |        | $        | 67,096 | 
|                                                                     |                                                                                             |                                            |        |               |        |              |        |         

See accompanying notes to condensed consolidated financial information

1



---



##### Table of Contents






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

|                                       |                                             |   |                    |        |                   |   |                |        |                |   |        |        |  |   |        |        |  
|-------------------------------------- | ------------------------------------------- | - | ------------------ | ------ | ----------------- | - | -------------- | ------ | -------------- | - | ------ | ------ |  | - | ------ | ------ | -
|                                       |                                             |   | Three Months Ended |        | Nine Months Ended
|                                       |                                             |   |                    |        |                  
|                                       |                                             |   | Sept. 28, 2003     |        | Sept. 29, 2002    |   | Sept. 28, 2003 |        | Sept. 29, 2002
|                                       |                                             |   |                    |        |                   |   |                |        |               
|Net sales                              |                                             | $ | 10,458             |        |                   | $ | 9,651          |        |                | $ | 30,131 |        |  | $ | 29,232 |       
|Cost of sales                          |                                             |   | 4,617              |        |                   |   | 4,392          |        |                |   | 14,044 |        |  |   | 14,219 |       
|                                       |                                             |   |                    |        |                   |   |                |        |                |   |        |        |  |   |        |       
|                                       | Gross profit                                |   |                    | 5,841  |                   |   |                | 5,259  |                |   |        | 16,087 |  |   |        | 15,013 |  
|                                       |                                             |   |                    |        |                   |   |                |        |                |   |        |        |  |   |        |       
|Operating expenses:                    |                                             |   |                    |        |                   |   |                |        |                |   |        |        |  |   |        |       
|                                       | Research and development                    |   |                    | 2,578  |                   |   |                | 3,440  |                |   |        | 8,128  |  |   |        | 9,637  |  
|                                       | Selling, general and administrative         |   |                    | 2,717  |                   |   |                | 2,750  |                |   |        | 7,783  |  |   |        | 8,622  |  
|                                       | Restructuring charge                        |   |                    |       |                   |   |                |       |                |   |        |       |  |   |        | 758    |  
|                                       | Amortization of purchased
intangible assets |   |                    | 225    |                   |   |                | 263    |                |   |        | 675    |  |   |        | 483    |  
|                                       | In-process research and development         |   |                    |       |                   |   |                |       |                |   |        |       |  |   |        | 1,800  |  
|                                       |                                             |   |                    |        |                   |   |                |        |                |   |        |        |  |   |        |       
|                                       |                                             |   | 5,520              |        |                   |   | 6,453          |        |                |   | 16,586 |        |  |   | 21,300 |       
|                                       |                                             |   |                    |        |                   |   |                |        |                |   |        |        |  |   |        |       
|Income (loss) from operations          |                                             |   | 321                |        |                   |   | (1,194         | )      |                |   | (499   | )      |  |   | (6,287 | )     
|                                       |                                             |   |                    |        |                   |   |                |        |                |   |        |        |  |   |        |       
|Interest expense                       |                                             |   | (14                | )      |                   |   | (813           | )      |                |   | (946   | )      |  |   | (2,451 | )     
|Interest income                        |                                             |   | 69                 |        |                   |   | 186            |        |                |   | 294    |        |  |   | 625    |       
|Other income and (expense), net        |                                             |   |                   |        |                   |   | 894            |        |                |   | 2,718  |        |  |   | (1,206 | )     
|                                       |                                             |   |                    |        |                   |   |                |        |                |   |        |        |  |   |        |       
|                                       |                                             |   | 55                 |        |                   |   | 267            |        |                |   | 2,066  |        |  |   | (3,032 | )     
|                                       |                                             |   |                    |        |                   |   |                |        |                |   |        |        |  |   |        |       
|Income (loss) before income taxes      |                                             |   | 376                |        |                   |   | (927           | )      |                |   | 1,567  |        |  |   | (9,319 | )     
|Provision for income taxes             |                                             |   |                   |        |                   |   |               |        |                |   |       |        |  |   |       |       
|                                       |                                             |   |                    |        |                   |   |                |        |                |   |        |        |  |   |        |       
|Net income (loss)                      |                                             | $ | 376                |        |                   | $ | (927           | )      |                | $ | 1,567  |        |  | $ | (9,319 | )     
|                                       |                                             |   |                    |        |                   |   |                |        |                |   |        |        |  |   |        |       
|Net income (loss) per common share:    |                                             |   |                    |        |                   |   |                |        |                |   |        |        |  |   |        |       
|                                       | Basic                                       |   | $                  | 0.01   |                   |   | $              | (0.04  | )              |   | $      | 0.06   |  |   | $      | (0.40  | )
|                                       |                                             |   |                    |        |                   |   |                |        |                |   |        |        |  |   |        |       
|                                       | Diluted                                     |   | $                  | 0.01   |                   |   | $              | (0.04  | )              |   | $      | 0.06   |  |   | $      | (0.40  | )
|                                       |                                             |   |                    |        |                   |   |                |        |                |   |        |        |  |   |        |       
|Shares used in per share calculations: |                                             |   |                    |        |                   |   |                |        |                |   |        |        |  |   |        |       
|                                       | Basic                                       |   |                    | 27,197 |                   |   |                | 23,625 |                |   |        | 25,807 |  |   |        | 23,126 |  
|                                       |                                             |   |                    |        |                   |   |                |        |                |   |        |        |  |   |        |       
|                                       | Diluted                                     |   |                    | 30,506 |                   |   |                | 23,625 |                |   |        | 27,890 |  |   |        | 23,126 |  
|                                       |                                             |   |                    |        |                   |   |                |        |                |   |        |        |  |   |        |       

See accompanying notes to condensed consolidated financial information

2



---



##### Table of Contents






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

|                                                    |                                                                                                |                                                            |                                              |         |                   |        |                |        |        |        |  
|--------------------------------------------------- | ---------------------------------------------------------------------------------------------- | ---------------------------------------------------------- | -------------------------------------------- | ------- | ----------------- | ------ | -------------- | ------ | ------ | ------ | -
|                                                    |                                                                                                |                                                            |                                              |         | Nine Months Ended
|                                                    |                                                                                                |                                                            |                                              |         |                  
|                                                    |                                                                                                |                                                            |                                              |         | Sept. 28, 2003    |        | Sept. 29, 2002
|                                                    |                                                                                                |                                                            |                                              |         |                   |        |               
|Cash flows from operating activities:               |                                                                                                |                                                            |                                              |         |                   |        |                |       
|                                                    | Net income (loss)                                                                              |                                                            | $                                            | 1,567   |                   |        | $              | (9,319 | )     
|                                                    | Adjustments to reconcile net income (loss) to cash provided
by (used in) operating activities: |                                                            |                                              |         |                   |        |                |        |       
|                                                    |                                                                                                | Depreciation                                               |                                              |         | 1,106             |        |                |        | 2,091  |       
|                                                    |                                                                                                | Amortization of fab gain                                   |                                              |         |                  |        |                |        | (2,082 | )     
|                                                    |                                                                                                | Amortization of debt issuance costs and warrants           |                                              |         | 353               |        |                |        | 911    |       
|                                                    |                                                                                                | Amortization of purchased intangibles                      |                                              |         | 675               |        |                |        | 482    |       
|                                                    |                                                                                                | Write off of purchased in-process research and development |                                              |         |                  |        |                |        | 1,800  |       
|                                                    |                                                                                                | Loss on impairment of investment                           |                                              |         |                  |        |                |        | 2,500  |       
|                                                    |                                                                                                | Gain on repurchase of convertible notes                    |                                              |         | (2,718            | )      |                |        |       |       
|                                                    |                                                                                                | Changes in assets and liabilities:                         |                                              |         |                   |        |                |        |        |       
|                                                    |                                                                                                |                                                            | Accounts receivable                          |         |                   | (692   | )              |        |        | (300   | )
|                                                    |                                                                                                |                                                            | Inventories                                  |         |                   | 1,887  |                |        |        | 4,027  |  
|                                                    |                                                                                                |                                                            | Prepaid expenses and other current assets    |         |                   | (52    | )              |        |        | (323   | )
|                                                    |                                                                                                |                                                            | Other assets                                 |         |                   | 108    |                |        |        | (112   | )
|                                                    |                                                                                                |                                                            | Accounts payable and accrued expenses        |         |                   | (3,505 | )              |        |        | (4,527 | )
|                                                    |                                                                                                |                                                            | Deferred income on shipments to distributors |         |                   | (2,211 | )              |        |        | (4,140 | )
|                                                    |                                                                                                |                                                            |                                              |         |                   |        |                |       
|Net cash used in operating activities               |                                                                                                |                                                            | (3,482                                       | )       |                   |        | (8,992         | )     
|                                                    |                                                                                                |                                                            |                                              |         |                   |        |                |       
|Cash flows from investing activities:               |                                                                                                |                                                            |                                              |         |                   |        |                |       
|                                                    | Purchase of investments                                                                        |                                                            |                                              | (16,152 | )                 |        |                | (4,352 | )     
|                                                    | Sale or maturity of investments                                                                |                                                            |                                              | 6,310   |                   |        |                |       |       
|                                                    | Investments in plant and equipment, net                                                        |                                                            |                                              | (712    | )                 |        |                | (449   | )     
|                                                    | Acquisition of Analog Integration Partners LLC                                                 |                                                            |                                              |        |                   |        |                | (5,000 | )     
|                                                    |                                                                                                |                                                            |                                              |         |                   |        |                |        |       
|Net cash used in investing activities               |                                                                                                |                                                            | (10,554                                      | )       |                   |        | (9,801         | )     
|                                                    |                                                                                                |                                                            |                                              |         |                   |        |                |       
|Cash flows from financing activities:               |                                                                                                |                                                            |                                              |         |                   |        |                |       
|                                                    | Repayments of long-term obligations                                                            |                                                            |                                              | (392    | )                 |        |                | (462   | )     
|                                                    | Net proceeds from sale of common stock                                                         |                                                            |                                              | 1,823   |                   |        |                | 944    |       
|                                                    | Repurchase of convertible notes                                                                |                                                            |                                              | (14,424 | )                 |        |                |       |       
|                                                    |                                                                                                |                                                            |                                              |         |                   |        |                |       
|Net cash provided by (used in) financing activities |                                                                                                |                                                            | (12,993                                      | )       |                   |        | 482            |       
|                                                    |                                                                                                |                                                            |                                              |         |                   |        |                |       
|Increase (decrease) in cash and cash equivalents    |                                                                                                |                                                            | (27,029                                      | )       |                   |        | (18,311        | )     
|Cash and cash equivalents at beginning of year      |                                                                                                |                                                            | 32,648                                       |         |                   |        | 56,367         |       
|                                                    |                                                                                                |                                                            |                                              |         |                   |        |                |        |       
|Cash and cash equivalents at end of period          |                                                                                                | $                                                          | 5,619                                        |         |                   | $      | 38,056         |       
|                                                    |                                                                                                |                                                            |                                              |         |                   |        |                |       
|Supplemental information:                           |                                                                                                |                                                            |                                              |         |                   |        |                |       
|Cash paid (refunded) during the period for:         |                                                                                                |                                                            |                                              |         |                   |        |                |       
|                                                    | Interest expense                                                                               |                                                            | $                                            | 809     |                   |        | $              | 1,067  |       
|                                                    | Income taxes                                                                                   |                                                            |                                              | 36      |                   |        |                | (57    | )     
|Common stock issued for acquisition                 |                                                                                                |                                                            |                                             |         |                   |        | 10,182         |       
|Common stock issued for repurchase of notes         |                                                                                                |                                                            | 13,106                                       |         |                   |        |               |       

See accompanying notes to condensed consolidated financial information

3



---



##### Table of Contents






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

Note 1  Interim financial information:

In the opinion of management, the accompanying unaudited condensed consolidated
financial statements contain all adjustments (consisting only of normal
recurring adjustments) necessary for a fair statement of the results of the
interim periods presented. The preparation of financial statements in
conformity with generally accepted accounting principles requires management to
make estimates and assumptions that affect the amounts reported in the
financial statements and accompanying notes. Actual results could differ from
these estimates. The condensed consolidated results of operations for the three
and nine months ended September 28, 2003 are not necessarily indicative of the
results to be expected for the full year. 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. The following table sets forth the computation of
basic and diluted earnings per share (in thousands, except per share data):

|                                 |                               |   |                    |        |                   |   |                |        |                |   |       |        |  |   |        |        |  
|-------------------------------- | ----------------------------- | - | ------------------ | ------ | ----------------- | - | -------------- | ------ | -------------- | - | ----- | ------ |  | - | ------ | ------ | -
|                                 |                               |   | Three Months Ended |        | Nine Months Ended
|                                 |                               |   |                    |        |                  
|                                 |                               |   | Sept. 28, 2003     |        | Sept. 29, 2002    |   | Sept. 28, 2003 |        | Sept. 29, 2002
|                                 |                               |   |                    |        |                   |   |                |        |               
|Net Income (Loss)                |                               | $ | 376                |        |                   | $ | (927           | )      |                | $ | 1,567 |        |  | $ | (9,319 | )     
|                                 |                               |   |                    |        |                   |   |                |        |                |   |       |        |  |   |        |       
|Shares                           |                               |   |                    |        |                   |   |                |        |                |   |       |        |  |   |        |       
|                                 | Basic shares                  |   |                    | 27,197 |                   |   |                | 23,625 |                |   |       | 25,807 |  |   |        | 23,126 |  
|                                 | Effect of dilutive securities |   |                    | 3,309  |                   |   |                |       |                |   |       | 2,083  |  |   |        |       |  
|                                 |                               |   |                    |        |                   |   |                |        |                |   |       |        |  |   |        |       
|                                 | Diluted shares                |   |                    | 30,506 |                   |   |                | 23,625 |                |   |       | 27,890 |  |   |        | 23,126 |  
|                                 |                               |   |                    |        |                   |   |                |        |                |   |       |        |  |   |        |       
|Earnings (Loss) per common share |                               |   |                    |        |                   |   |                |        |                |   |       |        |  |   |        |       
|                                 | Basic EPS                     |   | $                  | 0.01   |                   |   | $              | (0.04  | )              |   | $     | 0.06   |  |   | $      | (0.40  | )
|                                 |                               |   |                    |        |                   |   |                |        |                |   |       |        |  |   |        |       
|                                 | Diluted EPS                   |   | $                  | 0.01   |                   |   | $              | (0.04  | )              |   | $     | 0.06   |  |   | $      | (0.40  | )
|                                 |                               |   |                    |        |                   |   |                |        |                |   |       |        |  |   |        |       

At September 28, 2003 options to purchase 7.2 million shares of Xicor common
stock were outstanding under our stock option plans. Anti-dilutive weighted
average shares of common stock of 309,000 and 1,400,000 for the three and nine
months ended September 28, 2003, respectively, have been excluded from the
effect of diluted securities because the options exercise prices were greater
than the average price of the common stock for the periods then ended.
Outstanding warrants to purchase 0.9 million shares of our common stock at
$12.24 per share were also excluded from the 2003 computations as they were
anti-dilutive. Outstanding options to purchase 6.6 million shares of common
stock and warrants to purchase approximately 1.0 million shares of common stock
at September 29, 2002, were excluded from the earnings per

4



---



##### Table of Contents



share (EPS) computation for the three and nine months ended September 29, 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:

|                               |                                     |   |                |         |              |   |        |         |  
|------------------------------ | ----------------------------------- | - | -------------- | ------- | ------------ | - | ------ | ------- | -
|                               |                                     |   | September 28,  |         | December 31,
|                               |                                     |   | 2003           |         | 2002        
|                               |                                     |   |                |         |             
|                               |                                     |   | (In thousands)
|Inventories:                   |                                     |   |                |         |              |   |        |        
|                               | Raw materials and supplies          |   | $              | 48      |              |   | $      | 49      |  
|                               | Work in process                     |   |                | 2,031   |              |   |        | 3,370   |  
|                               | Finished goods                      |   |                | 973     |              |   |        | 1,520   |  
|                               |                                     |   |                |         |              |   |        |         |  
|                               |                                     | $ | 3,052          |         |              | $ | 4,939  |        
|                               |                                     |   |                |         |              |   |        |        
|Property, plant and equipment: |                                     |   |                |         |              |   |        |        
|                               | Leasehold improvements              |   | $              | 58      |              |   | $      | 49      |  
|                               | Equipment                           |   |                | 24,799  |              |   |        | 25,319  |  
|                               | Furniture and fixtures              |   |                | 92      |              |   |        | 92      |  
|                               |                                     |   |                |         |              |   |        |        
|                               |                                     |   | 24,949         |         |              |   | 25,460 |        
|                               | Accumulated depreciation            |   |                | (22,302 | )            |   |        | (22,419 | )
|                               |                                     |   |                |         |              |   |        |         |  
|                               |                                     | $ | 2,647          |         |              | $ | 3,041  |        
|                               |                                     |   |                |         |              |   |        |        
|Accrued expenses:              |                                     |   |                |         |              |   |        |        
|                               | Accrued wages and employee benefits |   | $              | 1,113   |              |   | $      | 1,136   |  
|                               | Accrued restructuring liabilities   |   |                | 55      |              |   |        | 718     |  
|                               | Other accrued expenses              |   |                | 3,869   |              |   |        | 4,282   |  
|                               |                                     |   |                |         |              |   |        |         |  
|                               |                                     | $ | 5,037          |         |              | $ | 6,136  |        
|                               |                                     |   |                |         |              |   |        |        

Accounts receivable:

Accounts receivable at September 28, 2003 and December 31, 2002 are presented
net of an allowance for doubtful accounts of $500,000.

Goodwill and intangibles:

At September 28, 2003 and December 31, 2002, goodwill resulting from the April
2002 acquisition of Analog Integration Partners LLC (AIP) amounted to $10.8
million. In accordance with SFAS No. 142 goodwill will not be amortized but
instead evaluated periodically to determine whether events or circumstances
have occurred indicating that goodwill might be impaired. For tax purposes,
the goodwill is being amortized on a straight-line basis over 15 years.

Purchased intangible assets, consisting of current technology from the
acquisition of AIP, and related amortization were as follows (in thousands):

5



---



##### Table of Contents



|                   |       |                   |  |     |        |        |  |              |       |             |  |   |       |  |  |   |      |   |  |   |       | 
|------------------ | ----- | ----------------- |  | --- | ------ | ------ |  | ------------ | ----- | ----------- |  | - | ----- |  |  | - | ---- | - |  | - | ----- | 
|September 28, 2003 |       | December 31, 2002
|                   |       |                  
|Gross              |       |                   |  |     |        |        |  |              |       | Gross       |  |   |       |  |  |   |      |  
|Carrying           |       | Accumulated       |  |     |        |        |  | Carrying     |       | Accumulated |  |   |       | 
|Amount             |       | Amortization      |  | Net |        | Amount |  | Amortization |       | Net        
|                   |       |                   |  |     |        |        |  |              |       |            
|$                  | 2,700 |                   |  | $   | (1,313 | )      |  | $            | 1,387 |             |  | $ | 2,700 |  |  | $ | (638 | ) |  | $ | 2,062 | 
|                   |       |                   |  |     |        |        |  |              |       |             |  |   |       |  |  |   |      |   |  |   |       | 

Amortization of purchased intangible assets was $0.7 million in the nine months
ended September 28, 2003. Amortization of purchased intangible assets from the
acquisition of AIP is expected to be $0.9 million in each of 2003 and 2004 and
$0.3 million in 2005.

Restructuring:

In the nine months ended September 28, 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
September 28, 2003, the restructuring accrual was less than $0.1 million. We
expect to complete these restructuring activities in 2003.

The following table summarizes the restructuring reserve activity for the nine
months ended September 28, 2003 (in thousands):

|                              |  |               |      |            |  |               |      |       |  |   |      |  
|----------------------------- |  | ------------- | ---- | ---------- |  | ------------- | ---- | ----- |  | - | ---- | -
|                              |  | Employee      |      |            |  |               |      | Total
|                              |  | Severance and |      | Facilities |  | Restructuring
|                              |  | Other         |      | Charge     |  | Liability    
|                              |  |               |      |            |  |              
|Balance at December 31, 2002  |  | $             | 281  |            |  | $             | 437  |       |  | $ | 718  |  
|(Utilized)                    |  |               | (235 | )          |  |               | (428 | )     |  |   | (663 | )
|                              |  |               |      |            |  |               |      |       |  |   |      |  
|Balance at September 28, 2003 |  | $             | 46   |            |  | $             | 9    |       |  | $ | 55   |  
|                              |  |               |      |            |  |               |      |       |  |   |      |  

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 provide warranty replacements.
The following table summarizes the activity related to the product warranty
liability during the nine months ended September 28, 2003 (in thousands):

|                              |                               |   |        |     |  
|----------------------------- | ----------------------------- | - | ------ | --- | -
|                              |                               |   | Amount
|                              |                               |   |       
|Balance at December 31, 2002  |                               | $ | 250    |    
|                              | Accrual for warranties issued |   |        | 45  |  
|                              | Warranty replacements         |   |        | (47 | )
|                              |                               |   |        |    
|Balance at September 28, 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.

6



---



##### Table of Contents



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 (in thousands, except per share data):

|                              |                                                           |   |                    |        |                   |   |           |        |           |   |        |        |   |   |         |        |  
|----------------------------- | --------------------------------------------------------- | - | ------------------ | ------ | ----------------- | - | --------- | ------ | --------- | - | ------ | ------ | - | - | ------- | ------ | -
|                              |                                                           |   | Three Months Ended |        | Nine Months Ended
|                              |                                                           |   |                    |        |                  
|                              |                                                           |   | Sept. 28,          |        | Sept. 29,         |   | Sept. 28, |        | Sept. 29,
|                              |                                                           |   | 2003               |        | 2002              |   | 2003      |        | 2002     
|                              |                                                           |   |                    |        |                   |   |           |        |          
|Net income (loss) as reported |                                                           | $ | 376                |        |                   | $ | (927      | )      |           | $ | 1,567  |        |   | $ | (9,319  | )     
|                              | Total pro forma
stock-based employee
compensation expense |   |                    | (1,248 | )                 |   |           | (1,648 | )         |   |        | (3,780 | ) |   |         | (3,521 | )
|                              |                                                           |   |                    |        |                   |   |           |        |           |   |        |        |   |   |         |       
|Pro forma net income (loss)   |                                                           | $ | (872               | )      |                   | $ | (2,575    | )      |           | $ | (2,213 | )      |   | $ | (12,840 | )     
|                              |                                                           |   |                    |        |                   |   |           |        |           |   |        |        |   |   |         |       
|Net income (loss) per share:  |                                                           |   |                    |        |                   |   |           |        |           |   |        |        |   |   |         |       
|                              | Basic
- as reported                                       |   | $                  | 0.01   |                   |   | $         | (0.04  | )         |   | $      | 0.06   |   |   | $       | (0.40  | )
|                              |                                                           |   |                    |        |                   |   |           |        |           |   |        |        |   |   |         |       
|                              | Basic - pro forma                                         |   | $                  | (0.03  | )                 |   | $         | (0.11  | )         |   | $      | (0.09  | ) |   | $       | (0.56  | )
|                              |                                                           |   |                    |        |                   |   |           |        |           |   |        |        |   |   |         |       
|                              | Diluted - as reported                                     |   | $                  | 0.01   |                   |   | $         | (0.04  | )         |   | $      | 0.06   |   |   | $       | (0.40  | )
|                              |                                                           |   |                    |        |                   |   |           |        |           |   |        |        |   |   |         |       
|                              | Diluted - pro forma                                       |   | $                  | (0.03  | )                 |   | $         | (0.11  | )         |   | $      | (0.09  | ) |   | $       | (0.56  | )
|                              |                                                           |   |                    |        |                   |   |           |        |           |   |        |        |   |   |         |       

Note 5  Repurchase of Convertible Subordinated Notes:

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 resulted in a one-time gain of approximately $2.7 million that
is included as other income in the results for the nine months ended
September 28, 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.  Other Income and Expense:

Other income for the nine months ended September 28, 2003 consists of a
one-time gain of $2.7 million resulting from the repurchase of all $35 million
of our outstanding 5.5% convertible subordinated notes.

7



---



##### Table of Contents



Other income for the three and nine months ended September 29, 2002 includes
$0.7 million from a favorable sales tax audit and $0.2 million, from the early
termination of a wafer foundry agreement with Standard MEMS. Other income for
the nine months ended September 29, 2002 also includes a $0.4 million benefit
associated with the sale of Xicors wafer fabrication facility.

Other expense for the nine months ended September 29, 2002 includes a non-cash
impairment charge of $2.5 million to write off an investment in a private
company.

Note 7.   Subsequent Event

In the third quarter of 2003 we signed a definitive agreement to acquire
Poweready, Inc. to expand our presence in the smart battery management area.
On October 28, 2003 we completed the acquisition. We will account for the
transaction using the purchase method of accounting. The acquisition purchase
price payable at closing consisted of $3 million in cash and 947,368 shares of
Xicor common stock ($9.4 million value based on Xicors average closing stock
price of $9.95 for the 5 days surrounding the signing of the definitive
agreement). Additional consideration of up to $3 million will be payable in
stock if certain performance milestones are met in 2004 through 2006.

Note 8.  Recent Accounting Pronouncements:

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. During October 2003, the FASB issued FSP 46-6 which is
effective for financial statements issued after October 9, 2003, and provides a
broad deferral of the latest date by which all public entities must apply FIN
46 to certain variable interest entities, to the first reporting period ending
after December 15, 2003. We believe that the adoption of this standard will
have no material impact on our financial statements.

In May 2003, the Financial Accounting Standards Board (FASB) issued Statement
of Financial Accounting Standards (SFAS) No. 150, Accounting for Certain
Financial Instruments with Characteristics of both Liabilities and Equity.
SFAS No. 150 requires that certain financial instruments, which under previous
guidance could be accounted for as equity, be classified as liabilities in
statements of financial position. SFAS No. 150 is effective for financial
instruments entered into or modified after May 31, 2003, and is otherwise
effective for the Company in the

8



---



##### Table of Contents



first quarter of 2004. We do not expect the
adoption of SFAS No. 150 to have a significant impact on our future results of
operations or financial condition.

In May 2003, a consensus was reached on EITF No. 03-5, which was ratified by
the FASB in August 2003. EITF No. 03-5 affirms that AICPA SOP 97-2 applies to
non-software deliverables, such as hardware, in an arrangement if the software
is essential to the functionality of the non-software deliverables. This
statement is effective for new revenue arrangements entered into for reporting
periods commencing after August 13, 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 and nine months ended September 28, 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.

Recent Developments

In the third quarter of 2003 we signed a definitive agreement to acquire
Poweready, Inc. to expand our presence in the smart battery management area.
On October 28, 2003 Xicor completed the acquisition of Poweready. On an
overall basis, in the fourth quarter of 2003, we expect Powereadys gross
margin contribution to cover its operating expenses, exclusive of the
amortization of purchased intangibles. The fourth quarter outlook discussed in
the results of operations section following includes the anticipated results
from Poweready subsequent to the closing of the acquisition.

RESULTS OF OPERATIONS

Sales

Total sales for the three and nine months ended September 28, 2003 were $10.5
million and $30.1 million, respectively. Total sales for the corresponding
prior year periods were $9.7 million and $29.2 million, respectively. Sales for
the nine months ended September 29, 2002 included a benefit of $0.4 million
resulting from putting all our global distribution partners on our fiscal
calendar in connection with the realignment of our distribution channel to
better serve fulfillment and demand creation efforts.

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

9



---



##### Table of Contents



|                             |  |                    |        |                   |  |           |       |           |  |   |        |  |  |   |        | 
|---------------------------- |  | ------------------ | ------ | ----------------- |  | --------- | ----- | --------- |  | - | ------ |  |  | - | ------ | 
|                             |  | Three Months Ended |        | Nine Months Ended
|                             |  |                    |        |                  
|                             |  | Sept. 28,          |        | Sept. 29,         |  | Sept. 28, |       | Sept. 29,
|                             |  | 2003               |        | 2002              |  | 2003      |       | 2002     
|                             |  |                    |        |                   |  |           |       |          
|Mixed-signal product sales   |  | $                  | 8,153  |                   |  | $         | 6,567 |           |  | $ | 22,599 |  |  | $ | 17,473 | 
|Mixed-signal royalty revenue |  |                    |       |                   |  |           | 280   |           |  |   |       |  |  |   | 280    | 
|Memory product sales         |  |                    | 2,305  |                   |  |           | 2,804 |           |  |   | 7,532  |  |  |   | 11,479 | 
|                             |  |                    |        |                   |  |           |       |           |  |   |        |  |  |   |        | 
|Total sales                  |  | $                  | 10,458 |                   |  | $         | 9,651 |           |  | $ | 30,131 |  |  | $ | 29,232 | 
|                             |  |                    |        |                   |  |           |       |           |  |   |        |  |  |   |        | 

We have had several consecutive quarters of sequential growth in mixed-signal
sales, which has lead to increases in total sales. Mixed-signal product sales
increased 24% in the third quarter of 2003 compared to the third quarter of
2002 primarily due to higher unit sales of power management products and, to a
lesser extent, higher unit sales of interface products and higher engineering
revenues generated by the Signal Processing Group. Mixed-signal product sales
increased 29% in the nine months ended September 28, 2003 compared to the
corresponding period of 2002 primarily due to higher unit sales of power
management products and higher unit sales of data conversion products used to
control LCD brightness in cellular phone handsets, and to a lesser extent,
higher engineering revenues generated by the Signal Processing Group.
Engineering revenues generated by the Signal Processing Group were 4% of total
sales in the three and nine months ended September 28, 2003 compared to 2% and
1% of total sales for the three and nine months ended September 29, 2002.

As shown in the table below, memory product sales declined 18% and 34% in the
three and nine months ended September 28, 2003 compared to the comparable prior
year periods (in thousands):

|                              |  |                    |       |                   |  |           |       |           |  |   |       |  |  |   |        | 
|----------------------------- |  | ------------------ | ----- | ----------------- |  | --------- | ----- | --------- |  | - | ----- |  |  | - | ------ | 
|                              |  | Three Months Ended |       | Nine Months Ended
|                              |  |                    |       |                  
|                              |  | Sept. 28,          |       | Sept. 29,         |  | Sept. 28, |       | Sept. 29,
|                              |  | 2003               |       | 2002              |  | 2003      |       | 2002     
|                              |  |                    |       |                   |  |           |       |          
|Parallel EEPROM product
sales |  | $                  | 1,789 |                   |  | $         | 1,849 |           |  | $ | 5,741 |  |  | $ | 7,708  | 
|Serial EEPROM product sales   |  |                    | 516   |                   |  |           | 955   |           |  |   | 1,791 |  |  |   | 3,771  | 
|                              |  |                    |       |                   |  |           |       |           |  |   |       |  |  |   |        | 
|Total memory product sales    |  | $                  | 2,305 |                   |  | $         | 2,804 |           |  | $ | 7,532 |  |  | $ | 11,479 | 
|                              |  |                    |       |                   |  |           |       |           |  |   |       |  |  |   |        | 

Parallel EEPROM product sales decreased nominally in the third quarter of 2003
compared to the third quarter of 2002. Parallel EEPROM product sales decreased
in the nine months ended September 28, 2003 compared to the corresponding
period of 2002 principally due to lower unit shipments of high density parallel
EEPROMs as the overall market for these products has contracted.

Serial EEPROM product sales have declined year over year and are expected to
continue to decline as we have substantially exited from that business.

10



---



##### Table of Contents



Cost of Sales and Gross Profit

Gross profit as a percentage of sales was 56% in the third quarter of 2003 and
54% in the third quarter of 2002. The gross profit as a percentage of product
sales, excluding royalty revenue, was 53% in the third quarter of 2002. Gross
profit as a percentage of sales was 53% for the nine months ended September 28,
2003 compared to 51% for the corresponding period of 2002. The gross profit
percentage in the third quarter and nine months ended September 29, 2002
benefited by $0.6 million per quarter from the quarterly amortization of the
deferred gain on the sale of the fab assets, which ended in the third quarter
of 2002.

The gross profit percentage in the third quarter and nine months ended
September 28, 2003 benefited from lower manufacturing overhead expenses
compared to the third quarter and nine months ended September 29, 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 third quarter and nine months ended September 28, 2003
improved compared to the third quarter and nine months ended September 29, 2002
due to a product mix that consisted of a higher proportion of mixed-signal
products. The gross margin improvement for the nine months ended September 28,
2003 compared to the corresponding period of 2002 was 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 $0.2 million in the third
quarter of 2003, less than $0.1 million in the third quarter of 2002, less than $0.3 million in the nine months ended
September 28, 2003, and less than $0.4 million in the nine months ended
September 29, 2002.

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.
We are projecting that our gross margin in the fourth quarter of 2003
will be approximately 53% of sales, depending in large part on
product mix and the Poweready integration.

Research and Development

Research and development expenses amounted to $2.6 million or 25% of sales in
the third quarter of 2003 compared to $3.4 million or 36% of sales in the third
quarter of 2002. In the nine months ended September 28, 2003, research and
development expenses were $8.1 million or 27% of sales, compared to $9.6
million or 33% of sales in the nine months ended September 29, 2002. Research
and development expenses decreased by $0.9 million in the third quarter of 2003
compared to the third quarter of 2002 principally due to the completion of the
development phase of several products and, to a lesser extent, headcount
reductions and spending controls. Research and development expenses decreased
by $1.5 million in the nine months ended September 28, 2003 compared to the
corresponding period of 2002 principally due to reduced personnel costs
resulting from headcount reductions and spending controls and the completion of
the development phase of several products. We plan to increase operating
spending in the fourth quarter of 2003 due to the Poweready acquisition and as
we continue to promote new products and invest in new product development.

11



---



##### Table of Contents



Selling, General and Administrative

Selling, general and administrative expenses amounted to $2.7 million or 26% of
sales in the third quarter of 2003 which is relatively consistent compared to
$2.8 million or 28% of sales in the third quarter of 2002. In the nine months
ended September 28, 2003, selling general and administrative expenses amounted
to $7.8 million or 26% of sales compared to $8.6 million or 29% of sales in the
corresponding period of 2002. The $0.8 million decrease in selling, general and
administrative expenses in the nine months ended September 28, 2003 compared to
the corresponding period of 2002 is primarily due to reduced personnel expenses
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. Quarterly cost reductions of $0.7 million associated
with the second quarter 2002 reduction in workforce were partially offset by
increased research and development expenses. The $0.4 million of quarterly cost
reductions resulting from the fourth quarter 2002 reduction in workforce were
realized in 2003.

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 previously at those facilities to our corporate headquarters.

Terminating our prior facility lease and entering into the new facility lease
allowed us to consolidate our operations in a more efficient facility and
reduce our future minimum lease commitments, exclusive of restructuring related
lease payments, by approximately $0.3 million per year in 2003 through 2009.
Our minimum lease commitment increased by $1.2 million in 2010 as the new
facility lease term is one year longer than the prior facility lease term. The
facilities abandonments 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 rent for the period after
abandonment of the facilities.

Rent expense in 2003 is expected to approximate our 2002 net rent expense as
the gross rent for the prior facility was reduced by an 18-month sublease that
was due to expire in 2003.

In the nine months ended September 28, 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 September 28, 2003, the restructuring accrual amounted to less
than $0.1 million.

12



---



##### Table of Contents



Amortization of Purchased Intangible Assets

Amortization of intangibles was $0.2 million in the third quarter of 2003
compared to $0.3 million in the third quarter of 2002. Amortization of
intangibles was $0.7 million in the nine months ended September 28, 2003
compared to $0.5 in the comparable period of 2002. We expect amortization of
purchased intangibles to increase commencing in the fourth quarter of 2003 due
to our acquisition of Poweready.

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. 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 three and nine months ended September 28, 2003 amounted
to $14,000 and $0.9 million, respectively. The comparable prior year amounts
were $0.8 million and $2.5 million, respectively. In April 2003, we repurchased
all $35 million of the outstanding 5.5% convertible subordinated notes, which
substantially reduced our interest expense and amortization commencing in the
second quarter of 2003. Interest expense in the third quarter of 2003
consisted of the interest portion of the payments related to long-term lease
obligations.

Interest income in the three and nine months ended September 28, 2003 amounted
to $0.1 million and $0.3 million, respectively. The comparable prior year
amounts were $0.2 million and $0.6 million, respectively. Interest income
decreased year over year primarily as a result of a decrease in the average
balance invested and, to a lesser extent, lower interest rates.

Other income for the nine months ended September 28, 2003 consists of a
one-time gain of $2.7 million resulting from the repurchase of all $35 million
of our outstanding 5.5% convertible subordinated notes in April 2003. Other
income for the three and nine months ended September 29, 2002 includes $0.7
million from a favorable sales tax audit and $0.2 million from the early
termination of a wafer foundry agreement with Standard MEMS. Other income for
the nine months ended September 29, 2002 also includes a $0.4 million benefit
associated with the sale of our wafer fabrication facility.

Other expense for the nine months ended September 29, 2002 includes a non-cash
impairment charge of $2.5 million to write-off an investment held in a private
company.

13



---



##### Table of Contents



Taxes

No taxes were provided in the three and nine months ended September 29, 2002
due to the net losses. While net income was generated during the three and nine
months ended September 28, 2003, no taxes were provided due to offsetting tax
deductions. Net deferred tax assets at September 28, 2003 and December 31, 2002
were fully reserved because of the uncertainty regarding the ultimate
realization of these assets.

LIQUIDITY AND CAPITAL RESOURCES

At September 28, 2003, we had $21.2 million in cash, cash equivalents and
short-term and long-term investments compared to $38.4 million at the end of
2002. During the nine months ended September 28, 2003, we used $3.5 million of
cash in operating activities (including approximately $0.7 million associated
with restructuring activities). Cash used in investing activities was
approximately $10.5 million in the nine months ended September 28, 2003,
consisting of net investments in cash-based, available for sale securities of
$9.8 million and $0.7 million for equipment purchases. We used $13.0 million of
net cash in financing activities in the nine months ended September 28, 2003,
consisting of $14.4 million of cash consideration paid in connection with the
repurchase of our convertible subordinated notes discussed below and $0.4
million of cash used to repay long-term capital lease obligations, partially
offset by $1.8 million of cash generated from the issuance of common stock
under employee stock plans.

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 (2.9 million shares of Xicor
common stock valued at the closing price on the respective repurchase dates).
The repurchase of the notes significantly reduced our interest expense, and to
a lesser extent, our interest income commencing in the second quarter of 2003.

Capital expenditures for 2003 are currently planned at approximately $1.0
million and are primarily related to tooling and test equipment. At
September 28, 2003, we had entered into commitments for equipment purchases aggregating
less than $0.5 million. At September 28, 2003 our principal source of
liquidity was cash, cash equivalents and short-term investments.

In October 2003, we acquired Poweready. The purchase consideration paid at
closing consisted of $3 million of cash and 947,368 shares of Xicor common
stock.

At September 28, 2003 our principal sources of liquidity were cash, cash
equivalents and short and long-term investments. Management believes that our
existing sources of liquidity will be adequate to support our activities for
the next twelve months.

14



---



##### Table of Contents



RECENT ACCOUNTING PRONOUNCEMENTS

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. During October 2003, the FASB issued FSP 46-6 which is
effective for financial statements issued after October 9, 2003, and provides a
broad deferral of the latest date by which all public entities must apply FIN
46 to certain variable interest entities, to the first reporting period ending
after December 15, 2003. We believe that the adoption of this standard will
have no material impact on our financial statements.

In May 2003, the Financial Accounting Standards Board (FASB) issued Statement
of Financial Accounting Standards (SFAS) No. 150, Accounting for Certain
Financial Instruments with Characteristics of both Liabilities and Equity.
SFAS No. 150 requires that certain financial instruments, which under previous
guidance could be accounted for as equity, be classified as liabilities in
statements of financial position. SFAS No. 150 is effective for financial
instruments entered into or modified after May 31, 2003, and is otherwise
effective for the Company in the first quarter of 2004. We do not expect the
adoption of SFAS No. 150 to have a significant impact on our future results of
operations or financial condition.

In May 2003, a consensus was reached on EITF No. 03-5, which was ratified by
the FASB in August 2003. EITF No. 03-5 affirms that AICPA SOP 97-2 applies to
non-software deliverables, such as hardware, in an arrangement if the software
is essential to the functionality of the non-software deliverables. This
statement is effective for new revenue arrangements entered into for reporting
periods commencing after August 13, 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 that on an
overall basis, in the fourth quarter of 2003, Powereadys gross margin
contribution will cover its operating expenses, exclusive of the amortization
of purchased intangibles; the expectation of a year over year 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 expectation for the fourth
quarter 2003 gross margin percentage to be approximately 53%,
depending in large part on product mix and the Poweready integration; the
plan to increase operating spending in the fourth quarter of 2003 compared to
the third quarter of 2003 due to the Poweready acquisition and as we continue
to promote new products and invest in new product development; the expectation
for the amortization of purchased intangibles to increase commencing in the
fourth quarter of 2003 due to our acquisition of Poweready; the plan to begin

15



---



##### Table of Contents



generating revenues from products developed using the in-process research and
development acquired from AIP toward the end of 2003; the projection that 2003
capital expenditures will approximate $1.0 million; and the expectation that
our 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.

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

16



---



##### Table of Contents



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.

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.

17



---



##### Table of Contents



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;                             
| | - |  | ---------------------------------------------------------------------------------
|
| |  |  | 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

18



---



##### Table of Contents



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.

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

We completed the acquisition of Poweready, Inc. in October 2003. If we fail to
integrate this business successfully or properly, our quarterly and annual
results may be seriously harmed. Integrating people, technology, products and
services with our existing business could be expensive, time-consuming and a
strain on our resources. Specific issues that we face with regard to our
acquisition include the difficulty of integrating acquired technology, the need
to integrate and coordinate geographically separated organizations, the
potential disruption of our ongoing business and distraction of management, the
failure to successfully develop acquired technology resulting in the impairment
of amounts capitalized as intangible assets, unanticipated expenses related to
technology integration and the potential unknown liabilities associated with
the acquired business.

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.

19



---



##### Table of Contents



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

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

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

We compete with major semiconductor companies such as Analog Devices, Atmel
Corporation, 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

20



---



##### Table of Contents



could be seriously harmed by the failure to be able to protect our intellectual
property. Policing unauthorized use of our intellectual property, however, is
difficult, especially in foreign countries. Litigation may be necessary to
enforce our intellectual property rights, to protect our trade secrets, to
determine the validity and scope of the proprietary rights of others, or to
defend against claims of infringement or invalidity. Litigation of this type
can result in substantial costs and diversion of resources and can harm our
business, operating results and financial condition regardless of the outcome
of the litigation.

If 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 67% and 66% of total net sales in the
third quarter and nine months ended September 28, 2003, respectively. Our
international business activities are subject to a number of risks, any of
which could impose unexpected costs on us that would have an adverse effect on
our operating results. These risks include difficulties in complying with
regulatory requirements and standards; tariffs and other trade barriers; costs
and risks of localizing products for foreign countries; severe currency
fluctuations and economic deflation; reliance on third parties to distribute
our products; longer accounts receivable payment cycles; potentially adverse
tax consequences; and burdens of complying with a wide variety of foreign laws.

We may 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.

21



---



##### Table of Contents



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 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

22



---



##### Table of Contents



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.

Evaluation of disclosure controls and procedures. Our management evaluated,
with the participation of our Chief Executive Officer and our Chief Financial
Officer, the effectiveness of our disclosure controls and procedures as of the
end of the period covered by this Quarterly Report on Form 10-Q. Based on this
evaluation, our Chief Executive Officer and our Chief Financial Officer have
concluded that 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 Securities Exchange Act of 1934 is recorded, processed, summarized
and reported within the time periods specified in Securities and Exchange
Commission rules and forms.

Changes in internal controls over financial reporting. There was no change in
our internal control over financial reporting that occurred during the period
covered by this Quarterly Report on Form 10-Q that has materially affected, or
is reasonably likely to materially affect, our internal control over financial
reporting.




PART II: OTHER INFORMATION




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



|(a) |  | Exhibits:
|--- |  | ---------

| |  |  |      |  |  |                                                                                                                                                                            
| |  |  | ---- |  |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  |  | 31.1 |  |  | Certification of Chief Executive Officer pursuant to Section
302 of the Sarbanes-Oxley Act of 2002                                                                         
| |  |  |      |  |  |                                                                                                                                                                            
| |  |  | 31.2 |  |  | Certification of Chief Financial Officer pursuant to Section
302 of the Sarbanes-Oxley Act of 2002                                                                         
| |  |  |      |  |  |                                                                                                                                                                            
| |  |  | 32.1 |  |  | Certifications of Chief Executive Officer and Chief Financial
Officer pursuant to 18 U.S.C. Section 1350, adopted pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002



|(b) |  | Reports on Form 8-K:
|--- |  | --------------------

|                        |  |          |  |                                                                                                                         
|----------------------- |  | -------- |  | ------------------------------------------------------------------------------------------------------------------------
|Date Filed or Furnished |  | Item No. |  | Description                                                                                                             
|                        |  |          |  |                                                                                                                         
|July 9, 2003            |  | Item 9.  |  | On July 9, 2003, we issued a press
release reporting we reiterated
second quarter 2003 revenue
guidance.                
|                        |  |          |  |                                                                                                                         
|July 23, 2003           |  | Item 9.  |  | On July 23, 2003, we issued a press
release reporting earnings results
for the three and six months ended
June 29, 2003.

23



---



##### Table of Contents






SIGNATURES

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

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

Date: November 12, 2003

24



---



##### Table of Contents






EXHIBIT INDEX

|        |  |                                                                                                                                                                           
|------- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |  |                                                                                                                                                                           
|Number  |  | Description                                                                                                                                                               
|        |  |                                                                                                                                                                           
|31.1    |  | Certification of Chief Executive Officer pursuant to Section 302
of the Sarbanes-Oxley Act of 2002                                                                        
|        |  |                                                                                                                                                                           
|31.2    |  | Certification of Chief Financial Officer pursuant to Section 302
of the Sarbanes-Oxley Act of 2002                                                                        
|        |  |                                                                                                                                                                           
|32.1    |  | Certification of Chief Executive Officer and Chief Financial
Officer pursuant to 18 U.S.C. Section 1350, adopted pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002

25