Micro Linear Announces Third Quarter 2005 Financial Results

21 October 2005

Net revenue for the third quarter of 2005 was $3.7 million, down from $6.0 million for the second quarter of 2005 and from $5.9 million in net revenue for the third quarter of 2004. Lower sales of digital cordless telephone transceiver chips and networking products accounted for most of the decrease in revenue from the prior quarter and the comparable third quarter of 2004. Gross margin for the third quarter of 2005 was $2.1 million down from $3.6 million for the second quarter of 2005, and from $3.4 million for the comparable third quarter of 2004. The percentage gross margin was 57% for the third quarter of 2005 down from 61% for the second quarter of 2005 and 58% for the comparable third quarter of 2004.

The Company reported a net loss for the third quarter of 2005 of $1.8 million, or $0.14 per share, compared to a net loss of $0.9 million, or $0.07 per share for the second quarter of 2005 and a net profit of $0.6 million, or $0.04 per share (diluted), for the third quarter of 2004. The net profit reported in the third quarter of 2004 included a gain of $1.1 million from the sale of our San Jose buildings.

Net revenue for the nine months ended September 30, 2005 was $13.9 million, compared to $16.2 million for the same period in 2004. Gross margin for the first nine months of 2005 totaled $7.9 million, down 12% from $9.0 million for the first nine months of 2004. The Company reported a net loss of $4.1 million, or $0.33 per share, for the first nine months of 2005, compared to a net loss of $2.9 million, or $0.24 per share, for the first nine months of 2004.

About Micro Linear Corporation:

Micro Linear Corporation is a fabless semiconductor company specializing in wireless integrated circuits. In addition to its PHS products, the Company offers a full line of high data-rate ISM-band transceivers for consumer applications such as cordless phones, wireless speakers and headphones, game controllers, voice headsets and other electronic appliances. Micro Linear offers a uniquely broad line of transceivers that address the most popular unlicensed bands: 900 MHz, 2.4 GHz, and 5.8 GHz. To simplify system design and decrease time to market, Micro Linear also offers starter kits and reference designs. Headquartered in San Jose, California, Micro Linear's products are available through its authorized representatives and distributors worldwide. More information on the company is available online at www.microlinear.com.

Micro Linear Safe Harbor Statement:

Except for the historical information contained herein, the statements in this press release are forward-looking statements within the meaning of the "safe harbor" provision of the Private Securities Litigation Reform Act of 1995. These forward-looking statements are not guarantees of future results and are subject to a number of risks and uncertainties that could cause actual results to differ materially from those projected. Such risks and uncertainties include, but are not limited to, the risks associated with the cyclical nature of the semiconductor industry; the level of product orders; the ability of customers to cancel, delay or otherwise change orders without significant penalty; new product announcements or introductions by competitors; and the market's acceptance of the Company's products, including the Company's PHS product family. Additional risks are detailed in the Company's filings with the Securities and Exchange Commission, including the Company's Quarterly Report on Form 10-Q for the quarter ended July 3, 2005. Statements included in this release are based on information known to the Company as of the date of this release, and the Company assumes no obligation to update information contained in this release.

MICRO LINEAR CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
UNAUDITED
(IN THOUSANDS)

Sept 30 DEC 31
2005 2004
ASSETS

CURRENT ASSETS
CASH AND SHORT-TERM INVESTMENTS $13,799 $15,580
ACCOUNTS RECEIVABLE, NET 2,378 2,878
INVENTORIES 3,103 1,770
OTHER CURRENT ASSETS 268 210
TOTAL CURRENT ASSETS 19,548 20,438

PROPERTY & EQUIPMENT, NET 476 459

OTHER ASSETS 17 28

TOTAL ASSETS $20,041 $20,925

LIABILITIES AND STOCKHOLDERS' EQUITY

CURRENT LIABILITIES
ACCOUNTS PAYABLE $2,327 $1,500
ACCRUED LIABILITIES 3,128 2,603
TOTAL CURRENT LIABILITIES 5,455 4,103

STOCKHOLDERS' EQUITY

COMMON STOCK 16 15
ADDITIONAL PAID-IN CAPITAL 63,264 61,368
ACCUMULATED OTHER COMPREHENSIVE LOSS (7) (8)
ACCUMULATED DEFICIT (28,454) (24,320)
TREASURY STOCK (20,233) (20,233)
TOTAL STOCKHOLDERS' EQUITY 14,586 16,822

TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $20,041 $20,925

MICRO LINEAR CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
UNAUDITED

THREE MONTHS ENDED NINE MONTHS ENDED
Sep 30, Sep 30, Sep 30, Sep 30,
2005 2004 2005 2004

NET REVENUE $3,674 $5,875 $13,884 $16,223

COST OF REVENUE 1,589 2,465 5,962 7,242

GROSS MARGIN 2,085 3,410 7,922 8,981

OPERATING EXPENSES:

RESEARCH AND
DEVELOPMENT 2,350 2,165 7,013 7,417
SELLING, GENERAL AND
ADMINISTRATIVE 1,606 1,796 5,325 5,498
GAIN ON SALE OF
LAND AND BUILDINGS -- (1,138) -- (1,138)
RESTRUCTURING CHARGES -- -- -- 166

TOTAL OPERATING
EXPENSES 3,956 2,823 12,338 11,943

INCOME (LOSS) FROM
OPERATIONS (1,871) 587 (4,416) (2,962)

INTEREST AND OTHER
INCOME 111 57 307 166
INTEREST AND OTHER
EXPENSE (4) (23) (10) (109)

INCOME (LOSS) BEFORE
INCOME TAXES (1,764) 621 (4,119) (2,905)

PROVISION FOR INCOME
TAXES 8 14 15 24

NET INCOME (LOSS) (1,772) 607 (4,134) (2,929)

NET INCOME (LOSS) PER SHARE:

BASIC EARNINGS PER SHARE:
NET INCOME (LOSS)
PER SHARE $(0.14) $0.05 $(0.33) $(0.24)
NUMBER OF SHARES USED
IN PER SHARE
COMPUTATION 12,906 12,424 12,652 12,383

DILUTED EARNINGS PER SHARE:
NET INCOME (LOSS)
PER SHARE $(0.14) $0.04 $(0.33) $(0.24)
NUMBER OF SHARES USED
IN PER SHARE
COMPUTATION 12,906 13,698 12,652 12,383