UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Form 10-Q

(Mark One)

For the Quarterly Period Ended March 28, 2004

OR

For the transition period from        to

Commission File Number 0-24758

Micro Linear Corporation

Registrant’s telephone number, including area code:
(408) 433-5200

     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]

     The number of shares of the Registrant’s Common Stock outstanding as of May 10, 2004, net of shares held in treasury, was 12,369,340.

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

MICRO LINEAR CORPORATION

See accompanying notes to unaudited consolidated condensed financial statements.

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MICRO LINEAR CORPORATION

See accompanying notes to unaudited consolidated condensed financial statements.

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MICRO LINEAR CORPORATION

See accompanying notes to unaudited consolidated condensed financial statements.

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MICRO LINEAR CORPORATION

1. Organization and Summary of Significant Accounting Policies

Organization

     Micro Linear is a fabless semiconductor company specializing in high data rate wireless integrated circuit solutions. These transceivers can be used in streaming wireless applications such as cordless phones, wireless speakers and headphones, security cameras, game controllers, cordless headsets and other personal electronic appliances.

     Micro Linear is headquartered in San Jose, CA with sales offices and authorized representatives and distributors worldwide.

Fiscal Year

     We report results of operations on the basis of fifty-two or fifty-three week periods, ending on the Sunday closest to December 31. Fiscal year 2003 ended on December 28, 2003. The first quarter of 2003 ended on March 30, 2003. The first quarter of 2004 ended on March 28, 2004. For presentation purposes, the accompanying financial statements refer to the calendar year end and month end of each respective period.

Principles of Consolidation

     The consolidated financial statements include the accounts of Micro Linear Corporation and our subsidiary in the United Kingdom. All significant inter-company accounts and transactions have been eliminated.

     The Company has designated the U.S. dollar as the functional currency for its United Kingdom subsidiary since that subsidiary is dependent on the parent company’s economic environment. The gains and losses resulting from the translation of the United Kingdom subsidiary are recorded as other income and expense. For the first quarters of 2004 and 2003, translation gains and losses were not significant.

Basis of Presentation

     The consolidated financial statements included herein have been prepared by us in accordance with accounting principles generally accepted in the United States of America and reflect all adjustments, consisting of normal recurring adjustments, which in the opinion of management are necessary to state fairly our financial position, results of operations, and cash flows for the periods presented. Certain accounts in the condensed financial statements have been reclassified where necessary to conform to the financial statements for the quarter ended March 28, 2004.

     The accompanying unaudited consolidated financial statements have been prepared in accordance with the instructions to Form 10-Q, and therefore do not include all information and footnotes necessary for a fair presentation of financial position, results of operations and cash flows in conformity with generally accepted accounting principles. The unaudited consolidated condensed financial statements and notes should be read in conjunction with the consolidated financial statements and notes in the Annual Report on Form 10-K for the year ended December 28, 2003, filed with the Securities and Exchange Commission on March 29, 2004.

Use of Estimates

     The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements as well as the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates, and such differences may be material to the financial statements.

Net Income (Loss) Per Share

     Basic earnings (loss) per share is computed by dividing net income (loss) available to common stockholders by the weighted average number of common shares outstanding during the period. Diluted earnings (loss) per share excludes potential common stock if the effect is anti-dilutive. Diluted net earnings (loss) per share includes the effect of all potentially dilutive common stock

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outstanding during the period. We compute diluted earnings (loss) per share using the treasury stock method for stock options outstanding.

     A total of 3,901,470 and 3,905,540 shares of potential common stock were not included in the dilutive net loss per share calculations for the periods ending March 31, 2004 and 2003, because to include them would be anti-dilutive.

     Following is a reconciliation of the basic and diluted loss per share computations (in thousands, except per share amounts):

Stock-Based Compensation

     We account for our employee stock option plans in accordance with Accounting Principles Board No. (“APB”) 25, “Accounting for Stock Issued to Employees.” Under APB No. 25, compensation cost is measured as the excess, if any, of the quoted market price of our stock at the date of grant over the exercise price of the option granted. Compensation cost for stock options, if any, is recognized ratably over the vesting period. We provide pro forma disclosures as required under Statement of Financial Accounting Standards (“SFAS”) No. 123, “Accounting for Stock-Based Compensation” and SFAS No. 148, “Accounting for Stock-Based Compensation, Transition and Disclosure”.

     We account for stock issued to non-employees in accordance with the provisions of SFAS No. 123. Stock option awards issued to non-employees are accounted for at fair value using the Black-Scholes option pricing model. The fair value of each non-employee stock award is re-measured at each period end until a commitment date is reached, which is generally the vesting date.

Pro Forma Net Income (Loss) Per Share

     As required by SFAS No. 123, we disclose our pro forma net income (loss) as if we had accounted for our employee stock purchase plan, employee stock options and director stock options under the fair value method as prescribed in SFAS No. 123. We estimate the fair value for these options at the date of grant using the Black-Scholes option pricing model and the multiple option approach with the following weighted-average assumptions:

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     The Black-Scholes option valuation model was intended for use in estimating the fair value of publicly traded options that have no vesting restrictions and are fully transferable, which differs significantly from the terms of our stock option awards. In addition, option valuation models require the input of highly subjective assumptions, including the expected stock price volatility and the expected life of the options before exercise, which greatly affect the calculated grant date fair value. The weighted average estimated fair values of shares at the date of grant that were issued under the Employee Stock Purchase Plan during the three months ended March 31, 2004 and 2003 were $1.52 and $1.10, respectively. The weighted average fair values at the date of grant of options which were granted under the employee and directors’ stock option plans during the three months ended March 31, 2004 and 2003 were $2.09 and $1.81 respectively.

     SFAS No. 148 amended SFAS No. 123 in December 2002 to require that disclosures of the pro forma effect of using the fair value method of accounting for stock-based employee compensation be displayed more prominently and in a tabular format. The following table illustrates the effect on our net loss and net loss per share if we had recorded compensation costs based on the estimated grant date fair value as defined by SFAS No. 123 for all granted stock-based awards.

2. Financial Statement Details

Inventories consist of the following (in thousands):

Property, plant and equipment consist of the following (in thousands):

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Provision for Income Taxes

     The provision for income taxes for the three months ended March 31, 2004 consists mainly of state taxes. The provision for the three months ended March 31, 2003 consists mainly of taxes incurred by our subsidiary in the United Kingdom. We did not record a benefit for income taxes related to our net losses in the U.S., as we believe that the available objective evidence creates sufficient uncertainty regarding the realization of the deferred tax assets such that we have recorded a full valuation allowance. The effective tax rate for the first quarter of 2004 was .1%, compared to 1% in the first quarter of 2003.

Comprehensive Income

     For the three months ended March 31, 2004 and 2003, comprehensive loss, which consists of the net loss for the periods and unrealized gain or loss on short-term marketable securities, is as follows (in thousands):

3. Recent Accounting Pronouncements

In May 2003, FASB issued Statement of Financial Accounting Standards No. 150, “Accounting for Certain Financial Instruments with Characteristics of both Liabilities and Equity”, or SFAS No. 150. SFAS No. 150 establishes standards for how an issuer classifies and measures certain financial instruments with characteristics of both liabilities and equity. It requires that an issuer classify a financial instrument that is within its scope as a liability (or an asset in some circumstances). Many of those instruments were previously classified as equity. SFAS No. 150 is effective for financial instruments entered into or modified after May 31, 2003, and otherwise is effective at the beginning of the first fiscal period beginning after June 15, 2003. SFAS No. 150 is to be implemented by reporting the cumulative effect of a change in an accounting principle for financial instruments created before the issuance date of SFAS No. 150 and still existing at the beginning of the interim period of adoption. Restatement is not permitted. The adoption of SFAS No. 150 to date did not have a material impact on our financial position and results of operations.

     In December 2003, the SEC issued Staff Accounting Bulletin No. 104, “Revenue Recognition” (“SAB 104”), which codifies, revises and rescinds certain sections of SAB No. 101, Revenue Recognition, in order to make this interpretive guidance consistent with current authoritative accounting and auditing guidance and SEC rules and regulations. The changes noted in SAB 104 did not have a material impact on our financial position and results of operations.

     In March 2004, the FASB approved EITF Issue 03-6 “Participating Securities and the Two-Class Method under FAS 128”. EITF Issue 03-6 supersedes the guidance in Topic No. D-95, “Effect of Participating Convertible Securities on the Computation of Basic Earnings per Share”, and requires the use of the two-class method of participating securities. The two-class method is an earnings allocation formula that determines earnings per share for each class of common stock and participating security according to dividends declared (or accumulated) and participation rights in undistributed earnings. In addition, EITF Issue 03-6 addresses other forms of participating securities, including options, warrants, forwards and other contracts to issue an entity’s common stock, with the exception of stock-based compensation (unvested options and restricted stock) subject to the provisions of Opinion 25 and FAS 123. EITF Issue 03-6 is effective for reporting periods beginning after March 31, 2004 and should be applied by restating previously reported EPS. We are currently in the process of evaluating the impact that the adoption of EITF Issue 03-6 will have on our financial position and results of operations.

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4. Operations by Geographic Regions

The following is a summary of operations by geographical regions (in thousands):

Identifiable assets by geographic region are as follows (in thousands):

5. Restructuring Charges

     In the second quarter of 2003, we announced a restructuring plan to better align our organizational structure with current business conditions. This realignment process included workforce reductions across all functions of the Company’s operations and a consolidation of our design centers into our San Jose facility. The remaining balance in the restructuring reserve pertains to employee relocation expenses.

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

     The statements in this report or incorporated by reference which are not historical are forward-looking statements and include, without limitation, statements under the caption, “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” Terms such as “may,” “will,” “could,” “should,” “project,” “believe,” “anticipate,” “expect,” “plan,” “estimate,” “forecast,” “potential,” “intend,” “continue” and variations of these words or similar expressions are intended to identify forward-looking statements.

     These forward-looking statements include, but are not limited to, statements regarding: our expectation that there will be an increase in unit volume shipments for our wireless products in the second and third quarters of 2004 and an increase in average selling prices as shipments of our new 5.86Hz products begin to represent a more significant portion of our total wireless products shipments, our expectations to achieve improvements in our gross margin as we anticipate the volumes of our 5.86Hz wireless products increase over the next two quarters, anticipated revenue from our wireless and networking products, our intentions to continue to focus significant resources on development of new products and technologies and may increase spending as necessary, our beliefs regarding deferred tax assets, including our beliefs that the available objective evidence creates sufficient uncertainty regarding the realization of the deferred tax assets such that we have recorded a full valuation allowance against our deferred tax assets, our expectation that international revenue will account for a significant percentage of our revenue for the foreseeable future, our belief that existing cash resources are sufficient to fund any anticipated operating losses and purchases of capital equipment, provide adequate working capital for the next 12 months.

     Forward-looking statements are subject to risks and uncertainties that could cause actual results to differ materially from those projected. These risks and uncertainties include, but are not limited, to our dependence on key products and customers, changes in the demand for our products and seasonal factors affecting certain of our products, our ability to attract and retain customers and distribution partners for existing and new products, our ability to develop and introduce new and enhanced products in a timely manner, our dependence on international sales and risks associated with international operations, our dependence on outside foundries and test subcontractors in the manufacturing process and other outside suppliers, our ability to recruit and retain qualified employees, and the strength of competitive offerings and the prices being charged by those competitors, and the risks set forth below under “Factors that May Affect Future Operating Results”.

     These forward-looking statements are made only as of the date of this report. We do not undertake to update or revise the forward-looking statements, whether as a result of new information, future events or otherwise. We caution you not to give undue weight to any of the forward-looking statements. You should not regard the inclusion of forward-looking information as a representation by us or any other person that we will achieve our objectives or plans.

Critical Accounting Policies

     Management’s Discussion and Analysis of Financial Condition and Results of Operations is based upon our consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States. The preparation of these financial statements requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue and expenses, and related disclosure of contingent assets and liabilities. Management bases its estimates on historical experience and other assumptions that are believed to be reasonable under the circumstances. These results form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Senior management has discussed the development, selection and disclosure of these estimates with the Audit Committee of Micro Linear’s Board of Directors. Actual results may differ from these estimates under different assumptions or conditions. Management believes the following critical accounting policies reflect its more significant estimates and assumptions used in the preparation of its consolidated financial statements. They include those regarding (1) revenue recognition, (2) estimating accrued liabilities and allowance for doubtful accounts, (3) inventory and related allowance for obsolete and excess inventory, (4) accounting for income taxes, and (5) valuation of long-lived and intangible assets.

     The critical accounting policies are described in Item 7, “Management Discussion and Analysis of Financial Condition and Results of Operations,” of our Annual Report on Form 10-K for the year ended December 28, 2003.

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Overview

     Micro Linear is a fabless semiconductor company specializing in wireless integrated circuit solutions. These transceivers can be used in streaming wireless applications such as cordless phones, wireless speakers and headphones, security cameras, game controllers, cordless headsets and other personal electronic appliances.

     We were founded in 1983 and until 2000, we were a supplier of advanced analog and mixed signal integrated circuits to the computer, communications, telecommunications, consumer and industrial markets. During 2000, we divested our manufacturing test operation and our non-communication product lines and focused our marketing, engineering and product development on new communications products, including some wired networking products, but most notably wireless integrated circuits. During 2001, we established ourselves as a volume supplier of RF transceivers to the digital cordless telephone segment of the communications market. Wireless product revenue represented 56% of net revenue for the first quarter of 2004 compared to 55% of net revenue for the first quarter of 2003.

Results of Operations

Three Months Ended March 31, 2004 Compared with Three Months Ended March 31, 2003

     The following table presents certain consolidated statements of operations data for the periods indicated:

Net Revenue

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     Revenues during the first quarter of 2004 decreased $0.9 million from the comparable first quarter of 2003. A 26% decrease in unit demand for our older networking products, combined with an 8% drop in average selling prices for these products, due to a shift in product mix, accounted for $0.6 million of the revenue decline. This was offset by a $0.2 million increase in shipments of our current networking media converter products. Our wireless product revenues decreased by $0.4 million due to a 10% decline in average selling prices of our mature wireless products and an 8% drop in unit shipment volumes resulting from our largest customer’s (Uniden’s) transition from our 2.4 GHz products to our new 5.8GHz product, which began shipping late in the first quarter of 2004.

     The majority of our wireless products are used in consumer applications and our first quarter results reflect the seasonality we experience selling into those markets. We expect to see an increase in unit volume shipments for these products in the second and third quarters of 2004 and an increase in average selling prices as shipments of our new 5.8 GHz products (which generally have a higher average selling price) begin to represent a more significant portion of our total wireless product shipments.

     In the first quarter of 2004 and 2003, sales to Uniden Corporation accounted for more than 10% of our net revenue.

     International revenue for the first quarter of 2004 totaled $3.6 million, or 93% of net revenue compared to $4.3 million, or 92% of net revenue for the first quarter of 2003. Domestic revenue was approximately 7% of net revenue for the first quarter of 2004 compared to 8% for the first quarter of 2003.

Gross Margin

     Gross margin is affected by the unit volume of product shipments, selling prices, product mix, manufacturing subcontract costs, manufacturing utilization, and product yields. It is also periodically affected by costs incurred in connection with start-up and installation of new process technologies at outside manufacturing foundries and test houses.

     The decrease in our overall average selling prices of 11% in the first quarter of 2004, compared to the comparable first quarter of 2003, was the primary reason for the decline in overall gross margin. In addition, we incurred approximately $0.2 million in increased manufacturing costs, related to the release and sale of new products, which added to our gross margin decline. We were successful, however, in reducing the average direct material costs of our products by approximately 8% in the first quarter of 2004 compared to the first quarter of 2003. We expect to achieve improvements in our gross margin as we anticipate the volumes of our 5.8GHz wireless products to increase over the next two quarters.

Research and Development Expenses (R&D)

     Research and development expenses include costs associated with the definition, design and development of new products. In addition, research and development expenses include test development and prototype costs associated with new product development.

     We expense wafers and production mask sets related to new products as research and development costs until products based on new designs are fully characterized, support published data sheets and satisfy reliability tests.

     The decrease in research and development expenses in the first quarter of 2004, as compared to the first quarter of 2003, resulted from the actions we took to reposition the Company, beginning with the cancellation of our 802.11a broadband wireless product development effort in October 2002 and continuing with our restructuring efforts in the second quarter of 2003. We remain committed

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to spend significant resources on our engineering development efforts, and in effecting that context, research and development costs increased almost $0.2 million for the first quarter of 2004 from the fourth quarter of 2003, as we prepared to introduce new products.

Selling, General and Administrative Expenses (SG&A)

     The decrease in SG&A expenses for the first quarter of 2004 compared to the first quarter of 2003 was primarily due to the workforce reductions and repositioning that occurred in the second quarter of 2003. Our SG&A expenses in the first quarter of 2004 included almost $0.2 million in sales and business development expenses incurred in connection with the introduction of new products.

Interest and Other Income and Interest and Other Expense

     The decrease in interest and other income for the first three months of 2004 as compared to the three months of 2003 was primarily due to the decrease in cash balances. Interest and other expense is primarily attributable to the mortgage on our San Jose facility. The decrease in interest and other expenses in the first three months of 2004 as compared to the first three months of 2003 is mainly due to a decrease in foreign currency translation losses for our United Kingdom subsidiary.

Provision for Income Taxes

     The provision for income taxes for the three months ended March 31, 2004 consists of state taxes. The provision for the three months ended March 31, 2003 consists of taxes incurred by our subsidiary in the United Kingdom. We did not record a benefit for income taxes related to our net losses in the U.S., as we believe that the available objective evidence creates sufficient uncertainty regarding the realization of the deferred tax assets such that we have recorded a full valuation allowance. The effective tax rate for the first quarter of 2004 was 0.1%, compared to 1% in the first quarter of 2003.

Liquidity and Capital Resources

     Net cash used in operating activities during the first three months of 2004 was due primarily to a net operating loss of $2.7 million, an increase in inventory of $0.9 million, and decreases in deferred revenue of $0.1 million and accrued liabilities of $0.2 million.

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These were partially offset by an increase in accounts payable of $1.3 million, and non-cash charges for depreciation and amortization of $0.2 million.

     Investing activities during these periods consisted primarily of net sales of short-term investments, which totaled $2.2 million for the first three months of 2004, and $1.7 million for the first three months of 2003. Capital expenditures were $0.2 million for the first three months of 2004 and $0.1 million in the comparable period of 2003.

     Cash used in financing activities consists of principal payments on our debt and proceeds from the issuance of common stock in connection with the exercise of employee stock options. Principal mortgage payments on our debt were $0.1 million for the first three months of 2004 and 2003. The use of cash for the principal payments on our debt was offset by proceeds from the issuance of common stock in the amount of $0.4 million during the first three months of 2004.

     Working capital was $11.9 million as of March 31, 2004, compared to $14.2 million as of December 31, 2003. Working capital at March 31, 2004 includes cash and cash equivalents of $8.5 million and short-term investments of $6.7 million.

     We anticipate that existing cash resources are sufficient to fund any anticipated operating losses, purchases of capital equipment, and provide adequate working capital for at least the next 12 months. Our liquidity is affected by many factors, including, among others, the extent to which we pursue additional wafer fabrication capacity from existing foundry suppliers or new suppliers, capital expenditures, the level of our product development efforts, and other factors related to the uncertainties of the industry and global economies. Accordingly, there can be no assurance that events in the future will not require us to seek additional capital sooner or, if so required, that such capital will be available on terms acceptable to us.

Recent Accounting Pronouncements

In May 2003, FASB issued Statement of Financial Accounting Standards No. 150, “Accounting for Certain Financial Instruments with Characteristics of both Liabilities and Equity”, or SFAS No. 150. SFAS No. 150 establishes standards for how an issuer classifies and measures certain financial instruments with characteristics of both liabilities and equity. It requires that an issuer classify a financial instrument that is within its scope as a liability (or an asset in some circumstances). Many of those instruments were previously classified as equity. SFAS No. 150 is effective for financial instruments entered into or modified after May 31, 2003, and otherwise is effective at the beginning of the first fiscal period beginning after June 15, 2003. SFAS No. 150 is to be implemented by reporting the cumulative effect of a change in an accounting principle for financial instruments created before the issuance date of SFAS No. 150 and still existing at the beginning of the interim period of adoption. Restatement is not permitted. The adoption of SFAS No. 150 to date did not have a material impact on our financial position and results of operations.

     In December 2003, the SEC issued Staff Accounting Bulletin No. 104, “Revenue Recognition” (“SAB 104”), which codifies, revises and rescinds certain sections of SAB No. 101, Revenue Recognition, in order to make this interpretive guidance consistent with current authoritative accounting and auditing guidance and SEC rules and regulations. The changes noted in SAB 104 did not have a material impact on our financial position and results of operations.

          In March 2004, the FASB approved EITF Issue 03-6 “Participating Securities and the Two-Class Method under FAS 128”. EITF Issue 03-6 supersedes the guidance in Topic No. D-95, “Effect of Participating Convertible Securities on the Computation of Basic Earnings per Share”, and requires the use of the two-class method of participating securities. The two-class method is an earnings allocation formula that determines earnings per share for each class of common stock and participating security according to dividends declared (or accumulated) and participation rights in undistributed earnings. In addition, EITF Issue 03-6 addresses other forms of participating securities, including options, warrants, forwards and other contracts to issue an entity’s common stock, with the exception of stock-based compensation (unvested options and restricted stock) subject to the provisions of Opinion 25 and FAS 123. EITF Issue 03-6 is effective for reporting periods beginning after March 31, 2004 and should be applied by restating previously reported EPS. We are currently in the process of evaluating the impact that the adoption of EITF Issue 03-6 will have on our financial position and results of operations.

Factors That May Affect Future Operating Results

     The risks and uncertainties described below are not the only ones we face. If any of the following risks actually occurs, our business, financial condition or results of operations could be materially and adversely affected:

Our operating results are difficult to predict and are likely to fluctuate significantly. They may fail to meet or exceed the

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expectations of securities analysts or investors, causing our stock price to decline.

     Our operating results are difficult to predict and have fluctuated significantly in the past. They are likely to continue to fluctuate in the future as a result of many factors, some of which are outside of our control. Some of the factors that may cause these fluctuations include:

•		the level and timing of spending by our customers, both in the U.S. and in foreign markets;
•		changes in market demand, including seasonal and cyclical fluctuations;
•		timing, amount, cancellation or rescheduling of customer orders;
•		fluctuations in manufacturing yields;
•		timing of revenue recognition from contracts, which may span several quarters;
•		competitive market conditions;
•		the announcement or introduction of new or enhanced products by us, or competitors, or both;
•		any delay in the introduction of new or enhanced products by us;
•		market acceptance of our new products and continuing demand for our existing products;
•		cost and availability of wafers, other components and testing services;
•		mix of products sold;
•		fluctuations in end user demand for wireless products manufactured by our customers which incorporate our technology;
•		economic conditions specific to the networking and wireless industries and markets, as well as general economic conditions;
•		ability to hire and retain qualified technical and other personnel;
•		development of new industry standard communication protocols; and
•		availability and performance of advanced silicon process technologies from foundry sources.

     We believe that period-to-period comparisons of our operating results will not necessarily be meaningful. You should not rely on these comparisons as an indication of our future performance. If our operating results in one or more future periods fail to meet or exceed the expectations of securities analysts or investors, the trading price of our common stock may fluctuate, possibly by a significant amount.

The markets in which we operate are intensely competitive, and many competitors are larger and more established. If we do not compete successfully, our business could be harmed.

     Intense international and domestic competition, decreasing selling prices, rapid technological change, short product life cycles and cyclical patterns characterize the markets for our products. Competitors include significantly larger corporations. New entrants in these markets could provide additional competition. Most of our competitors are substantially larger and have greater financial, technical, marketing and other resources than we do. Many of these large organizations are in a better position to withstand any significant reduction in spending by customers in these markets. They often have broader product lines and market focus, and will therefore not be as susceptible to downturns in a particular market. In addition, many competitors have focused on the wireless market for longer than we have, and therefore have more long-standing and established relationships with domestic and foreign customers.

     The computer networking equipment and wireless markets have undergone a period of rapid growth and consolidation in recent years. We expect our dependence on sales to digital cordless phone and network equipment manufacturers to continue. Our business

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and results of operations would be harmed in the event of a significant slowdown in the digital cordless phone or computer networking equipment market. In addition, as a result of competitive pricing pressures, we have experienced lower margins on some of our products. Such pricing pressures will continue to have an adverse effect on our results of operations, and our business could suffer unless they can be offset by higher margins on other products or lower operating expenses.

     We do not currently manufacture our own semiconductor wafers. As a result, we are vulnerable to process technology advances competitors use to manufacture products offering higher performance and lower cost. Larger companies with wafer manufacturing facilities, broader product lines, greater technical and financial resources and greater service and support capabilities have an advantage in this market.

     In addition, our products are generally sole-sourced to our customers. If our customers were to develop other sources for our products, our operating results would be harmed.

The market for wireless applications is characterized by rapid technological change. Our future success depends on our ability to respond to these changes.

     Rapidly changing technology, frequent product introductions and evolving industry standards make it difficult to accurately predict the wireless product market’s future growth rate, size or technological direction. In view of the evolving nature of this market, suppliers of wireless products may decide to adopt alternative standards or technologies that are incompatible with our products. If we are unable to design, develop, manufacture and sell products that are compatible with these new standards or technologies, our business and operating results would be harmed.

We need to develop and introduce new and enhanced products in a timely manner to successfully compete in our industry.

     Continuing technological advancement, changes in customer requirements and evolving industry standards characterize the wireless and computer equipment networking markets. To compete successfully, we must design, develop, manufacture and sell new or enhanced products that:

•		provide increasingly higher levels of performance and reliability;
•		meet performance or other objective specified parameters;
•		are cost effective;
•		are brought to market in a timely manner;
•		are in accordance with existing or evolving industry standards; and
•		achieve market acceptance.

     The development of these new circuits is highly complex. We have sometimes experienced delays in completing the development of new products. Successful product development and introduction depends on many factors, including:

•		proper new product definition;
•		timely completion and introduction of new product designs;
•		availability of foundry capacity;
•		acceptable manufacturing yields; and
•		market acceptance of our products and our customers’ products.

     We must be able to adjust to changing market conditions quickly and cost-effectively to compete successfully. Furthermore, we must introduce new products in a timely manner, and achieve market acceptance for these products. In addition, our customers’ products which incorporate our products must be introduced in a timely manner and achieve market acceptance. If we, or our

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customers, fail to develop and introduce new products successfully, our business and operating results would suffer.

     To successfully develop and market certain of our planned products, we may need to enter into technology development or licensing agreements with third parties. If we cannot enter into such agreements on acceptable terms, our ability to develop and market new products could suffer, and our business and operating results would be adversely affected.

     Customers typically take a long time to evaluate our new products. It takes three to six months or more for customers to test new products, and at least an additional three to 12 months until customers begin significant production of products incorporating our products. We may therefore experience a lengthy delay between product development and the generation of revenues from new products. Delays inherent in such a long sales cycle raise additional risks that customers may decide to cancel or change their product plans. Such changes could result in the loss of anticipated sales. Our business, financial condition, and results of operations would suffer if customers reduce or delay orders, or choose not to release products incorporating our products.

We have a history of losses and, because of continued investment in product development, expect to incur losses in the future. We may not become profitable.

     We have incurred quarterly net losses from June 2000 through March 2004, except for a profit in the third quarter of 2002 which was attributable to an income tax refund. Because of those losses, we had an accumulated deficit of $22,975,000 as of March 31, 2004.

     Successful engineering development and market penetration in the product areas we have chosen to compete in require high levels of engineering and product development expense. We intend to continue to spend significant amounts on new product and technology development. Our networking products are reaching maturity, and revenue from this product line has declined and is expected to decline further over the next twelve months. We anticipate that our existing cash will fund any anticipated operating losses, purchases of capital equipment, and provide adequate working capital for at least the next 12 months. We expect to incur losses in the future and may not achieve our goals of positive net income and cash flow.

To the extent that our existing resources and cash generated from operations are insufficient to fund our future activities, we may need to raise additional capital. If funds are not available on acceptable terms, we may not be able to hire or retain employees, fund our operations or compete effectively.

     We believe that our existing capital resources and cash generated from operations will enable us to maintain our operations for at least the next 12 months. However, if our capital requirements or results of operations vary materially from those currently planned, we may require additional financing sooner than anticipated. If additional funds are raised through the issuance of debt securities, these securities could have rights, preferences and privileges senior to our common stock, and the terms of this debt could impose restrictions on our operations. The sale of additional equity or convertible debt securities could result in additional dilution to our stockholders. We cannot be certain that additional financing will be available in amounts or on terms acceptable to us, if at all. If adequate funds are not available to us on acceptable terms, our ability to hire, train or retain employees, to fund our operations and sales and marketing efforts, take advantage of unanticipated opportunities, develop or enhance services or products, or respond to competitive pressures would be significantly limited, which could harm our business, financial condition and operating results.

We depend on networking, wireless, and telecommunications spending for our revenue. Any decrease or delay in spending in these industries would negatively impact future operating results and financial condition.

     Demand for our products in the future will depend on the amount and timing of spending by network providers, manufacturers of wireless consumer products, and telecommunications equipment suppliers. Spending in these areas depends upon a variety of factors, including competitive pressures, discretionary consumer spending patterns, and general economic conditions.

     During certain periods, new orders slowed, customers cancelled or placed holds on existing orders, and new order levels fluctuated, due to developments in the general economy and capital markets. This situation could recur in the future. Because the majority of our revenue comes from sales to a few customers, a delay in orders from one customer could have a significant negative effect on future revenues.

     Relatively short product life cycles characterize the computer network equipment and digital cordless telephone markets. If one or more of our significant customers were to select circuits manufactured by a competitor for future products, our business would suffer. The loss of one or more of our current customers, failure to attract new customers, or disruption of our sales and distribution channels

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could harm our business and operating results.

Our customer base is concentrated. The loss of one or more key customers or distributors would harm our business.

     A significant majority of our revenue comes from sales to relatively few customers. Sales to the ten largest customers, excluding domestic distributors, accounted for approximately 82% of net revenue for the three months ended March 31, 2004 and 78% of net revenue for the same period in 2003. Sales to domestic distributors accounted for approximately 6% of net revenue for both the three months ended March 31, 2004 and 2003, respectively. We anticipate that a limited number of key customers and distributors will continue to provide a significant portion of our net revenue for the foreseeable future. Our future success depends on our ability to retain our current customers and attract new customers. A reduction, delay or cancellation of orders from one or more significant customers could materially harm our operating results. In addition, our operating results could be adversely affected if one or more of our major customers were to develop other sources for the products we now supply them.

     Generally, customers may cancel or reschedule orders to purchase standard products without significant penalty until 30 days prior to requested shipment. Customers frequently revise delivery schedules, and the quantities of products to be delivered, to reflect changes in their needs. Since backlog can be canceled or rescheduled, our backlog at any time is not necessarily indicative of future revenue.

We depend on international sales and are subject to the risks associated with international operations, which may negatively affect our business.

     Sales to customers outside of the United States represented 93% of net revenue for the three months ended March 31, 2004 and 91% of net revenue in 2003. We expect that international sales will continue to generate a substantial proportion of net revenue for the foreseeable future. Our international operations are subject to a number of risks, including:

•		changes in regulations and laws of foreign governments and telecommunications standards;
•		import and export legislation and license requirements, tariffs, taxes, quotas and other trade barriers;
•		compliance with foreign laws, treaties and technical standards;
•		delays resulting from difficulty in obtaining export licenses for certain technology;
•		fluctuations in currency exchange rates;
•		difficulty in collecting accounts receivable;
•		difficulty in managing foreign operations;
•		loss of one or more international distributors;
•		geopolitical risks, changes in diplomatic and trade relationships and economic instability; and
•		the effects of the terrorist attacks on the United States, the war in Iraq, the United States’ war on international terrorism, a recurrence of SARS and any related conflicts or similar events worldwide.

     Substantially all of our international sales must be licensed by the Office of Export Administration of the U.S. Department of Commerce. To date, we have not experienced any material difficulties in obtaining export licenses.

     Our international sales are typically denominated in U.S. dollars. Fluctuations in currency exchange rates could cause our products to become relatively more expensive to customers in a particular country, while competitors’ products denominated in local currencies become less expensive. This may lead to a reduction in sales or profitability in that country, which could adversely affect our business.

     Gains and losses on the conversion to U.S. dollars of accounts receivable, accounts payable and other international assets and liabilities may contribute to fluctuations in operating results. In addition, international customers typically take longer to pay for purchases than customers in the United States. If foreign markets do not continue to develop, or foreign sales cycles prove

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unpredictable, our revenue and business would be adversely affected.

Selling prices for wireless products typically decrease, which could lead to lower operating results.

     Average selling prices for products in the wireless markets have rapidly declined due to many factors, including:

•		rapidly changing technologies;
•		price-performance enhancements;
•		product introductions by competitors;
•		price pressure from significant customers; and
•		product maturity and obsolescence.

     The decline in the average selling prices of our products may cause substantial fluctuations in our operating results. We continue to develop and market new products that incorporate valued new features and sell at higher prices. Failure to deliver new products offering increased value would result in a decline in both revenue and margins, harming our business, financial condition, and results of operations.

Defects in our products, product returns and product liability could result in a decrease in customers and revenue, unexpected expenses and loss of market share.

     Complex products such as ours frequently contain errors, defects, and bugs upon release. Despite thorough testing by Micro Linear, our test houses and customers, these errors, defects and bugs are sometimes discovered after we begin to ship products. We expend significant resources to remedy these problems, but occasionally have faced legal claims by customers and others. Product defects can also cause interruptions, delays or cancellations of sales to customers, in addition to claims against us, all of which could adversely affect our operating results.

We depend on the health of the semiconductor industry, which is highly cyclical. The decline in demand in the semiconductor industry could affect our financial condition and results of operations.

     The semiconductor industry experiences significant downturns and wide fluctuations in supply and demand. The industry also experiences significant fluctuations in anticipation of changes in general economic conditions. This causes significant variances in product demand and production capacity, and aggravates both our manufacturing costs and product selling prices. These cyclical patterns, which we expect to continue, may substantially harm our business, financial condition, and results of operations.

If we fail to adequately forecast demand for our products, we may incur product shortages or excess product inventory.

     We regularly request indications from customers as to their future plans and requirements, to ensure that we will be prepared to meet production demand for our products. However, we may not receive anticipated purchase orders for our products. We must be able to effectively manage the expenses and inventory risks associated with meeting potential demand. If we fail to meet customers’ supply expectations, we may lose business from such customers. If we expend resources and purchase materials, or enter into commitments to acquire materials and manufacture products, and customers do not purchase these products, our business and operating results would suffer.

     Design wins, which require significant expenditures, often precede the generation of volume sales by a year or more. The value of any design win will largely depend upon the commercial success of the customer’s product, and on the extent to which the design of the customer’s product accommodates components manufactured by our competitors. We cannot assure that we will achieve design wins, or that any design win will result in significant future revenue.

We depend on a limited number of outside foundries and test subcontractors in the manufacturing process, and any failure to obtain sufficient foundry or testing capacity could significantly delay our ability to ship our products, damage our customer relationships, and result in reduced revenue.

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     We utilize outside foundries for all wafer production. We believe that utilizing outside foundries enable us to focus on our design strengths, minimize fixed costs and capital expenditures and access diverse manufacturing technologies. We currently intend to continue to rely exclusively upon our outside foundries for our wafer fabrication requirements. However, there are significant risks associated with the reliance on outside foundries, including the lack of assured wafer supply and control over delivery schedules, delays in obtaining access to key process technologies, and limited control over manufacturing yields and production costs.

     The manufacture of integrated circuits is a highly complex and technically demanding process. We have diversified our sources of wafer supply and have worked closely with our foundries to minimize the likelihood of reduced manufacturing yields. However, our foundries have sometimes experienced lower than anticipated manufacturing yields, particularly in connection with the introduction of new products and the installation and start-up of new processes. Reduced yields have, at times, negatively affected our operating results, a situation which may recur in the future.

     Dependence on foundries located outside of the United States subjects us to numerous risks, including exchange rate fluctuations, export and import restrictions, trade sanctions, political instability and tariff increases. One of our main foundries is located in Singapore, which presents specific risks due to political instability in that region.

     We purchase wafers from outside foundries pursuant to customers’ purchase orders. We generally do not have a guaranteed level of wafer capacity or wafer costs at our foundries. Our wafer suppliers could prioritize capacity for other uses, or reduce or eliminate deliveries to us on short notice. In addition, we depend upon a limited number of foundries for our wafer requirements. Any sudden demand for an increased amount of wafers, or sudden reduction or elimination of any source of wafers, could result in a material delay in the shipment of products. Disruptions in supply, which have occurred in the past, may occur in the future. If such a disruption occurred, and we were unable to qualify alternative manufacturing sources for our products in a timely manner, or if such sources were unable to produce wafers with acceptable manufacturing yields, our business and operating results would be materially and adversely affected.

     We rely on four outside test service subcontractors to test our products. The same risks described in the paragraphs above, concerning guaranteed capacity, dependence upon a limited number of test service subcontractors, and disruptions in service, also apply to our test and assembly subcontractors.

     Rapid technological change and frequent new product introductions characterize the markets for our products. To remain competitive, we must develop or obtain access to new semiconductor process technologies in order to reduce die size, increase die performance and functional complexity, and improve manufacturing yields. If we are unable to obtain access to advanced wafer processing technologies, limiting our ability to introduce competitive products on a timely basis, our future operating results would be harmed.

     Minute levels of contaminants in the semiconductor manufacturing environment, defects in the masks used to print circuits on a wafer, difficulties in the fabrication process and other factors can cause a substantial percentage of wafers to be rejected or a significant number of die on each wafer to be nonfunctional. Many of these manufacturing problems are difficult to diagnose and time consuming and expensive to remedy. Our foundries have, at times, experienced lower than anticipated yields, which have adversely affected production and operating results.

     The manufacturing processes utilized by our foundries are continuously being improved in order to increase yield and product performance. Process changes can, however, result in interruptions in production or significantly reduced yields. New process technologies and new products are especially susceptible to wide variations in manufacturing yields and efficiency. Irregularities, adverse yield fluctuations or other manufacturing problems at our foundries could result in production interruption or delivery delays, which would harm our business and results of operations.

     We have granted nontransferable, limited process licenses to some of our foundries to utilize our processes to manufacture and sell wafers to other customers. We protect our proprietary technology, particularly our design methodology, but may not be able to prevent its misappropriation by our foundries or others.

We and the independent foundries and subcontractors we use to manufacture and test our products are subject to environmental laws. Failure to comply with these laws could delay manufacturing of our products and result in unexpected expenses.

     Our wafer suppliers and test and assembly subcontractors are subject to a variety of U.S. and foreign government regulations related to the discharge or disposal of toxic, volatile or otherwise hazardous chemicals used in their manufacturing processes. Failure

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by our suppliers or subcontractors to comply with environmental regulations could result in fines, suspension of production or cessation of operations. Environmental regulations could also require our suppliers or subcontractors to acquire equipment or incur other expenses to comply with environmental regulations. If our suppliers or subcontractors incur substantial additional expenses, product costs could significantly increase, adversely affecting our results of operations.

     We are also subject to a variety of environmental regulations relating to our operations. If we fail to comply with present and future regulations, the government could impose fines on us, or compel us to suspend or cease operations. If we or our suppliers or subcontractors fail to control the use or discharge of hazardous substances, we could be subject to civil or criminal liabilities, which could harm our business and operating results.

Because the availability of qualified personnel experienced in the technologies we utilize is limited and competition for these experienced technologists is intense, we may not be successful in attracting and retaining personnel, which could have an impact upon the development or sales of our products.

     Our future success will depend to a significant extent on our ability to attract, retain and motivate qualified personnel, especially those with engineering design experience and expertise. We may not be successful in attracting and retaining such qualified personnel.

     Competitors may attempt to recruit our employees. While employees are required to sign standard agreements concerning confidentiality and ownership of inventions, we do not have employment contracts or non-competition agreements with most of our personnel. The loss of the services of key employees, the inability to attract or retain qualified personnel, or delays in hiring personnel, particularly engineers and other technical personnel could negatively affect our business and prevent us from achieving our business goals.

Our success depends on our ability to protect our intellectual property and proprietary rights.

     We own twelve U.S. patents, and have five U.S. patent applications and ten foreign patent applications pending. Through a sale of a portion of our assets, we maintain a royalty-free license to forty-five U.S. patents, three foreign patents, seven U.S. patent applications, and three foreign patent applications.

     We attempt to protect our intellectual property rights through patents, trademarks, copyrights, licensing arrangements, maintaining certain technology as trade secrets and other measures. However, any patent, trademark, copyright or other intellectual property rights we own may be invalidated, circumvented or challenged. We cannot be certain that our intellectual property rights will provide competitive advantages, or that any pending or future patent applications will be issued with the scope of the claims sought by us. Competitors may develop technologies that are similar or superior to our technology, duplicate our technology or design around the patents that we own. In addition, effective patent, copyright and trade secret protection may be unavailable or limited in certain foreign countries in which we do business.

     We believe that the future success of our business will depend on our ability to translate technological expertise and innovation into new and enhanced products. We enter into confidentiality or license agreements with our employees, consultants, vendors and customers, and limit access to and distribution of our proprietary information. Nevertheless, we may not be able to prevent the misappropriation of our technology.

     In addition, we have taken legal action to enforce our patents and other intellectual property rights, protect our trade secrets, determine the validity and scope of the proprietary rights of others, and defend against claims of infringement or invalidity. If a third party makes a valid claim, and we cannot obtain a license to the technology on reasonable terms, our operations could be harmed.

     We may be subject to legal proceedings and claims from time to time in the ordinary course of our business, including claims of alleged infringement of the proprietary rights and other intellectual property rights of third parties. Intellectual property litigation is expensive and time-consuming, and could divert our management’s attention away from running our business.

We have in the past, and may in the future, be parties to legal proceedings that could have a negative financial impact on us.

     From time to time we have received correspondence from vendors, distributors, customers or end-users of our products regarding disputes with respect to contract rights, product performance or other matters that occur in the ordinary course of business. Some of these disputes may involve us in costly litigation or other actions, the outcome of which cannot be determined in advance and may adversely affect our business. The defense of lawsuits or other actions could divert our management’s attention away from running our

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business. In addition, negative developments with respect to litigation could cause the price of our common stock to decline significantly.

Our stock price has been and will likely continue to be volatile because of stock market fluctuations that affect the price of technology stocks. A decline in our stock price could result in securities class action litigation against us, which could divert management’s attention and harm our business.

     Our stock price has been and is likely to continue to be highly volatile. Between January 1, 2004 and March 31, 2004, our stock price has closed as high as $7.95 on January 28, 2004, and as low as $5.50 on January 2, 2004. Our stock price could fluctuate significantly due to a number of factors, including:

•		variations in our actual or anticipated operating results;
•		sales of substantial amounts of our stock;
•		announcements about us or about our competitors, including technological innovation or new products;
•		litigation and other developments relating to our patents or other proprietary rights or those of our competitors;
•		conditions in the computer networking equipment and wireless markets;
•		governmental regulation and legislation; and
•		changes in securities analysts’ estimates of our performance, or our failure to meet analysts’ expectations.

     Many of these factors are beyond our control. In addition, the stock markets in general, and the NASDAQ National Market and the market for technology companies in particular, have experienced extreme price and volume fluctuations recently. These fluctuations often have been unrelated or disproportionate to the operating performance of these companies. These broad market and industry factors may decrease the market price of our common stock, regardless of our actual operating performance. In the past, companies that have experienced volatility in the market prices of their stock have been the objects of securities class action litigation. If we were the objects of securities class action litigation, it could result in substantial costs and a diversion of management’s attention and resources, which could harm our business.

Our Certificate of Incorporation and Bylaws, Stockholder Rights Plan and Delaware law contain provisions that could discourage a change in control, even if the change in control would be beneficial to our stockholders.

     Provisions of our Amended and Restated Certificate of Incorporation, Bylaws, the 1998 Shareholder Rights Plan, our stock option plans and Delaware law could make it more difficult for a third party to acquire us, even if doing so would be beneficial to our stockholders. These provisions could limit the price that investors might be willing to pay in the future for shares of our common stock.

     Under the Shareholder Rights Plan, adopted in August 1998, each share of our outstanding common stock carries one Right to purchase 1/1000 of a share of Series A Participating Preferred Stock at an exercise price of $30.00 per Right. If someone acquires 15% or more of our common stock, each Right not owned by a holder of 15% or more of our common stock entitles the holder, upon payment of the $30.00 exercise price, to receive common stock having a current market value of $60.00. This issuance of additional common stock would significantly reduce the percentage of common stock held by a potential acquirer. The Rights expire in August 2008.

     In addition, Section 203 of the Delaware General Corporation Law and the terms of our stock option plans may discourage, delay or prevent a change in control of Micro Linear. Specifically, Section 203 prohibits a Delaware corporation from engaging in any business combination with an interested stockholder for three years after the date the stockholder became an interested stockholder unless specific conditions are met. Also, in the event outstanding options granted pursuant to certain of our stock option plans are not assumed by an acquiring corporation, the unvested portion of such options may be accelerated upon a change of control. In addition, some individual stock option grants provide for the partial or complete acceleration of vesting upon a change of control.

Recently enacted regulatory changes may cause us to incur increased costs.

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     Recently enacted and proposed changes in the laws and regulations affecting public companies, including the provisions of the Sarbanes-Oxley Act of 2002 and rules adopted by the SEC and NASDAQ, could cause us to incur increased costs as we evaluate the implications of new rules and respond to new requirements. The new rules could make it more difficult for us to obtain certain types of insurance, including director and officer liability insurance, and we may be forced to accept reduced policy limits and coverage or incur substantially higher costs to obtain the same or similar coverage. The impact of these events could also make it more difficult for us to attract and retain qualified persons to serve on our board of directors, or as executive officers. We are presently evaluating and monitoring developments with respect to these new and proposed rules, and we cannot predict or estimate the amount of additional costs we may incur or the timing of such costs.

Item 3. Quantitative and Qualitative Disclosures about Market Risk

Interest Rate Risk

     As of March 31, 2004, our investment portfolio consisted of U.S. government obligations, commercial paper and money market funds, typically with maturities of less than 12 months. Some of these securities are subject to interest rate risk, and will decline in value if market interest rates increase. We intend to hold our fixed income investments until maturity and, therefore, do not expect to recognize an adverse impact from interest rate changes on income or cash flows. If market interest rates were to increase immediately and uniformly by 10% as of March 31, 2004 and March 31, 2003, the decline in the fair value of the portfolio would not be material.

Foreign Currency Exchange Risk

     We have international facilities and are, therefore, subject to foreign currency rate exposure. We limit our foreign currency risks principally by maintaining minimal foreign currency balances. Since our exposure related to exchange rate volatility has not been significant, we do not currently hedge this exposure.

Item 4. Controls and Procedures

     (a) Evaluation of disclosure controls and procedures. We maintain “disclosure controls and procedures,” as such term is defined in Rule 13a-15(e) under the Securities Exchange Act of 1934 (the “Exchange Act”), that are designed to ensure that information required to be disclosed by us in reports that we file or submit under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in Securities and Exchange Commission rules and forms, and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure. In designing and evaluating our disclosure controls and procedures, management recognized that disclosure controls and procedures, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the disclosure controls and procedures are met. Additionally, in designing disclosure controls and procedures, our management necessarily was required to apply its judgment in evaluating the cost-benefit relationship of possible disclosure controls and procedures. The design of any disclosure controls and procedures also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions.

     Based on their evaluation as of the end of the period covered by this Quarterly Report on Form 10-Q, our Chief Executive Officer and Chief Financial Officer have concluded that, subject to the limitations noted above, our disclosure controls and procedures were effective to ensure that material information relating to us, including our consolidated subsidiaries, is made known to them by others within those entities, particularly during the period in which this Quarterly Report on Form 10-Q was being prepared.

     (b) Changes in internal control over financial reporting. There was no change in our internal control over financial reporting (as defined in Rule 13a-15(f) under the Exchange Act) identified in connection with the evaluation described in Item 4(a) above that occurred during our last fiscal quarter that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

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PART II. OTHER INFORMATION

Item 6. Exhibits and Reports on Form 8-K

(a) Exhibits:

* In accordance with Item 601(b)(32)(ii) of Regulation S-K and SEC Release Nos. 33-8238 and 34-47986, Final Rule: Management’s Reports on Internal Control Over Financial Reporting and Certification of Disclosure in Exchange Act Periodic Reports, the certifications furnished in Exhibit 32.1 and Exhibit 32.2 are deemed to accompany this Form 10-Q and will not be deemed “filed” for purpose of Section 18 of the Exchange Act. Such certifications will not be deemed to be incorporated by reference into any filing under the Securities Act or the Exchange Act, except to the extent that the registrant specifically incorporates it by reference.

(b) Reports on Form 8-K

     On January 22, 2004, the Company furnished a Current Report on Form 8-K furnishing under item 12 the Company’s press release relating to its financial results for its fiscal year ended December 31, 2003.

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SIGNATURES

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

	MICRO LINEAR CORPORATION
Date: May 12, 2004	By	/s/ TIMOTHY A. RICHARDSON
		Timothy A. Richardson
		President and Chief Executive Officer (Principal Executive Officer)

Date: May 12, 2004	By	/s/ MICHAEL W. SCHRADLE
		Michael W. Schradle
		Chief Financial Officer (Principal Financial and Accounting Officer)

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INDEX TO EXHIBITS

* In accordance with Item 601(b)(32)(ii) of Regulation S-K and SEC Release Nos. 33-8238 and 34-47986, Final Rule: Management’s Reports on Internal Control Over Financial Reporting and Certification of Disclosure in Exchange Act Periodic Reports, the certifications furnished in Exhibit 32.1 and Exhibit 32.2 are deemed to accompany this Form 10-Q and will not be deemed “filed” for purpose of Section 18 of the Exchange Act. Such certifications will not be deemed to be incorporated by reference into any filing under the Securities Act or the Exchange Act, except to the extent that the registrant specifically incorporates it by reference.

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