RF Micro Devices, Inc. Announces Fiscal 2001 Third Quarter and Nine-Month Results

Greensboro, NC. RF Micro Devices, Inc. (Nasdaq: RFMD), a leading provider of proprietary radio frequency integrated circuits (RFICs) for wireless communications applications, today reported financial results for its fiscal 2001 third quarter and nine months ended December 31, 2000.

Financial Results

Consistent with guidance given on October 17, 2000, revenues for the quarter were approximately $79.9 million, an increase of 9.2% over revenues of $73.2 million for the corresponding quarter of fiscal 2000 and a decrease of 21.8% versus the previous quarter s revenues of $102.2 million.

Gross profit for the quarter increased 5.3% to $37.5 million, versus $35.6 million for the corresponding quarter of fiscal 2000, and decreased 27.7% sequentially over gross profit of $51.9 million for the quarter ended September 30, 2000. The year-over-year improvement in gross profit was primarily attributable to increased volume and a lower cost structure attributed to output from the Company s wafer fabrication facility (fab). The sequential decline in gross profit was primarily attributable to the decrease in the Company s revenues.

During the quarter the Company added a line item to the statement of income called "Other operating expenses." "Other operating expenses" represent startup costs associated with the Company s second wafer fab facility, which is expected to commence operation during the summer of 2001. In accordance with AICPA SOP 98-5, the Company will expense costs associated with preparing the second wafer fab facility for production. When the second fab is qualified for production and economic value can be obtained, its costs will flow through the "Cost of goods sold" line on the Company s statement of income and the "Other operating expenses" line item will be omitted.

Net income for the quarter was $7.8 million, or $0.05 per diluted share, based on a tax rate of 36%, compared to net income of $12.6 million, or $0.07 per diluted share, for the third quarter of fiscal 2000, based on a 35% tax rate, and net income of $17.7 million, or $0.10 per diluted share, for the second quarter of fiscal 2001, based on a tax rate of 36%. Earnings per share for all periods have been adjusted to reflect a 2-for-1 stock split effective August 8, 2000.

Quarterly Highlights

RF Micro Devices attained several new milestones during the quarter. First, the Company received production orders for a high-volume GSM power amplifier module. Not only does this represent a sizable new win for RF Micro Devices multi-chip module products, it also provides a significant opportunity for the Company to gain additional share in the market for GSM components. The GSM power amplifier module is manufactured using RFMD s advanced GaAs HBT process.

The Company also announced the achievement of a significant strategic milestone in its alliance with QUALCOMM CDMA Technologies (QCT), a division of QUALCOMM Incorporated. The PA3300™ series of power amplifier modules, announced on December 5, 2000 by QUALCOMM, is the second product developed by QCT and RF Micro Devices, and is manufactured by RFMD using its advanced GaAs HBT process. The PA3300™ series of power amplifier modules is intended to help handset manufacturers reduce production time while extending talk-time.

RF Micro Devices module revenue increased 302% sequentially in dollar terms, and represented 16% of revenue in the December quarter, versus 3% of revenues in the September quarter. Additionally, CDMA revenues grew 11% sequentially and represented 24% of revenue in the December quarter, versus 16% in the September quarter.

Also during the December quarter, RF Micro Devices announced it had begun production shipments of its RF2173 GaAs HBT power amplifier to be used in Motorola s Talkabout™ T900 two-way data pager. The RF2173 helps produce a very low-cost, small-size pager with outstanding battery efficiency. The announcement is particularly significant because RF Micro Devices anticipates the RF2173 will be featured in additional Motorola two-way data paging products in the future - reflecting the Company s expanding relationship with Motorola.

Finally, the Company announced during the fiscal third quarter that it had been added to the Standard and Poor s MidCap 400 Index. The S&P MidCap 400 Index consists of 400 domestic stocks chosen for market size, liquidity, and industry group representation.

Business Outlook

The Company s outlook for the March quarter has been affected by a number of factors. First, the Company believes the handset industry is in the midst of a transition, during which some mature, high-volume handsets incorporating integrated circuit power amplifiers are nearing the end of their product lifecycles and are being replaced by new models incorporating more complex, highly integrated multi-chip module power amplifiers. New handset models that utilize the Company s module technology are increasing in volume but not as rapidly as the decline in mature handsets. While this has affected demand in the near-term, the Company believes some modules designed into new handsets could be among the highest running products ever manufactured by the Company.

Second, some OEMs have cancelled or delayed introductions of new models, some of which were expected to ship in the March quarter. In spite of this, the Company continues to see robust design activity, especially for its module products.

Third, as stated earlier, the Company will expense costs associated with preparing its second fab for operation, consistent with SOP 98-5. While this practice will enable it to minimize amortization costs when the second fab begins operation, it is expected to negatively impact earnings in the March 2001 quarter by approximately $0.01 per share after tax.

As a result of these factors, the Company currently expects revenues for the March quarter to be down sequentially from the December quarter by approximately 10 percent. Gross margin for the March quarter currently is anticipated to be in the range of 42 to 45 percent. The decrease in gross margin is due primarily to higher costs associated with the startup of module manufacturing. Operating expenses in the March quarter currently are expected to be flat, while other operating expenses associated with the Company s second wafer fab facility are anticipated to range from $3.0 to $3.5 million. Based on initial findings in an R&D study, the annualized tax rate for fiscal 2001 is expected to be in the range of 32 percent to 33 percent. Year-to-date, the Company has accrued taxes at 36.8 percent. These factors are currently expected to result in diluted earnings per share for the March 2001 quarter in the range of approximately $0.02 to $0.03.

Looking beyond the March quarter, RF Micro Devices anticipates the handset industry will grow between 25 and 35 percent in 2001, consistent with current industry estimates. Additionally, the Company remains optimistic about opportunities for growth and market share gains. The manufacturers of new, high-volume handsets are increasingly requiring that these phones contain multi-chip modules. In response, RF Micro Devices has embarked upon a technology shift from stand-alone integrated circuits to multi-chip modules that contain one or more integrated circuits as well as passive components in a single package. The Company believes this strategy and its expectations for market share gains in CDMA and GSM will enable it to achieve growth in fiscal 2002 at an annualized rate in excess of growth in the overall handset market.

Comments From Management

"Fiscal 2001 third quarter results were in line with our expectations and consistent with the guidance provided in our October 17th earnings release," said, David Norbury, President and Chief Executive Officer of RF Micro Devices. "However, we experienced lower than anticipated order activity in the December quarter, which is expected to negatively impact our March quarter.

"While we view December s order activity as disappointing, we are seeing significant opportunities for future growth for the Company. Our ability to capture GSM market share has been greatly enhanced, as evidenced by production orders for a key GSM module. Additionally, we believe our transition to a supplier of multi-chip modules, while negatively impacting our near-term results, has positioned the Company to be a key industry supplier in the future. In fact, we view the investment we ve made in module technology to be as strategic to the Company s future growth as the decision to adopt GaAs HBT several years ago. We re seeing essentially all major handset manufacturers transitioning to modules in their next generation handsets."

Dean Priddy, CFO and vice president of administration, stated, "The production ramp of our module products is accelerating rapidly as shown by the December results. The continued ramp of module products, while creating great opportunity, is also challenging for the Company, particularly in supply chain management. But we re taking every step we can to mitigate manufacturing risks. Successful execution of our module strategy positions the Company for growth in excess of the overall industry during our next fiscal year.

"In light of the reduced sales in the December quarter, we believe appropriate action has been taken in managing our business. Operating expenses were held essentially flat sequentially. Additionally, the Company was able to generate $39.0 million in cash flow from operations by significantly reducing receivables and holding inventory flat."

Norbury concluded, "In spite of our current outlook for the remainder of this fiscal year, we view this as near-term and we believe we are extremely well positioned to participate in - and, in fact, exceed - growth estimates for the handset industry. Specifically, we anticipate our module technology will enable us to take additional share in GSM and CDMA while remaining strong in TDMA. Our customers tell us the transition to modules is mandatory, and we see tremendous potential for our module products across all air interface standards beginning at the end of the March quarter."

RF Micro Devices will conduct a conference call at 5:00 p.m. (ET) today to discuss fiscal third quarter results and comment on the Company s outlook. The conference call will be broadcast live over the Internet and can be accessed by any interested party at www.streetevents.com or www.rfmd.com .

RF Micro Devices, Inc., an ISO 9001-certified manufacturer, designs, develops, manufactures and markets proprietary RFICs for wireless communications applications such as cellular and PCS phones, cordless phones, wireless LANs, wireless local loop handsets, industrial radios, wireless security systems and remote meter readers. The company offers a broad array of products - including amplifiers, mixers, modulators/demodulators, and single-chip receivers, transmitters and transceivers - representing a substantial majority of the RFICs required in wireless subscriber equipment. The company s strategy is to focus on wireless markets by offering a broad range of standard and custom-designed RFICs in order to position itself as a "one-stop solution for its customers RFIC needs. In the September 4, 2000 issue of FORTUNE magazine, RF Micro Devices was ranked second among FORTUNE s "100 Fastest Growing Companies." RF Micro Devices, Inc. is traded on the Nasdaq National Market under the symbol RFMD.

RF MICRO DEVICES® and RFMD® are trademarks of RF Micro Devices, Inc. For further information about RFMD, please visit our web site at http://www.rfmd.com.

This press release contains forward-looking statements that relate to the company s plans, objectives, estimates and goals. Words such as "expects," "anticipates," "intends," "plans," "believes," and "estimates," and variations of these words and similar expressions, identify these forward-looking statements. The company s business is subject to numerous risks and uncertainties, including probable variability in quarterly operating results, the rate of growth and development of wireless markets, risks associated with the operation of a wafer fabrication facility and the construction of a second facility, the company s ability to manage rapid growth, variability in production yields, dependence on a limited number of customers and dependence on third parties. These and other risks and uncertainties, which are described in more detail in the company s Annual Report on Form 10-K and the company s Prospectus dated December 19, 2000 included in its Registration Statement on Form S-3 (Registration No. 333-49432) filed with the Securities and Exchange Commission, could cause actual results and developments to be materially different from those expressed or implied by any of these forward-looking statements.

Contact: Dean Priddy, Chief Financial Officer Tel: 336-931-7152 or Doug DeLieto, Director Investor Relations Tel: 336-931-7968 both of RF Micro Devices