California Micro Devices Second Fiscal Quarter Shows Profit on Reduced Sales.

MILPITAS, Calif.--(BUSINESS WIRE)--Oct. 23, 1996--California Micro Devices Corp. (NASDAQ NMS:CAMD) (CMD) today reported net income of $140,000, or $0.01 per share on revenues of $8.1 million, for the quarter ended Sept. 30, 1996, the second quarter of its fiscal year 1997.

This compares with net income of $836,000, or $0.08 per share, on revenues of $9.6 million, for the quarter ended Sept. 30, 1995. Average share and share equivalents outstanding were 10,908,000 compared to 10,866,000 at Sept. 30, 1995.

For the six months ended Sept. 30, 1996, the company reported net income of $472,000, or $0.04 per share, on revenues of $17.7 million. This compares with net income of $1,353,000, or $0.13 per share, for the six months ended Sept. 30, 1995, on revenues of $18.3 million.

According to Jeffrey Kalb, CMD's president and chief executive officer, "This has been a tough quarter for CMD and most of the semiconductor and related industries. As we said earlier this year, many customers are reducing their inventories, and giving us significantly shorter lead times than this time a year ago.

"Also, some customers, in addition to correcting inventory levels, have lost market share in certain key areas, and some customers have delayed production on products where CMD has design wins. All this has resulted in a 16% reduction in revenues compared to both the year ago quarter and the quarter ended June 30, 1996. Revenues for the six months ended September 30, 1996, however, were just 3% below the same period last year."

Kalb noted that: "Margins improved by about 3 percentage points over the previous quarter ended June 30, 1996 but have dropped approximately 7 percentage points compared to the same quarter a year ago. The drop from a year ago was primarily due to a significant change in product mix. We took many steps during the quarter to reduce costs, including company-wide shutdowns during the first weeks of July and September.

"As a result, we were able to improve margins and, with interest income, stay in the black in spite of the reduction in revenue. Additional cost reductions are being executed, including shutdowns scheduled at the end of November and at the end of December."

As Kalb noted: "While we are controlling costs, we are not neglecting our future. We increased our R&D spending by over 50%, to $1,214,000 compared to $795,000 a year ago, emphasizing our confidence in the future of the business. Much of this increase related to our new P/Active(TM) family of termination and filtering products, as well as some new potentially high volume semiconductor devices.

"While the P/Active(TM) family of solutions is still small and was only recently announced, we have already begun to see significant interest in these new products. A key factor is that by interacting closely with our customers and doing not only the design but applications characterization, CMD is providing our customers with real solutions to their problems, not just another bag of parts."

"This approach is very akin to that pursued by the chip set providers in the semiconductor industry some years ago, but it has been generally foreign to the passive components business. For product developers to meet today's short time to market requirements, they have to be able to access devices they know will work in their application. CMD is pioneering this approach to termination and filtering applications.

"Our increased R&D investment was more than offset by reduced administrative expenses. Although legal costs continue to be very high, we have significantly reduced the unusual consultant, audit and other costs that increased expenses last year. And due to reduced profits, management and other bonuses are much lower than a year ago.

"We are keeping a very tight rein on general expenses, but making strategic investments in people and materials to expand our marketing and sales activities. We have also been making changes in our indirect sales activities to strengthen their ability to focus on our new generation of passive solutions."

Kalb noted that: "We are also very pleased with the progress we have made in our internal systems and procedures. We now have in place the infrastructure needed to support significant growth and meet customer requirements without adding much additional administrative cost.

"We have also completed the transfer of most of our testing operations to Far East assemblers, reducing cost and lead times, while improving our ability to respond to customer requirements. These steps have positioned us to respond quickly when our business recovers."

In closing, Kalb noted that: "The company's balance sheet remains strong. Receivables continue to be in line with industry norms. And although inventory grew, nearly all the growth was in raw materials to replenish our supply of wafers, while we kept current production spending in line with demand.

"We have made significant investment in equipment primarily to upgrade our manufacturing capabilities, improve efficiencies and increase responsiveness to customer requirements."

The company noted that shares outstanding at both Sept. 30, 1996 and 1995 included 1.5 million shares issued in 1995 and held in trust in connection with a proposed, but not approved, February 1995 settlement of shareholder class-action lawsuits. A new proposed settlement of these lawsuits was announced in September 1996 and is subject to court approval.

However, until such time as the new settlement is funded, the previous settlement remains as recorded in the fiscal year ended March 31, 1995. The overall cost of this settlement is the same as the earlier one expensed in fiscal 1995, but the new settlement involves the issuance of 608,696 shares combined with $6 million in cash, compared with 1.5 million shares and $1 million in cash under the previously proposed settlement.

When and if the new settlement is funded, the company's cash will be reduced by $5 million and the number of shares outstanding reduced by 891,304 shares.

Forward-looking statements involve a number of risks and uncertainties including, but not limited to, product demand, pricing, market acceptance, risk of dependence on third-party suppliers, intellectual property rights and litigation, risks in product and technology development and other risk factors detailed in CMD's Securities and Exchange Commission filings.

Statements contained herein, which are not historical facts are forward-looking statements. The forward-looking statements in this release are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Due to the risk factors discussed herein, the company's future actual results could differ materially from those discussed above. -0-

Note to Editors: Headquartered in Milpitas, California Micro Devices (CMD) designs, manufactures and markets integrated thin-film, silicon-based termination and filtering passive components and active electronic circuitry. CMD's products target the requirements of computer, networking and communication-based customers for smaller, densely integrated devices that operate at higher frequencies with superior performance and functionality. -0-

                  California Micro Devices Corp.
                    Statements of Operations
           (Amounts in Thousands, Except Per Share Data)
                          (Unaudited)


                                 Three Months          Six Months
                                    Ended                Ended
                                   Sept. 30,            Sept. 30,
                                1996      1995      1996       1995

Revenues:
 Net product sales             $7,738   $ 9,322    $17,033   $17,666
 Technology related revenues      380       307        680       610
    Total revenues              8,118     9,629     17,713    18,276

Costs and expenses:
 Cost of sales                  4,921     5,314     11,145    10,067
 Research and development       1,214       795      2,201     1,661
 Selling, marketing and
  administrative                2,009     2,729      4,161     5,203
    Total costs and expenses    8,144     8,838     17,507    16,931

Operating income (loss)           (26)      791        206     1,345

Other (income) expense, net      (166)      (45)      (266)       (8)
Income before income taxes        140       836        472     1,353

Income taxes                       --        --         --        --

Net income                     $  140  $    836    $   472   $ 1,353

Net income per share           $ 0.01  $   0.08    $  0.04   $  0.13

Weighted average common shares
 and share equivalents
 outstanding                   10,908    10,866     10,964    10,324


                   California Micro Devices Corp.
                          Balance Sheets
              (Amounts in Thousands, Except Share Data)

                                              Sept. 30,   March 31,
                                                 1996       1996
                                             (Unaudited)

ASSETS:
Current assets:
 Cash and short-term securities                $16,341    $22,150
 Accounts receivable, less allowance for
  doubtful accounts of $796 and $900             3,700      4,500
 Inventories                                     8,079      6,940
 Other assets                                      752        585
    Total current assets                        28,872     34,175

Property, plant and equipment, net              12,878      9,314
Restricted cash                                    984        905
Other long term assets                             443        534
    Total assets                               $43,177    $44,928

LIABILITIES & SHAREHOLDERS' EQUITY:
Current liabilities:
 Accounts payable                              $ 2,804    $ 2,832
 Accrued salaries and benefits                     896      1,250
 Other accrued liabilities                       2,748      4,279
 Deferred margin on shipments to distributors      748      1,039
 Current maturities of long-term debt and
  capital lease obligations                        583      1,282
    Total current liabilities                    7,779     10,682

Long-term debt, less current maturities          7,490      7,490
Capital lease obligations, less current
 maturities                                        164        299
Deferred income                                     --        107
     Total liabilities                          15,433     18,578

Shareholders' equity:
 Common stock -- no par value; authorized
 25,000,000; issued and outstanding
 10,507,645 shares                              56,392     55,442
Retained earnings                              (28,648)   (29,092)
    Total shareholders' equity                  27,744     26,350

Total liabilities and shareholders' equity     $43,177    $44,928

CONTACT: California Micro Devices

Jeffrey Kalb, 408/934-3106 (president and CEO)

John Trewin, 408/934-3103 (vice president and CFO)

Roberta Silverstein, 408/934-3141 (press and media)