SMSC Updates Third Quarter Guidance; Expects Immediate and Sustained Profitability Due to Exit From PC Chipset Business; Receives $29.6 Million Payment from Intel.

Business Editors

HAUPPAUGE, N.Y.--(BUSINESS WIRE)--Dec. 3, 2001

Standard Microsystems Corporation (Nasdaq: SMSC) announced today that it is exiting the PC chipset business and increasing its focus on leveraging its core technologies toward higher growth, higher margin businesses, targeting more predictable returns on investment.

In line with this decision and the sustained economic difficulties of the semiconductor marketplace, SMSC has eliminated approximately 55 positions, or 11% of its worldwide workforce.

This decision follows a series of changes over the past two years in the industry outlook for the PC chipset business, including excess industry capacity and eroding margins. In addition, the current, unprecedented semiconductor market downturn has prevented SMSC from remaining profitable while continuing its significant investment in PC chipsets.

The Company also announced that it has received a $29.6 million payment from Intel Corporation for the 12 months ended September 21, 2001, as provided for in its September 1999 chipset agreement with Intel. Going forward, there can be no assurance whatsoever that Intel will elect to make any future payments to SMSC under the Agreement.

"While our prospects for the PC chipset business have not materialized, and we are taking these necessary and appropriate actions, we have identified and are pursuing significant new growth opportunities related to our core businesses," said Steven J. Bilodeau, Chairman and Chief Executive Officer. "In evaluating the long-term goals of the Company, we believe it is in the best interests of SMSC and its shareholders to more intensely focus our resources on accretive growth opportunities in our Advanced I/O and Embedded businesses, where we hold leadership positions. Following this reorganization, we expect to immediately achieve sustainable profitability, and believe this strategy will best optimize long-term shareholder return."

Mr. Bilodeau continued, "We have made significant strides in growing market share and broadening our product line in our core businesses through new design wins. We have introduced several new products, which are receiving wide acceptance, including our 91C111 10/100 Ethernet MAC+PHY. In addition, we are engaged in a number of exciting new product developments that will enable us to expand our existing presence within the PC and Embedded markets and open the door to new growth opportunities in a host of attractive vertical markets."

Impact on Financial Results:

The $29.6 million payment from Intel will be recorded as revenue in the current quarter, and will result in an increase in net income from continuing operations of approximately $1.04 per share. In addition, the Company will record non-recurring pre-tax charges of up to $11 million in the current quarter, or up to $0.40 per share after tax. These charges, which are primarily due to exiting the PC chipset business, include asset revaluations, lease runout costs, separation costs and other expenses associated with the exit.

Business Outlook for SMSC:

SMSC expects revenues, excluding the Intel payment, for the third fiscal quarter ending November 30, 2001 to exceed previously provided guidance and be approximately $35 million. This represents a 15% sequential improvement over the second quarter. Including the effects of the payment from Intel and non-recurring charges, third quarter net income per share from continuing operations is expected to range from $0.51 to $0.55.

Commenting on SMSC's financial outlook, Andrew M. Caggia, Senior Vice President and Chief Financial Officer said, "Product revenues for the fourth fiscal quarter are expected to be higher than in the year-ago period, but, reflecting normal seasonal patterns, less than in this year's third quarter. Research and development expenses are expected to range from $6.5 million to $7.0 million, and selling, general and administrative expenses will be between $7.5 million and $8.0 million. Accordingly, net income from continuing operations is expected to be modestly positive in the fourth quarter, despite seasonal weakness. In addition, excluding the impact of the payment from Intel in fiscal 2002, we are looking forward to a double-digit percentage revenue growth for fiscal 2003.

"SMSC's balance sheet has improved considerably in the third quarter, Mr. Caggia added. Our quarter ending cash balance will exceed $130 million and, with no debt, book value will exceed $12.25 per share."

Unaudited full results for the fiscal third quarter will be released in mid-December.

About SMSC:

SMSC is a worldwide supplier of metal-oxide-semiconductor/very large-scale integrated (MOS/VLSI) circuits for the personal computer, peripherals and embedded systems marketplaces. The Company's products provide solutions in Advanced Input/Output (I/O) technology, Systems Logic, USB Connectivity, Local Area Networking and Embedded Control Systems. SMSC is the world's leading supplier of PC I/O integrated circuits.

Standard Microsystems is based in Hauppauge, New York and maintains offices worldwide, including locations in North America, Asia, Europe and Japan. SMSC operates engineering design centers in San Jose, CA; Hauppauge, NY and Austin, TX. More information about the Company is available on the World Wide Web at http://www.smsc.com.

Forward Looking Statements:

Except for historical information contained herein, the matters discussed in this announcement are forward-looking statements that involve risks and uncertainties, including the timely development and market acceptance of new products, the impact of competitive products and pricing, the effect of changing economic conditions, and such risks and uncertainties as are detailed from time to time in the Company's reports filed with the SEC. Investors are advised to read the Company's Annual Report on Form 10-K and quarterly reports on Form 10-Q filed with the Securities and Exchange Commission, particularly those sections entitled "Other Factors That May Affect Future Operating Results" for a more complete discussion of these and other risks and uncertainties.

Standard Microsystems is a registered trademark and SMSC is a trademark of Standard Microsystems Corporation. Product names and company names are the trademarks of their respective holders.