2325 Orchard Parkway San Jose, California 95131
(Address of principal executive offices)
(408) 441-0311
(Registrant's telephone number)

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 ý No o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ý No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of "large accelerated filer," "accelerated filer" and "smaller reporting company" in Rule 12b-2 of the Exchange Act. (Check one):

Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No ý

On October 31, 2011, the Registrant had 462,603,364 outstanding shares of Common Stock.

	Three Months Ended					Nine Months Ended

	September 30, 2011			September 30, 2010		September 30, 2011			September 30, 2010
	*(in thousands, except per share data)*
Net revenues	$	479,375		$	444,344	$	1,419,444		$	1,186,254
Operating expenses
Cost of revenues		238,984			236,225		695,868			684,715
Research and development		64,160			56,513		191,984			177,411
Selling, general and administrative		68,467			65,940		209,593			194,608
Acquisition-related charges		1,019			1,167		3,069			433
Restructuring charges		-			1,080		21,210			3,663
Asset impairment charges		-			-		-			11,922
(Gain) loss on sale of assets		(33,428	)		5,715		(35,310	)		99,767

Total operating expenses		339,202			366,640		1,086,414			1,172,519

Income from operations		140,173			77,704		333,030			13,735
Interest and other (expense) income, net		(264	)		5,530		918			12,656

Income before income taxes		139,909			83,234		333,948			26,391
(Provision for) benefit from income taxes		(23,203	)		136,578		(51,819	)		173,593

Net income	$	116,706		$	219,812	$	282,129		$	199,984

Basic net income per share:
Net income per share	$	0.25		$	0.48	$	0.62		$	0.44

Weighted-average shares used in basic net income per share calculations		457,721			459,588		456,992			458,872

Diluted net income per share:
Net income per share	$	0.25		$	0.47	$	0.60		$	0.43

Weighted-average shares used in diluted net income per share calculations		466,862			468,173		467,040			465,945

The accompanying notes are an integral part of these Condensed Consolidated Financial Statements.

		September 30, 2011		December 31, 2010

		*(in thousands, except par value)*
ASSETS
Current assets
Cash and cash equivalents		$	478,055	$	501,455
Short-term investments			4,579		19,574
Accounts receivable, net of allowances for doubtful accounts of $11,941 and $11,847, respectively			244,269		231,876
Inventories			379,801		276,650
Prepaids and other current assets			111,701		123,620

Total current assets			1,218,405		1,153,175
Fixed assets, net			262,864		260,124
Goodwill			55,518		54,676
Intangible assets, net			12,161		17,603
Other assets			168,281		164,464

Total assets		$	1,717,229	$	1,650,042

	LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Trade accounts payable			106,925		160,011
Accrued and other liabilities			237,262		217,985
Deferred income on shipments to distributors			54,340		66,708

Total current liabilities			398,527		444,704
Other long-term liabilities			127,704		152,282

Total liabilities			526,231		596,986

Commitments and contingencies (Note 6)
Stockholders' equity
Preferred stock; par value $0.001; Authorized: 5,000 shares; no shares issued and outstanding			-		-
Common stock; par value $0.001; Authorized: 1,600,000 shares; Shares issued and outstanding: 455,338 at September 30, 2011 and 456,788 at December 31, 2010			455		457
Additional paid-in capital			1,139,080		1,273,853
Accumulated other comprehensive income			6,917		16,329
Retained earnings (accumulated deficit)			44,546		(237,583	)

Total stockholders' equity			1,190,998		1,053,056

Total liabilities and stockholders' equity		$	1,717,229	$	1,650,042

The accompanying notes are an integral part of these Condensed Consolidated Financial Statements.

			Nine Months Ended

			September 30, 2011			September 30, 2010
			*(in thousands)*
Cash flows from operating activities
Net income			$	282,129		$	199,984
Adjustments to reconcile net income to net cash provided by operating activities Depreciation and amortization				56,270			48,456
	Non-cash gain on sale of fixed assets			-			(33,043	)
	(Gain) loss on sale of fixed assets			(36,333	)		2,168
	Asset impairment charges			-			11,922
	Other non-cash gains, net			(6,526	)		(14,763	)
	Allowance for (recovery of) doubtful accounts receivable			94			(123	)
	Accretion of interest on long-term debt			570			473
	Stock-based compensation expense			49,604			41,806
	Excess tax benefit on stock-based compensation			(22,328	)		-
Changes in operating assets and liabilities
Accounts receivable				(12,325	)		(45,068	)
	Inventories			(103,562	)		(10,922	)
	Current and other assets			10,169			(87,241	)
	Trade accounts payable			(28,809	)		32,522
	Accrued and other liabilities			1,191			59,282
	Deferred income on shipments to distributors			(12,368	)		9,417

		Net cash provided by operating activities		177,776			214,870

Cash flows from investing activities
Acquisitions of fixed assets				(74,944	)		(55,659	)
Proceeds from the sale of businesses, net of cash				1,597			19,023
Proceeds from the sale of fixed assets, net				47,250			652
Acquisition of businesses				(819	)		-
Acquisitions of intangible assets				(3,000	)		(3,000	)
Purchases of marketable securities				-			(15,768	)
Sales or maturities of marketable securities				15,242			32,588
Investment in private company				-			(3,936	)
Increase in long-term restricted cash				-			(5,000	)

		Net cash used in investing activities		(14,674	)		(31,100	)

Cash flows from financing activities
Principal payments on debt				(85	)		(10,915	)
Proceeds from issuance of common stock				26,588			13,278
Repurchase of common stock				(169,083	)		(40,913	)
Tax payments related to shares withheld for vested restricted stock units				(64,999	)		(5,715	)
Excess tax benefit on stock-based compensation				22,328			-

		Net cash used in financing activities		(185,251	)		(44,265	)

Effect of exchange rate changes on cash and cash equivalents				(1,251	)		(1,286	)

Net (decrease) increase in cash and cash equivalents				(23,400	)		138,219

Cash and cash equivalents at beginning of the period				501,455			437,509

Cash and cash equivalents at end of the period			$	478,055		$	575,728

The accompanying notes are an integral part of these Condensed Consolidated Financial Statements.

Atmel Corporation
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except per share data, employee data, and where otherwise indicated)
(Unaudited)

These unaudited interim condensed consolidated financial statements reflect all normal recurring adjustments which are, in the opinion of management, necessary to state fairly, in all material respects, the financial position of Atmel Corporation (the "Company" or "Atmel") and its subsidiaries as of September 30, 2011 and the results of operations for the three and nine months ended September 30, 2011 and 2010 and cash flows for the nine months ended September 30, 2011 and 2010. All intercompany balances have been eliminated. Because all of the disclosures required by U.S. generally accepted accounting principles are not included, as permitted by the rules of the Securities and Exchange Commission (the "SEC"), these interim condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and accompanying notes included in the Company's Annual Report on Form 10-K for the year ended December 31, 2010. The December 31, 2010 year-end condensed balance sheet data was derived from the Company's audited consolidated financial statements, which are included in the Company's Annual Report on Form 10-K for the year ended December 31, 2010 and does not include all of the disclosures required by U.S. generally accepted accounting principles. The condensed consolidated statements of operations for the periods presented are not necessarily indicative of results to be expected for any future period, or for the entire year.

The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Significant estimates in these financial statements include provisions for excess and obsolete inventory, sales return reserves, stock-based compensation expense, allowances for doubtful accounts receivable, warranty reserves, estimates for useful lives associated with long-lived assets, recoverability of goodwill and intangible assets, restructuring charges, accrued liabilities and income taxes and income tax valuation allowances. Actual results could differ materially from those estimates.

In the three months ended June 30, 2011, the Company recorded an out of period adjustment to reverse test and assembly subcontractor accruals for $6,908, related to cost of revenues for the three month periods ended March 31, 2011, December 31, 2010, September 30, 2010 and June 30, 2010. In addition, in the three months ended June 30, 2011, the Company corrected excess depreciation for certain fixed assets for $1,731, related to research and development for the three month periods ended March 31, 2011 and December 31, 2010. The correction of these errors resulted in an increase to the Company's net income of $8,639 for the three months ended June 30, 2011. Management assessed the impact of these errors and concluded that the amounts are not material, either individually or in the aggregate, to any of the prior periods' annual or interim financial statements, nor is the impact of the errors in the three months ended June 30, 2011 expected to be material to the full year 2011 financial statements. On that basis, the Company has recorded the correction to all periods in the three months ended June 30, 2011.

Inventories are stated at the lower of standard cost (which approximates actual cost on a first-in, first-out basis for raw materials and purchased parts; and an average-cost basis for work in progress and finished goods) or market. Market is based on estimated net realizable value. The Company establishes provisions for lower of cost or market and excess and obsolescence write-downs. The determination of obsolete or excess inventory requires an estimation of the future demand for the Company's products and these reserves are recorded when the inventory on hand exceeds management's estimate of future demand

for each product. Once the inventory is written down, a new cost basis is established and these inventory reserves are not released until the related inventory has been sold or scrapped.

In September 2011, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") No. 2011-08 Intangibles – Goodwill and Other (ASC Topic 350) – Testing Goodwill for Impairment. The amendments from this update will simplify how entities, both public and non-public, test for goodwill impairment. The amendments permit an entity to first assess qualitative factors to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount as a basis for determining whether it is necessary to perform the two-step goodwill impairment test described in ASC Topic 350. The more-likely-than-not threshold is defined as having a likelihood of more than 50 percent. If, after assessing the totality of events or circumstances, an entity determines it is likely that the fair value of a reporting unit is less than its carrying amount, then it is required to perform the first step of the two-step impairment test by calculating the fair value of the reporting unit and comparing the fair value with the carrying amount of the reporting unit, as described in the accounting literature. However, if an entity concludes otherwise, then performing the two-step impairment test is unnecessary. If the carrying amount of a reporting unit exceeds its fair value, then the entity is required to perform the second step of the goodwill impairment test to measure the amount of the impairment loss, if any, as described in the accounting literature. Under the amendments in this update, an entity has the option to bypass the qualitative assessment for any reporting unit in any period and proceed directly to performing the first step of the two-step goodwill impairment test. An entity may resume performing the qualitative assessment in any subsequent period. The amendments are effective for annual and interim goodwill impairment tests performed for fiscal years beginning after December 15, 2011. Early adoption of the update to ASC Topic 350 is permitted, including for annual and interim goodwill impairment tests performed as of a date before September 15, 2011, if an entity's financial statements for the most recent annual or interim period have not yet been issued or, for nonpublic entities, have not yet been made available for issuance. The adoption of this guidance is not anticipated to have a material impact on the Company's condensed consolidated financial position, results of operations or cash flows.

In June 2011, the FASB issued ASU No. 2011-05, Comprehensive Income (ASC Topic 220) — Presentation of Comprehensive Income. The amendments from this update will result in more converged guidance on how comprehensive income is presented under U.S. GAAP and International Financial Reporting Standards ("IFRS"). With this update to ASC 220, an entity has the option to present the total of comprehensive income, the components of net income, and the components of other comprehensive income either in a single continuous statement of comprehensive income or in two separate but consecutive statements. In both choices, an entity is required to present each component of net income along with total net income, each component of other comprehensive income along with a total for other comprehensive income, and a total amount for comprehensive income. The amendments in this update do not change the items that must be reported in other comprehensive income or when an item of other comprehensive income must be reclassified to net income, nor does it affect how earnings per share is calculated or presented. Current U.S. GAAP allows reporting entities three alternatives for presenting other comprehensive income and its components in financial statements. One of those presentation

options is to present the components of other comprehensive income as part of the statement of changes in stockholders' equity. This update eliminates that option. The amended guidance also requires presentation of adjustments for items that are reclassified from other comprehensive income to net income in the statement where the components of net income and the components of other comprehensive income are presented. The amendments in this ASU should be applied retrospectively. For public entities, the amendments are effective for fiscal years, and interim periods within those years, beginning after December 15, 2011. On October 21, 2011 the FASB decided to propose a deferral of the requirement to present reclassifications of other comprehensive income on the face of the income statement. The adoption of this guidance is not anticipated to have a material impact on the Company's condensed consolidated financial position, results of operations or cash flows.

In May 2011, the FASB issued ASU No. 2011-04, Fair Value Measurement (ASC Topic 820) — Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and IFRSs. The amendments in this ASU result in common fair value measurement and disclosure requirements under U.S. GAAP and IFRS. Consequently, the amendments describe many of the requirements in U.S. GAAP for measuring fair value and for disclosing information about fair value measurements as well as improving consistency in application across jurisdictions to ensure that U.S. GAAP and IFRS fair value measurement and disclosure requirements are described in the same way. The ASU also provides for certain changes in current GAAP disclosure requirements, for example with respect to the measurement of Level 3 assets and for measuring the fair value of an instrument classified in a reporting entity's shareholders' equity. The amendments in this ASU are to be applied prospectively. For public entities, the amendments are effective during interim and annual periods beginning after December 15, 2011. The adoption of this guidance is not anticipated to have a material impact on the Company's condensed consolidated financial position, results of operations or cash flows.

Investments at September 30, 2011 and December 31, 2010 are primarily comprised of corporate equity securities, U.S. and foreign corporate debt securities and auction-rate securities.

All marketable securities are deemed by management to be available-for-sale and are reported at fair value, with the exception of certain auction-rate securities as described below. Net unrealized gains or losses that are not deemed to be other than temporary are reported within stockholders' equity on the Company's condensed consolidated balance sheets as a component of accumulated other comprehensive income. Gross realized gains or losses are recorded based on the specific identification method. For the three and nine months ended September 30, 2011, the Company's gross realized gains or losses on short-term investments were insignificant. In the three months ended September 30, 2010, the Company's gross realized gains or losses on short-term investments were insignificant. In the nine months ended September 30, 2010, the Company recorded gross realized gains of $2,141 from the sale of short-term

investments, which are included in interest and other (expense) income, net in the condensed consolidated statements of operations. The Company's investments are further detailed in the table below:

	September 30, 2011					December 31, 2010

	Adjusted Cost			Fair Value		Adjusted Cost			Fair Value
	*(in thousands)*
Corporate equity securities	$	-		$	-	$	87		$	158
Auction-rate securities		2,220			2,251		2,220			2,251
Corporate debt securities and other obligations		4,597			4,579		19,686			19,416

	$	6,817		$	6,830	$	21,993		$	21,825

Unrealized gains		31					126
Unrealized losses		(18	)				(294	)

Net unrealized gains (losses)		13					(168	)

Fair value	$	6,830				$	21,825

Amount included in short-term investments				$	4,579				$	19,574
Amount included in other assets					2,251					2,251

				$	6,830				$	21,825

For the three and nine months ended September 30, 2011, auctions for auction-rate securities held by the Company have continued to fail and as a result these securities continued to be illiquid. The Company concluded that $2,220 (adjusted cost) of these securities are unlikely to be liquidated within the next twelve months and classified these securities as long-term investments, which are included in other assets on the condensed consolidated balance sheets.

Contractual maturities (at adjusted cost) of available-for-sale debt securities as of September 30, 2011, were as follows:

Atmel has classified all investments with maturity dates of 90 days or more as short-term as it has the ability and intent to redeem them within the year, with the exception of the Company's remaining auction-rate securities, which have been classified as long-term investments and included in other assets on the condensed consolidated balance sheets.

The Company applies the accounting standard that defines fair value as "the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (exit price)." The standard establishes a consistent framework for measuring fair value and expands disclosure requirements about fair value measurements. This accounting standard, among other things, requires the Company to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value.

The table below presents the balances of investments measured at fair value on a recurring basis at September 30, 2011:

The table below presents the balances of investments measured at fair value on a recurring basis at December 31, 2010:

		December 31, 2010

		Total		Level 1		Level 2		Level 3
*Assets*		*(in thousands)*
Cash
	Money market funds	$	-	$	-	$	-	$	-
Short-term investments
	Corporate equity securities		158		158		-		-
	Corporate debt securities, including government-backed securities		19,416		-		19,416		-
Other assets
	Auction-rate securities		2,251		-		-		2,251
	Deferred compensation plan assets		3,783		3,783		-		-

	Total	$	25,608	$	3,941	$	19,416	$	2,251

The Company's investments, with the exception of auction-rate securities, are classified within Level 1 or Level 2 of the fair value hierarchy because they are valued using quoted market prices, broker or dealer quotations, or alternative pricing sources with reasonable levels of price transparency. The types of instruments valued based on quoted market prices in active markets include most U.S. government and agency securities, sovereign government obligations, and money market securities. Such instruments are generally classified within Level 1 of the fair value hierarchy. The types of instruments valued based on other observable inputs include corporate debt securities and other obligations. Such instruments are generally classified within Level 2 of the fair value hierarchy.

Auction-rate securities are classified within Level 3 as significant assumptions that are not observable in the market. The total amount of assets measured using Level 3 valuation methodologies represented less than 1% of total assets as of September 30, 2011 and December 31, 2010.

A summary of the changes in Level 3 assets measured at fair value on a recurring basis is as follows:

The following table summarizes the distribution of stock-based compensation expense related to employee stock options, restricted stock units, performance-based restricted stock units and employee stock purchases for the three and nine months ended September 30, 2011 and 2010:

The table above excludes stock-based compensation (credit) of $0 and $(3,065) for the three and nine months ended September 30, 2010, respectively, related to the Quantum Research Group Ltd. acquisition, which are classified within acquisition-related charges in the condensed consolidated statements of operations.

Non-employee stock-based compensation expense for the three and nine months ended September 30, 2011 and 2010 was not material.

In May 2005, Atmel's stockholders initially approved Atmel's 2005 Stock Plan (as amended, the "2005 Stock Plan"). As of September 30, 2011, 133,000 shares were authorized for issuance under the 2005 Stock Plan, and 18,448 shares of common stock remained available for grant. Under the 2005 Stock Plan, Atmel may issue common stock directly, grant options to purchase common stock or grant restricted stock units payable in common stock to employees, consultants and directors of Atmel. Options, which generally

vest over four years, are granted at fair market value on the date of the grant and generally expire ten years from that date.

				Outstanding Options

				Outstanding Options					Weighted- Average Exercise Price per Share
	Available for Grant			Number of Options			Exercise Price per Share		Weighted- Average Exercise Price per Share
	*(in thousands, except per share data)*
Balances, December 31, 2010		11,463			12,660		$	1.68-$14.94	$	4.35
Restricted stock units issued		(642	)		-			-		-
Adjustment for restricted stock units issued		(501	)		-			-		-
Performance-based restricted stock units issued		(9	)		-			-		-
Adjustment for performance-based restricted stock units issued		(7	)		-			-		-
Restricted stock units cancelled		152			-			-		-
Adjustment for restricted stock units cancelled		119			-			-		-
Options cancelled/expired/forfeited		22			(22	)	$	3.59-$14.94		6.68
Options exercised		-			(2,467	)	$	1.80-$13.77		4.61

Balances, March 31, 2011		10,597			10,171		$	1.68-$13.77	$	4.28
Additional shares authorized		19,000			-			-		-
Restricted stock units issued		(461	)		-			-		-
Adjustment for restricted stock units issued		(332	)		-			-		-
Performance-based restricted stock units issued		(3,409	)		-			-		-
Adjustment for performance-based restricted stock units issued		(2,079	)		-			-		-
Restricted stock units cancelled		172			-			-		-
Adjustment for restricted stock units cancelled		134			-			-		-
Options cancelled/expired/forfeited		17			(17	)		$2.11-4.92		3.58
Options exercised		-			(1,008	)		$1.80-13.77		4.28

Balance, June 30, 2011		23,639			9,146		$	1.68-$10.01	$	4.28
Restricted stock units issued		(3,874	)		-			-		-
Adjustment for restricted stock units issued		(2,363	)		-			-		-
Restricted stock units cancelled		526			-			-		-
Adjustment for restricted stock units cancelled		410			-			-		-
Options cancelled/expired/forfeited		111			(111	)		$2.11-4.43		4.24
Options exercised		-			(313	)		$1.80-8.83		4.72

Balance, September 30, 2011		18,448			8,722		$	1.68-$10.01	$	4.27

Restricted stock units are granted from the pool of options available for grant. As the result of an amendment and restatement of the 2005 Stock Plan in May 2011, every share underlying restricted stock, restricted stock units (including performance-based restricted stock units), and stock purchase rights issued on or after May 18, 2011 (the date on which the amendment and restatement became effective) is counted against the numerical limit for options available for grant as 1.61 shares in the table above, except that restricted stock, restricted stock units (including performance-based restricted stock units), and stock purchase rights issued prior to May 18, 2011, continue to be governed by an earlier amendment to the 2005 Stock Plan that provided for a numerical limit of 1.78 shares. If shares issued pursuant to any restricted stock, restricted stock unit, and stock purchase right agreements granted on or after May 18, 2011 are cancelled, forfeited or repurchased by the Company and would otherwise return to the 2005 Stock Plan, 1.61 times the number of those shares will return to the 2005 Stock Plan and will again become available for issuance. The Company issued 6,921 shares of restricted stock units from May 18, 2011 to September 30, 2011 (net of cancellations) resulting in a reduction of 11,054 shares available for grant under the 2005 Stock Plan.

In the three and nine months ended September 30, 2011, 1,878 and 3,755 restricted stock units vested, respectively, including 838 and 1,542 units withheld for taxes, respectively. These vested restricted stock units had a weighted-average fair value of $12.84 and $14.07 per share, on the vesting dates, respectively. As of September 30, 2011, total unearned stock-based compensation related to nonvested restricted stock units previously granted (including performance-based restricted stock units) was approximately $179,186, excluding forfeitures, and is expected to be recognized over a weighted-average period of 2.95 years.

In the three and nine months ended September 30, 2010, 1,536 and 2,658 restricted stock units vested, respectively, including 688 and 1,064 units withheld for taxes, respectively. These vested restricted stock units had a weighted-average fair value of $5.77 and $5.49 per share on the vesting dates in the three and nine months ended September 30, 2010, respectively.

Until restricted stock units are vested, they do not have the voting rights of common stock and the shares underlying such restricted stock units are not considered issued and outstanding. Upon vesting of restricted stock units, shares withheld by the Company to pay taxes are retired.

In the three months ended June 30, 2011, 8,476 performance-based restricted stock units issued under the Company's 2008 Incentive Plan (the "2008 Plan") vested upon board of director approval on May 23, 2011 as a result of the Company achieving all of the performance criteria under the 2008 Plan as of March 31, 2011. A total of 5,127 shares were issued to participants, net of withholding taxes. These vested performance-based restricted stock units had a weighted average value of $14 per share on the vesting date. The Company recorded total stock-based compensation expense related to the performance-based restricted stock units granted under the 2008 Plan, of $6,511 in the nine months ended September 30, 2011, and $4,429 and $20,624 in the three and nine months ended September 30, 2010, respectively. There were no charges under the 2008 Plan for the three months ended September 30, 2011 as the plan concluded in May 2011.

In May 2011, the Company adopted the 2011 Long-Term Performance-Based Incentive Plan (the "2011 Plan"), which provides for the grant of restricted stock units to eligible employees; vesting of these restricted stock units is subject to the satisfaction of specified performance metrics over the designated performance periods. The performance periods for the 2011 Plan run from January 1, 2011 through December 31, 2013, consisting of three one-year performance periods (calendar years 2011, 2012 and 2013) and a three-year cumulative performance period. The Company issued 3,409 performance-based restricted stock units in May 2011 under the 2011 Plan and recorded stock-based compensation expense related to these performance-based restricted stock units of $3,652 and $4,276 in the three and nine months ended September 30, 2011, respectively.

The 2011 Plan performance metrics include ranking of revenue growth relative to a semiconductor peer group or a microcontroller peer group, as determined by the Compensation Committee. In addition, in order for a participant to receive credit for a performance period the Company must achieve a minimum operating margin during such performance period, measured on a pro forma basis, subject to adjustment by the Compensation Committee. The Company re-evaluates estimated achievement of performance metrics each quarter in determining stock-based compensation expense for performance share plans.

No stock options were granted during the three and nine months ended September 30, 2011. In the three and nine months ended September 30, 2010, 60 and 299 stock options were granted, respectively.

As of September 30, 2011, total unearned compensation expense related to unvested stock options was approximately $6,252, excluding forfeitures, and is expected to be recognized over a weighted-average period of 1.74 years.

Under the 1991 Employee Stock Purchase Plan ("1991 ESPP") and 2010 Employee Stock Purchase Plan ("2010 ESPP" and together with the 1991 ESPP, the "Company's ESPPs"), qualified employees are entitled to purchase shares of Atmel's common stock at the lower of 85% of the fair market value of the common stock at the date of commencement of the six-month offering period or at 85% of the fair market value on the last day of the offering period. Purchases are limited to 10% of an employee's eligible compensation. In 2010, the Company's stockholders approved the 2010 ESPP and authorized 25,000 shares for issuance under the 2010 ESPP; the 2010 ESPP became effective with the offering period commencing August 15, 2011. There were 679 shares purchased under the 2010 ESPP in the three months ended September 30, 2011 at an average price per share of $8.56. There were 980 shares purchased under the 1991 ESPP in the three months ended September 30, 2010 at an average price per share of $4.05. There were 835 and 2,028 shares purchased under the 1991 ESPP in the nine months ended September 30, 2011 and 2010, respectively, at an average price per share of $4.85 and $3.65, respectively. The 1,888 shares that remained available under the 1991 ESPP were not purchased and the 1991 ESPP was superseded by the 2010 ESPP in the three months ended March 31, 2011. As of September 30, 2011, 24,321 shares remained available for issuance under the 2010 ESPP.

The fair value of each purchase under the Company's ESPPs is estimated on the date of the beginning of the offering period using the Black-Scholes option pricing model. The following assumptions were utilized to determine the fair value of the Company ESPPs shares:

The weighted-average fair value of the rights to purchase shares under the Company ESPPs for offering periods started in the three months ended September 30, 2011 and 2010 was $2.23 and $1.02, respectively and in the nine months ended September 30, 2011 and 2010 was $2.70 and $0.89, respectively. Cash proceeds for the issuance of shares under the Company's ESPPs were $6,207 and $3,974 for the three months ended September 30, 2011 and 2010, respectively. Cash proceeds for the issuance of shares under the Company's ESPPs were $6,207 and $7,411 for the nine months ended September 30, 2011 and 2010, respectively.

Atmel's Board of Directors has authorized $500,000 of funding for its stock repurchase program. The repurchase program does not have an expiration date, and the number of shares repurchased and the timing of repurchases are based on the level of the Company's cash balances, general business and market conditions, regulatory requirements, and other factors, including alternative investment opportunities.

During the three and nine months ended September 30, 2011, Atmel repurchased 6,095 and 13,826 shares of its common stock on the open market at an average repurchase price of $9.23 and $12.23 per share, respectively, excluding commission, and subsequently retired those shares. Common stock and additional paid-in capital were reduced by $56,271 and $169,083, excluding commission, for the three and

nine months ended September 30, 2011, respectively, as a result of the stock repurchases. As of September 30, 2011, $241,934 remained available for repurchase under this program.

Comprehensive income is defined as a change in equity of a company during a period, from transactions and other events and circumstances excluding transactions resulting from investments by owners and distributions to owners. The primary difference between net income and comprehensive income for the Company arises from foreign currency translation adjustments, actuarial gains related to defined benefit pension plans and net unrealized gain (loss) on investments. The components of accumulated other comprehensive income at September 30, 2011 and December 31, 2010, net of tax, are as follows:

The components of comprehensive income in the three and nine months ended September 30, 2011 and 2010 are as follows:

		Three Months Ended						Nine Months Ended

		September 30, 2011			September 30, 2010			September 30, 2011			September 30, 2010
		*(in thousands)*
Net income		$	116,706		$	219,812		$	282,129		$	199,984

Other comprehensive (loss) income:
	Foreign currency translation adjustments		(10,024	)		6,925			(8,309	)		(29,821	)
	Release of currency translation adjustment		-			(2,412	)		-			(99,779	)
	Actuarial losses related to defined benefit pension plans		(2,261	)		(2,173	)		(1,284	)		(3,468	)
	Unrealized (losses) gains on investments		(58	)		(16	)		181			(2,070	)

Other comprehensive (loss) income			(12,343	)		2,324			(9,412	)		(135,138	)

Total comprehensive income		$	104,363		$	222,136		$	272,717		$	64,846

On August 30, 2011, the Company completed the sale of its San Jose corporate headquarters and adjacent parcels of land to Ellis Partners LLC for an aggregate sale price of $48,500. Concurrent with the sale, the Company is leasing back its corporate headquarters facility for a term of seven months at a rate of $247 per month with two three-month renewal options (refer to Note 10).

On August 30, 2011, the Company entered into a ten year lease for a new corporate headquarters located at 1600 Technology Drive in San Jose, California (the "Technology Drive Lease"). The Company expects to commence occupancy of the premise in the second quarter of 2012.

Non-cancelable future minimum rental payments under the Technology Drive Lease are anticipated to be as follows:

As is customary in the Company's industry, the Company's standard contracts provide, subject to negotiated terms, remedies to its customers, such as defense, settlement, or payment of judgment for intellectual property claims related to the use of the Company's products. From time to time, the Company will indemnify customers against combinations of loss, expense, or liability arising from various trigger events related to the sale and the use of the Company's products and services, usually up to a specified maximum amount. In addition, as permitted under state laws in the United States, the Company has entered into indemnification agreements with its officers and directors and certain employees, and the Company's bylaws permit the indemnification of the Company's agents. In the Company's experience, the estimated fair value of the Company's indemnification liability is not material.

At September 30, 2011, the Company had certain commitments which were not included on the condensed consolidated balance sheet at that date. These include outstanding capital purchase commitments of $5,361, wafer purchase commitments of approximately $2,032 under the Company's supply agreement with Telefunken Semiconductors GmbH & Co. KG and wafer purchase commitments of approximately $253,767 under the Company's supply agreement with LFoundry GmbH ("LFoundry").

The Company is party to various legal proceedings. Management currently believes that the ultimate outcome of these proceedings, individually and in the aggregate, will not have a material adverse effect on its financial position, results of operations and statement of cash flows. If, however, an unfavorable ruling were to occur in any of the legal proceedings described below, there exists the possibility of a material adverse effect on the Company's financial position, results of operations and cash flows. The Company has accrued for losses related to the litigation described below that it considers probable and for which the loss can be reasonably estimated. In the event that a probable loss cannot be reasonably estimated, it has not accrued for such losses. The Company continues to monitor these matters; its determination could change, however, and the Company may decide, at some future date, to establish an appropriate reserve. With respect to each of the matters below, except where noted otherwise, management has determined a potential loss is not probable at this time and, accordingly, no amount has been accrued at September 30, 2011. Management makes a determination as to when a potential loss is reasonably possible based on relevant accounting literature and then includes appropriate disclosure of the contingency. Except as otherwise noted, management does not believe that the amount of loss or a range of possible losses is reasonably estimable.

Matheson Litigation. On September 28, 2007, Matheson Tri-Gas ("MTG") filed suit against the Company in Texas state court in Dallas County. Plaintiff alleges claims for: (1) breach of contract for the Company's alleged failure to pay minimum payments under a purchase requirements contract; (2) breach of contract under a product supply agreement; and (3) breach of contract for failure to execute a process gas agreement. MTG seeks unspecified damages, pre- and post-judgment interest, attorneys' fees and costs. In late November 2007, the Company filed its answer denying liability. In July 2008, the Company filed an amended answer, counterclaim and cross claim seeking among other things a declaratory judgment that a termination agreement cut off any claim by MTG for additional payments. In an Order entered on June 26, 2009, the Court granted the Company's motion for partial summary judgment dismissing MTG's breach of contract claims relating to the requirements contract and the product supply agreement. The parties dismissed the remaining claims and, on August 26, 2009, the Court entered a Summary Judgment Order and Final Judgment. MTG filed a Motion to Modify Judgment and Notice of Appeal on September 24, 2009. On July 27, 2011, the Texas Court of Appeals affirmed the trial court's judgment. After the Court of Appeals denied MTG's motion for a rehearing, MTG declined to appeal the decision to the Supreme Court of Texas.

Distributor Litigation. On June 3, 2009, the Company filed an action in Santa Clara County Superior Court against three of its now-terminated Asia-based distributors, NEL Group Ltd. ("NEL"), Nucleus Electronics (Hong Kong) Ltd. ("NEHK") and TLG Electronics Ltd. ("TLG"). The Company seeks, among other things, to recover $8,500 owed it, plus applicable interest and attorneys fees. On June 9, 2009, NEHK separately sued Atmel in Santa Clara County Superior Court, alleging that Atmel's suspension of shipments to NEHK on September 23, 2008 — one day after TLG appeared on the Department of Commerce, Bureau of Industry and Security's Entity List — breached the parties' International Distributor Agreement. NEHK also alleges that Atmel libeled it, intentionally interfered with contractual relations and/or prospective business advantage, and violated California Business and Professions Code Sections 17200 et seq. and 17500 et seq. Both matters now have been consolidated. On July 29, 2009, NEL filed a cross-complaint against Atmel that alleges claims virtually identical to those NEHK has alleged. NEL and NEHK are seeking damages of up to $50,000. On March 28, 2011, the Court entered an order requiring that NEL (and/or certain of its subsidiaries, including NEHK) deposit $2,900 in a court-administered account until final disposition of the litigation or a further court order. The Court ordered the funds deposited after it found this amount to be the current "gain" realized from certain restructuring transactions NEL and NEHK completed in violation of the Court's October 22, 2009 preliminary injunction prohibiting such restructuring. Despite the order, to date, no funds have been deposited with the Court. On June 3, 2011, both NEL and NEHK's counsel withdrew from the case and, as of the date of this Form 10-Q, have not been replaced. No trial date has yet been set and discovery is not yet complete. Should the case continue, Atmel intends to prosecute its claims and defend the NEHK/NEL claims vigorously. TLG did not answer, and the Court entered a default judgment of $2,697 on November 23, 2009.

French Labor Litigation. On July 24, 2009, 56 former employees of Atmel's Nantes facility filed claims in the First Instance labor court, Nantes, France against the Company and MHS Electronics claiming that (1) the Company's sale of the Nantes facility to MHS (XbyBus SAS) in 2005 did not result in the transfer of their labor agreements to MHS, and (2) these employees should still be considered Atmel employees, with the right to claim related benefits from Atmel. Alternatively, each employee seeks damages of at least 45 Euros and court costs. Five of the original 56 plaintiffs later dropped out of the case — leaving 51 remaining plaintiffs. A ruling is expected on November 30, 2011. These claims are similar to those filed in the First Instance labor court in October 2006 by 47 other former employees of Atmel's Nantes facility (MHS was not named a defendant in the earlier claims). On July 24, 2008, the judge hearing the earlier claims issued an oral ruling in favor of the Company, finding that there was no jurisdiction for those claims by certain "protected employees," and denying the claims as to all other employees. Forty of those earlier plaintiffs appealed, and on February 11, 2010, the Court of Appeal of

Rennes, France affirmed the lower court's ruling. Plaintiffs' time to appeal has expired and the earlier litigation now is concluded.

Azure Litigation. On December 22, 2010, Azure Networks, LLC, a non-practicing entity, and Tri-County Excelsior Foundation, a non-profit organization, sued Atmel and several other semiconductor companies for patent infringement in the United States District Court for the Eastern District of Texas. In a First Amended Complaint filed on April 18, 2011, Plaintiffs alleged that Atmel makes, uses, offers for sale, sells, and/or imports into or within the United States RF transceivers that, when integrated with certain Zigbee-compliant software that Atmel provides, allegedly induce the infringement of United States Patent Number 7,020,501 (entitled "Energy Efficient Forwarding in Ad-Hoc Wireless Networks"). On May 5, 2011, Atmel filed counterclaims seeking a declaration that the '501 patent is invalid and not infringed. On July 11, 2011, the Court granted Atmel and plaintiffs' joint motion to dismiss without prejudice all claims and counterclaims, resulting in the conclusion of this matter.

Infineon Litigation. On April 11, 2011, Infineon Technologies A.G. and Infineon Technologies North America Corporation (collectively, "Infineon") filed a patent infringement lawsuit against Atmel in the United States District Court for the District of Delaware. Infineon alleges that Atmel is infringing 11 Infineon patents and seeks a declaration that three Atmel patents are either invalid or not infringed. On July 5, 2011, Atmel answered Infineon's complaint, and filed counterclaims seeking a declaration that each of the 11 asserted Infineon patents is invalid and not infringed. Atmel also counterclaimed for infringement of six Atmel patents and breach of contract related to Infineon's breach of a confidentiality agreement. On July 29, 2011, Infineon answered Atmel's counterclaims and sought a declaration that Atmel's newly-asserted patents were either invalid or not infringed. The Company intends to prosecute its claims and defend vigorously against Infineon's claims.

From time to time, the Company is notified of claims that its products may infringe patents, or other intellectual property, issued to other parties. The Company periodically receives demands for indemnification from its customers with respect to intellectual property matters. The Company also periodically receives claims relating to the quality of its products, including claims for additional labor costs, costs for replacing defective parts, reimbursement to customers for damages incurred in correcting their defective products, costs for product recalls or other damages. Receipt of these claims and requests occurs in the ordinary course of the Company's business, and the Company responds based on the specific circumstances of each event. The Company undertakes an accrual for losses relating to those types of claims when it considers those losses "probable" and when a reasonable estimate of loss can be determined.

In October 2008, officials of the European Union Commission (the "Commission") conducted an inspection at the offices of one of the Company's French subsidiaries. The Company was informed that the Commission was seeking evidence of potential violations by Atmel or its subsidiaries of the European Union's competition laws in connection with the Commission's investigation of suppliers of integrated circuits for smart cards. On September 21, 2009 and October 27, 2009, the Commission requested additional information from the Company, and the Company responded to the Commission's requests. The Company continues to cooperate with the Commission's investigation and has not received any specific findings, monetary demand or judgment through the date of filing this Quarterly Report on Form 10-Q. As a result, the Company has not recorded any provision in its financial statements related to this matter.

The Company accrues for warranty costs based on historical trends of product failure rates and the expected material and labor costs to provide warranty services. The Company's products are generally covered by a warranty typically ranging from 90 days to two years.

The following table summarizes the activity related to the product warranty liability for the three and nine months ended September 30, 2011 and 2010.

Product warranty liability is included in accrued and other liabilities on the condensed consolidated balance sheets.

During the ordinary course of business, the Company provides standby letters of credit or other guarantee instruments to certain parties as required for certain transactions initiated by either the Company or its subsidiaries. As of September 30, 2011, the maximum potential amount of future payments that the Company could be required to make under these guarantee agreements was $1,850. The Company has not recorded any liability in connection with these guarantee arrangements. Based on historical experience and information currently available, the Company believes it will not be required to make any payments under these guarantee arrangements.

The Company estimates its annual effective tax rate at the end of each quarter. In making these estimates, the Company considers, among other things, annual pre-tax income, the geographic mix of pre-tax income and the application and interpretations of tax laws, treaties and judicial developments, in collaboration with its tax advisors, and possible outcomes of audits.

The following table presents the (provision for) benefit from income taxes and the effective tax rates:

The Company's effective tax rate for the three and nine months ended September 30, 2011 is lower than the statutory federal income tax rate of 35% primarily due to tax rate benefits of certain earnings from the Company's operations in jurisdictions with lower tax rates than the U.S. These benefits result primarily from a global restructuring program implemented during the quarter ended March 31, 2011. The effective tax rate for the three and nine months ended September 30, 2010 was substantially lower than the statutory federal income tax rate of 35% primarily due to IRS settlement for years 2000-2003, the recognition of certain refundable R&D credits and a net discrete income tax benefit associated with the sale of the Company's wafer manufacturing operations in Rousset, France, as management determined that this benefit will more likely than not be realized.

The Company files U.S., state, and foreign income tax returns in jurisdictions with varying statutes of limitations. The Company's 2000 through 2010 tax years generally remain subject to examination by federal and most state tax authorities. For significant foreign jurisdictions, the 2007 through 2010 tax years generally remain subject to examination by their respective tax authorities.

Currently, the Company has tax audits in progress in various foreign jurisdictions. To the extent the final tax liabilities are different from the amounts originally accrued, the increases or decreases are recorded as income tax expense or benefit in the consolidated statements of operations. While the Company believes that the resolution of these audits will not have a material adverse impact on the Company's results of operations, the outcome is subject to uncertainty.

At September 30, 2011 and December 31, 2010, the Company had $67,956 and $63,593 of unrecognized tax benefits, respectively. It is reasonably possible that the total amount of unrecognized tax benefits will increase between $5,000 and $10,000 over the next 12 months. Such changes could occur due to unrecognized tax benefits to be established in the normal course of business. The Company does not expect a material change in unrecognized tax benefits during the remainder of the year ending December 31, 2011. The calculation of unrecognized tax benefits involves dealing with uncertainties in the application of complex global tax regulations. The Company regularly assesses its tax positions in light of legislative, bilateral tax treaty, regulatory and judicial developments in the countries in which the Company does business.

The Company sponsors defined benefit pension plans that cover substantially all of its French and German employees. Plan benefits are provided in accordance with local statutory requirements. Benefits are based on years of service and employee compensation levels. The plans are not funded. Pension liabilities and charges to expense are based upon various assumptions, updated quarterly, including discount rates, future salary increases, employee turnover, and mortality rates.

Retirement plans consist of two types of plans. The first plan type covers the Company's French employees and provides for termination benefits paid to employees only at retirement, and consists of approximately one to five months of salary. The second plan type covers the Company's German employees and provides for defined benefit payouts for the employee's post-retirement life.

The aggregate net pension expense relating to the two plan types are as follows:

Settlement and other related gains of $726 for the nine months ended September 30, 2011 related to restructuring activity in the Company's Rousset, France operations initiated in the second quarter of 2010. Settlement and other related losses of $242 and $1,149 for the three and nine months ended September 30, 2010, respectively related to the sale of the Company's Secure Microcontroller Solutions (SMS) business in the third quarter of 2010 and the sale of the Company's Rousset fabrication facility in the second quarter of 2010, respectively.

The Company's net pension cost for 2011 is expected to be approximately $2,591. Cash funding for benefits paid was $51 and $127 for the three and nine months ended September 30, 2011, respectively. Cash funding for benefits to be paid for 2011 is expected to be approximately $417.

The Company designs, develops, manufactures and sells semiconductor integrated circuit products. The Company's segments represent management's view of the Company's businesses and how it allocates Company resources and measures performance of its major components. Each segment consists of product families with similar requirements for design, development and marketing. Each segment requires different design, development and marketing resources to produce and sell products. Atmel's four reportable segments are as follows:

The Company evaluates segment performance based on revenues and income from operations excluding acquisition-related charges, restructuring charges, asset impairment charges, and (gain) loss on

sale of assets. Interest and other (expense) income, net, foreign exchange gains and losses and income taxes are not measured by operating segment. Because the Company's segments reflect the manner in which management reviews its business, they necessarily involve subjective judgments that management believes are reasonable in light of the circumstances under which they are made. These judgments may change over time or may be modified to reflect new facts or circumstances. Segments may also be changed or modified to reflect products, technologies or applications that are newly created, or that change over time, or other business conditions that evolve, each of which may result in management reassessing specific segments and the elements included within each of those segments. Recent events may affect the manner in which the Company presents segments in the future.

Segments are defined by the products they design and sell. They do not make sales to each other. The Company's net revenues and segment income from operations for each reportable segment for the three and nine months ended September 30, 2011 and 2010 are as follows:

	Micro- Controllers		Nonvolatile Memories		RF and Automotive		ASIC		Total

	*(in thousands)*
Three months ended September 30, 2011
Net revenues from external customers	$	301,275	$	65,922	$	52,021	$	60,157	$	479,375
Segment income from operations		70,084		15,211		5,036		17,433		107,764
Three months ended September 30, 2010
Net revenues from external customers	$	255,546	$	66,473	$	45,179	$	77,146		444,344
Segment income from operations		57,920		15,052		4,932		7,762		85,666
Nine months ended September 30, 2011
Net revenues from external customers	$	897,293	$	200,557	$	155,445	$	166,149	$	1,419,444
Segment income from operations		219,341		44,999		15,843		41,816		321,999
Nine months ended September 30, 2010
Net revenues from external customers	$	604,054	$	217,527	$	136,934	$	227,739		1,186,254
Segment income from operations		93,614		27,475		7,356		1,075		129,520

The Company does not allocate assets by segment, as management does not use asset information to measure or evaluate a segment's performance.

		Three Months Ended						Nine Months Ended

		September 30, 2011			September 30, 2010			September 30, 2011			September 30, 2010
		*(in thousands)*
Total segment income from operations		$	107,764		$	85,666		$	321,999		$	129,520
Unallocated amounts:
	Acquisition-related charges		(1,019	)		(1,167	)		(3,069	)		(433	)
	Restructuring charges		-			(1,080	)		(21,210	)		(3,663	)
	Asset impairment charges		-			-			-			(11,922	)
	Gain (loss) on sale of assets		33,428			(5,715	)		35,310			(99,767	)

Consolidated income from operations		$	140,173		$	77,704		$	333,030		$	13,735

		Three Months Ended				Nine Months Ended

		September 30, 2011		September 30, 2010		September 30, 2011		September 30, 2010
		*(in thousands)*
United States		$	57,254	$	68,964	$	192,109	$	194,348
Germany			58,669		51,929		178,068		150,744
France			6,350		13,318		23,769		46,835
Japan			15,342		11,810		44,895		31,347
China, including Hong Kong			157,284		137,181		427,956		362,440
Singapore			11,626		11,186		34,915		31,944
South Korea			67,544		43,079		170,449		85,970
Taiwan			30,943		35,286		124,837		79,030
Rest of Asia-Pacific			17,890		18,810		52,246		49,540
Rest of Europe			48,859		41,760		149,920		130,368
Rest of the World			7,614		11,021		20,280		23,688

	Total net revenues	$	479,375	$	444,344	$	1,419,444	$	1,186,254

Net revenues are attributed to countries based on the locations to where the Company ships.

One customer accounted for more than 10% of net revenues in the three months ended September 30, 2011. No single customer accounted for more than 10% of net revenues in the nine months ended September 30, 2011 and three and nine months ended September 30, 2010. Three distributors each accounted for 16%, 11% and 11% of accounts receivable at September 30, 2011. Two distributors each accounted for 14% and 12% of accounts receivable at December 31, 2010.

Locations of long-lived assets as of September 30, 2011 and December 31, 2010 were as follows:

Excluded from the table above are auction-rate securities of $2,251 as of both September 30, 2011 and December 31, 2010, which are included in other assets on the condensed consolidated balance sheets. Also excluded from the table above as of September 30, 2011 and December 31, 2010 are goodwill of $55,518 and $54,676, respectively, intangible assets, net of $12,161 and $17,603, respectively, and deferred income tax assets of $150,730 and $140,562, respectively.

sale, the Company is leasing back its corporate headquarters facility for a term of seven months at a rate of $247 per month with two three-month renewal options. The net book value of the properties sold was approximately $12,262 on the closing date. The sale qualified for minor sale leaseback accounting; therefore, the gain of $33,428 was recorded in the three months ended September 30, 2011, which is summarized below:

On February 15, 2011, the Company sold its DREAM business, including its French subsidiary, Digital Research in Electronics, Acoustics and Music SAS (DREAM), which sold custom-designed ASIC chips for karaoke and other entertainment machines, for $2,297. The Company recorded a gain of $1,882, which is reflected in gain on sale of assets in the condensed consolidated statements of operations.

On September 30, 2010, the Company completed the sale of its SMS business to INSIDE Contactless S.A. ("INSIDE"). Under the terms of the sale agreement, the Company transferred certain assets and employee liabilities to INSIDE in return for cash consideration of $37,000, subject to a working capital adjustment. Cash proceeds of $5,000 were deposited in escrow by INSIDE to secure the payment of potential post-sale losses. The Company may receive additional cash consideration of up to $15,000, if certain financial targets are met in 2011. The SMS business did not meet the financial targets for 2010, and the Company, therefore, did not receive any of the potential earnout payments tied to 2010 performance. The Company also entered into other ancillary agreements, including technology licensing and transition services for certain supply arrangements, testing, and engineering services. The Company recorded a loss on sale of $5,715 in the three months ended September 30, 2010, which is summarized below:

In connection with the sale, the Company transferred net assets totaling $32,420 to INSIDE.

The Company's East Kilbride, UK facility was included in the assets transferred to INSIDE, resulting in the complete liquidation of the Company's investment in this foreign entity and, as a result, the Company recorded a charge of $2,412 as a component of loss on sale related to the currency translation adjustment balance that was previously recorded within stockholders' equity.

As part of the SMS sale, the Company incurred direct and incremental selling costs of $3,882, which represented broker commissions and legal fees. The Company also incurred a transfer fee of $1,300 related to transferring a royalty agreement to INSIDE. These costs provided no benefit to the Company, and would not have been incurred if the Company were not selling the SMS business unit. Therefore, the direct and incremental costs associated with these services were recorded as part of the loss on sale. Atmel incurred other costs related to the sale of $2,701, which included performance-based bonuses of $533 for certain employees (no executive officers were included), related to the completion of the sale.

In connection with the SMS sale, Atmel and INSIDE entered into an escrow agreement, under which $5,000 of the sales price was deposited into escrow for a period of twenty months from the date of sale to secure potential losses. Upon termination of the escrow period, the escrow, less any validated and paid or outstanding claims for losses, will be released to Atmel. The escrow amount is not considered contingent consideration and, therefore, is included in the loss on sale recognized for the year ended December 31, 2010.

INSIDE entered into a three year supply agreement to source wafers from the fabrication facility in Rousset, France that the Company sold to LFoundry GmbH ("LFoundry") in the second quarter of 2010. Wafers purchased by INSIDE from LFoundry will reduce the Company's future commitment under its Wafer Supply Agreement with LFoundry.

The SMS sale also provides INSIDE a royalty-based, non-exclusive license to certain business-related intellectual property in order to support the current SMS business and future product development.

In connection with the SMS sale, the Company participated in INSIDE's preferred stock offering and invested $3,936 in INSIDE. This represented an approximate 3% ownership interest in INSIDE at the time of the investment. This equity investment does not provide the Company with any decision-making rights that are significant to the economic performance of INSIDE and the Company is shielded from economic losses and does not participate fully in INSIDE's residual economics. Accordingly, the Company has concluded that its interest in INSIDE is an interest in a variable interest entity ("VIE"). A VIE must be consolidated into the Company's financial statements if the Company is its primary beneficiary; a primary beneficiary means an entity having the power to direct the activities that most significantly impact the VIE's economic performance or having the obligation to absorb losses or the right to receive benefits of the VIE that could potentially be significant to the VIE. In determining whether the Company is the primary beneficiary of INSIDE, the Company identified INSIDE's significant activities and the parties holding power to direct such activities, determined INSIDE's equity, profit and loss participation, and reviewed INSIDE's funding and operating agreements. Based on the above factors, the Company concluded that it is not the primary beneficiary of INSIDE and hence does not consolidate INSIDE in its financial statements. The Company's maximum exposure related to INSIDE is not expected to be significantly in excess of the amounts recorded and the Company does not intend to provide any other support to the INSIDE in connection with the sale, financial or otherwise.

The sale of the SMS business unit did not qualify as discontinued operations as it did not meet the requirement to be considered a component of an entity.

On June 23, 2010, the Company closed the sale of its manufacturing operations in Rousset, France to LFoundry GmbH ("LFoundry"). Under the terms of the agreement, the Company transferred manufacturing assets and related liabilities (valued at $61,646) to the buyer in return for nominal cash consideration. In connection with the sale, the Company entered into certain other ancillary agreements, including a Manufacturing Services Agreement ("MSA") under which the Company will purchase wafers from LFoundry for four years following the closing on a "take-or-pay" basis. Upon closing of this

transaction, the Company recorded a loss on sale of $94,052 in the three months ended June 30, 2010, which is summarized in the following table:

As future wafer purchases under the MSA were negotiated at pricing above their fair value, the Company recorded a liability in conjunction with the sale, representing the present value of the unfavorable purchase commitment. The Company obtained current market prices for wafers from unaffiliated, well-known third party foundries, taking into consideration minimum volume requirements as specified in the contract, process technology, industry pricing trends and other factors. The Company determined that the difference between the contract prices and the market prices over the term of the agreement totaled $103,660 as of June 30, 2010. The present value of this liability totaled $92,417 (discount rate of 7%) and is included in loss on sale of assets in the consolidated statements of operations. The discount rate was determined based on publicly-traded debt for companies comparable to the Company. The present value of the liability will be recognized as a credit to cost of revenues over the term of the MSA as the wafers are purchased and the present value discount of $11,243 will be recognized as interest expense over the same term. In the three and nine months ended September 30, 2011 the Company reduced the liability by approximately $8,089 and $23,796, respectively, offset in part by interest expense of approximately $1,019 and $3,520, respectively.

The sale of the Rousset, France manufacturing operations resulted in the substantial liquidation of the Company's investment in its European manufacturing facilities, and accordingly, the Company recorded a gain of $97,367 related to currency translation adjustments that was previously recorded within stockholders' equity, as the Company concluded, based on guidance related to foreign currency, that it should similarly release all remaining related currency translation adjustments.

As part of the sale, the Company agreed to reimburse LFoundry for specified severance costs expected to be incurred subsequent to the sale. The Company entered into an escrow agreement in which the Company agreed to remit funds to LFoundry for the required benefits and payments to those employees who are determined to be part of the approved departure plan. The Company recorded a liability of $27,840 as a component of the loss on sale. This amount was paid to the escrow account in the first quarter of 2011.

As part of the sale of the manufacturing operations, the Company incurred $4,746 in software/hardware and consulting costs to set up a separate, independent IT infrastructure for LFoundry. These costs were incurred to facilitate, and as a condition of, the sale to LFoundry; the IT infrastructure provided no benefit to the Company and the costs related to those efforts would not have been incurred if the Company were not selling the manufacturing operations. Therefore, the direct and incremental consulting costs associated with these services were recorded as part of the loss on sale. The Company also incurred $1,597 of other costs related to the sale, including performance-based bonuses of $497 for non-executive Company employees responsible for assisting in the completion of the sale to LFoundry.

The Company also incurred direct and incremental consulting costs of $3,173, which represented broker commissions and legal fees associated with the sale to LFoundry.

The Company has retained a minority equity interest in the manufacturing operations (the "entity") sold to LFoundry. This equity interest provides limited protective rights to the Company, but no decision-making rights that are significant to the economic performance of the entity. The Company is an equity holder that is shielded from economic losses and does not participate fully in the entity's residual economics; accordingly, the Company has concluded that its interest in the entity is an interest in a VIE. In determining whether the Company is the primary beneficiary of LFoundry, it identified LFoundry's significant activities and the parties that have the power to direct them, determined LFoundry's equity, profit and loss participation, and reviewed LFoundry's funding and operating agreements. Based on the above factors, the Company determined that it is not the primary beneficiary of LFoundry and hence does not consolidate LFoundry in its financial statements. The Company's maximum exposure related to LFoundry is not expected to be significantly in excess of the amounts recorded and it does not intend to provide any other support to LFoundry, financial or otherwise.

The asset disposal group the Company initially expected to transfer to LFoundry was determined as of December 31, 2009 when the Company reclassified $83,260 in long-term assets as held for sale. Following negotiation with LFoundry, the Company determined that certain assets should instead remain with the Company. As a result, the Company reclassified property and equipment to held and used in the quarter ended June 30, 2010. In connection with this reclassification, the Company assessed the fair value of these assets to be retained and concluded that the fair value of the assets was lower than its carrying value less depreciation expense that would have been recognized had the assets been continuously classified as held and used. As a result, the Company recorded an asset impairment charge of $11,922 in the three months ended June 30, 2010.

The following table summarizes the activity related to the accrual for restructuring charges detailed by event for the periods from January 1, 2011 to September 30, 2011 and January 1, 2010 to September 30, 2010.

		January 1, 2011 Accrual		Charges		Payments			Currency Translation Adjustment		March 31, 2011 Accrual		Charges		Payments			Currency Translation Adjustment		June 30, 2011 Accrual		Charges		Payments			Foreign Exchange (Gain)/Loss			September 30, 2011 Accrual


		*(in thousands)*
Third quarter of 2002
	Termination of contract with supplier	$	1,592	$	-	$	-		$	-	$	1,592	$	-	$	-		$	-	$	1,592	$	-	$	-		$	-		$	1,592	(2)
Second quarter of 2008
	Employee termination costs		3		-		-			-		3		-		-			-		3		-		-			-			3
Third quarter of 2008
	Employee termination costs		460		-		-			16		476		-		-			11		487		-		(12	)		-			475
First quarter of 2009
	Other restructuring charges		136		-		(45	)		-		91		-		(46	)		-		45		-		(45	)		-			-
Second quarter of 2010
	Employee termination costs		1,286		21,210		(1,972	)		735		21,259		-		(3,428	)		430		18,261		-		(1,808	)		(1,166	)		15,287

Total 2011 activity		$	3,477	$	21,210	$	(2,017	)	$	751	$	23,421	$	-	$	(3,474	)	$	441	$	20,388	$	-	$	(1,865	)	$	(1,166	)	$	17,357	(1)

		January 1, 2010 Accrual		Charges		Payments			Currency Translation Adjustment			March 31, 2010 Accrual		Charges		Payments			Currency Translation Adjustment			June 30, 2010 Accrual		Charges		Payments			Currency Translation Adjustment		September 30, 2010 Accrual


		*(in thousands)*
Third quarter of 2002
	Termination of contract with supplier	$	1,592	$	-	$	-		$	-		$	1,592	$	-	$	-		$	-		$	1,592	$	-	$	-		$	-	$	1,592
Second quarter of 2008
	Employee termination costs		4		-		-			(1	)		3		-		-			-			3		-		-			-		3
Third quarter of 2008
	Employee termination costs		557		-		-			(37	)		520		-		-			(30	)		490		-		-			20		510
First quarter of 2009
	Employee termination costs		-		969		(398	)		-			571		11		(184	)		(39	)		359		6		(201	)		7		171
	Other restructuring charges		318		-		(46	)		-			272		-		(45	)		-			227		-		(45	)		-		182
Second quarter of 2010			-		-		-			-			-		-					-			-
	Employee termination costs		-		-		-			-			-		1,603		-			(76	)		1,527		1,074		(1,888	)		77		790

Total 2010 activity		$	2,471	$	969	$	(444	)	$	(38	)	$	2,958	$	1,614	$	(229	)	$	(145	)	$	4,198	$	1,080	$	(2,134	)	$	104	$	3,248

In the nine months ended September 30, 2011, the Company implemented cost reduction actions, primarily targeting reduction of labor costs. The Company did not incur restructuring charges in the three months ended September 30, 2011 and incurred restructuring charges of $21,210 in the nine months ended September 30, 2011 related to severance costs resulting from involuntary termination of 89 employees at the Company's Rousset, France subsidiary. Employee severance costs were recorded in accordance with the accounting standard related to costs associated with exit or disposal activities.

In the three and nine months ended September 30, 2010, the Company incurred restructuring charges of $1,080 and $3,663, respectively, related to severance costs resulting from involuntary termination of employees. Employee severance costs were recorded in accordance with the accounting standard related to costs associated with exit or disposal activities.

Basic net income per share is calculated by using the weighted-average number of common shares outstanding during that period. Diluted net income per share is calculated giving effect to all dilutive potential common shares that were outstanding during the period. Dilutive potential common shares consist of incremental common shares issuable upon exercise of stock options, upon vesting of restricted stock units, contingent issuable shares for all periods and accrued issuance of shares under employee stock purchase plan.

A reconciliation of the numerator and denominator of basic and diluted net income per share is provided as follows:

	Three Months Ended				Nine Months Ended

	September 30, 2011		September 30, 2010		September 30, 2011		September 30, 2010
	*(in thousands, except per share data)*
Net income	$	116,706	$	219,812	$	282,129	$	199,984

Weighted-average shares — basic		457,721		459,588		456,992		458,872
Incremental shares and share equivalents		9,141		8,585		10,048		7,073

Weighted-average shares — diluted		466,862		468,173		467,040		465,945

Net income per share:
Basic
Net income per share — basic	$	0.25	$	0.48	$	0.62	$	0.44

Diluted
Net income per share — diluted	$	0.25	$	0.47	$	0.60	$	0.43

The Company's anti-dilutive shares for the three and nine months ended September 30, 2011 and 2010 were not material.

Interest and other (expense) income, net, are summarized in the following table:

On October 6, 2011, Atmel completed its acquisition of Advanced Digital Design, S.A. ("ADD"). Management has not, as of the date of this Quarterly Report on Form 10-Q, determined the purchase price allocation for the acquisition. However, the substantial majority of the purchase price is expected to be allocated to goodwill and intangible assets. Additionally, the pro forma impact of the ADD acquisition on 2011 results is not expected to be material.

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

You should read the following discussion and analysis in conjunction with the Condensed Consolidated Financial Statements and related Notes thereto contained elsewhere in this Quarterly Report. The information contained in this Quarterly Report on Form 10-Q is not a complete description of our business or the risks associated with an investment in our common stock. We urge you to carefully review and consider the various disclosures made by us in this Quarterly Report and in our other reports filed with the SEC, including our Annual Report on Form 10-K for the year ended December 31, 2010. Atmel's annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and amendments to such reports are available, free of charge, through the "Investors" section of www.atmel.com. We make them available as soon as reasonably practicable after we electronically file such material with, or furnish it to, the SEC. The SEC also maintains a website located at www.sec.gov that contains Atmel's SEC filings.

You should read the following discussion in conjunction with our Condensed Consolidated Financial Statements and the related "Notes to Condensed Consolidated Financial Statements", and "Financial Statements and Supplementary Data" included in this Quarterly Report on Form 10-Q. This discussion contains forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934, particularly statements regarding our outlook for fiscal 2011, the expansion of the market for microcontrollers, revenues for our maXTouch products, our gross margins, anticipated revenues by geographic area, operating expenses and capital expenditures, cash flow and liquidity measures, factory utilization, new product introductions, access to independent foundry capacity and the quality issues associated with the use of third party foundries, the effects of our strategic transactions and restructuring efforts, estimates related to the amount and/or timing of the expensing of unearned stock-based compensation expense and similar estimates related to our performance-based restricted stock units, our expectations regarding tax matters, the outcome of litigation (and the expenses involved) in which we are involved, the effects of exchange rates and our ongoing efforts to manage exposure to exchange rate fluctuation. Our actual results could differ materially from those projected in

any forward-looking statements as a result of a number of factors, risks and uncertainties, including the risk factors set forth in this discussion and in Part II. Item 1A — Risk Factors, and elsewhere in this Quarterly Report on Form 10-Q. Generally, the words "may," "will," "could," "should," "would," "anticipate," "expect," "intend," "believe," "seek," "estimate," "plan," "view," "continue," the plural of such terms, the negatives of such terms, or other comparable terminology and similar expressions identify forward-looking statements. The information included in this Quarterly Report on Form 10-Q is provided as of the filing date with the Securities and Exchange Commission and future events or circumstances could differ significantly from the forward-looking statements included herein. Accordingly, we caution readers not to place undue reliance on such statements. Atmel undertakes no obligation to update any forward-looking statements in this Quarterly Report on Form 10-Q.

We are one of the world's leading designers, developers and suppliers of microcontrollers. We offer an extensive portfolio of capacitive touch products that integrate our microcontrollers with fundamental touch-focused intellectual property, or IP, we have developed. We also design and sell products that are complementary to our microcontroller business, including nonvolatile memory and Flash memory products, radio frequency and mixed-signal components and application specific integrated circuits. Our microcontrollers, which are self-contained computers-on-a-chip, and related products are used today in many of the world's leading smartphones, tablet devices and other consumer and industrial electronics to provide core functionality for touch sensing, security, wireless and battery management. Our semiconductors also enable applications in many other fields, such as smart-metering for utility monitoring and billing, buttons, sliders and wheels found on the touch panels of appliances, various aerospace, industrial and military products and systems, and electronic-based automotive components, like keyless ignition, access, engine control, lighting and entertainment systems, for standard and hybrid vehicles. Over the past several years, we successfully transitioned our business to a "fab-lite" model, lowering our fixed costs and capital investment requirements, and we currently own and operate just a single manufacturing facility.

Our net revenues totaled $479 million for the three months ended September 30, 2011, an increase of 8%, or $35 million, from $444 million in net revenues for the three months ended September 30, 2010. Net revenues increased to $1,419 million in the nine months ended September 30, 2011 from $1,186 million in the nine months ended September 30, 2010, an increase of $233 million or 20%. Revenues for the third quarter of 2011 increased primarily due to strong demand for our 32-bit ARM-based microcontrollers and maXTouch microcontrollers. Our Microcontroller segment revenues increased 18% to $301 million for the three months ended September 30, 2011 compared to revenues of $256 million for the three months ended September 30, 2010. Our Microcontroller segment revenues increased 49% to $897 million for the nine months ended September 30, 2011, compared to revenues of $604 million for the nine months ended September 30, 2010.

Gross margin rose to 50.1% and 51.0% for the three and nine months ended September 30, 2011, respectively, compared to 46.8% and 42.3% for the three and nine months ended September 30, 2010, respectively. Gross margin in the three and nine months ended September 30, 2011 was positively impacted by higher overall shipment levels, a more favorable mix of higher margin microcontroller products and continued cost reduction activities.

Provision for income taxes totaled $23 million and $52 million for the three and nine months ended September 30, 2011, respectively, compared to benefit from income taxes totaling $137 million and $174 million for the three and nine months ended September 30, 2010, respectively. The tax provision recorded for the three and nine months ended September 30, 2011 is primarily related to increased profitability from higher revenues and improved gross margin, which resulted in additional taxable income. While the provision for income taxes increased over the prior comparable period, we benefited from a global tax restructuring implemented on January 1, 2011, which allowed us to generate earnings in jurisdictions with lower tax rates.

Cash provided by operating activities was $178 million and $215 million for the nine months ended September 30, 2011 and 2010, respectively. Our cash, cash equivalents and short-term investments decreased to $483 million at September 30, 2011, compared to $521 million at December 31, 2010, primarily as a result of repurchases of common stock. Payments for capital expenditures totaled $75 million for the nine months ended September 30, 2011, compared to $56 million for the nine months ended September 30, 2010. We repurchased approximately 14 million shares of our common stock in the nine months ended September 30, 2011, using approximately $169 million.

On August 30, 2011, we completed the sale of our San Jose corporate headquarters and adjacent parcels of land to Ellis Partners LLC for an aggregate sale price of $48.5 million and recorded a gain of $33 million.

On August 30, 2011, we entered into a ten year lease for a new corporate headquarters located at 1600 Technology Drive in San Jose, California. We expect to commence occupancy of the premises in the second quarter of 2012.

Our net revenues totaled $479 million for the three months ended September 30, 2011, an increase of 8%, or $35 million, from $444 million in net revenues for the three months ended September 30, 2010. Net revenues increased to $1,419 million in the nine months ended September 30, 2011 from $1,186 million in the nine months ended September 30, 2010, an increase of $233 million or 20%. Revenues for the third quarter of 2011 increased primarily due to strong demand for our 32-bit ARM-based microcontrollers, and our maXTouch microcontrollers. Our Microcontroller segment revenues increased 18% to $301 million for the three months ended September 30, 2011 compared to revenues of $256 million for the three months ended September 30, 2010. Our Microcontroller segment revenues increased 49% to $897 million for the nine months ended September 30, 2011 compared to revenues of $604 million for the nine months ended September 30, 2010.

Net revenues denominated in Euros were 19% and 20% for the three months ended September 30, 2011 and 2010, respectively, and 21% and 20% in the nine months ended September 30, 2011 and 2010, respectively. Average exchange rates utilized to translate foreign currency revenues and expenses in Euros were approximately 1.43 and 1.27 Euros to the dollar in the three months ended September 30, 2011 and 2010, respectively, and 1.40 and 1.32 Euros to the dollar in the nine months ended September 30, 2011 and 2010. Our net revenues for the three months ended September 30, 2011 would have been approximately $10 million lower had the average exchange rate in the current quarter remained the same as the average exchange rate in effect in the three months ended September 30, 2010. Our net revenues for the nine months ended September 30, 2011 would have been approximately $14 million lower had the average exchange rate in the nine months ended September 30, 2011 remained the same as the rate in effect in the nine months ended September 30, 2010.

Microcontroller segment net revenues increased 18% to $301 million for the three months ended September 30, 2011 from $256 million for the three months ended September 30, 2010. Microcontroller segment net revenues increased 49% to $897 million for the nine months ended September 30, 2011 from $604 million for the nine months ended September 30, 2010. Revenues for the three and nine months ended September 30, 2011 increased primarily due to strong demand for our 32-bit ARM-based microcontrollers and maXTouch microcontrollers. Microcontroller net revenues represented 63% of total net revenues for both the three and nine months ended September 30, 2011.

Nonvolatile Memory segment net revenues remained flat at $66 million for both the three months ended September 30, 2011 and the three months ended September 30, 2010. Nonvolatile Memory segment net revenues decreased 8% to $201 million for the nine months ended September 30, 2011 from $218 million for the nine months ended September 30, 2010. This decrease is primarily related to lower shipments of Serial EE memory and BIOS Flash products, which decreased 10% and 13%, respectively, for the three months ended September 30, 2011 over the same period last year and decreased 23% and increased 5%, respectively, for the nine months ended September 30, 2011 over the same period last year. While demand for memory products remained strong during the three and nine months ended September 30, 2011, shipments of memory products (primarily Serial EE family products) were unfavorably impacted by limited production capacity resulting from wafer allocation to our microcontroller customers to satisfy the significant increase in demand in that segment.

RF and Automotive segment net revenues increased 15% to $52 million for the three months ended September 30, 2011 from $45 million for the three months ended September 30, 2010. RF and Automotive segment net revenues increased 14% to $155 million for the nine months ended September 30, 2011 from $137 million for the nine months ended September 30, 2010. This increase was primarily related to improved demand in automotive markets for the three and nine months ended September 30, 2011. Our identification and high voltage products increased 59% and 26%, respectively, for the three months ended September 30, 2011 over the same period last year and increased 77% and 22%, respectively, for the nine months ended September 30, 2011 over the same period last year, driven by higher shipments for vehicle networking products (LIN/IVN applications). In addition, revenues increased 8% and 23% for foundry products sourced from our Colorado Springs fabrication facility for the three and nine months ended September 30, 2011, respectively.

ASIC segment net revenues decreased 22% to $60 million for the three months ended September 30, 2011 from $77 million for the three months ended September 30, 2010. ASIC segment net revenues decreased 27% to $166 million for the nine months ended September 30, 2011 from $228 million for the nine months ended September 30, 2010. The decrease in revenues for the ASIC segment primarily reflects the impact of the sale of the SMS business which occurred in the second half of 2010. ASIC segment net revenues were also unfavorably affected by limited production capacity, resulting from wafer allocation to support increased demand for our microcontroller customers in the three and nine months ended September 30, 2011. Aerospace business revenues which are also included within this segment increased approximately 105% and 46% for the three and nine months ended September 30, 2011, respectively, compared to the same period in 2010, primarily due to space and military aero products.

Our net revenues by geographic areas in the three and nine months ended September 30, 2011 compared to the three and nine months ended September 30, 2010 are summarized as follows (revenues are attributed based on the locations to where we ship products; see Note 9 of Notes to Condensed Consolidated Financial Statements for further discussion):

Net revenues outside the United States accounted for 88% and 86% of our net revenues for the three and nine months ended September 30, 2011, respectively, compared to 84% for both the three and nine months ended September 30, 2010. Net revenues through distribution channels totaled 58% and 59% for the three and nine months ended September 30, 2011, respectively, compared to 53% and 54% for the three and nine months ended September 30, 2010, respectively.

Our net revenues in Asia increased $43 million, or 17%, for the three months ended September 30, 2011, compared to the three months ended September 30, 2010 and increased by $215 million, or 34% in the nine months ended September 30, 2011, compared to the nine months ended September 30, 2010. The increase in this region for the three and nine months ended September 30, 2011, compared to the three and nine months ended September 30, 2010 was primarily due to higher shipments of our microcontroller products as a result of improved demand in customer end markets for smartphone and other consumer-based products. Net revenues for the Asia region were 63% and 60% of total net revenues in the three and nine months ended September 30, 2011, respectively, compared to 58% and 54%, for the three and nine months ended September 30, 2010, respectively.

Our net revenues in Europe increased $7 million, or 6%, for the three months ended September 30, 2011, compared to the three months ended September 30, 2010 and increased by $24 million, or 7% for the nine months ended September 30, 2011, compared to the nine months ended September 30, 2010. The increase in this region for the three and nine months ended September 30, 2011, compared to the three and nine months ended September 30, 2010, resulted primarily from improved automotive and industrial markets, partially offset by the sale of our SMS business and declining demand for our Cell Based Integrated Circuit, or CBIC, products. Net revenues for the Europe region were 24% and 25% of total net revenues for the three and nine months ended September 30, 2011, respectively, compared to 24% and 28% of total net revenues for the three and nine months ended September 30, 2010, respectively.

Our net revenues in the United States region decreased by $12 million, or 17%, for the three months ended September 30, 2011, compared to the three months ended September 30, 2010, and decreased by $2 million, or 1% for the nine months ended September 30, 2011, compared to the nine months ended September 30, 2010. The decrease in this region for the three months ended September 30, 2011, compared to the three months ended September 30, 2010 was a result of lower demand for industrial and consumer-based products. The decrease in this region for the nine months ended September 30, 2011, compared to the nine months ended September 30, 2010 was a result of lower demand for industrial and consumer-based products partly offset by higher demand for smart metering products. Net revenues for the United States region were 12% and 14% of total net revenues for the three and nine months ended September 30, 2011, respectively, compared to 16% of total net revenues for both the three and nine months ended September 30, 2010.

We expect that net revenues in the Asia region will continue to grow more rapidly than other regions in the future driven by the growth of the electronics industry within Asia and the continued outsourcing of production to that region by large North American and European original equipment manufacturers (OEMs).

In the nine months ended September 30, 2011, we manufactured approximately 51% of our products in our own wafer fabrication facilities compared to 73% for the nine months ended September 30, 2010, with the decline resulting primarily from the sale of our Rousset, France fabrication facility in the second quarter of 2010.

Our cost of revenues includes the costs of wafer fabrication, assembly and test operations, inventory write down, royalty expense, freight costs and stock compensation expense. Our gross margin as a percentage of net revenues fluctuates depending on product mix, manufacturing yields, utilization of manufacturing capacity, and average selling prices, among other factors.

Research and development ("R&D") expenses increased 14%, or $8 million, to $64 million in the three months ended September 30, 2011 from $57 million in the three months ended September 30, 2010. R&D expenses increased 8%, or $15 million, to $192 million in the nine months ended September 30, 2011 from $177 million in the nine months ended September 30, 2010.

R&D expenses in the three months ended September 30, 2011, compared to the three months ended September 30, 2010, increased primarily due to higher employee payroll related expenses of $6 million as a result of increased headcount, decreased grant benefit of $3 million and increased stock-based compensation expense of $1 million, partly offset by a decrease of $1 million in outside services and a decrease of $2 million in masks and foundry wafer expense. Including items described above, the three months ended September 30, 2011 were unfavorably affected by approximately $4 million due to foreign exchange rate fluctuations, compared to rates in effect for the three months ended September 30, 2010.

R&D expenses in the nine months ended September 30, 2011, compared to the nine months ended September 30, 2010, increased primarily due to increased employee payroll related expenses of $13 million as a result of increased headcount, decreased grant benefit of $5 million and increased stock-based compensation expense of $2 million, partly offset by decreases of $2 million related to outside services and $5 million related to masks and foundry wafer expense. Including items described above, the nine months ended September 30, 2011 were unfavorably affected by approximately $6 million due to foreign exchange rate fluctuations, compared to rates in effect for the nine months ended September 30, 2010.

As a percentage of net revenues, R&D expenses totaled 13% and 14% for the three and nine months ended September 30, 2011, respectively, compared to 13% and 15% for the three and nine months ended September 30, 2010, respectively.

Our internally developed process technologies are an important part of new product development. We continue to invest in developing process technologies emphasizing wireless, high voltage, analog, digital, and embedded memory manufacturing processes. Our technology development groups, in partnership with certain external foundries, are developing new and enhanced fabrication processes, including architectures utilizing advanced processes at the 65 nanometer line width node. We believe this investment allows us to bring new products to market faster, add innovative features and achieve performance improvements. We believe that continued strategic investments in process technology and product development are essential for us to remain competitive in the markets we serve.

Selling, general and administrative ("SG&A") expenses increased 4%, or $3 million, to $68 million in the three months ended September 30, 2011 from $66 million in the three months ended September 30, 2010. SG&A expenses increased 8%, or $15 million, to $210 million in the nine months ended September 30, 2011 from $195 million in the nine months ended September 30, 2010.

SG&A expenses increased in the three months ended September 30, 2011, primarily due to increased stock-based compensation expense of $3 million and legal fees of $1 million, partly offset by decreased employee payroll expense of $2 million. Including the items described above, SG&A expenses for the three months ended September 30, 2011, were unfavorably affected by approximately $2 million due to foreign exchange rate fluctuations, compared to rates in effect for the three months ended September 30, 2010.

SG&A expenses increased in the nine months ended September 30, 2011, primarily due to increased employee payroll expense related to increased headcount of $8 million, increased travel and training expenses of $4 million, increased stock-based compensation expense of $2 million and increased expenses related to licenses and other fees of $1 million. Including the items described above, SG&A expenses for the nine months ended September 30, 2011, were unfavorably affected by approximately $3 million due to foreign exchange rate fluctuations, compared to rates in effect and the related expenses for the nine months ended September 30, 2010.

As a percentage of net revenues, SG&A expenses totaled 14% and 15% of net revenues for the three and nine months ended September 30, 2011, respectively, compared to 15% and 16% for the three and nine months ended September 30, 2010, respectively.

We issue primarily restricted stock units to our employees as equity compensation. Employees may also participate in an Employee Stock Purchase Program that offers the ability to purchase stock through payroll withholdings at a discount to market price.

Stock-based compensation cost for stock options is based on the fair value of the award at the measurement date (grant date). The compensation amount for those options is calculated using a Black-Scholes option valuation model. For restricted stock unit awards, the compensation amount is determined based upon the market price of our common stock on the grant date. Stock-based compensation for restricted stock units is recognized as expense over the applicable vesting terms for each employee receiving restricted stock units.

The recognition as expense of the fair value of performance-related stock-based awards is determined based upon management's estimate of the probability and timing for achieving the associated performance criteria, utilizing the fair value of the common stock on the grant date. Stock-based compensation for performance-related awards is recognized over the estimated performance period, which may vary from period to period based upon management's estimates of the timing to achieve the related performance goals. These awards vest once the performance criteria are met.

The following table summarizes the distribution of stock-based compensation expense related to employee stock options, restricted stock units and employee stock purchases for the three and nine months ended September 30, 2011 and 2010:

The table above excludes stock-based compensation (credit) of $0 and $(3) million for the three and nine months ended September 30, 2010, respectively, related to the Quantum Research Group Ltd. acquisition, which are classified within acquisition-related charges in the condensed consolidated statements of operations.

Non-employee stock-based compensation expense for the three and nine months ended September 30, 2011 and 2010 was not material.

In the three months ended June 30, 2011, 8 million performance-based restricted stock units issued under our 2008 Incentive Plan (the "2008 Plan") vested upon board of director approval on May 23, 2011 as a result of us achieving all of the performance criteria as of March 31, 2011. A total of 5 million shares were issued to participants, net of withholding taxes under the 2008 Plan. These vested performance-based restricted stock units had a weighted average value of $14 per share on the vesting date. We recorded total stock-based compensation expense related to the performance-based restricted stock units granted under the 2008 Plan of $7 million in the nine months ended September 30, 2011, and $4 million and $21 million in the three and nine months ended September 30, 2010, respectively. There were no charges under the 2008 Plan for the three months ended September 30, 2011 as the plan concluded in May 2011.

In May 2011, we adopted the 2011 Long-Term Performance-Based Incentive Plan (the "2011 Plan"), which provides for the grant of restricted stock units to eligible employees; vesting of these restricted stock units is subject to the satisfaction of specified performance metrics over the designated performance periods. The performance periods for the 2011 Plan run from January 1, 2011 through December 31, 2013, consisting of three one-year performance periods (calendar years 2011, 2012 and 2013) and a three-year cumulative performance period. We issued 3 million performance-based restricted stock units in May 2011 under the 2011 Plan and recorded stock-based compensation expense related to these performance-based restricted stock units of $4 million in both the three and nine months ended September 30, 2011.

The 2011 Plan performance metrics include ranking of revenue growth relative to a semiconductor peer group or a microcontroller peer group, as determined by the Compensation Committee. In addition, in order for a participant to receive credit for a performance period we must achieve a minimum operating margin during such performance period, measured on a pro forma basis, subject to adjustment by the Compensation Committee. We re-evaluate estimated achievement of performance metrics each quarter in determining stock-based compensation expense for performance share plans.

For the three months ended September 30, 2011, Microcontroller segment operating income was $70 million, compared to $58 million for three months ended September 30, 2010. For the nine months ended September 30, 2011, Microcontroller segment operating income was $219 million, compared to

$94 million for nine months ended September 30, 2010. These period over period increases resulted principally from significantly higher shipment levels, lower manufacturing costs on a per unit basis from higher manufacturing volumes along with a more favorable mix of higher margin products included in net revenues within this segment.

For both the three months ended September 30, 2011 and 2010, Nonvolatile Memory segment operating income was $15 million. For the nine months ended September 30, 2011, Nonvolatile Memory segment operating income was $45 million, compared to $27 million for nine months ended September 30, 2010. Despite reduced revenues, operating results in this segment improved compared to the same period last year as a result of lower production costs related to improved factory loading.

For both the three months ended September 30, 2011 and 2010, RF and Automotive segment operating income was $5 million. For the nine months ended September 30, 2011, RF and Automotive segment operating income was $16 million, compared to $7 million for the nine months ended September 30, 2010. These period over period increases resulted primarily from increased shipments and lower manufacturing costs on a per unit basis from higher manufacturing volumes.

For the three months ended September 30, 2011, ASIC segment operating income was $17 million, compared to $8 million for the three months ended September 30, 2010. For the nine months ended September 30, 2011, ASIC segment operating income was $42 million, compared to $1 million for the nine months ended September 30, 2010. Despite reduced revenues, operating results in this segment improved significantly, compared to the same period last year as a result of improved pricing conditions and lower production costs associated with improved factory loading.

We recorded total acquisition-related charges primarily related to the amortization of intangible assets related to the acquisition of Quantum Research Group Ltd in 2008 of $1 million for both the three months ended September 30, 2011 and 2010, respectively, and $3 million and $0.4 million in the nine months ended September 30, 2011 and 2010, respectively. The net acquisition-related charge in the nine months ended September 30, 2010 included a stock-based compensation credit of $3 million. We recorded amortization of intangible assets associated with customer relationships, developed technology, trade name, non-compete agreements and backlog. We estimate charges related to amortization of intangible assets related to the acquisition of Quantum will be approximately $1 million for the remainder of 2011.

On August 30, 2011, we completed the sale of our San Jose corporate headquarters and adjacent parcels of land to Ellis Partners LLC for an aggregate purchase price of $48.5 million. Concurrent with the sale, we are leasing back our corporate headquarters facility for a term of seven months at a rate of $0.2 million per month with two three-month renewal options. The net book value of the properties sold was approximately $12 million on the closing date. The sale qualified for minor sale leaseback accounting;

therefore, the gain of $33 million was recorded in the three months ended September 30, 2011, which is summarized below:

On February 15, 2011, we sold our DREAM business, including our French subsidiary, Digital Research in Electronics, Acoustics and Music SAS (DREAM), which sold custom-designed ASIC chips for karaoke and other entertainment machines, for $2 million. We recorded a gain of $2 million, which is reflected in gain on sale of assets in the condensed consolidated statements of operations.

On September 30, 2010, we completed the sale of our SMS business to INSIDE Contactless S.A. ("INSIDE"). Under the terms of the sale agreement, we transferred certain assets and employee liabilities to INSIDE in return for cash consideration of $37 million, subject to a working capital adjustment. Cash proceeds of $5 million were deposited in escrow by INSIDE to secure the payment of potential post-sale losses. We may receive additional cash consideration of up to $15 million, if certain financial targets are met in 2011. The SMS business did not meet the financial targets for 2010; therefore, we did not receive any of the potential earnout payments tied to 2010 performance. We also entered into other ancillary agreements, including technology licensing and transition services for certain supply arrangements, testing, and engineering services. We recorded a loss on sale of $6 million in the three months ended September 30, 2010, which is summarized below:

In connection with the sale, we transferred net assets totaling $32 million to INSIDE.

Our East Kilbride, UK facility was included in the assets transferred to INSIDE, resulting in the complete liquidation of our investment in this foreign entity. As a result, we recorded a charge of $2 million as a component of the loss on sale related to the currency translation adjustment balance that was previously recorded within stockholders' equity.

As part of the SMS sale, we incurred direct and incremental selling costs of $4 million, which represented broker commissions and legal fees. We also incurred a transfer fee of $1 million related to transferring a royalty agreement to INSIDE. These costs provided no benefit to us, and would not have been incurred if we were not selling the SMS business unit. Therefore, the direct and incremental costs associated with these services were recorded as part of the loss on sale. We also incurred other costs related to the sale of $3 million, which included performance-based bonuses of $0.5 million for certain employees (no executive officers were included), related to the completion of the sale.

INSIDE has entered into a three year supply agreement to purchase wafers from LFoundry, the entity that purchased our manufacturing operations in Rousset, France in the second quarter of 2010. Wafers that INSIDE purchases from LFoundry will reduce future commitment under our wafer supply agreement with LFoundry.

We also agreed to provide INSIDE a royalty-based, non-exclusive license to certain SMS business-related intellectual property that we retained in order to support the current SMS business and future product development.

On June 23, 2010, we closed the sale of our manufacturing operations in Rousset, France to LFoundry GmbH ("LFoundry"). Under the terms of the agreement, we transferred manufacturing assets and related liabilities (valued at $62 million) to LFoundry in return for nominal cash consideration. In connection with the sale, we entered into certain other ancillary agreements, including a Manufacturing Services Agreement ("MSA") under which we agreed to purchase wafers from LFoundry for four years following the closing on a "take-or-pay" basis. Upon closing of this transaction, we recorded a loss on sale of $94 million in the three months ended June 30, 2010, which is summarized in the following table:

As future wafer purchases under the MSA were negotiated at pricing above their fair value, we recorded a liability in conjunction with the sale, representing the present value of the unfavorable purchase commitment. We obtained current market prices for wafers from unaffiliated, well-known third party foundries, taking into consideration minimum volume requirements as specified in the contract, process technology, industry pricing trends and other factors. We determined that the difference between the contract prices and the market prices over the term of the agreement totaled $104 million as of June 30, 2010. The present value of this liability totaled $92 million (discount rate of 7%) and is included in loss on sale of assets in the consolidated statements of operations. The discount rate was determined based on publicly-traded debt for companies comparable to us. The gross value of the MSA will be recognized as a credit to cost of revenues over the term of the MSA as the wafers are purchased and the present value discount of $11 million will be recognized as interest expense over the same term. In the three and nine months ended September 30, 2011 we reduced the liability by approximately $8 million and $24 million, respectively, offset in part by interest expense of approximately $1 million and $4 million, respectively.

The sale of the Rousset, France manufacturing operations resulted in the substantial liquidation of our investment in our European manufacturing facilities, and accordingly, we recorded a gain of $97 million related to currency translation adjustments that was previously recorded within stockholders' equity, as we concluded, based on guidance related to foreign currency, that we should similarly release all remaining related currency translation adjustments.

As part of the sale, we agreed to reimburse LFoundry for specified severance costs expected to be incurred subsequent to the sale. We entered into an escrow agreement in which we agreed to remit funds to LFoundry for the required benefits and payments to those employees who are determined to be part of the approved departure plan. We recorded a liability of $28 million as a component of the loss on sale, which represented our best estimate of the severance amount payable under this arrangement. This amount was paid to the escrow account in the first quarter of 2011.

As part of the sale of the manufacturing operations, we incurred $5 million in software/hardware and consulting costs to set up a separate, independent IT infrastructure for LFoundry. These costs were incurred to facilitate, and as a condition of, the sale to LFoundry; the IT infrastructure provided no benefit to us and the costs related to those efforts would not have been incurred if we were not selling the manufacturing operations. Therefore, the direct and incremental consulting costs associated with these services were recorded as part of the loss on sale. We also incurred $2 million of other costs related to the sale, including performance-based bonuses of $0.5 million for non-executive Company employees responsible for assisting in the completion of the sale to LFoundry.

We also incurred direct and incremental consulting costs of $3 million, which represented broker commissions and legal fees associated with the sale to LFoundry.

The asset disposal group we initially expected to transfer to LFoundry was determined as of December 31, 2009 when we reclassified $83 million in long-term assets as held for sale. Following negotiation with LFoundry, we determined that certain assets should instead remain with us. As a result, we reclassified property and equipment to held and used in the quarter ended June 30, 2010. In connection with this reclassification, we assessed the fair value of these assets to be retained and concluded that the fair value of the assets was lower than its carrying value less depreciation expense that would have been recognized had the assets been continuously classified as held and used. As a result, we recorded an asset impairment charge of $12 million in the three months ended June 30, 2010.

	January 1, 2011 Accrual		Charges		Payments			Currency Translation Adjustment		March 31, 2011 Accrual		Charges		Payments			Currency Translation Adjustment		June 30, 2011 Accrual		Charges		Payments			Foreign Exchange (Gain)/Loss			September 30, 2011 Accrual


	*(in thousands)*
Third quarter of 2002 Termination of contract with supplier	$	1,592	$	-	$	-		$	-	$	1,592	$	-	$	-		$	-	$	1,592	$	-	$	-		$	-		$	1,592
Second quarter of 2008 Employee termination costs		3		-		-			-		3		-		-			-		3		-		-			-			3
Third quarter of 2008 Employee termination costs		460		-		-			16		476		-		-			11		487		-		(12	)		-			475
First quarter of 2009 Other restructuring charges		136		-		(45	)		-		91		-		(46	)		-		45		-		(45	)		-			-
Second quarter of 2010 Employee termination costs		1,286		21,210		(1,972	)		735		21,259		-		(3,428	)		430		18,261		-		(1,808	)		(1,166	)		15,287

Total 2011 activity	$	3,477	$	21,210	$	(2,017	)	$	751	$	23,421	$	-	$	(3,474	)	$	441	$	20,388	$	-	$	(1,865	)	$	(1,166	)	$	17,357

		January 1, 2010 Accrual		Charges		Payments			Currency Translation Adjustment			March 31, 2010 Accrual		Charges		Payments			Currency Translation Adjustment			June 30, 2010 Accrual		Charges		Payments			Currency Translation Adjustment		September 30, 2010 Accrual


		*(in thousands)*
Third quarter of 2002 Termination of contract with supplier		$	1,592	$	-	$	-		$	-		$	1,592	$	-	$	-		$	-		$	1,592	$	-	$	-		$	-	$	1,592
Second quarter of 2008 Employee termination costs			4		-		-			(1	)		3		-		-			-			3		-		-			-		3
Third quarter of 2008 Employee termination costs			557		-		-			(37	)		520		-		-			(30	)		490		-		-			20		510
First quarter of 2009 Employee termination costs			-		969		(398	)		-			571		11		(184	)		(39	)		359		6		(201	)		7		171
	Other restructuring charges		318		-		(46	)		-			272		-		(45	)		-			227		-		(45	)		-		182
Second quarter of 2010			-		-		-			-			-		-					-			-
	Employee termination costs		-		-		-			-			-		1,603		-			(76	)		1,527		1,074		(1,888	)		77		790

Total 2010 activity		$	2,471	$	969	$	(444	)	$	(38	)	$	2,958	$	1,614	$	(229	)	$	(145	)	$	4,198	$	1,080	$	(2,134	)	$	104	$	3,248

In the nine months ended September 30, 2011, we implemented cost reduction actions, primarily targeting reduction of labor costs. We incurred no restructuring charges in the three months ended September 30, 2011 and incurred $21 million in restructuring charges in the nine months ended September 30, 2011 related to severance costs resulting from involuntary termination of 89 employees at our Rousset, France subsidiary. Employee severance costs were recorded in accordance with the accounting standard related to costs associated with exit or disposal activities.

In the three and nine months ended September 30, 2010, we incurred restructuring charges of $1 million and $4 million, respectively, related to severance costs resulting from involuntary termination of employees. Employee severance costs were recorded in accordance with the accounting standard related to costs associated with exit or disposal activities.

Interest and other (expense) income, net, resulted in an expense of $(0.3) million in the three months ended September 30, 2011, compared to an income of $6 million in the three months ended September 30, 2010, and an income of $1 million in the nine months ended September 30, 2011, compared to an income of $13 million in the nine months ended September 30, 2010. These changes are primarily due to our foreign exchange exposures from intercompany balances between our subsidiaries compared to the three and nine months ended September 30, 2010, offset by lower interest expense for the three and nine months ended September 30, 2011. We continue to have unhedged exposures to exchange rate fluctuations of foreign currency balances of assets and liabilities, and may incur further gains or losses in the future.

We recorded a provision for income taxes of $(23) million and $(52) million for the three and nine months ended September 30, 2011, respectively, compared to income tax benefit of $137 million and $174 million for the three and nine months ended September 30, 2010, respectively.

Our effective tax rate for the three and nine months ended September 30, 2011 was 17% and 16%, respectively, compared to the effective tax rate for the three and nine months ended September 30, 2010 of (164)% and (658)%, respectively. Our effective tax rate for the three and nine months ended September 30, 2011 is lower than the statutory federal income tax rate of 35% primarily due to tax rate benefits of certain earnings from operations in jurisdictions with lower tax rates than the US. These benefits result primarily from a global tax restructuring program implemented in 2011.

Our effective tax rate for the three and nine months ended September 30, 2010 was substantially lower than the statutory federal income tax rate of 35% primarily due to IRS settlement for years 2000-2003, the recognition of certain refundable R&D credits and a net discrete income tax benefit associated with the sale of our wafer manufacturing operations in Rousset, France, as management determined that this benefit will more likely than not be realized.

Our global tax restructuring, implemented on January 1, 2011, was designed to more effectively align our corporate structure and transaction flows with changes in our geographic business operations.

To reflect the shift of our business and revenue to the Asia/Pacific region, our tax restructuring included the implementation of a cost sharing arrangement designed to enhance cost-efficiencies resulting from operations transitioning to countries such as Malaysia and the Philippines. In connection with those efforts, we also implemented several functional changes to our internal organization, including the creation of new legal entities, realignment of existing legal entities, intercompany sales of intellectual property and non-US inventory and fixed assets across different tax jurisdictions, elimination of previous Switzerland based intellectual property licensing and royalty arrangements, and creation of new cost-sharing and intellectual property royalty agreements between our U.S. and Bermuda entities.

At September 30, 2011 and December 31, 2010, we had $68 million and $64 million of unrecognized tax benefits, respectively.

It is reasonably possible that the total amount of unrecognized tax benefits will increase by $5 million to $10 million over the next 12 months. Such changes could occur due to additional unrecognized tax benefits established in the normal course of business. We do not expect a material change in unrecognized tax benefits during the remainder of the year ending December 31, 2011. The calculation of unrecognized tax benefits involves dealing with uncertainties in the application of complex global tax regulations. We regularly assess our tax positions in light of legislative, bilateral tax treaty, regulatory and judicial developments in the countries in which we do business.

At September 30, 2011, we had $483 million of cash, cash equivalents and short-term investments, compared to $521 million at December 31, 2010. Our current ratio, calculated as total current assets divided by total current liabilities, was 3.06 at September 30, 2011, compared to 2.59 at December 31, 2010. Working capital, calculated as total current assets less total current liabilities, increased to $820 million at September 30, 2011, compared to $708 million at December 31, 2010. Cash provided by operating activities was $178 million and $215 million for the nine months ended September 30, 2011 and 2010, respectively. Although net income increased, cash provided by operating activities decreased due to cash used for higher receivables and inventory balances necessary to support higher revenue levels in 2011. Capital expenditures totaled $75 million and $56 million for the nine months ended September 30, 2011 and 2010, respectively.

Net cash provided by operating activities was $178 million for the nine months ended September 30, 2011, compared to $215 million for the nine months ended September 30, 2010. Net cash provided by operating activities for the nine months ended September 30, 2011 was primarily due to improved operating results, adjusting net income of $282 million to exclude certain non-cash charges for depreciation and amortization of $56 million and stock-based compensation charges of $50 million, partly offset by excess tax benefit on stock-based compensation of $22 million and a gain on sale of assets of $36 million. Operating cash flows were reduced by increased inventory of $104 million during the nine months ended September 30, 2011.

Accounts receivable increased by 5% or $12 million to $244 million at September 30, 2011, from $232 million at December 31, 2010. The average days of accounts receivable outstanding ("DSO") was 46 days at both September 30, 2011 and December 31, 2010. Inventories increased by using $104 million of operating cash flows for the nine months ended September 30, 2011, compared to $11 million for the nine months ended September 30, 2010. Our days of inventory increased to 145 days at September 30, 2011 from 109 days at December 31, 2010. We increased inventory levels during the period primarily to support higher increased demand within our Microcontroller business and to enable us to deliver products with reduced lead time. Inventories consist of raw wafers, purchased foundry wafers, work-in-process and finished units.

Net cash used in investing activities was $15 million for the nine months ended September 30, 2011, compared to $31 million for the nine months ended September 30, 2010. For the nine months ended September 30, 2011, we paid $75 million for acquisitions of fixed assets and $3 million for intangible assets, which were partially offset by net proceeds of $15 million from the sale of short-term investments and net proceeds of $47 million from the sale of fixed assets. In the nine months ended September 30, 2010, we paid $56 million for the acquisitions of fixed assets and $3 million for intangible assets, offset in part by net proceeds of $19 million from the sale of our SMS business and net proceeds of $17 million from the sale of short-term investments.

Net cash used in financing activities was $185 million and $44 million for the nine months ended September 30, 2011 and 2010, respectively. Proceeds from the issuance of common stock totaled $27 million and $13 million for the nine months ended September 30, 2011 and 2010, respectively. We utilized $169 million in cash to repurchase 14 million shares of our common stock in the first nine months of 2011, following the authorizations by our Board of Directors in August 2010 and May 2011 to repurchase up to a total of $500 million of our common stock, depending upon market conditions and other factors. As of September 30, 2011, approximately $242 million of the authorized $500 million remained available to repurchase our common stock. In the nine months ended September 30, 2010, we utilized $41 million in cash to repurchase 7 million shares of our common stock.

We believe our existing balances of cash, cash equivalents and short-term investments, together with anticipated cash flow from operations, available equipment lease financing, and other short-term and medium-term bank borrowings, if necessary, will be sufficient to meet our liquidity and capital requirements over the next twelve months.

During the next twelve months, we expect our operations to continue generating positive cash flow. However, a portion of cash balances may be used to make capital expenditures, repurchase common stock, or make acquisitions. Remaining debt obligations totaled $5 million at September 30, 2011. We made $75 million in cash payments for capital equipment in the nine months ended September 30, 2011, and we expect total cash payments for capital expenditures of $10 million to $15 million in the fourth

quarter of 2011. We paid $7 million in restructuring payments, primarily for employee severance, in the nine months ended September 30, 2011. We expect to pay out approximately $16 million in additional restructuring and disposition related payments over the next twelve months. During 2011 and in future years, our ability to make necessary capital investments or strategic acquisitions will depend on our ability to continue to generate sufficient cash flow from operations and on our ability to obtain adequate financing if necessary. We believe we have sufficient working capital to fund operations with $483 million in cash, cash equivalents and short-term investments as of September 30, 2011 together with expected future cash flows from operations. Cash flows from operations totaled $178 million for the nine months ended September 30, 2011.

The following table describes new material commitments to settle contractual obligations in cash as of September 30, 2011 (see Note 6 of Notes to Condensed Consolidated Financial Statements for further discussion):

We entered into a ten year lease for our new corporate headquarters on August 30, 2011. The table above provides anticipated minimum commitments for that ten-year period.

See the paragraph under the heading "Guarantees" in Note 6 of Notes to Condensed Consolidated Financial Statements for a discussion of off-balance sheet arrangements.

See Note 1 of Notes to Condensed Consolidated Financial Statements for information regarding recent accounting pronouncements.

Management's Discussion and Analysis of Financial Condition and Results of Operations is based upon our Condensed Consolidated Financial Statements, which we have prepared in accordance with U.S. generally accepted accounting principles. 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 on various other assumptions that it believes to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.

We believe that the estimates, assumptions and judgments involved in revenue recognition, allowances for doubtful accounts and sales returns, accounting for income taxes, valuation of inventories, fixed assets, stock-based compensation, restructuring charges and litigation have the greatest potential impact on our Condensed Consolidated Financial Statements, so we consider these to be our critical accounting policies. Historically, our estimates, assumptions and judgments relative to our critical accounting policies have not differed materially from actual results, although there can be no assurance that results may, in the future, differ. The critical accounting estimates associated with these policies are

described in Part II, Item 7, "Management's Discussion and Analysis of Financial Condition and Results of Operation" of our Annual Report on Form 10-K filed with the SEC on March 1, 2011.

We maintain investment portfolio holdings of various issuers, types and maturities whose values are dependent upon short-term interest rates. We generally classify these securities as available for sale, and consequently record them on the condensed consolidated balance sheet at fair value with unrealized gains and losses being recorded as a separate part of stockholders' equity. We do not currently hedge these interest rate exposures. Given our current profile of interest rate exposures and the maturities of our investment holdings, we believe that an unfavorable change in interest rates would not have a significant negative impact on our investment portfolio or statements of operations through September 30, 2011.

When we take an order denominated in a foreign currency we will receive fewer dollars than we initially anticipated if that local currency weakens against the dollar before we ship our product, which will reduce revenue. Conversely, revenues will be positively impacted if the local currency strengthens against the dollar. In Europe, where our significant operations have costs denominated in European currencies, costs will decrease if the local currency weakens. Conversely, costs will increase if the local currency strengthens against the dollar.

Net revenues denominated in Euros were 19% and 20% in the three months ended September 30, 2011 and 2010, respectively, and 21% and 20% in the nine months ended September 30, 2011 and 2010, respectively. Costs denominated in Euro were 12% and 20% of our total costs in the three months ended September 30, 2011 and 2010, respectively, and 13% and 27% in the nine months ended September 30, 2011 and 2010, respectively.

Net revenues included 63 million Euros and 71 million Euros in the three months ended September 30, 2011 and 2010, respectively, and 216 million Euros and 179 million Euros in the nine months ended September 30, 2011 and 2010, respective. Operating expenses included 32 million Euros and 56 million Euros in the three months ended September 30, 2011 and 2010, respectively, and 104 million Euros and 216 million Euros in the nine months ended September 30, 2011 and 2010, respectiv

Average exchange rates utilized to translate foreign currency revenues and expenses in Euros were approximately 1.43 and 1.27 Euros to the dollar in the three months ended September 30, 2011 and 2010, respectively, and 1.40 and 1.32 Euros to the dollar in the nine months ended September 30, 2011 and 2010.

In the three months ended September 30, 2011, changes in foreign exchange rates had a favorable impact to our operating results. Our net revenues for the three months ended September 30, 2011 would have been approximately $10 million lower had the average exchange rate in the current quarter remained the same as the average exchange rate in effect in the three months ended September 30, 2010. In addition, in the three months ended September 30, 2011 our operating expenses would have been approximately $7 million lower (consisting of a decrease in cost of revenues of $1 million, a decrease in research and development expenses of $4 million, and a decrease in sales, general and administrative expenses of $2 million). Therefore, income from operations in the three months ended September 30, 2011 would have been approximately $3 million lower had the average exchange rates of 1.43 in the three months ended September 30, 2011 remained unchanged from the average exchange rates of 1.27 in the three months ended September 30, 2010.

In the nine months ended September 30, 2011, changes in foreign exchange rates had a favorable impact to our operating results. Our net revenues for the nine months ended September 30, 2011 would have been approximately $14 million lower had the average exchange rate in the current nine month

period remained the same as the rate in effect in the nine months ended September 30, 2010. However, in the nine months ended September 30, 2011 our operating expenses would have been approximately $9 million lower (relating to a decrease in cost of revenues of $1 million, a decrease in research and development expenses of $6 million and a decrease in sales, general and administrative expenses of $3 million). Therefore, income from operations in the nine months ended September 30, 2011 would have been approximately $5 million lower had exchange rates in the nine months ended September 30, 2011 remained unchanged from the nine months ended September 30, 2010.

We may take actions in the future to reduce our exposure to exchange rate fluctuations, including hedging, derivative or other financial transactions designed to mitigate exchange rate risk.

We also face the risk that our accounts receivables denominated in foreign currencies will be devalued if such foreign currencies weaken quickly and significantly against the dollar. Approximately 21% and 33% of our accounts receivables were denominated in foreign currencies as of September 30, 2011 and December 31, 2010.

We also face the risk that our accounts payable and debt obligations denominated in foreign currencies will increase if such foreign currencies strengthen quickly and significantly against the dollar. Approximately 11% and 10% of our accounts payable were denominated in foreign currencies as of September 30, 2011 and December 31, 2010, respectively. Approximately 100% and 98% of our debt obligations were denominated in foreign currencies as of September 30, 2011 and December 31, 2010, respectively.

Approximately $2 million of our investment portfolio at September 30, 2011 and December 31, 2010 were invested in auction-rate securities.

As of the end of the period covered by this Quarterly Report on Form 10-Q, under the supervision of our Chief Executive Officer and our Chief Financial Officer, we evaluated the effectiveness of our disclosure controls and procedures, as such terms are defined in Rule 13a-15(e) and Rule 15d-15(e) under the Securities and Exchange Act of 1934. Based on this evaluation our Chief Executive Officer and our Chief Financial Officer have concluded that our disclosure controls and procedures were effective as of the end of the period covered by this Quarterly Report on Form 10-Q to ensure that information we are required to disclose in reports that we file or submit under the Securities and Exchange Act of 1934 is accumulated and communicated to our management, including our principal executive and principal financial officers, as appropriate to allow timely decisions regarding required disclosure, and that such information is recorded, processed, summarized and reported within the time periods specified in SEC rules and forms.

Our management, including the Chief Executive Officer and Chief Financial Officer, does not expect that our disclosure controls or internal control over financial reporting will prevent all errors and all fraud. A control system, no matter how well designed and operated, can provide only reasonable, not absolute, assurance that the control system's objectives will be met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within Atmel have been detected.

There were no changes in our internal control over financial reporting that occurred during the fiscal quarter ended September 30, 2011 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

We are party to various legal proceedings. Our management currently believes that the ultimate outcome of these proceedings, individually and in the aggregate, will not have a material adverse effect on our financial position, results of operations and statement of cash flows. If an unfavorable ruling were to occur in any of the legal proceedings described in Note 6 of Notes to Condensed Consolidated Financial Statements, there exists the possibility of a material adverse effect on our financial position, results of operations and cash flows. For more information regarding certain of these proceedings, see Note 6 of Notes to Condensed Consolidated Financial Statements, which is incorporated by reference into this Item. We have accrued for losses related to litigation described in Note 6 of Notes to Condensed Consolidated Financial Statements that we consider probable and for which the loss can be reasonably estimated. In the event that a loss cannot be reasonably estimated, we have not accrued for such losses. As we continue to monitor these matters our determination could change, however, and we may decide, at some future date, to establish an appropriate reserve. With respect to each of the matters described in Note 6 of Notes to Condensed Consolidated Financial Statements, except where noted otherwise, management has determined a potential loss is not probable at this time and, accordingly, no amount has been accrued at September 30, 2011. Our management makes a determination as to when a potential loss is probable based on relevant accounting literature and then includes appropriate disclosure of the contingency. Except as otherwise noted in Note 6 of Notes to Condensed Consolidated Financial Statements, our management does not believe that the amount of loss or a range of possible losses is reasonably estimable.

In addition to the other information contained in this Form 10-Q, we have identified the following risks and uncertainties that may have a material adverse effect on our business, financial condition, or results of operations. Investors should carefully consider the risks described below before making an investment decision. The trading price of our common stock could decline due to any of these risks, and investors may lose all or part of their investment. In addition, these risks and uncertainties may affect the "forward-looking" statements described elsewhere in this Form 10-Q and in the documents incorporated herein by reference. They could also affect our actual results of operations, causing them to differ materially from those expressed in "forward-looking" statements.

OUR REVENUES AND OPERATING RESULTS MAY FLUCTUATE SIGNIFICANTLY DUE TO A VARIETY OF FACTORS, WHICH MAY RESULT IN VOLATILITY OR A DECLINE IN OUR STOCK PRICE.

Our future operating results will be subject to quarterly variations based upon a variety of factors, many of which are not within our control. In addition to the other factors discussed in this "Risk Factors" section, factors that could affect our operating results include:

Any unfavorable changes in any of these factors could harm our operating results and may result in volatility or a decline in our stock price. In addition, from time to time, our annual revenues and operating results can become increasingly dependent upon orders booked and shipped within a given quarter and, accordingly, our annual results can become less predictable and subject to greater variability.

WE DEPEND SUBSTANTIALLY ON THE SUCCESS OF OUR CUSTOMERS' END PRODUCTS, OUR INTRODUCTION OF NEW PRODUCTS INTO THE MARKET AND ON OUR ABILITY TO REDUCE MANUFACTURING COSTS OF OUR PRODUCTS OVER TIME.

We believe that our future sales will depend substantially on the success of our customers' end products, our ability to introduce new products to our end customers over time and our ability to reduce the manufacturing costs of our products over time. Our new products are generally incorporated into our customers' products or systems at their design stage. However, design wins can precede volume sales by a year or more. In addition, we may not be successful in achieving design wins or design wins may not result in future revenues, which depend in large part on our customers' ability to sell their end products or systems within their market.

Rapid innovation within the semiconductor industry also continually increases pricing pressure, especially on products containing older technology. We experience continuous pricing pressure, just as many of our competitors do. Product life cycles are relatively short, and as a result, products tend to be replaced by more technologically advanced substitutes on a regular basis. In turn, demand for older technology falls, causing the price at which such products can be sold to drop, often quickly. As a result, the average selling price of each of our products usually declines as individual products mature and competitors enter the market. To offset average selling price decreases and to continue profitably supplying our products, we rely primarily on reducing costs to manufacture our products, improving our process technologies and production efficiency, increasing product sales to absorb fixed costs and introducing new, higher priced products that incorporate advanced features or integrated technologies to address new or emerging markets. Our operating results could be harmed if such cost reductions, production improvements, increased product sales and new product introductions do not occur in a timely manner.

THE CYCLICAL NATURE OF THE SEMICONDUCTOR INDUSTRY CREATES FLUCTUATIONS IN OUR OPERATING RESULTS.

The semiconductor industry has historically been cyclical, characterized by annual seasonality and wide fluctuations in product supply and demand. The semiconductor industry has also experienced significant downturns, often in connection with, or in anticipation of, maturing product cycles and declines in general economic conditions. Global semiconductor sales decreased 3% to $249 billion in 2008 and 9% to $226 billion in 2009. Global semiconductor sales increased 32% from 2009 to $298 billion in 2010.

Our operating results have been adversely affected in the past by industry-wide fluctuations in the demand for semiconductors, which resulted in under-utilization of our manufacturing capacity and declining gross margins. In the past, we have recorded significant charges to recognize impairment in the value of our manufacturing equipment, the cost to reduce our workforce, and other restructuring costs. Our business may be harmed in the future by cyclical conditions in the semiconductor industry as a whole and also by any slower growth in any of the specific markets served by our products.

A significant portion of our revenue comes from sales to customers supplying consumer markets and from international sales. As a result, our business may be subject to seasonally lower revenues in particular quarters of our fiscal year. The semiconductor industry has also been affected by significant shifts in consumer demand due to economic downturns or other factors, which can exacerbate the cyclicality within the industry and result in further diminished product demand and production over-capacity. We have, in the past, experienced substantial quarter-to-quarter fluctuations in revenues and operating results and expect, in the future, to continue to experience short term period-to-period fluctuations in operating results due to general industry and economic conditions.

WE COULD EXPERIENCE DISRUPTION OF OUR BUSINESS WITH OUR FAB-LITE STRATEGY AND INCREASED DEPENDENCE ON INDEPENDENT FOUNDRIES, BECAUSE THOSE FOUNDRIES MAY NOT HAVE ADEQUATE CAPACITY TO FULFILL OUR NEEDS AND MAY NOT MEET OUR QUALITY AND DELIVERY OBJECTIVES OR MAY ABANDON FABRICATION PROCESSES THAT WE REQUIRE.

As part of our fab-lite strategy, we have reduced the number of manufacturing facilities we own. We currently operate only one manufacturing facility in Colorado Springs, Colorado and we increasingly rely on independent third-party foundry manufacturing partners to manufacture certain products. As part of this strategy, we have expanded and will continue to expand our foundry relationships by entering into new agreements with third-party foundries. If these agreements are not completed on a timely basis, or the transfer of production is delayed for other reasons, the supply of certain products could be disrupted, which could harm our business. In addition, difficulties in production yields can often occur when transitioning to a new third-party foundry. If our foundries fail to deliver quality products and components on a timely basis, our business could be harmed. For the nine months ended September 30, 2011, we manufactured approximately 51% of our products in our own wafer fabrication facilities compared to 73% for the nine months ended September 30, 2010. We expect over time that an increasing portion of our wafer fabrication, especially as we seek to expand capacity, will be undertaken by third party foundries.

If any of the above risks occur, we could experience an interruption in our supply chain or an increase in costs, which could delay or decrease our revenue and adversely affect our business.

We hope to mitigate these risks with a strategy of qualifying multiple foundry subcontractors. However, there can be no guarantee that this or any other strategy will eliminate these risks. Additionally, since most independent foundries are located in foreign countries, we are subject to risks generally associated with contracting with foreign manufacturers, including currency exchange fluctuations, political and economic instability, trade restrictions, changes in tariff and freight rates and import and export regulations. Accordingly, we may experience problems maintaining expected timelines and the adequacy or quality of product deliveries, any of which could have a material adverse effect on our results of operations.

The terms in which we will be able to obtain wafer production for our products, and the timing and volume of such production will be substantially dependent on future agreements to be negotiated with independent foundries. We cannot be certain that the agreements we reach with such foundries will be on terms reasonable to us. For example, any future agreements with independent foundries may have short terms, may not be renewable, and may provide inadequate certainty regarding the supply and pricing of wafers for our products.

If demand for our product increases significantly, we may not be able to guarantee that our third party foundries will be able to increase their manufacturing capacity to a level that meets our

requirements, thereby preventing us from meeting our customer demand and potentially harming our business and customer relationships. Also, even if our independent foundries are able to meet our increased demand, those foundries may decide to charge significantly higher wafer prices to us. That could reduce our gross margins or require us to offset the increased prices by increasing corresponding prices to our customers, either of which could harm our business and operating results.

THE 2011 EARTHQUAKE IN JAPAN HAD A SIGNIFICANT EFFECT ON THE JAPANESE ECONOMY AND SEMICONDUCTOR INDUSTRY. ALTHOUGH WE HAVE NOT SUFFERED ANY NEAR-TERM DISRUPTION OF OUR SUPPLY CHAIN, OR OTHER MATERIAL ADVERSE EFFECT ON OUR BUSINESS FROM THE EARTHQUAKE, THERE REMAINS SIGNIFICANT UNCERTAINTY ABOUT THE LONGER-TERM EFFECTS OF THIS NATURAL DISASTER, WHICH COULD, DIRECTLY OR INDIRECTLY, AFFECT OUR BUSINESS IN SOME WAYS.

A 9.0 magnitude earthquake struck northern Japan in March 2011. The earthquake, and related tsunami, caused severe and extensive human and economic damage within Japan. Many companies within the semiconductor industry were adversely affected by this natural disaster, including several companies with manufacturing facilities in the devastated region. There continue to be significant threats of nuclear fallout from damaged nuclear reactors and ongoing issues with the availability of power supplies to industries throughout Japan (which, for example, have caused severe disruptions to automobile production). There are many other significant matters affecting human health and industry that the Japanese government is attempting to address. While we do not have any manufacturing facilities in Japan, and have not, as of the date of this Quarterly Report on Form 10-Q, suffered any near-term adverse effect on our supply-chain from this disaster, there remain uncertainties about the longer-term effects that this disaster may have on the global economy, the electronics industry and other sectors. If these longer-term effects are not adequately addressed, or if additional unfavorable events occur in Japan, they could, directly or indirectly, adversely affect our business.

OUR REVENUES ARE DEPENDENT TO A LARGE EXTENT ON SELLING THROUGH THIRD PARTY DISTRIBUTORS.

Sales through distributors accounted for 58% and 53% of our net revenues for the three months ended September 30, 2011 and 2010, respectively, and 59% and 54% in the nine months ended September 30, 2011 and 2010, respectively. We are dependent on our distributors to supplement our direct marketing and sales efforts. Our agreements with third-party distributors can generally be terminated for convenience by either party upon relatively short notice. These agreements are non-exclusive and also permit our distributors to offer our competitors' products.

If any significant distributor or a substantial number of our distributors terminated their relationship with us, decided to market our competitors' products in preference to our products, were unable to sell our products or were unable to pay us for products sold for any reason, our ability to bring our products to market could be adversely affected, we could have difficulty in collecting outstanding receivable balances, or we could incur other charges or adjustments, any of which could have a material adverse effect on our revenues and operating results. For example, in the three months ended December 31, 2008, we recorded a onetime bad-debt charge of $12 million related to outstanding invoices after one of our Asian distributors appeared on the U.S. Department of Commerce Entity List.

OUR REVENUE REPORTING IS HIGHLY DEPENDENT ON RECEIVING ACCURATE SELL-THROUGH INFORMATION FROM OUR DISTRIBUTORS. IF WE RECEIVE INACCURATE OR LATE INFORMATION FROM OUR DISTRIBUTORS, OUR FINANCIAL REPORTING COULD BE MISSTATED.

Our revenue reporting is highly dependent on receiving pertinent, accurate and timely data from our distributors. As our distributors resell products, they provide us with periodic data regarding the products sold, including prices, quantities, end customers, and the amount of our products they still have in

stock. Because the data set is large and complex and because there may be errors in the reported data, we must use estimates and apply judgments to reconcile distributors' reported inventories to their activities. Actual results could vary unfavorably from our estimates, which could affect our operating results and could adversely affect our business.

OUR REVENUE REPORTING IS COMPLEX AND DEPENDENT, IN PART, ON OUR MANAGEMENT'S ABILITY TO MAKE JUDGEMENTS AND ESTIMATES REGARDING FUTURE CLAIMS FOR RETURNS. IF OUR JUDGEMENTS OR ESTIMATES ABOUT THESE MATTERS ARE INCORRECT OR INACCURATE, OUR REVENUE REPORTING COULD BE ADVERSELY AFFECTED.

Our revenue reporting is highly dependent on judgments and estimates that our management is required to make when preparing our financial statements. We currently recognize revenue for our distributors based in the United States and Europe in a different manner from the method we use for our distributors based in Asia (excluding Japan).

For sales to certain distributors (primarily based in the U.S. and Europe) with agreements allowing for price protection and product returns, we do not have the ability to estimate future claims at the point of shipment, and given that price is not fixed or determinable at that time, revenue is not recognized until the distributor sells the product to its end customer. During 2010, we negotiated new sales terms with our independent distributors in Asia, excluding Japan. Under the terms of those arrangements, we invoice those distributors at full list price upon shipment and issue a rebate, or "credit," once product has been sold to the end customer and the distributor has met certain reporting requirements. We had historically recognized revenue for our Asia distributors at the point of shipment as the price was fixed or determinable and all other revenue recognition criteria were met at the point of shipment. After implementing our new sales agreements, and reviewing the pricing, rebate and quotation related terms, we concluded that we could reliably estimate future claims. Therefore, we continue to recognize revenue at the point of shipment for our Asian distributors, utilizing amounts invoiced, less estimated future claims, as we have the ability to estimate future claims at that time. If, however, our judgments or estimates are incorrect or inaccurate regarding future claims, our revenue reporting could be adversely affected. In addition, the fact that we recognize revenue differently in the United States and Europe than Asia (excluding Japan) makes the preparation of our financial statements more complicated, and, therefore, more susceptible, possibly, to inaccuracies over time.

IN SOME CASES, WE PROVIDE PRICE PROTECTION TO OUR DISTRIBUTORS ON THE INVENTORY THEY CARRY. SIGNIFICANT DECLINES IN THE VALUE OF THAT INVENTORY, OR OTHER PRICE DECLINES IN OUR PRODUCTS, MAY REQUIRE US TO UNDERTAKE INVENTORY WRITE-DOWNS OR OTHER EXPENSES TO REIMBURSE OUR DISTRIBUTORS FOR THOSE CHANGES IN VALUE.

Distributors typically maintain an inventory of our products. For certain distributors, we have signed agreements that protect the value of their inventory of our products against price reductions, as well as provide for rights of return under specific conditions. Certain agreements with our distributors also contain standard stock rotation provisions permitting limited levels of product returns. We defer the gross margins on our sales to these distributors until the applicable products are re-sold by the distributors and reported to us. However, in the event of an unexpected significant decline in the price of our products or significant return of unsold inventory, we may experience inventory write-downs, charges to reimburse costs incurred by distributors, or other charges or adjustments, any of which could result in a material adverse impact to our revenues and operating results.

WE BUILD SEMICONDUCTORS BASED, FOR THE MOST PART, ON NON-BINDING FORECASTS FROM OUR CUSTOMERS. AS A RESULT, CHANGES TO FORECASTS FROM ACTUAL DEMAND MAY RESULT IN EXCESS INVENTORY OR OUR INABILITY TO FILL CUSTOMER ORDERS ON A TIMELY BASIS, WHICH MAY HARM OUR BUSINESS.

We schedule production and build semiconductor devices based primarily on non-binding forecasts from customers and our own internal forecasts. Typically, customer orders, consistent with general industry practices, may be cancelled or rescheduled with short notice to us. In addition, our customers frequently place orders requesting product delivery in a much shorter period than our lead time to fully fabricate and test devices. Because the markets we serve are volatile and subject to rapid technological, price and end user demand changes, our forecasts of unit quantities to build may be significantly incorrect. Changes to forecasted demand from actual demand may result in us producing unit quantities in excess of orders from customers, which could result in the need to record additional expense for the write-down of inventory and negatively affect our gross margins and results of operations.

Our forecasting risks may increase as a result of our fab-lite strategy because we will have less control over modifying production schedules to match changes in forecasted demand. If we commit to obtaining foundry wafers and cannot cancel or reschedule commitments without material costs or cancellation penalties, we may be forced to purchase inventory in excess of demand, which could result in a write-down of inventories and negatively affect our gross margins and results of operations.

Conversely, failure to produce or obtain sufficient wafers for increased demand could cause us to miss revenue opportunities and could affect our customers' ability to sell products, which could adversely affect our customer relationships and thereby materially adversely affect our business, financial condition and results of operations. For example, for the year ended December 31, 2010 and the three and nine months ended September 30, 2011, shipments of our ASIC and memory products were unfavorably affected by limited production capacity, as we allocated wafers to microcontroller customers in an effort to meet significantly increased demand for those products during 2010 and 2011. In order to support our ASIC and memory customers in 2011, we have increased orders for wafers from independent foundries.

OUR INTERNATIONAL SALES AND OPERATIONS ARE SUBJECT TO COMPLEX LAWS RELATING TO TRADE, EXPORT CONTROLS, FOREIGN CORRUPT PRACTICES AND ANTI-BRIBERY LAWS AMONG MANY OTHER SUBJECTS. A VIOLATION OF, OR CHANGE IN, THESE LAWS COULD ADVERSELY AFFECT OUR BUSINESS, FINANCIAL CONDITION OR RESULTS OF OPERATIONS.

For hardware, software or technology exported from, or otherwise subject to the jurisdiction of, the United States, we are subject to U.S. laws and regulations governing international trade and exports, including, but not limited to, the International Traffic in Arms Regulations ("ITAR"), the Export Administration Regulations ("EAR") and trade sanctions against embargoed countries and destinations administered by the U.S. Department of the Treasury, Office of Foreign Assets Control ("OFAC"). Hardware, software and technology exported from other countries may also be subject to local laws and regulations governing international trade. Under these laws and regulations, we are responsible for obtaining all necessary licenses and approvals for exports of hardware, software and technology, as well as the provision of technical assistance. In many cases, a determination of the applicable export control laws and related licensing requirements depends on design intent, the source and origin of a specific technology, the nationalities and localities of participants involved in creating, marketing, selling or supporting that technology, the specific technical contributions made by individuals to that technology and other matters of an intensely factual nature. We are also required to obtain all necessary export licenses prior to transferring technical data or software to foreign persons. In addition, we are required to obtain necessary export licenses prior to the export or re-export of hardware, software and technology to any person identified on the U.S. Department of Commerce Denied Persons or Entity List, the U.S. Department of Treasury's Specially Designated Nationals or Blocked Persons List or the Department of State's Debarred List. Products for use in space, satellite, military, nuclear, chemical/biological weapons,

rocket systems or unmanned air vehicle applications may also require similar export licenses and involve many of the same complexities and risks of non-compliance.

We are enhancing our export compliance program, including analyzing historical and current product shipments and technology transfers. We also work with, and assist, U.S. government officials, when requested, to ensure compliance with applicable U.S. export laws and regulations, and we continue to develop additional operational procedures to improve our compliance efforts. However, export laws and regulations are highly complex and vary from jurisdiction to jurisdiction; a determination by U.S. or local governments that we have failed to comply with one or more of these export control laws or trade sanctions, including failure to properly restrict an export to the persons or countries set forth on government restricted party lists, could result in significant civil or criminal penalties, including the imposition of significant fines, denial of export privileges, loss of revenues from certain customers or damages claims from those customers to the extent that they may be adversely affected and exclusion from participation in U.S. government contracts. As we review or audit our import and export practices, from time to time, we may also discover prior unknown errors in our compliance practices, requiring corrective actions; these actions could include voluntary disclosures of those matters to appropriate government agencies, discontinuance or suspension of product sales pending a resolution of any reviews or other adverse interim or final actions. Further, a change in these laws and regulations could restrict our ability to export to previously permitted countries, customers, distributors, foundries or other third parties. For example, in the past, one of our distributors was added to the U.S. Department of Commerce Entity List, resulting in our terminating our relationship with that distributor. Any one or more of these violations, sanctions or a change in law or regulations could have a material adverse effect on our business, financial condition and results of operations.

We are also subject to complex laws that seek to regulate the payment of bribes or other forms of compensation to foreign officials or persons affiliated with companies or organizations in which foreign governments may own an interest or exercise control. The Foreign Corrupt Practices Act in the United States requires United States companies to comply with an extensive legal framework to prevent bribery of foreign officials. The laws are complex and require that we closely monitor local practices of our overseas offices. The United States Department of Justice has recently heightened enforcement of these laws. In addition, other countries continue to implement similar laws that may have extra-territorial effect. The United Kingdom, for example, where we have operations, has recently adopted the U.K. Bribery Act, which could impose significant oversight obligations on us and could have application to our operations outside of the United Kingdom. The costs for complying with these and similar laws may be significant and could reasonably be expected to require significant management time and focus. Any violation of these or similar laws, intentional or unintentional, could have a material adverse effect on our business, financial condition or results of operations.

WE ARE EXPOSED TO FLUCTUATIONS IN CURRENCY EXCHANGE RATES THAT COULD NEGATIVELY AFFECT OUR FINANCIAL RESULTS AND CASH FLOWS, AND REVENUES AND COSTS DENOMINATED IN FOREIGN CURRENCIES COULD ADVERSELY AFFECT OUR OPERATING RESULTS AS A RESULT OF FOREIGN CURRENCY MOVES AGAINST THE DOLLAR.

Because a significant portion of our business is conducted outside the United States, we face exposure to adverse movements in foreign currency exchange rates. These exposures may change over time as business practices evolve and could have a material adverse effect on our financial results and cash flows. Our primary exposure relates to operating expenses in Europe.

When we take an order denominated in a foreign currency, we will receive fewer dollars than we initially anticipated if that local currency weakens against the dollar before we ship our product. This reduces our revenue. Conversely, revenues will be positively impacted if the local currency strengthens against the dollar. For example, in Europe, where we have costs denominated in European currencies, costs will decrease if the local currency weakens. Conversely, all costs will increase if the local currency

strengthens against the dollar. The net effect of average exchange rates in the three and nine months ended September 30, 2011, compared to the average exchange rates in the three and nine months ended September 30, 2010, would have resulted in a decrease in income from operations of $3 million and $5 million, respectively. This impact is determined assuming that all foreign currency denominated transactions that occurred for the three and nine months ended September 30, 2011 were recorded using the average foreign currency exchange rates in the same period in 2010.

We also face the risk that our accounts receivables denominated in foreign currencies will be devalued if such foreign currencies weaken quickly and significantly against the dollar. Similarly, we face the risk that our accounts payable and debt obligations denominated in foreign currencies will increase if such foreign currencies strengthen quickly and significantly against the dollar. We have not historically sought to hedge our foreign currency exposure, although we may determine to do so in the future.

WE DEPEND ON INDEPENDENT ASSEMBLY CONTRACTORS WHICH MAY NOT HAVE ADEQUATE CAPACITY TO FULFILL OUR NEEDS AND WHICH MAY NOT MEET OUR QUALITY AND DELIVERY OBJECTIVES.

After wafer testing, we ship the wafers to one of our independent assembly contractors primarily located in China, Indonesia, Japan, Malaysia, the Philippines, South Korea, Taiwan or Thailand where the wafers are separated into die, packaged and, in some cases, further tested. In some cases, we also use contractors located in France, Germany, Netherlands, Singapore and the United States. Our reliance on independent contractors to assemble, package and test our products may expose us to significant risks, including the following:

In addition, our independent contractors may not continue to assemble, package and test our products for a variety of reasons. Moreover, because our independent contractors are located in foreign countries, we are subject to certain risks generally associated with contracting with foreign suppliers, including currency exchange fluctuations, political and economic instability, trade restrictions, including export controls, and changes in tariff and freight rates. Accordingly, we may experience problems with the time, adequacy or quality of product deliveries, any of which could have a material adverse effect on our results of operations.

WE MAY FACE BUSINESS DISRUPTION RISKS, AS WELL AS THE RISK OF SIGNIFICANT UNANTICIPATED COSTS, AS WE CONSIDER CHANGES IN OUR BUSINESS AND ASSET PORTFOLIO.

We are continually reviewing potential changes in our business and asset portfolio throughout our worldwide operations in order to enhance our overall competitiveness and viability. Disposal and restructuring activities that we have taken, and may take in the future, can divert significant time and resources, can involve substantial costs and lead to production and product development delays and may fail to enhance our overall competitiveness and viability as intended, any of which can negatively impact our business. Since 2008, we have sold three manufacturing facilities and completed one other significant asset sale.

We have in the past and may, in the future, experience labor union or workers council objections, or labor unrest actions (including possible strikes), when we seek to reduce our manufacturing or operating facilities in Europe and other regions. Many of our operations are located in countries and regions that have extensive employment regulations that we must comply with in order to reduce our workforce, and we may incur significant costs to complete such exercises. Any of those events could have an adverse effect on our business and operating results.

We continue to evaluate the existing restructuring accruals related to restructuring plans previously implemented. As a result, there may be additional restructuring charges or reversals or recoveries of previous charges. However, we may incur additional restructuring and asset impairment charges in connection with additional restructuring plans adopted in the future. Any such restructuring or asset impairment charges recorded in the future could significantly harm our business and operating results.

OUR PERIODIC DISPOSAL ACTIVITIES HAVE IN THE PAST AND MAY, IN THE FUTURE, TRIGGER IMPAIRMENT CHARGES AND/OR RESULT IN A LOSS ON SALE OF ASSETS.

Our disposal activities have in the past and may, in the future, trigger restructuring, impairment and other accounting charges and/or result in a loss on sale of assets. Any of these charges or losses could cause the price of our common stock to decline.

For example, in the fourth quarter of 2009, we announced that we entered into an exclusivity agreement with LFoundry GmbH for the purchase of our manufacturing operations in Rousset, France. As a result of this agreement, the asset disposal group we initially expected to transfer to LFoundry was determined as of December 31, 2009 when we reclassified $83 million in long-term assets as held for sale. Following negotiation with LFoundry, we determined that certain assets should instead remain with us. As a result, we reclassified property and equipment to held and used in the quarter ended June 30, 2010. In connection with this reclassification, we assessed the fair value of these assets to be retained and concluded that the fair value of the assets was lower than its carrying value less depreciation expense that would have been recognized had the assets been continuously classified as held and used. As a result, we recorded an asset impairment charge of $12 million in the three months ended June 30, 2010.

TO OBTAIN CAPACITY, WE MAY SOMETIMES ENTER INTO "TAKE-OR-PAY" AGREEMENTS WITH WAFER MANUFACTURERS. IF THE PRICING FOR THOSE WAFERS EXCEEDS THE PRICES WE COULD HAVE OTHERWISE OBTAINED IN THE OPEN MARKET, WE MAY INCUR A CHARGE TO OUR OPERATING RESULTS.

In connection with the sale of our manufacturing operations in Rousset, France in June 2010, we entered into a manufacturing services agreement pursuant to which we will purchase wafers from LFoundry until 2014 on a "take-or-pay" basis. If the purchase price of the wafers under that type of agreement is higher than the fair value of the wafers at the time of purchase, based on the pricing we could have obtained from third-party foundries, we would be required to take a charge to our financial statements to reflect the above market price we have agreed to pay. In 2010, we recorded a charge of $92 million for the three months ended June 30, 2010 to reflect above market wafer prices that we were required to pay under our LFoundry agreement.

Similarly, in connection with the sale of our manufacturing operations in Heilbronn, Germany in December 2008, we entered into a wafer supply agreement pursuant to which we will purchase wafers from Telefunken Semiconductors GmbH & Co. KG. Under the supply agreement, we purchase wafers at cost in Euros, which represents their fair value at the time of purchase. This commitment is equivalent to approximately $2 million as of September 30, 2011.

IF WE ARE UNABLE TO IMPLEMENT NEW MANUFACTURING TECHNOLOGIES OR FAIL TO ACHIEVE ACCEPTABLE MANUFACTURING YIELDS, OUR BUSINESS WOULD BE HARMED.

Whether demand for semiconductors is rising or falling, we are constantly required by competitive pressures in the industry to successfully implement new manufacturing technologies in order to reduce the geometries of our semiconductors and produce more integrated circuits per wafer. We are developing processes that support effective feature sizes as small as 0.13-microns, and we are studying how to implement advanced manufacturing processes with even smaller feature sizes such as 0.065-microns.

Fabrication of our integrated circuits is a highly complex and precise process, requiring production in a tightly controlled, clean environment. Minute impurities, difficulties in the fabrication process, defects in the masks used to print circuits on a wafer or other factors can cause a substantial percentage of wafers to be rejected or numerous die on each wafer to be nonfunctional. Whether through the use of our foundries or third-party manufacturers, we may experience problems in achieving acceptable yields in the manufacture of wafers, particularly during a transition in the manufacturing process technology for our products.

We have previously experienced production delays and yield difficulties in connection with earlier expansions of our wafer fabrication capacity or transitions in manufacturing process technology. Production delays or difficulties in achieving acceptable yields at any of our fabrication facilities or at the fabrication facilities of our third-party manufacturers could materially and adversely affect our operating results. We may not be able to obtain the additional cash from operations or external financing necessary to fund the implementation of new manufacturing technologies.

WE MAY FACE THIRD PARTY INTELLECTUAL PROPERTY INFRINGEMENT CLAIMS THAT COULD BE COSTLY TO DEFEND AND RESULT IN LOSS OF SIGNIFICANT RIGHTS.

The semiconductor industry is characterized by vigorous protection and pursuit of IP rights or positions, which have on occasion resulted in significant and often protracted and expensive litigation. From time to time we receive communications from third parties asserting patent or other IP rights covering our products or processes. In order to avoid the significant costs associated with our defense in litigation involving such claims, we may license the use of the technologies that are the subject of these claims from such companies and make regular corresponding royalty payments, which may harm our operating results.

We have in the past been involved in intellectual property infringement lawsuits, which adversely affected our operating results. In addition to patent infringement lawsuits in which we may be directly involved and named as a defendant, we also may assist our customers, in many cases at our own cost, in defending intellectual property lawsuits involving technologies that are combined with our technologies. See Part II, Item 1 of this Form 10-Q. The cost of defending against intellectual property lawsuits, or assisting our customers, in terms of management time and attention, legal fees and product delays, can be substantial. If such infringement lawsuits are successful, we may be prohibited from using the technologies at issue in the lawsuits, and if we are unable to obtain a license on acceptable terms, license a substitute technology or design new technology to avoid infringement, our business and operating results may be significantly harmed.

Many of our new and existing products and technologies are intended to address needs in specialized and emerging markets. Given the aggressive pursuit and defense of intellectual property rights that are typical in the semiconductor industry, we expect to see an increase in intellectual property litigation in many of the key markets that our products and technologies serve in the future. An increase in infringement lawsuits within these markets generally, even if they do not involve us, may divert management's attention and resources, which may seriously harm our business, results of operations and financial condition.

As is customary in the semiconductor industry, our standard contracts provide remedies to our customers, such as defense, settlement, or payment of judgments for intellectual property claims related to the use of our products. From time to time, we will indemnify customers against combinations of loss, expense, or liability related to the sale and the use of our products and services. Even if claims or litigation against us are not valid or successfully asserted, these claims could result in significant costs and diversion of the attention of management and other key employees to defend.

SIGNIFICANT PATENT LITIGATION IN THE MOBILE DEVICE SECTOR MAY ADVERSELY AFFECT SOME OF OUR CUSTOMERS. UNFAVORABLE OUTCOMES IN THAT PATENT LITIGATION COULD AFFECT OUR CUSTOMERS ABILITY TO SELL THEIR PRODUCTS AND, AS A RESULT, COULD ULTIMATELY AFFECT THEIR ABILITY TO PURCHASE OUR PRODUCTS IF THEIR MOBILE DEVICE BUSINESS DECLINES.

There is significant ongoing patent litigation throughout the world involving many of our customers, especially in the mobile device sector. The outcome of these disputes is uncertain. While we may not have a direct involvement in these matters, an adverse outcome that affects the ability of our customers to ship or sell their products could ultimately have an adverse effect on our business. That could happen if these customers reduce their business exposure in the mobile device sector, seek to reduce their cost structures to help fund the payment of unanticipated licensing fees or take other actions that slow or hinder their market penetration.

OUR MARKETS ARE HIGHLY COMPETITIVE, AND IF WE DO NOT COMPETE EFFECTIVELY, WE MAY SUFFER PRICE REDUCTIONS, REDUCED REVENUES, REDUCED GROSS MARGINS AND LOSS OF MARKET SHARE.

We operate in markets that are intensely competitive and characterized by rapid technological change, product obsolescence and price decline. Throughout our product line, we compete with a number of large semiconductor manufacturers, such as Cypress, Freescale, Fujitsu, Hitachi, Infineon, Intel, Microchip, NXP Semiconductors, ON Semiconductor, Renesas, Samsung, Spansion, STMicroelectronics, Synaptics and Texas Instruments. Some of these competitors have substantially greater financial, technical, marketing and management resources than we do. As we introduce new products we are increasingly competing directly with these companies, and we may not be able to compete effectively. We also compete with emerging companies that are attempting to sell products in specialized markets that our products address. We compete principally on the basis of the technical innovation and performance of our products, including their speed, density, power usage, reliability and specialty packaging alternatives, as well as on price and product availability. During the last several years, we have experienced significant price competition in several business segments, especially in our nonvolatile memory segment for EPROM, Serial EEPROM and Flash memory products, as well as in our commodity microcontrollers. We expect continuing competitive pressures in our markets from existing competitors, new entrants, new technology and cyclical demand, among other factors, will likely maintain the recent trend of declining average selling prices for our products.

In addition to the factors described above, our ability to compete successfully depends on a number of factors, including the following:

Many of these factors are outside of our control, and may cause us to be unable to compete successfully in the future, which would materially harm our business.

Our future success substantially depends on our ability to develop and introduce new products that compete effectively on the basis of price and performance and that address customer requirements. We are continually designing and commercializing new and improved products to maintain our competitive position. These new products typically are more technologically complex than their predecessors, and thus have increased potential for delays in their introduction.

The success of new product introductions is dependent upon several factors, including timely completion and introduction of new product designs, achievement of acceptable fabrication yields and market acceptance. Our development of new products and our customers' decisions to design them into their systems can take as long as three years, depending upon the complexity of the device and the application. Accordingly, new product development requires a long-term forecast of market trends and customer needs, and the successful introduction of our products may be adversely affected by competing products or by technologies serving the markets addressed by our products. Our qualification process involves multiple cycles of testing and improving a product's functionality to ensure that our products operate in accordance with design specifications. If we experience delays in the introduction of new products, our future operating results could be adversely affected.

In addition, new product introductions frequently depend on our development and implementation of new process technologies, and our future growth will depend in part upon the successful development and market acceptance of these process technologies. Our integrated solution products require more technically sophisticated sales and marketing personnel to market these products successfully to customers. We are developing new products with smaller feature sizes, the fabrication of which will be substantially more complex than fabrication of our current products. If we are unable to design, develop, manufacture, market and sell new products successfully, our operating results will be harmed. Our new product development, process development or marketing and sales efforts may not be successful, our new products may not achieve market acceptance, and price expectations for our new products may not be achieved, any of which could significantly harm our business.

OUR OPERATING RESULTS ARE HIGHLY DEPENDENT ON OUR INTERNATIONAL SALES AND OPERATIONS, WHICH EXPOSES US TO VARIOUS RISKS.

Net revenues outside the United States accounted for 88% and 86% of our net revenues for the three and nine months ended September 30, 2011, respectively, compared to 84% for both the three and nine months ended September 30, 2010. We expect that revenues derived from international sales will continue to represent a significant portion of net revenues. International sales and operations are subject to a variety of risks, including:

Some of our distributors, independent foundries, independent assembly, packaging and test contractors and other business partners also have international operations and are subject to the risks described above. Even if we are able to manage the risks of international operations successfully, our business may be adversely affected if our distributors, independent foundries and contractors and other business partners are not able to manage these risks successfully.

OUR OPERATIONS AND FINANCIAL RESULTS COULD BE HARMED BY BUSINESS INTERRUPTIONS, NATURAL DISASTERS, TERRORIST ACTS OR OTHER EVENTS BEYOND OUR CONTROL.

Our operations are vulnerable to interruption by fire, earthquake, volcanoes, power loss, telecommunications failure and other events beyond our control. We do not have a comprehensive disaster recovery plan. In addition, business interruption insurance may not be enough to compensate us for losses that may occur and any losses or damages incurred by us as a result of business interruptions could significantly harm our business.

In recent years, based on insurance market conditions, we have relied to a greater degree on self-insurance. Our headquarters, some of our manufacturing facilities, the manufacturing facilities of third party foundries and some of our major suppliers' and customers' facilities are located near major earthquake faults and in potential terrorist target areas. If a major earthquake, other disaster or a terrorist act affects us and insurance coverage is unavailable for any reason, we may need to spend significant amounts to repair or replace our facilities and equipment, we may suffer a temporary halt in our ability to manufacture and transport products, and we could suffer damages that could materially adversely harm our business, financial condition and results of operations.

A LACK OF EFFECTIVE INTERNAL CONTROL OVER FINANCIAL REPORTING COULD RESULT IN AN INABILITY TO ACCURATELY REPORT OUR FINANCIAL RESULTS, WHICH COULD LEAD TO A LOSS OF INVESTOR CONFIDENCE IN OUR FINANCIAL REPORTS AND HAVE AN ADVERSE EFFECT ON OUR STOCK PRICE.

Effective internal controls are necessary for us to provide reliable financial reports. If we cannot provide reliable financial reports or prevent fraud, our business and operating results could be harmed. We have in the past discovered, and may in the future discover, deficiencies in our internal controls. Evaluations of the effectiveness of our internal controls in the future may lead our management to determine that internal control over financial reporting is no longer effective. Such conclusions may result from our failure to implement controls for changes in our business or from deterioration in the degree of compliance with our policies or procedures.

A failure to maintain effective internal control over financial reporting, including a failure to implement effective new controls to address changes to our business, could result in a material misstatement of our condensed consolidated financial statements or could cause us to fail to meet our financial reporting obligations. Any material misstatement of our condensed consolidated financial statements could cause us to fail to meet our financial reporting obligations and could result in a loss of investor confidence in the accuracy and completeness of our financial reports, either of which could have an adverse effect on our stock price. In addition, any material misstatement of our condensed consolidated financial statements could cause us to fail to meet our financial reporting obligations and subject us to

significant civil or criminal actions and increased U.S. regulatory focus, all of which would divert management's time and our resources and could harm our business and reputation.

Our ability to maintain close, satisfactory relationships with large customers is important to our business. A reduction, delay, or cancellation of orders from our large customers would harm our business. The loss of one or more of our key customers, or reduced orders by any of our key customers, could harm our business and results of operations. Moreover, our customers may vary order levels significantly from period to period, and customers may not continue to place orders with us in the future at the same levels as in prior periods. Our business is organized into four operating segments (see Note 9 of Notes to the Condensed Consolidated Financial Statements for further discussion). The principal customers as of the year ended December 31, 2010 in each of our markets are described in Item 1 "Business — Principal Markets and Customers" in our Annual Report on Form 10-K for the year ended December 31, 2010.

We do not typically enter into long-term supply contracts with our customers, and we cannot be certain as to future order levels from our customers. When we do enter into a long-term contract, the contract is generally terminable at the convenience of the customer. In the event of an early termination by one of our major customers, it is unlikely that we will be able to rapidly replace that revenue source, which would harm our financial results.

WE ARE SUBJECT TO ENVIRONMENTAL, HEALTH AND SAFETY REGULATIONS, WHICH COULD IMPOSE UNANTICIPATED REQUIREMENTS ON OUR BUSINESS IN THE FUTURE. ANY FAILURE TO COMPLY WITH CURRENT OR FUTURE ENVIRONMENTAL REGULATIONS MAY SUBJECT US TO LIABILITY OR SUSPENSION OF OUR MANUFACTURING OPERATIONS.

We are subject to a variety of environmental laws and regulations in each of the jurisdictions in which we operate governing, among other things, air emissions, wastewater discharges, the use, handling and disposal of hazardous substances and wastes, soil and groundwater contamination and employee health and safety. We could incur significant costs as a result of any failure by us to comply with, or any liability we may incur under, environmental, health and safety laws and regulations, including the limitation or suspension of production, monetary fines or civil or criminal sanctions, clean-up costs or other future liabilities in excess of our reserves. We are also subject to laws and regulations governing the recycling of our products, the materials that may be included in our products, and our obligation to dispose of our products at the end of their useful life. For example, the European Directive 2002/95/Ec on restriction of hazardous substances (RoHS Directive) bans the placing on the European Union market of new electrical and electronic equipment containing more than specified levels of lead and other hazardous compounds. As more countries enact requirements like the RoHS Directive, and as exemptions are phased out, we could incur substantial additional costs to convert the remainder of our portfolio, conduct required research and development, alter manufacturing processes, or adjust supply chain management. Such changes could also result in significant inventory obsolescence. In addition, compliance with environmental, health and safety requirements could restrict our ability to expand our facilities or require us to acquire costly pollution control equipment, incur other significant expenses or modify our manufacturing processes. We also are subject to cleanup obligations at properties that we currently own or at facilities that we may have owned in the past or at which we conducted operations. In the event of the discovery of new or previously unknown contamination, additional requirements with respect to existing contamination, or the imposition of other cleanup obligations at these or other sites for which we are responsible, we may be required to take remedial or other measures that could have a material adverse effect on our business, financial condition and results of operations.

WE DEPEND ON CERTAIN KEY PERSONNEL, AND THE LOSS OF ANY KEY PERSONNEL MAY SERIOUSLY HARM OUR BUSINESS.

Our future success depends in large part on the continued service of our key technical and management personnel and on our ability to continue to attract and retain qualified employees, particularly those highly skilled design, process and test engineers involved in the manufacture of existing products and in the development of new products and processes. The competition for such personnel is intense, and the loss of key employees, none of whom is subject to an employment agreement for a specified term or a post-employment non-competition agreement, could harm our business.

WE ISSUE PERFORMANCE-BASED RESTRICTED STOCK UNITS TO OUR EMPLOYEES FROM TIME TO TIME. ACCOUNTING FOR THOSE EQUITY AWARDS IS TYPICALLY SUBJECT TO SIGNIFICANT JUDGMENT AND MAY LEAD TO UNPREDICTABLE EXPENSE RECOGNITION IF THOSE JUDGEMENTS CHANGE OVER TIME.

We have issued, and may in the future continue to issue, performance-based restricted stock units to eligible employees, entitling those employees to receive restricted stock if they, and we, meet designated performance criteria established by our compensation committee. For example, in 2008 we issued performance-based restricted stock units that vested on May 23, 2011 upon achievement of the specified performance criteria (our "2008 Plan"). We recorded total stock-based compensation expense related to performance-based restricted stock units of $4 million and $21 million in the three and nine months ended September 30, 2010; and $7 million in the nine months ended September 30, 2011, related to the 2008 Plan.

Similarly, in May 2011, we adopted the 2011 Long-Term Performance-Based Incentive Plan (the "2011 Plan"), which provides for the grant of restricted stock units to eligible employees, subject to the satisfaction of specified performance metrics. The performance periods for the 2011 Plan run from January 1, 2011 through December 31, 2013. We recorded total stock-based compensation expense related to performance-based restricted stock units of $4 million in both the three and nine months ended September 30, 2011.

We recognize the stock-based compensation expense for performance-based restricted stock units when we believe it is probable that we will achieve the specified performance criteria. If achieved, the award vests. If the performance goals are not met, no compensation expense is recognized and any previously recognized compensation expense is reversed. The expected cost of each award is reflected over the service period and is reduced for estimated forfeitures. We are required to reassess this probability at each reporting date, and any change in our forecasts may result in an increase or decrease to the expense recognized. As a result, our expense recognition for performance based restricted stock units could change over time, requiring adjustments to our financial statements to reflect changes in our judgment regarding the probability of achieving the performance goals.

We periodically make enhancements to our integrated financial and supply chain management systems. The enhancement process is complex, time-consuming and expensive. Operational disruptions during the course of such processes or delays in the implementation of such enhancements could impact our operations. Our ability to forecast sales demand, ship products, manage our product inventory and record and report financial and management information on a timely and accurate basis could be impaired while we are making these enhancements.

PROVISIONS IN OUR RESTATED CERTIFICATE OF INCORPORATION AND BYLAWS MAY HAVE ANTI-TAKEOVER EFFECTS.

Certain provisions of our Restated Certificate of Incorporation, our Bylaws and Delaware law could make it more difficult for a third party to acquire us, even if doing so would benefit our stockholders. Our board of directors has the authority to issue up to five million shares of preferred stock and to determine the price, voting rights, preferences and privileges and restrictions of those shares without the approval of our stockholders. The rights of the holders of common stock will be subject to, and may be harmed by, the rights of the holders of any shares of preferred stock that may be issued in the future. The issuance of preferred stock may delay, defer or prevent a change in control, by making it more difficult for a third party to acquire a majority of our stock. In addition, the issuance of preferred stock could have a dilutive effect on our stockholders. We have no present plans to issue shares of preferred stock.

OUR FOREIGN PENSION PLANS ARE UNFUNDED, AND ANY REQUIREMENT TO FUND THESE PLANS IN THE FUTURE COULD NEGATIVELY AFFECT OUR CASH POSITION AND OPERATING CAPITAL.

We sponsor defined benefit pension plans that cover substantially all of our French and German employees. Plan benefits are managed in accordance with local statutory requirements. Benefits are based on years of service and employee compensation levels. Pension benefits payable totaled $32 million at September 30, 2011 and $27 million at December 31, 2010. The plans are non-funded, in compliance with local statutory regulations, and we have no immediate intention of funding these plans. Benefits are paid when amounts become due, commencing when participants retire. We expect to pay approximately $0.4 million in 2011 for benefits earned. Should legislative regulations require complete or partial funding of these plans in the future, it could negatively affect our cash position and operating capital.

FUTURE ACQUISITIONS MAY RESULT IN UNANTICIPATED ACCOUNTING CHARGES OR OTHERWISE ADVERSELY AFFECT OUR RESULTS OF OPERATIONS AND RESULT IN DIFFICULTIES IN ASSIMILATING AND INTEGRATING THE OPERATIONS, PERSONNEL, TECHNOLOGIES, PRODUCTS AND INFORMATION SYSTEMS OF ACQUIRED COMPANIES OR BUSINESSES, OR BE DILUTIVE TO EXISTING STOCKHOLDERS.

A key element of our business strategy includes expansion through the acquisition of businesses, assets, products or technologies that allow us to complement our existing product offerings, expand our market coverage, increase our skilled engineering workforce or enhance our technological capabilities. Between January 1, 1999 and September 30, 2011, we acquired five companies and assets of six other businesses. We continually evaluate and explore strategic opportunities as they arise, including business combination transactions, strategic partnerships, and the purchase or sale of assets, including tangible and intangible assets such as intellectual property.

Acquisitions may require significant capital infusions, typically entail many risks and could result in difficulties in assimilating and integrating the operations, personnel, technologies, products and information systems of acquired companies or businesses. We have in the past experienced and may in the future experience, delays in the timing and successful integration of an acquired company's technologies and product development through volume production, unanticipated costs and expenditures, changing relationships with customers, suppliers and strategic partners, or contractual, intellectual property or employment issues. In addition, key personnel of an acquired company may decide not to work for us. The acquisition of another company or its products and technologies may also require us to enter into a geographic or business market in which we have little or no prior experience. These challenges could disrupt our ongoing business, distract our management and employees, harm our reputation and increase our expenses. These challenges are magnified as the size of the acquisition increases. Furthermore, these challenges would be even greater if we acquired a business or entered into a business combination transaction with a company that was larger and more difficult to integrate than the companies we have historically acquired.

Acquisitions may require large one-time charges and can result in increased debt or contingent liabilities, adverse tax consequences, additional stock-based compensation expense and the recording and later amortization of amounts related to certain purchased intangible assets, any of which items could negatively impact our results of operations. In addition, we may record goodwill in connection with an acquisition and incur goodwill impairment charges in the future. Any of these charges could cause the price of our common stock to decline. Effective January 1, 2009, we adopted an amendment to the accounting standard on business combinations. The accounting standard will have an impact on our condensed consolidated financial statements, depending upon the nature, terms and size of the acquisitions we consummate in the future.

Acquisitions or asset purchases made entirely or partially for cash may reduce our cash reserves. We may seek to obtain additional cash to fund an acquisition by selling equity or debt securities. Any issuance of equity or convertible debt securities may be dilutive to our existing stockholders.

We cannot assure you that we will be able to consummate any pending or future acquisitions or that we will realize any anticipated benefits from any of our historic or future acquisitions. We may not be able to find suitable acquisition opportunities that are available at attractive valuations, if at all. Even if we do find suitable acquisition opportunities, we may not be able to consummate the acquisitions on commercially acceptable terms, and any decline in the price of our common stock may make it significantly more difficult and expensive to initiate or consummate additional acquisitions.

We are required under U.S. GAAP to test goodwill for possible impairment on an annual basis and at any other time that circumstances arise indicating the carrying value may not be recoverable. At September 30, 2011, we had $56 million of goodwill. We completed our annual test of goodwill impairment in the fourth quarter of 2010 and concluded that we did not have any impairment at that time. However, if we continue to see deterioration in the global economy and the current market conditions in the semiconductor industry worsen, the carrying amount of our goodwill may no longer be recoverable, and we may be required to record a material impairment charge, which would have a negative impact on our results of operations.

WE MAY NOT BE ABLE TO EFFECTIVELY UTILIZE ALL OF OUR MANUFACTURING CAPACITY, WHICH MAY NEGATIVELY IMPACT OUR BUSINESS.

The manufacture and assembly of semiconductor devices requires significant fixed investment in manufacturing facilities, specialized equipment, and a skilled workforce. If we are unable to fully utilize our own fabrication facilities due to decreased demand, significant shift in product mix, obsolescence of the manufacturing equipment installed, lower than anticipated manufacturing yields, or other reasons, our operating results will suffer. Our inability to produce at anticipated output levels could include delays in the recognition of revenue, loss of revenue or future orders or customer-imposed penalties for failure to meet contractual shipment deadlines.

If we are unable to operate our manufacturing facilities at optimal production levels, our operating costs will increase and gross margin and results from operations will be negatively affected.

DISRUPTIONS TO THE AVAILABILITY OF RAW MATERIALS CAN AFFECT OUR ABILITY TO SUPPLY PRODUCTS TO OUR CUSTOMERS, WHICH COULD SERIOUSLY HARM OUR BUSINESS.

The manufacture of semiconductor devices requires specialized raw materials, primarily certain types of silicon wafers. We generally utilize more than one source to acquire these wafers, but there are only a limited number of qualified suppliers capable of producing these wafers in the market. In addition, the raw materials, which include specialized chemicals and gases, and the equipment necessary for our business, could become more difficult to obtain as worldwide use of semiconductors in product applications increases. We have experienced supply shortages and price increases from time to time in the past, and on occasion our suppliers have told us they need more time than expected to fill our orders. Any

significant interruption of the supply of raw materials or increase in cost of raw materials could harm our business.

WE COULD FACE PRODUCT LIABILITY CLAIMS THAT RESULT IN SIGNIFICANT COSTS AND DAMAGE TO OUR REPUTATION WITH CUSTOMERS, WHICH WOULD NEGATIVELY AFFECT OUR OPERATING RESULTS.

All of our products are sold with a limited warranty. However, we could incur costs not covered by our warranties, including additional labor costs, costs for replacing defective parts, reimbursement to customers for damages incurred in correcting their defective products, costs for product recalls or other damages. These costs could be disproportionately higher than the revenue and profits we receive from the sales of our products.

Our products have previously experienced, and may in the future experience, manufacturing defects, software or firmware bugs, or other similar quality problems. If any of our products contain defects or bugs, or have reliability, quality or compatibility problems, our reputation may be damaged and customers may be reluctant to buy our products, which could materially and adversely affect our ability to retain existing customers and attract new customers. In addition, any defects, bugs or other quality problems could interrupt or delay sales or shipment of our products to our customers.

We have implemented significant quality control measures to mitigate these risks; however, it is possible that products shipped to our customers will contain defects, bugs or other quality problems. Such problems may divert our technical and other resources from other development efforts. If any of these problems are not found until after we have commenced commercial production of a new product, we may be required to incur significant additional costs or delay shipments for revenue, which would negatively affect our business, financial condition and results of operations.

THE OUTCOME OF CURRENTLY ONGOING AND FUTURE AUDITS OF OUR INCOME TAX RETURNS, BOTH IN THE U.S. AND IN FOREIGN JURISDICTIONS, COULD HAVE AN ADVERSE EFFECT ON OUR NET INCOME AND FINANCIAL CONDITION.

We are subject to continued examination of our income tax returns by the Internal Revenue Service and other foreign and domestic tax authorities. We regularly assess the likelihood of adverse outcomes resulting from these examinations to determine the adequacy of our provision for income taxes. While we believe that the resolution of these audits will not have a material adverse effect on our results of operations, the outcome is subject to significant uncertainties. If we are unable to obtain agreements with the tax authority on the various proposed adjustments, there could be an adverse material impact on our results of operations, cash flows and financial position.

OUR LEGAL ENTITY ORGANIZATIONAL STRUCTURE IS COMPLEX, WHICH COULD RESULT IN UNANTICIPATED UNFAVORABLE TAX OR OTHER CONSEQUENCES, WHICH COULD HAVE AN ADVERSE EFFECT ON OUR NET INCOME AND FINANCIAL CONDITION. WE CURRENTLY HAVE OVER 40 ENTITIES GLOBALLY AND SIGNIFICANT INTERCOMPANY LOANS BETWEEN ENTITIES.

We currently operate legal entities in countries where we conduct manufacturing, design, and sales operations around the world. In some countries, we maintain multiple entities for tax or other purposes. Changes in tax laws, regulations, and related interpretations in the countries in which we operate may adversely affect our results of operations.

We also have significant unsettled intercompany balances that could result in adverse tax or other consequences affecting our capital structure, intercompany interest rates and legal structure. We initiated a program in 2010 to reduce the complexity of our legal entity structure, reduce our potential tax exposure in many jurisdictions and reduce our intercompany loan balances. Despite these efforts, we may incur

additional income tax or other expense related to our global operations, loan settlements or loan restructuring activities, or incur additional costs related to legal entity restructuring or dissolution efforts.

In addition, in light of ongoing discussions within the United States legislative and executive branches regarding debt reduction programs and plans, we expect that proposals may be made to change U.S. tax laws in various respects. The President, in his 2012 budget, recently proposed modifications of the United States tax code that would change the tax treatment associated with the transfer of intangibles offshore. Proposals of a similar nature have been made in the past, but have not been enacted into law. If these proposals were enacted, they could materially affect how U.S. corporations are taxed on foreign earnings, including us. Although we cannot predict whether, or in what form, changes in tax laws may take, especially in light of debt reduction efforts, significant changes to tax foreign earnings, or other significant changes in taxation policy, could have a material adverse effect impact on our tax expense and cash flows.

FROM TIME TO TIME WE RECEIVE GRANTS FROM GOVERNMENTS, AGENCIES AND RESEARCH ORGANIZATIONS. IF WE ARE UNABLE TO COMPLY WITH THE TERMS OF THOSE GRANTS, WE MAY NOT BE ABLE TO RECEIVE OR RECOGNIZE GRANT BENEFITS OR WE MAY BE REQUIRED TO REPAY GRANT BENEFITS PREVIOUSLY PAID TO US AND RECOGNIZE RELATED CHARGES, WHICH WOULD ADVERSELY AFFECT OUR OPERATING RESULTS AND FINANCIAL POSITION.

From time to time, we receive economic incentive grants and allowances from European governments, agencies and research organizations targeted at increasing employment at specific locations. The subsidy grant agreements typically contain economic incentive, headcount, capital and research and development expenditure and other covenants that must be met to receive and retain grant benefits and these programs can be subjected to periodic review by the relevant governments. Noncompliance with the conditions of the grants could result in the forfeiture of all or a portion of any future amounts to be received, as well as the repayment of all or a portion of amounts received to date. For example, in the three months ended March 31, 2008, we repaid $40 million of government grants as a result of closing our North Tyneside manufacturing facility. In addition, we may need to record charges to reverse grant benefits recorded in prior periods as a result of changes to our plans for headcount, project spending, or capital investment relative to target levels agreed with government agencies at any of these specific locations. If we are unable to comply with any of the covenants in the grant agreements we may face adverse actions from the government agencies providing the grants and our results of operations and financial position could be materially adversely affected.

CURRENT AND FUTURE LITIGATION AGAINST US COULD BE COSTLY AND TIME CONSUMING TO DEFEND.

We are subject to legal proceedings and claims that arise in the ordinary course of business. See Part II, Item 1 of this Form 10-Q. Litigation may result in substantial costs and may divert management's attention and resources, which may seriously harm our business, results of operations, financial condition and liquidity.

The following table provides information about the repurchase of our common stock in open-market transactions during the three months ended September 30, 2011. See Note 4 to our Condensed Consolidated Financial Statements in Part 1 to this Quarterly Report on Form 10-Q for further discussion.

We did not sell unregistered securities during the three or nine months ended September 30, 2011.

The following Exhibits have been filed with, or incorporated by reference into, this Report:

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this Quarterly Report on Form 10-Q to be signed on its behalf by the undersigned, thereunto duly authorized.


	10.1		Agreement of Sale and Purchase between Registrant and Ellis Partners LLC, as subsequently assigned to BEP Orchard Investors LLC, dated as of August 22, 2011.
	10.2		Office Lease between Registrant and CA-Skyport III Limited Partnership dated as of August 30, 2011.
	10.3+		Amendment No. 1 to Amended Employment Agreement between Registrant and Steven Laub dated as of October 25, 2011.
	10.4+		2011 Long-Term Performance-Based Incentive Plan.
	31.1		Certification of Chief Executive Officer pursuant to Securities Exchange Act Rules 13a-14(a) and 15d-14(a).
	31.2		Certification of Chief Financial Officer pursuant to Securities Exchange Act Rules 13a-14(a) and 15d-14(a).
	32.1		Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
	32.2		Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
	101.INS†		XBRL Instance Document
	101.SCH†		XBRL Taxonomy Extension Schema
	101.CAL†		XBRL Taxonomy Extension Calculation Linkbase
	101.DEF†		XBRL Taxonomy Definition Linkbase
	101.LAB†		XBRL Taxonomy Extension Label Linkbase
	101.PRE†		XBRL Taxonomy Extension Presentation Linkbase


ý		QUARTERLY REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
		For the quarter ended September 30, 2011
or
o		TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
		For the transition period from to


Large accelerated filer ý		Accelerated filer o		Non-accelerated filer o (Do not check if a smaller reporting company)		Smaller reporting filer o

			Page

PART I: FINANCIAL INFORMATION
	ITEM 1. FINANCIAL STATEMENTS (UNAUDITED)		3
		CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2011 AND 2010	3
		CONDENSED CONSOLIDATED BALANCE SHEETS AT SEPTEMBER 30, 2011 AND DECEMBER 31, 2010	4
		CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2011 AND 2010	5
		NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS	6
	ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS		29
	ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK		46
	ITEM 4. CONTROLS AND PROCEDURES		47
PART II: OTHER INFORMATION
	ITEM 1. LEGAL PROCEEDINGS		48
	ITEM 1A. RISK FACTORS		48
	ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS		68
	ITEM 3. DEFAULTS UPON SENIOR SECURITIES		68
	ITEM 4. (REMOVED AND RESERVED)		68
	ITEM 5. OTHER INFORMATION		68
	ITEM 6. EXHIBITS		68
SIGNATURES			70
EXHIBITS			71

	September 30, 2011		December 31, 2010

	*(in thousands)*
Raw materials and purchased parts	$	24,243	$	12,689
Work-in-progress		249,431		158,599
Finished goods		106,127		105,362

	$	379,801	$	276,650

		Balance at January 1, 2010		Total Unrealized Gains		Sales and Other Settlements			Balance at December 31, 2010

		*(in thousands)*
Auction-rate securities		$	5,392	$	9	$	(3,150	)	$	2,251

	Total	$	5,392	$	9	$	(3,150	)	$	2,251


Delaware (State or other jurisdiction of incorporation or organization)		77-0051991 (I.R.S. Employer Identification Number)

	*(in thousands)*

Due within one year	$	4,597
Due in 1-5 years		-
Due in 5-10 years		-
Due after 10 years		2,220

Total	$	6,817

	September 30, 2011		December 31, 2010

	*(in thousands)*
Foreign currency translation adjustments	$	6,279	$	14,588
Actuarial gains related to defined benefit pension plans		625		1,909
Net unrealized gain (loss) on investments		13		(168	)

Total accumulated other comprehensive income	$	6,917	$	16,329

Years Ending December 31:	Operating Leases

	*(in thousands)*
2011 (October to December)	$	-
2012		406
2013		4,981
2014		5,130
2015		5,285
Thereafter		36,797

	$	52,599

		September 30, 2011		December 31, 2010

		*(in thousands)*
United States		$	82,791	$	106,052
Germany			21,261		18,963
France			28,722		30,674
Philippines			75,144		65,049
Asia-Pacific			61,630		47,524
Rest of Europe			8,616		13,513

	Total	$	278,164	$	281,775

	Three Months Ended

*(in thousands)*	September 30, 2011
Sales price	$	48,500
Net book value of assets transferred		(12,262	)
Transaction related costs		(2,810	)

Gain on sale of assets	$	33,428

		Three Months Ended

*(in thousands)*		June 30, 2010
Net assets transferred		$	(61,646	)
Fair value of Manufacturing Services Agreement			(92,417	)
Currency translation adjustment			97,367
Severance cost liability			(27,840	)
Transition services			(4,746	)
Selling costs			(3,173	)
Other related costs			(1,597	)

	Loss on Sale of Assets	$	(94,052	)

		Three Months Ended

		September 30, 2011		September 30, 2010		Change			% Change
		(in thousands, except for percentages)
Microcontroller		$	301,275	$	255,546	$	45,729			18	%
Nonvolatile Memory			65,922		66,473		(551	)		-1	%
RF and Automotive			52,021		45,179		6,842			15	%
ASIC			60,157		77,146		(16,989	)		-22	%

	Total net revenues	$	479,375	$	444,344	$	35,031			8	%

	Payments Due by Period


Contractual Obligations:	Less than 1 Year		1-3 Years		3-5 Years		More than 5 years		Total
	*(in thousands)*
Operating Lease	$	-	$	9,226	$	10,650	$	32,723	$	52,599

Period	Total Number of Shares Purchased	Average Price Paid per Share ($) (1)	Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs (2)	Approximate Dollar Value of Shares that May Yet be Purchased Under the Plans or Programs (3)


July 1 - July 31	-	-	-	-
August 1 - August 31	3,654,842	$9.63	3,654,842	$263,009,911
September 1 - September 30	2,440,598	$8.64	2,440,598	$241,934,474


		ATMEL CORPORATION (Registrant)
November 9, 2011		/s/ STEVEN LAUB Steven Laub President & Chief Executive Officer (Principal Executive Officer)
November 9, 2011		/s/ STEPHEN CUMMING Stephen Cumming Vice President Finance & Chief Financial Officer (Principal Financial Officer)
November 9, 2011		/s/ DAVID MCCAMAN David McCaman Vice President Finance & Chief Accounting Officer (Principal Accounting Officer)