Wednesday August 1, 4:04 pm Eastern Time

Press Release

SOURCE: O2Micro

O2Micro Reports Second Quarter Sales and Earnings

SANTA CLARA, Calif. and GEORGE TOWN, Grand Cayman --(BUSINESS WIRE)--Aug. 1, 2001--O2Micro International Limited (Nasdaq:OIIM - news), a leading supplier of innovative power management ICs to mobile computer and communications manufacturers, reported today its financial results for the second quarter ended June 30, 2001.

Net sales for the second quarter, were $9.8 million, a 3% increase over the comparable quarter of the prior year. Second quarter revenue of $9.8 million was an increase of 11% over the preceding quarter. O2Micro grew sales revenue despite the industry inventory correction and general economic conditions.

Earnings per share for the second quarter, fully diluted, were 3 cents per share, compared to 4 cents per share for the comparable quarter of the prior year, and 2 cents per share in the preceding quarter.

Net income for the second quarter, was $959,000, compared to $1,269,000 for the comparable quarter of the prior year. Second quarter net income of $959,000 was an increase of 48% over the preceding quarter. Due to the focus given to proprietary products business, margin expectations were exceeded and profitability was maintained while aggressively expanding the investment in R&D. R&D expenditures in the 2nd quarter were $3,252,000, an increase of 38% over the comparable quarter of the prior year, and an increase of 13% over the preceding quarter.

``This quarter, much like the first quarter, was one of investment for O2Micro,'' said Sterling Du, Chairman and CEO. ``We invested in the growth of our design centers and continued to strengthen our market position through intellectual property expansion, and the introduction of new high-performance products.''

Conference Call: O2Micro will hold its first quarter conference call today at 2:00 p.m. PDT; 5:00 p.m. EDT. You may participate by dialing 800/360-9865 or 973/694-6836. A replay of the call will be available by phone until August 8th by dialing 800/428-6051 or 973/709-2089, pass code No. 200190. A live simulcast will also be available on the company website at www.o2micro.com, and an online replay will be available on the site for one week.

About O2Micro

Founded in March 1995, O2Micro designs, develops and markets innovative power management and security components for mobile communication, computer, Information appliance, and LCD products. Products include AudioDJ(TM), SmartCardBus® for secure on line e-commerce, LCD Backlight Inverters and Battery Management IC's.

O2Micro maintains an extensive portfolio of intellectual property with 268 patent claims granted, and over 500 more pending. The company maintains offices worldwide. Additional company and product information can be found on the company website at www.o2micro.com.

Statements made in this release that are not historical, including statements regarding O2Micro's or management's intentions, hopes, beliefs, expectations, representations, projections, plans or predictions of the future, are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Such statements involve risks and uncertainties that may cause actual results to differ materially from those set forth in these statements. Factors that could cause actual results to differ materially include risks and uncertainties such as reduced demand for products of electronic equipment manufacturers which include O2Micro's products due to adverse economic conditions in general or specifically affecting O2Micro's markets, technical difficulties and delays in the development process, and errors in the products. You are also referred to the documents filed by O2Micro with the SEC from time to time, including but not limited to the Form F-1 in connection with the company's initial public offering in August 2000, which identify important risk factors that could cause actual results to differ from those contained in the forward-looking statements.

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O2Micro International Limited

Consolidated Statements of Operations and Comprehensive Income

(Unaudited)

(In Thousand U.S. Dollars, Except Per Share Amounts)

Three Months Six Months Ended

Ended June 30, Ended June 30,

2001 2000 2001 2000

(Unaudited) (Unaudited)

NET SALES $ 9,781 $ 9,524 $18,571 $17,872

COST OF SALES 3,346 3,754 6,619 6,681

------- ------- ------- -------

GROSS PROFIT 6,435 5,770 11,952 11,191

------- ------- ------- -------

OPERATING EXPENSES

Research and

development 3,252 2,345 6,120 4,408

Selling, general

and administrative 2,357 2,056 4,794 4,203

Stock-based

compensation 45 114 98 270

------- ------- ------- -------

Total Operating

Expenses 5,654 4,515 11,012 8,881

------- ------- ------- -------

INCOME FROM

OPERATIONS 781 1,255 940 2,310

------- ------- ------- -------

NON-OPERATING

INCOME

Interest - net 396 43 913 83

Other - net 107 72 104 107

------- ------- ------- -------

Total Nonoperating

Income - Net 503 115 1,017 190

------- ------- ------- -------

INCOME BEFORE

INCOME TAX 1,284 1,370 1,957 2,500

INCOME TAX

(EXPENSES)

BENEFITS ( 325) ( 101) ( 352) 14

------- ------- ------- -------

NET INCOME 959 1,269 1,605 2,514

OTHER COMPREHENSIVE

INCOME(LOSS)

Translation

adjustments

on subsidiaries ( 154) 55 ( 164) ( 83)

------- ------- ------- -------

COMPREHENSIVE

INCOME $ 805 $ 1,324 $ 1,441 $ 2,431

======= ======= ======= =======

EARNINGS PER SHARE:

Basic $ 0.03 $ 0.13 $ 0.05 $ 0.25

======= ======= ======= =======

Diluted $ 0.03 $ 0.04 $ 0.05 $ 0.08

======= ======= ======= =======

NUMBER OF THOUSAND

SHARES USED IN

EARNINGS PER

SHARE CALCULATION:

Basic 33,268 9,999 33,087 10,037

======= ======= ======= =======

Diluted 34,489 30,134 34,432 30,038

======= ======= ======= =======

O2Micro International Limited

Consolidated Balance Sheets

(In Thousand U.S. Dollars, Except Share Amounts)

June 30, December 31,

ASSETS 2001 2000

(Unaudited)

CURRENT ASSETS

Cash $27,237 $37,448

Restricted cash 1,158 1,199

Short-term investment 9,118 --

Accounts receivable - net 7,306 5,420

Inventories 4,756 5,472

Prepaid expenses and

other current assets 1,486 1,148

------- -------

Total Current Assets 51,061 50,687

------- -------

LONG-TERM INVESTMENT 500 500

------- -------

FIXED ASSETS - NET 2,846 2,102

------- -------

OTHER ASSETS

Receivables from

360(degree) web Ltd. 750 750

------- -------

Deferred income tax - noncurrent 133 133

------- -------

Other assets 691 435

------- -------

TOTAL ASSETS $55,981 $54,607

======= =======

LIABILITIES AND SHAREHOLDERS'

EQUITY

CURRENT LIABILITIES

Notes and accounts payable $ 2,522 $ 3,767

Income tax payable 458 449

Current portion of obligations

under capital lease 24 41

Accrued expenses and other

current liabilities 2,718 2,358

------- -------

Total Current Liabilities 5,722 6,615

------- -------

OBLIGATIONS UNDER CAPITAL

LEASE - NET OF CURRENT PORTION 11 13

------- -------

GUARANTEE DEPOSITS 51 51

------- -------

Total Liabilities 5,784 6,679

------- -------

SHAREHOLDERS' EQUITY

Ordinary shares at $0.001 par value

per share Authorized -95,000,000

shares Issued -33,309,354 and

32,788,238 shares as of

June 30, 2001 and December

31, 2000, respectively 33 33

Additional paid-in capital 55,767 55,071

Warrants 51 51

Deferred compensation ( 117) ( 249)

Accumulated other

comprehensive income ( 387) ( 223)

Accumulated deficit ( 5,150) ( 6,755)

------- -------

Total Shareholders' Equity 50,197 47,928

------- -------

TOTAL LIABILITIES AND

SHAREHOLDERS' EQUITY $55,981 $54,607

======= =======

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Contact:

O2Micro

Gil Goodrich, 408/987-5920 Ext. 8013