Thursday October 31, 4:03 pm ET

SANTA CLARA, Calif. & GEORGE TOWN, Grand Cayman--(BUSINESS WIRE)-- Oct. 31, 2002--O2Micro International Limited (Nasdaq:OIIM - News), a leading supplier of innovative power management and security ICs to mobile computer and communications manufacturers, reported its financial results today for the third quarter ended September 30, 2002.

Net sales for the third quarter were $18.0 million, a record high quarter for O2Micro. Third quarter revenue of $ $18.0 million was an increase of 2% over the preceding quarter, and 52% over the comparable quarter of the prior year. Earnings per share for the third quarter, fully diluted, were 7 cents per share, compared to 8 cents per share in the preceding quarter, and 4 cents in the comparable quarter of the prior year.

Net income for the third quarter of $2,545,000 was a decrease of 15% from the preceding quarter, and 93% greater than the net income for the comparable quarter of the prior year. Third quarter R&D expenditures were $4,750,000, an increase of 3% over the preceding quarter, and 26% over the comparable quarter of the prior year.

"In Q3 we continued to grow revenue and market share in key product areas," said Sterling Du, Chairman and CEO of O2Micro. "We will also focus on IP protection, an area that is key to our future growth."

Conference Call: O2Micro will hold its third quarter conference call today at 2:00 p.m. PST, 5:00 p.m. EST. You may participate by dialing (800) 997-8642 or (973) 694-6836 (for International participants). A replay of the call will be available by phone until November 7th by dialing (800) 428-6051 or (973) 709-2089 (for International participants), passcode #262984. 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 April 1995, O2Micro designs, develops and markets innovative power management and security components for mobile communication, computer, information appliance, and LCD products. Products include AudioDJ®, SmartCardBus® for secure on line e-commerce, Intelligent Inverter® and Battery Management IC's.

O2Micro International maintains an extensive portfolio of intellectual property with 831 patent claims granted, and over 3100 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 and Subsidiaries

Consolidated Statements of Operations and Comprehensive Income

(Unaudited)

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

Three Months Ended Nine Months Ended

September 30, September 30,

2002 2001 2002 2001

NET SALES $ 18,024 $ 11,855 $ 51,794 $ 30,425

COST OF SALES 7,269 4,306 20,407 10,924

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

GROSS PROFIT 10,755 7,549 31,387 19,501

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

OPERATING EXPENSES

Research and development 4,750 3,771 13,948 9,890

Selling, general and

administrative 3,284 2,510 8,796 7,305

Stock - based

compensation 9 47 42 145

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

Total Operating Expenses 8,043 6,328 22,786 17,340

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

INCOME FROM OPERATIONS 2,712 1,221 8,601 2,161

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

NONOPERATING INCOME

(EXPENSES)

Interest income on

bank deposits 144 282 584 1,168

Interest income on

short-term investments 230 123 905 158

Impairment loss on

investment in shares

of stocks ( 254) -- ( 483) --

Interest expenses ( 1) ( 1) ( 3) ( 9)

Other - net 69 ( 50) 285 54

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

Total Nonoperating

Income - Net 188 354 1,288 1,371

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

INCOME BEFORE INCOME TAX 2,900 1,575 9,889 3,532

INCOME TAX EXPENSES 355 257 1,307 609

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

NET INCOME 2,545 1,318 8,582 2,923

OTHER COMPREHENSIVE

GAIN (LOSS)

Translation adjustments

on subsidiaries ( 32) ( 71) 71 ( 235)

Unrealized gain (loss)

on available-for-sale

securities ( 3) 69 ( 68) 69

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

Total Other

Comprehensive

Gain (Loss) ( 35) ( 2) 3 ( 166)

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

COMPREHENSIVE INCOME $ 2,510 $ 1,316 $ 8,585 $ 2,757

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

EARNINGS PER SHARE:

Basic $ 0.07 $ 0.04 $ 0.22 $ 0.09

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

Diluted $ 0.07 $ 0.04 $ 0.21 $ 0.08

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

SHARES USED IN EARNINGS

PER SHARE

CALCULATION:

Basic (in thousands) 38,361 33,351 38,362 33,175

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

Diluted (in thousands) 39,073 34,944 40,232 34,618

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

O2Micro International Limited and Subsidiaries

Consolidated Balance Sheets

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

September 30, December 31,

ASSET 2002 2001

(Unaudited)

CURRENT ASSETS

Cash and cash equivalents $ 86,158 $ 108,936

Restricted cash 1,815 1,159

Short-term investments 19,472 10,014

Accounts receivable - net 10,370 3,700

Inventories 8,304 5,361

Prepaid expenses and other

current assets 2,170 1,808

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

Total Current Assets 128,289 130,978

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

INVESTMENT IN SHARES OF STOCKS 5,485 500

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

FIXED ASSETS - NET 4,789 3,213

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

OTHER ASSETS

Convertible loans to 3600 Web Ltd. 1,750 750

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

Deferred income tax - noncurrent 55 219

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

Other assets 1,083 759

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

TOTAL ASSETS $ 141,451 $ 136,419

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

LIABILITIES AND SHAREHOLDERS' EQUITY

CURRENT LIABILITIES

Notes and accounts payable $ 3,916 $ 3,570

Income tax payable 1,609 1,220

Current portion of obligations

under capital lease 10 9

Accrued expenses and other

current liabilities 3,253 3,189

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

Total Current Liabilities 8,788 7,988

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

OBLIGATIONS UNDER CAPITAL LEASE

- NET OF CURRENT PORTION -- 7

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

Total Liabilities 8,788 7,995

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

CONTINGENCIES AND COMMITMENT

SHAREHOLDERS' EQUITY

Ordinary shares at $0.001 par

value per share

Authorized - 95,000,000 shares.

Issued - 38,798,269 and 38,134,511

shares as of September 30, 2002

and December 31, 2001, respectively. 39 38

Treasury Stock - 710,700 shares

as of September 30, 2002 ( 6,763) --

Additional paid-in capital 132,621 130,197

Warrants -- 51

Deferred compensation ( 1) ( 44)

Accumulated other comprehensive income ( 694) ( 697)

Accumulated earnings (deficit) 7,461 ( 1,121)

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

Total Shareholders' Equity 132,663 128,424

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

TOTAL LIABILITIES AND

SHAREHOLDERS' EQUITY $ 141,451 $ 136,419

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

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Contact:

O2Micro

Gil Goodrich, 408/987-5920 ext. 8013

gil.goodrich@o2micro.com