O₂Micro^® International Limited (NASDAQ:OIIM) (SEHK:0457), a leading supplier of innovative power management, and security components and systems, reported its financial results today for the second quarter of fiscal 2008 and six months ending June 30, 2008.

Financial results for the second quarter ending 6/30/2008:

Net sales for the second quarter of 2008 were $40.8 million, an increase of 8.6% from the preceding quarter, and up 6.8% from the second quarter of the prior year. The GAAP gross margin on net sales was 58.2% in the second quarter, which was similar to 58.5% in the preceding quarter, and up from 56.7% from the second quarter of the prior year.

The Company recorded a GAAP operating margin of 11.1% in the second quarter. Research and Development (R&D) expenditures were $9.5 million, or 23.2% of net sales including $288,000 of stock-based compensation. SG&A expenses were $9.7 million, or 23.9% of net sales, including $433,000 of stock-based compensation.

GAAP Net Income for the second quarter of 2008 was $4.4 million or 12 cents per American Depositary Share (ADS).

Financial results for the six months ending 6/30/2008:

Net sales for the six months ending June 30, 2008 were $78.3 million, an increase of 7.0% from the prior year. The GAAP gross margin on net sales was 58.3% in the first half of fiscal 2008, up from 55.7% in the first half of fiscal 2007.

The Company recorded a GAAP operating margin of 8.6% for the first half of fiscal 2008. This compares with a GAAP operating margin of 7.1% in the first six months of fiscal 2007. For the first six months of fiscal 2008, R&D expenditures were $19.2 million, or 24.5% of net sales, including $546,000 of stock-based compensation; SG&A expenses were $21.8 million for the same period, or 27.8% of net sales, including $848,000 of stock-based compensation.

GAAP Net Income for the first half of fiscals 2007 and 2008 was $5.8 million and $6.6 million, respectively. GAAP Net Income per fully diluted ADS rose from 15 cents in the first six months of fiscal 2007 to 17 cents in the comparable period of fiscal 2008. GAAP Net Income increased by 13% during the first half of fiscal 2008 when compared with the first half of 2007 and GAAP Net Income per fully diluted ADS increased by 15% for the same periodic comparison.

Supplementary data:

As of June 30, 2008, O₂Micro had unrestricted cash and short-term investments of $82.6 million, or $2.19 per ADS. Net accounts receivable was $26.8 million, and there were 57 days sales outstanding in accounts receivable at the end of the second quarter of 2008. Inventory was $20.7 million and turned over 3.2 times in the same quarterly period.

As of June 30, 2008, O₂Micro’s headcount consisted of 1,063 employees, including 608 people working in R&D. This headcount was approximately flat with 1,075 employees at the end of the first quarter of 2008.

Management Commentary:

Sterling Du, Chairman and CEO, commented, “During these challenging economic times, we are continuing to grow because O₂Micro is bringing great new products to the market.” Mr. Du continued, “Our newest products are building momentum and we look forward to increasing contributions from our Security, DC/DC, and battery lines in the coming quarters.”

Conference Call: O₂Micro will hold its second quarter conference call today at 2:00 p.m. PDT, 5:00 p.m. EDT, and 5:00 a.m. (July 31, 2008) Hong Kong time. You may participate using the following dial-in information.

A replay of the call will be available by phone until August 6^th using the following dial-in information.

A live simulcast will also be available on the company website at www.o2micro.com, and an online replay will be available on the website for one week.

About O₂Micro

Founded in April 1995, O₂Micro develops and markets innovative power management, and security components and systems for the Computer, Consumer, Industrial, and Communications markets. Products include Intelligent Lighting, Battery Management, Power Management, SmartCardBus^® and Security products, such as VPN/Firewall system solutions.

O₂Micro International maintains an extensive portfolio of intellectual property with 10,001 patent claims granted, and over 12,000 more pending. The company maintains offices worldwide. Additional company and product information can be found on the company website at www.o2micro.com.

O₂Micro, the O₂Micro logo, SmartCardBus, and combinations thereof are registered trademarks of O₂Micro. All other trademarks are the property of their respective owners.

Certain statements in this release are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. They include statements regarding O₂Micro’s future growth, long term profitability, increases in shareholder value, introduction of innovative technologies, expansion of O₂Micro’s product and patent portfolios, legal expenditures, litigation activity and other statements regarding O₂Micro’s or management’s intentions, hopes, beliefs, expectations, representations, projections, plans or predictions of the future. 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 Form F-1 in connection with the company’s initial public offering in August 2000, Form F-3 in connection with the company’s public offering in November 2001, and the annual reports on Form 20-F, which identify important risk factors that could cause actual results to differ from those contained in the forward-looking statements. The company assumes no obligation to update or revise any forward-looking information, whether as a result of new information, future events or otherwise.

O₂Micro
Gary E. Abbott, 408-987-5920 ext. 8888
Director of Investor Relations
gary.abbott@o2micro.com