O2Micro Reports Fourth Quarter and Fiscal Year End Earnings and Record High Revenues

UNITED STATES


GEORGE TOWN, Grand Cayman, Jan. 31, 2007 (PRIME NEWSWIRE) -- O2Micro(r) 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 fourth quarter and fiscal year ended December 31, 2006.

Net sales for the fourth quarter were $36.3 million. Fourth quarter revenue of $36.3 million was an increase of 15.4% from the preceding quarter and an increase of 27% from the comparable quarter of the prior year. Earnings per American Depositary Share (ADS) for the fourth quarter, fully diluted, were 4 cents, compared to 1 cent per ADS in the preceding quarter and the comparable quarter of the prior year.

Net income for the fourth quarter of $1.7 million was an increase of $1.1 million from the preceding quarter and an increase of $1.4 million from the comparable quarter of the prior year. Fourth quarter R&D expenditures were $8.7 million, an increase of 12.3% from the preceding quarter, and an increase of 21.2% from the comparable quarter of the prior year.

For the fiscal year ended December 31, 2006, total revenues were $124.9 million, an increase of 18.3% from $105.6 million in fiscal year 2005. Earnings per ADS for the year ended December 31, 2006 were 2 cents, fully diluted, compared to 20 cents, fully diluted, for the previous year. Net income was $743,000, compared to $8.1 million for the previous year. R&D expenditures were $31.8 million, compared to $25.4 million for the previous year, an increase of 24.9%.

"Q4 revenue growth of 15.4% over the prior quarter, and fiscal year 2006 revenue increase of 18.3% from the previous year, reflects growth and market share gain in our core markets as well as expansion of revenue from new products," commented Sterling Du, Chairman and CEO of O2Micro. Mr. Du continued, "The Company continued its ongoing effort to increase shareholder value through the introduction of innovative technologies and by increasing the company's patent portfolio, from 239 in Q3 to 260 in Q4, 2006. We continue to build our base for future growth and long term profitability with our investment in O2Micro's Integrated Circuit (IC) test facility in China, close to customers and suppliers."

Conference Call: O2Micro will hold its fourth quarter conference call today at 2:00 p.m. PST, 5:00 p.m. EST, and 6:00 a.m. (February 1, 2007) Hong Kong time. You may participate using the following dial-in information.



 In the U.S. and CANADA:             866-288-0540, pass code no. 6558954
 In HONG KONG:                       800-965-503, pass code no. 6558954
 Other INTERNATIONAL participants:   913-312-6666, pass code no. 6558954

A replay of the call will be available by phone until February 7th using the following dial-in information.



 In the U.S. and CANADA:             888-203-1112, pass code no. 6558954
 In HONG KONG:                       800-908-709, pass code no. 6558954
 Other INTERNATIONAL participants:   719-457-0820, pass code no. 6558954

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(r) and Security products, such as VPN/Firewall system solutions.

O2Micro International maintains an extensive portfolio of intellectual property with 6,461 patent claims granted, and over 8,000 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, 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 International Limited and Subsidiaries
         Consolidated Statements of Operations and Comprehensive Income

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


                                   Three Months Ended     Year Ended 
                                                           December
                                      December 31,        December 31,
                                    2006       2005      2006      2005
                                    ----       ----      ----      ----
                                  Unaudited Unaudited

NET SALES                         $36,315    $28,592   $124,915  $105,552

COST OF SALES                      16,746     11,482     56,772    40,741
                                  --------   --------  --------  --------

GROSS PROFIT                       19,569     17,110     68,143    64,811
                                  --------   --------  --------  --------

OPERATING EXPENSES
Research and development (a)        8,745      7,214     31,751    25,421
Selling, general and
 administrative (a)                 8,563      5,456     29,209    20,279
Patent related litigation           2,102      2,325     10,962    10,174
                                  --------   --------  --------  --------
Total Operating Expenses           19,410     14,995     71,922    55,874
                                  --------   --------  --------  --------

INCOME (LOSS) FROM OPERATIONS         159      2,115   (  3,779)    8,937
                                  --------   --------  --------  --------

NON-OPERATING INCOME (EXPENSES)
Interest income                       856        882      3,627     2,824
Impairment loss on long-term
 investments                            -          -   (    756)        -
Foreign exchange gain (loss)          214         66   (    261) (    443)
Other -- net                           13   (  2,297)  (    538) (  2,137)
                                  --------   --------  --------  --------
Total Non-operating Income          1,083   (  1,349)     2,072       244
                                  --------   --------  --------  --------

INCOME (LOSS) BEFORE
 INCOME TAX                         1,242        766   (  1,707)    9,181

INCOME TAX EXPENSE (BENEFIT)     (    432)       540   (  2,450)    1,034
                                  --------   --------  --------  --------

NET INCOME                          1,674        226        743     8,147

OTHER COMPREHENSIVE INCOME (LOSS)
Translation adjustments on
 subsidiaries                         365  (     406)       695  (    238)
Unrealized loss on
 available-for-sale
 securities                      (    293)  (    470)  (    205) (    770)
                                  --------   --------  --------  --------
Total Other Comprehensive
 Income (Loss)                         72   (    876)       490  (  1,008)
                                  --------   --------  --------  --------

COMPREHENSIVE INCOME (LOSS)       $ 1,746   ($   650)   $ 1,233   $ 7,139
                                  ========   ========  ========  ========

EARNINGS PER SHARE:
Basic                             $0.0009    $0.0001    $0.0004   $0.0042
                                  ========   ========  ========  ========
Diluted                           $0.0009    $0.0001    $0.0004   $0.0041
                                  ========   ========  ========  ========

EARNINGS PER ADS
Basic                               $0.04      $0.01      $0.02     $0.21
                                  ========   ========  ========  ========
Diluted                             $0.04      $0.01      $0.02     $0.20
                                  ========   ========  ========  ========

SHARES USED IN EARNINGS PER SHARE CALCULATION:

Basic (in thousands)            1,906,970  1,962,519  1,932,575 1,961,168
                                =========  =========  =========  ========

Diluted (in thousands)          1,912,792  1,995,056  1,946,211 1,997,459
                                =========  =========  ========= =========

ADS UNITS USED IN EARNINGS PER ADS CALCULATION:
Basic (in thousands)               38,139     39,250     38,652    39,223
                                =========  =========  ========= =========
Diluted (in thousands)             38,256     39,901     38,924    39,949
                                =========  =========  ========= =========

(a) INCLUDES STOCK-BASED COMPENSATION CHARGE AS FOLLOWS:
Research and development          $   246    $     -    $ 1,181   $     -
Selling, general and
 administrative                   $   312    $     -    $ 1,408   $     -


               O2Micro International Limited and Subsidiaries
                        Consolidated Balance Sheets

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

                                             December 31,    December 31,
                                                 2006            2005
                                                 ----            ----
ASSETS
------
CURRENT ASSETS
Cash and cash equivalents                   $  45,438       $  46,375
Restricted cash                                 8,342           5,605
Short-term investments                         19,697          55,653
Accounts receivable -- net                     18,987          11,460
Inventories                                    14,076          15,943
Prepaid expenses and other
 current assets                                 7,379           6,665
                                            ---------       ---------
Total Current Assets                          113,919         141,701
                                            ---------       ---------

LONG-TERM INVESTMENTS                          24,059          16,898
                                            ---------       ---------

LAND, PROPERTY AND EQUIPMENT -- NET            41,427          23,319
                                            ---------       ---------

OTHER ASSETS
Restricted assets -- net                       14,540          14,492
                                            ---------       ---------
Other Assets                                    3,075           3,245
                                            ---------       ---------

TOTAL ASSETS                                $ 197,020       $ 199,655
                                            =========       =========

LIABILITIES AND SHAREHOLDERS' EQUITY
------------------------------------
CURRENT LIABILITIES
Notes and accounts payable                  $   9,851       $   5,760
Income taxes payable                              991           3,907
Accrued expenses and other current
 liabilities                                   12,212          14,092
                                            ---------       ---------
Total Current Liabilities                      23,054          23,759
                                            ---------       ---------

ACCRUED RETIREMENT BENEFIT COSTS                  455               -
                                            ---------       ---------

Total Liabilities                              23,509          23,759
                                            ---------       ---------

COMMITMENTS AND CONTINGENCIES

SHAREHOLDERS' EQUITY
Preference shares at $0.00002 par value per share
   Authorized -- 250,000,000 shares                 -               -
Ordinary shares at $0.00002 par value per share
   Authorized -- 4,750,000,000 shares
   Issued -- 1,906,969,950 and 1,967,824,350
      shares as of December 31, 2006 and
      December 31, 2005, respectively              38              39
Treasury stock -- 15,030,000 shares as of
   December 31, 2005                                -      (    3,296)
Additional paid-in capital                    140,224         141,532
Accumulated other comprehensive loss       (      628)     (    1,118)
Retained earnings                              33,877          38,739
                                            ---------       ---------
Total Shareholders' Equity                    173,511        175,896
                                            ---------       ---------

TOTAL LIABILITIES AND
   SHAREHOLDERS' EQUITY                     $ 197,020       $ 199,655
                                            =========       =========


        

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