Monolithic Power Systems, Inc. Announces Financial Results for Third Fiscal Quarter of 2006

LOS GATOS, Calif. October 30, 2006--Monolithic Power Systems (MPS) (Nasdaq: MPWR), a leading fabless manufacturer of high-performance analog and mixed-signal semiconductors, today announced financial results for the quarter ended September 30, 2006, as follows:

• Net revenues of $27.3 million, down 8% percent from the third quarter of 2005 and up 2% sequentially from $26.6 million in the second quarter of 2006
• Gross margin of 65.6%, compared to 64.3% in the third quarter of 2005 and 63.0% in the second quarter of 2006
• GAAP operating expenses of $18.5 million, including $9.9 million for research and development and selling, general and administrative, $2.8 million for patent litigation, $3.0 million for the one-time Micrel settlement, and $2.8 million for stock-based compensation
• Non-GAAP(1) operating expenses of $9.9 million, excluding $2.8 million for stock-based compensation and $5.8 million in total litigation expenses
• GAAP net loss of $1.9 million, or ($0.06) per basic share
• Non-GAAP(1) net income of $3.8 million, or $0.12 per diluted share, excluding stock-based compensation, the one-time litigation settlement listed above and related tax effects
• Cash, cash equivalents, current restricted cash and investments of $74 million, up from $64.5 million at the end of Q2, and compared with $60.3 million at September 30, 2005

Other Third Quarter Business Highlights

• In Q3 MPS sampled the first 8 amp, 1.5 megahertz step-down converter based on our BCD Plus™ technology for graphics cards, flat panel TVs and laser printers. This is one of the first products from MPS’ new and exciting, high current, high voltage ”MiniMonsters™” product family.
• MPS’ Chengdu test operations hit full production, contributing to a record gross margin.
• The company reached a settlement with Micrel Corporation, resulting in a one time charge, which enhances MPS’s process technology portfolio.

“While the overall analog market environment remained challenging in Q3, we are pleased to have exceeded our revenue targets, hit a record high gross margin, introduced our first high current, high speed MiniMonsters product and added almost $10 million to our cash balances," said Michael Hsing, chief executive officer of MPS. "With the Micrel settlement behind us, our BCD Plus technology demonstrating excellent early results, and with more products to be introduced in the fourth quarter, we look forward to the significant opportunities ahead of us.”

Business Outlook
The following are MPS’ financial targets for the fourth quarter ending December 31, 2006:

• Revenues in the range of $25 million to $27 million
• Gross margin in the upper end of our target range of 58% to 63%
• Research and development and selling, general and administrative expense between $13.2 million and $14.5 million. Non-GAAP research and development and selling, general and administrative expense between $10.5 million and $11.5 million. These exclude an estimate of stock-based compensation expense in the range of $2.7 million to $3.0 million
• Litigation expense in the range of $3.5 million to $4.0 million

(1) Non-GAAP net income and non-GAAP operating expenses differ from net income and operating expenses determined in accordance with GAAP (Generally Accepted Accounting Principles in the United States). Non-GAAP net income excludes the effect of stock-based compensation expense, one-time legal settlements and provision for litigation and related tax effects. Non-GAAP operating expenses for the third quarter ending September 30, 2006 exclude the effect of stock-based compensation expense and patent litigation. Projected non-GAAP research and development and selling, general and administrative expense excludes the effect of stock-based compensation expense. A schedule reconciling these amounts is included in this news release. MPS' non-GAAP net income and non-GAAP operating expenses differ from GAAP net income and operating expenses in that the non-GAAP financial measures exclude stock-based compensation expense, one-time legal settlements and provision for litigation and related tax effect. Non-GAAP financial measures should not be considered as a substitute for, or superior to, measures of financial performance prepared in accordance with GAAP. MPS utilizes both GAAP and non-GAAP net income and operating expenses in assessing what it believes to be its core operating performance and to evaluate and manage its internal business and assist in making financial operating decisions. MPS believes that the inclusion of non-GAAP financial measures, together with GAAP measures, provides investors with an alternative presentation useful to investors' understanding of MPS’ core operating results and trends. Additionally, MPS believes that the inclusion of non-GAAP measures, together with GAAP measures, provides investors with an additional dimension of comparability to similar companies. However, investors should be aware that non-GAAP financial measures utilized by other companies are not likely to be comparable in most cases to the non-GAAP financials measures used by MPS.

Conference Call
MPS plans to conduct a management teleconference covering its second quarter results at 2:00 p.m. PST / 5:00 p.m. EST today, October 30, 2006. The call will be webcast at http://www.monolithicpower.com/cmp_02_inv_rel.htm. In addition to the webcast replay, which will be archived for all investors for one year on the MPS website, a phone replay will be available for seven days after the live call at 617-801-6888, code number 13526332. This press release and any other information related to the call will also be posted on the website.

Safe Harbor Statement
This press release contains forward-looking statements regarding MPS’ planned product offerings, targeted net revenues, gross margin, GAAP and non-GAAP operating expenses, stock-based compensation expense and litigation expenses for the fiscal quarter ending December 31, 2006. These statements are not historical facts or guarantees of future performance or events, are based on current expectations, estimates, beliefs, assumptions, goals, and objectives, and involve known and unknown risks, uncertainties and other factors that may cause actual results to be materially different from the results expressed by these statements. Readers of this press release and listeners to the accompanying conference call are cautioned not to place undue reliance on any forward-looking statements. Factors that could cause actual results to differ include, but are not limited to, the risks, uncertainties and costs of litigation in which the company is involved; the outcome of any upcoming trials, hearings, motions, and appeals; any interruptions in MPS’ schedule of new product release development; adverse change in production and testing efficiency; adverse changes in government regulations in foreign countries where MPS has offices; acceptance of, or demand for, MPS’ products being lower than expected; the adverse impact on MPS’ financial performance if its tax and litigation provisions are inadequate; difficulty in predicting or budgeting for future expenses and financial contingencies; and other important risk factors identified in MPS’ SEC filings, including, but not limited to, its Annual Report on Form 10-K filed on March 28, 2006.

The forward-looking statements in this press release represent MPS’ targets, not predictions of actual performance. MPS assumes no obligation to update the information in this press release or in the accompanying conference call. Any statements by persons outside of MPS speculating on the progress of the quarter or other aspects of MPS’ business are not based on internal MPS information and should be assessed accordingly by investors.

About Monolithic Power Systems
Monolithic Power Systems, Inc. (MPS) develops and markets proprietary, advanced analog and mixed-signal semiconductors. The company combines advanced process technology with its highly experienced analog designers to produce high-performance power management integrated circuits (ICs) for DC to DC converters, LED drivers, Cold Cathode Fluorescent Lamp (CCFL) backlight controllers, Class D audio amplifiers, and Linear ICs. MPS products are used extensively in computing and network communications products, LCD monitors and TVs, and a wide variety of consumer and portable electronics products. MPS partners with world-class manufacturing organizations to deliver top quality, ultra-compact, high-performance solutions through the most productive, cost-efficient channels. Founded in 1997 and headquartered in Los Gatos, California, the company has expanded its global presence with sales offices in Taiwan, China, Korea, Japan, and Europe, which operate under MPS International, Ltd.

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Monolithic Power Systems, MPS, and the MPS logo are registered trademarks of Monolithic Power Systems, Inc. in the U.S. and trademarked in certain other countries. BCD Plus and MiniMonsters are Trademarks of Monolithic Power Systems, Inc.

MPS Third-Quarter 2006 Financial Statements