Monolithic Power Systems Announces Record Second Calendar Quarter Revenues, Enters into Settlement Agreement with Taiwan Sumida

SAN JOSE, Calif. July 31, 2007--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 June 30, 2007.

The results for the quarter ended June 30, 2007 are as follows:

• Net revenues of $30.8 million, compared to $26.6 million in the second quarter of 2006 and up 26% sequentially from $24.5 million in the first quarter of 2007
• Gross margin of 63.5%, compared to 63.0% in the second quarter of 2006 and 63.4% in the first quarter of 2007
• GAAP operating expenses of $26.9 million, including $11.2 million for research and development and selling, general and administrative, $4 million for patent litigation, $9.8 million for a one time legal settlement provision, $2.4 million for stock-based compensation and a credit of $0.5 million resulting from the sublease of the company’s Los Gatos property
• Non-GAAP(1) operating expenses of $15.2 million, excluding $2.4 million for stock-based compensation and a $9.8 million provision for litigation, and including a reversal of the lease write-off of $0.5 million
• Net loss of $6.4 million, with GAAP EPS of ($0.20) per share
• Non-GAAP(1) net income of $4.3 million, or $0.12 per diluted share, excluding stock-based compensation, the one-time provision for litigation and related tax effects, and including a reversal of the lease write-off of $0.5 million that was previously recorded

The results for the six months ended June 30, 2007 are as follows:

• Net revenues of $55.3 million, compared to $51.4 million for the six months ended June 30, 2006
• Gross margin of 63.5%, compared to 62.6% for the six months ended June 30, 2006
• GAAP operating expenses of $41.9 million, including $21.1 million for research and development and selling, general and administrative, $6.9 million for patent litigation, $9.8 million for a one time legal settlement provision, $4.6 million for stock-based compensation and a credit of $0.5 million for the sublease of the company’s Los Gatos property
• Non-GAAP(1) operating expenses of $28.0 million, excluding $4.6 million for stock-based compensation and a $9.8 million provision for litigation, and including a reversal of the lease write-off of $0.5 million
• Net loss of $6.3 million, with GAAP EPS of ($0.20) per share
• Non-GAAP(1) net income of $7.0 million, or $0.20 per diluted share, excluding stock-based compensation, the one-time provision for litigation and related tax effects, and including a reversal of the lease write-off of $0.5 million that was previously recorded

“MPS recorded our strongest calendar second quarter in the company’s history, and we are pleased with the momentum we see in the market," said Michael Hsing, chief executive officer of MPS. "Our existing products are finding new applications and our CCFL inverters are growing with the market again. In addition, we look forward to growth from our new, high current, high voltage products such as the MiniMonster™ family in future quarters, as these products begin to penetrate additional new applications for MPS.”

The company also announced that it had reached a definitive settlement agreement with Taiwan Sumida Corporation (TSE) in its indemnity contract dispute. The company agreed to pay Taiwan Sumida approximately $2.5 million and to place in escrow $7.3 million. The details of the settlement agreement will be disclosed in our 2007 second quarter Form 10-Q.

Business Outlook
The following are MPS’ financial targets for the third quarter ending September 30, 2007:
• Revenues in the range of $33 million to $35 million
• Gross margin in the upper end of the company’s target range of 58% to 63%
• Research and development and selling, general and administrative expenses between $14.0 million and $15.5 million. Non-GAAP(1) research and development and selling, general and administrative expenses between $11.5 million and $12.5 million. This excludes an estimate of stock-based compensation expense in the range of $2.5 million to $3.0 million
• Litigation expense in the range of $2.2 million to $2.7 million

(1) Non-GAAP net income, non-GAAP operating expenses and non-GAAP research and development and selling, general and administrative expense differ from net income, operating expenses, and research and development and selling, general and administrative expense determined in accordance with GAAP (Generally Accepted Accounting Principles in the United States). Non-GAAP net income for the three and six months ending June 30, 2007 excludes the effect of stock-based compensation expense, a one-time provisions for litigation and related tax effects, and includes a reversal of the lease write-off that was recorded previously. Non-GAAP operating expenses for the three and six months ending June 30, 2007 exclude the effect of stock-based compensation expense and the one-time provision for litigation and includes a reversal of the lease write-off that was recorded previously. Projected non-GAAP research and development and selling, general and administrative expenses exclude the effect of stock-based compensation expense and related tax effects. A schedule reconciling these amounts is included in this news release. 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 financial measures to assess 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. PDT / 5:00 p.m. EDT today, July 31, 2007. 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 87093234. 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’ expectations of the market for MPS’ products, targeted net revenues, gross margin, GAAP and non-GAAP research and development and selling, general and administrative expenses, stock-based compensation expense and litigation expenses for the three months ending September 30, 2007. 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 market disruptions or 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 Form 10-Q filed on April 27, 2007.

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. MiniMonster is a Trademark of Monolithic Power Systems, Inc.