Description

TLCM designs, develops, manufactures and markets high-performance analog
integrated circuits for use in a wide variety of electronic systems. For
the nine months ended 9/30/00, net sales rose 33% to $55.4 million. Net
income rose 42% to $12.9 million. The market for analog chips is projected
to be $31 billion (+39%) in 2000, $37B (+20%) in 2001, $40B (+10%) in 2002,
and $47B (15%) in 2003 -- which gives an annualized average rate of growth
of 20.5% over the next 4 years.

TLCM closed at $13.6875/share on 11/03/00, and has $6.23/ share cash and a
PE of 15, about 1/2 that of competitors.Price/sales ~ 3.4 versus 17 for the
semiconductor industry, price/tangible book ~ 1.8 vs. 10. Sales growth is
around 20% over the last 5 years vs. 31% whereas EPS growth is 70% vs. 37.
Recent margins (last 12 months) are in line with rest of industry.

Microchip Technology, Inc. and TelCom Semiconductor, Inc. announced that
Microchip will acquire TelCom in a stock-for-stock transaction valued at
approximately $300 million. Under the terms of the definitive merger
agreement, if the average closing price of Microchip's common stock for the
preceding the closing of the transaction is between $28.30 and $32.61,
Microchip will issue a number of shares of its common stock for each
outstanding share of TelCom equal to $15.00 divided by such 10 day average
price. If Microchip's ten-day average closing price prior to the merger is
less than $28.30, then each TelCom stockholder will receive .53 shares of
Microchip, and if the ten-day average price is greater than $32.61, then
each TelCom stockholder will receive .46 shares of Microchip. Microchip
will account for the transaction as a pooling of interests, and is expected
to be completed during the first calendar quarter of 2001.

Besides being in a growing industry, having lots of cash, the merger will
most likely occur at a conversion price of $15, or about 10% premium over
the actual price. The combined company looks very good, since TLCM's
products complement those of MCHP (the second largest microcontroller
manufacturer). The microcontroller market is estimated to grow 35%, 25%,
13% and 29% from 2000 to 2003.

Catalyst

The merged company (MCHP-TLCM) will be considerably enhanced and there is a
likely 10% premium in the conversion over the actual price of TLCM.