SAN JOSE, Calif., Jan. 4 -- Micrel, Incorporated(Nasdaq: MCRL), an industry leader in Power, Connect and Protect IC solutions,today announced that it has revised its revenue and profit outlook for itsfourth fiscal quarter ended December 31, 2004. Micrel now projects fourthquarter revenues will be approximately $60 million to $61 million, comparedwith the previous guidance issued on October 21, 2004 of $65 million to $69million. The shortfall in revenue is primarily a result of weakness in demandfrom customers in the computing, industrial/distribution and wirelinecommunication markets, as well as reduced demand from wireless handsetmanufacturers in China. Revenues declined in all geographic regions with thelargest sequential declines occurring in Asia and North America. Overalldemand was below normal seasonal trends and turns fill for the Company'sproducts did not improve as anticipated during the quarter. As a result,Micrel's order rates in the fourth quarter remained at about the same level asthe third quarter, leading to a book to bill ratio of less than one.

"The less than expected revenue for the fourth quarter can be attributedto three factors," stated Ray Zinn, President and CEO of Micrel. "One, in thecurrent low lead time environment our customers appear willing to operate withextremely lean levels of inventory and are even willing to risk line shutdownsto keep inventories low. Two, customers remained cautious in the face ofshrinking component lead times and uncertain end demand for their products,especially in the computing, wireless handset and wireline communications endmarkets. Three, the continued migration of manufacturing to Asia is resultingin more pricing pressure and competition from Asian-based semiconductorcompanies. Our strategy to minimize the effect of the Asian market dynamicsby continuing to concentrate our design efforts in higher end, less commodityrelated markets, while increasing our total dollar content per system, isresulting in Micrel becoming a more strategic supplier to our customers. Webegan this effort three years ago and expect to see the fruits of this in2005."

As a result of revised revenue projections, fourth quarter earnings perdiluted share are expected to be approximately $0.05, compared with theprevious guidance issued on October 21, 2004 of $0.07 to $0.09. Fourthquarter gross margins are now anticipated to range from 45 percent to 47percent and operating expenses are expected to be approximately $21.0 million.These figures are estimates pending the final accounting for the quarter andyear ended December 31, 2004.

At this time, based on the current backlog and preliminary projections, itdoes not appear that first quarter 2005 revenue will be sequentially higherthan revenue in the fourth quarter 2004. Micrel is scheduled to release itsfourth quarter and full year 2004 financial results on February 3, 2005 aftermarket close. The Company will update its guidance for the first quarter of2005 in its fourth quarter earnings release and conference call on that date.

SAFE HARBOR STATEMENT UNDER THE PRIVATE SECURITIES LITIGATION REFORM ACTOF 1995

This press release includes statements that qualify as forward-lookingstatements under the Private Securities Litigation Reform Act of 1995. Theseforward-looking statements include statements about the following topics: ourexpectations regarding future financial results, including revenues, grossmargin, expense levels, net income and earnings per share; and the nature ofindustry trends. Forward-looking statements are subject to certain risks anduncertainties that could cause actual results to differ materially. Thoserisks and uncertainties include, but are not limited to, such factors as:softness in demand for our products; customer decisions to cancel, reschedule,or delay orders for our products; economic or financial difficultiesexperienced by our customers; the effect of business conditions in thecomputer, telecommunications and industrial markets; the impact of anyprevious or future acquisitions; changes in demand for networking or highbandwidth communications products; the impact of competitive products andpricing and alternative technological advances; the accuracy of estimates usedto prepare the Company's financial statements; the global economic situation;the timely and successful development and market acceptance of new productsand upgrades to existing products; softness in the economy and the U.S. stockmarkets as a whole; fluctuations in the market price of Micrel's common stockand other market conditions; the effect of the Company's restatement ofprevious financial statements; the difficulty of predicting our future cashneeds; the nature of other investment opportunities available to the Companyfrom time to time; and Micrel's operating cash flow. For further discussionof these risks and uncertainties, we refer you to the documents the Companyfiles with the SEC from time to time, including the Company's Annual Report onForm 10-K for the year ended December 31, 2003 and Quarterly Report on Form10-Q for the quarter ended September 30, 2004. All forward-looking statementsare made as of today, and the Company disclaims any duty to update suchstatements.

About Micrel

Micrel Inc., is a leading global manufacturer of Power, Connect andProtect IC solutions for the worldwide analog, Ethernet and high bandwidthmarkets. The Company's products include advanced mixed-signal, analog andpower semiconductors; high performance communication, clock management,Ethernet switch and physical layer transceiver ICs. Company customers includeleading manufacturers of enterprise, consumer, industrial, mobile,telecommunications, automotive, and computer products. Corporationheadquarters and state-of-the-art wafer fabrication facilities are located inSan Jose, CA with regional sales and support offices and advanced technologydesign centers situated throughout the Americas, Europe and Asia. Inaddition, the Company maintains an extensive network of distributors and repsworldwide.

For further information, contact Richard Crowley at: Micrel, Incorporated,2180 Fortune Drive, San Jose, California 95131, (408) 944-0800; or visit ourwebsite at http://www.micrel.com.