The following discussion and analysis is intended to provide greater details of our results of operations and financial condition. The following discussion should be read in conjunction with the information under Part II. Item 6. Selected Financial Data and Part II. Item 8. Financial Statements and Supplementary Data. Certain statements under this caption constitute "forward-looking statements" within the meaning of Section 21E of the Securities Exchange Act of 1934, and, as such, are based on current expectations and are subject to certain risks and uncertainties. You should not place undue reliance on these forward-looking statements for many reasons including those risks discussed under Part I. Item 1A. Risk Factors and elsewhere in this Annual Report on Form 10-K.

SIGNIFICANT ESTIMATES. The preparation of our consolidated financial statements and related disclosures in conformity with generally accepted accounting principles in the United States requires us to make estimates and judgments that affect the amounts reported in our financial statements and accompanying notes. By their nature, these estimates and judgments are subject to an inherent degree of uncertainty. On an ongoing basis we re- evaluate our judgments and estimates including those related to bad debts and sales returns and allowances, inventories, long-lived assets, intangible assets, income taxes, accrued expenses and other contingencies. We base our estimates and judgments on our historical experience, market trends, financial forecasts and projections and on other assumptions that we believe are reasonable under the circumstances, and apply them on a consistent basis. Any factual errors or errors in these estimates and judgments may have a material impact on our financial condition and operating results.

Results for the quarter ended December 31, 2008 included a charge of $815,000 against cost of product sales as an estimate of a loss contingency to cover anticipated customer warranty and associated costs arising from previously announced in-field failures of one of our products. This charge represents an amount within a range of a potential warranty claim that can be reasonably estimated with currently available information. We continue to work with the customer to determine the amount of the customer's losses for which we might be liable. Future estimates and the final amount of the charge could change depending on various factors, including, among others, a change in contemplated remediation actions, the Company's potential to be liable for any of the customer's consequential losses, changes in the estimated time to complete remediation, and laws governing warranty and remediation

RECOGNITION OF REVENUE. Revenue from product sales to direct customers and distributors is recognized upon shipment as we generally do not have any post-shipment obligations or allow for any acceptance provisions. In the event a situation occurs to create a post-shipment obligation, we would defer revenue recognition until the specific obligation was satisfied. We defer recognition of sales to distributors when we are unable to make a reasonable estimate of product returns due to insufficient historical product return information. The revenue recorded is dependent upon estimates of expected customer returns and sales discounts based upon both historical data and management estimates.

Revenue from licensing programs is recognized over the period we are required to provide services under the terms of the agreement. Revenue from research and development activities that are funded by customers is recognized as the services are performed. Revenue from royalties is recognized upon the notification to us of shipment of product from our technology license partners to direct customers.

INVENTORY VALUATION/SCRAP. We write-down our inventory, with a resulting increase in our scrap expense, for estimated obsolescence or lack of marketability for the difference between the cost of inventory and the estimated market value based upon assumptions about future demand and market conditions. If actual market conditions are less favorable than those projected by management, additional inventory write-downs may be required.

ALLOWANCE FOR DOUBTFUL ACCOUNTS AND RETURNS. We seek to maintain a stringent credit approval process although our management must make significant judgments in assessing our customers' ability to pay at the time of shipment. Despite this assessment, from time to time, customers are unable to meet their payment obligations. If we are aware of a customer's inability to meet its financial obligations to us, we record an allowance to reduce the receivable to the amount we believe we will be able to collect from the customer. For all other customers, we record an allowance based upon the amount of time the receivables are past due. If actual accounts receivable collections differ from these estimates, an adjustment to the allowance may be necessary with a resulting effect on operating expense. We continue to monitor customers' credit worthiness, and use judgment in establishing the estimated amounts of customer receivables which will ultimately not be collected.

In addition, our distributors have a right to return products under certain conditions. We recognize revenue on shipments to distributors at the time of shipment, along with a reserve for estimated returns based on historical data and future estimates.

In assessing the potential to realize our deferred tax assets, we consider whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible. We consider the scheduled reversal of deferred tax assets and liabilities, projected future taxable income, and tax planning strategies in making this assessment. Based upon the level of historical taxable income and projections for future taxable income over the periods in which the deferred tax assets are deductible, management believes it is more likely than not that we will realize the benefits of these deductible differences. The amount of the deferred tax assets considered realizable, however, could be reduced if estimates of future taxable income during the carryforward period are reduced.

LONG-LIVED ASSETS. We review the carrying values of long-lived assets whenever events or changes in circumstances indicate that such carrying values may not be recoverable. Under current standards, the assets must be carried at historical cost if the projected cash flows from their use will recover their carrying amounts on an undiscounted basis and without considering interest. However, if projected cash flows are less than their carrying value, the long-lived assets must be reduced to their estimated fair value. Considerable judgment is required to project such cash flows and, if required, estimate the fair value of the impaired long-lived asset. The estimated future cash flows are based upon, among other things, assumptions about expected future operating performance and may differ from actual cash flows. There can be no assurance that future long-lived asset impairments will not occur.

SHARE-BASED PAYMENT ASSUMPTIONS. We estimate volatility and forfeitures based upon historical data. Securities and Exchange Commission Staff Accounting Bulletin No. 110, issued in December 2007, permits certain companies to use the "simplified" method for estimating the term of "plain vanilla" share options granted under specified conditions. We use this method to estimate our expected term of options granted. All of these variables have an effect on the estimated fair value of our share-based awards.

RESULTS OF OPERATIONS

OVERVIEW

We are a fabless semiconductor company that designs, develops and markets specialized semiconductor memory, microcontroller, and integrated semiconductor solutions, used in many markets for a wide range of applications. We pioneered the integration of ferroelectric materials into semiconductor products, which enabled the development of a new class of nonvolatile memory products, called ferroelectric random access memory (F-RAM). F-RAM products merge the advantages of multiple memory technologies into a single device that is able to retain information without a power source, can be read from and written to at very fast speeds and written to many times, and consumes low amounts of power and can simplify the design of electronic systems. In many cases, we are the sole provider of F-RAM enabled semiconductor products, which facilitates close customer relationships, long application lifecycles and the potential for high-margin sales.

We also integrate analog and mixed-signal functions such as microprocessor supervision, tamper detection, timekeeping, and power failure detection onto a single device with our F-RAM. This has enabled a new class of products that addresses the growing market need for more efficient and cost effective semiconductor products.

Our total revenue for the year ended December 31, 2008 was $63.6 million. In 2008, 98% of our revenue was derived from sales of our products and 2% of our revenue was derived from customer-sponsored research and development programs and royalties.

FINANCIAL HIGHLIGHTS FOR THE YEAR ENDED DECEMBER 31, 2008

- Total revenue in 2008 was $63.6 million, an increase of 24% from $51.1 million in 2007.

- Total product revenue in 2008 was $62.1 million, an increase of 26% from $49.4 million in 2007.

- Integrated product revenue in 2008 was $17.9 million, an increase of 143% from $7.4 million in 2007.

- Product gross margin in 2008 was 52%, compared to 53% in 2007.

- A charge of $815,000 was recorded in the quarter ended December 31, 2008 against cost of product sales as an estimate of a loss contingency to cover anticipated customer warranty and associated costs arising from in-field failures of one of our products. This charge represents an amount within a range of a potential warranty claim that can be reasonably estimated with currently available information. Future estimates of this contingency and the final amount of the charge are subject to change.

- The Company reversed all previously recognized expense for previously issued performance-based restricted stock awards totaling $892,000 in 2008 and does not expect to accrue any further expense.

- By region, sales in 2008 were as follows: Asia Pacific (28% of sales), Americas (30% of sales), Japan (16% of sales), and Europe (26% of sales). These sales are based on the location of the design program that uses the Company's device.

2009 FINANCIAL OUTLOOK

The following statements are based on the Company's current expectations of results for full-year 2009. These statements are forward looking, and actual results may differ materially from those set forth in these statements. Ramtron intends to continue its policy of not updating forward-looking statements other than in publicly available documents, even if experience or future changes show that anticipated results or events will not be realized.

- Total revenue comparable to 2008 full-year revenue of $63.5 million.

- The full-year total revenue projection represents management's best estimate based on current visibility and inputs from the Company's sales organization; however, external economic factors may cause management to reevaluate its projections during the year.

- Gross margin of 53% to 55%.

- Non-product revenue of approximately $1.2 million.

- Total operating expenses to be approximately 46% to 48% of total revenue. By expense line item, management is targeting sales and marketing to be 13% to 14% of total revenue, research and development to be 23% to 24% of total revenue, and general and administrative to be 10% of total revenue.

- Net income between 2.5% and 4.5% of total revenue.

- Stock-based compensation expense of approximately $1.4 million.

- We expect to record tax expense approximating 40% of net income before income taxes. We do not expect to release any further valuation allowance associated with our deferred tax assets during 2009, if not, we would record a corresponding tax benefit.

2009 BUSINESS OUTLOOK

During 2009 management plans to:

- Focus the Company's product development efforts on integrated products.

- Expand the Company's F-RAM V-Family to include two-wire serial parts and additional densities and interfaces.

- Develop new automotive grade products, including a specially qualified versions of the Company's state saver products.

- Introduce a new class of RFID tag silicon that capitalizes on the capabilities of the Company's F-RAM technology.

- Take substantive action to reduce cost of our products to increase the Company's market opportunities. These actions may include the re- design or optimization of selected products or seeking lower cost foundry capacity.

We have started loan negotiations and renewal negotiations of our revolving security credit facility with Silicon Valley Bank, which will provide us access to funds that may be needed for future capital expenditures or working capital. We have no assurance that the loan or revolving credit facility will be renewed or that the terms will be acceptable us the Company.

Revenue
=======
                                      December 31,         December 31,
                                   ------------------   ------------------
                                    2008       2007      2007       2006
                                   -------    -------   -------    -------
                                 (in thousands, except average selling price)

Product sales                      $62,101    $49,422   $49,422    $39,095
% change compared to prior period         +26%                 +26%

Units shipped                       87,927     54,068    54,068     44,743
% change compared to prior period         +63%                 +21%

Average selling price               $0.71      $0.91     $0.91      $0.87
% change compared to prior period         -22%                  +5%

Other revenue                      $ 1,453    $ 1,672   $ 1,672    $ 1,386
% change compared to prior period         -13%                 +20%

Total revenue                      $63,554    $51,094   $51,094    $40,481
% change compared to prior period         +24%                 +26%

2008 TO 2007:

Product revenue for the year ended December 31, 2008 reflects a strong year both in terms of units shipped and revenue growth. Units shipped increased by 33.9 million or 63%, compared to the prior year. Average selling price decreased $0.20, or 22%, from 2007 to 2008. This decrease was due primarily to increased sales of custom products that had lower selling prices. However, margin contribution from these products was similar to overall corporate margin levels. Product revenue was $62.1 million in 2008, which was an increase of $12.7 million from 2007. This increase was due primarily to new product introductions and a broadening of our customer base.

2007 TO 2006:

The Company had a very strong year both in terms of units shipped and revenue. Our product revenue for the year ended December 31, 2007 was $49.4 million, which was an increase of $10.3 million from 2006. The product revenue increase was driven by a 21% increase in unit shipments combined with a 5% increase in the average selling price.

Non-product revenue for the year ended December 31, 2007 increased $286,000 over the prior year. This increase was due primarily to customer-sponsored research and development (R&D) revenue of $330,000 recognized during 2007 compared to no R&D revenue in 2006.

Cost of Product Sales
=====================

                                         December 31,         December 31,
                                      ------------------   ------------------
                                       2008       2007      2007       2006
                                      -------    -------   -------    -------
                                                  (in thousands)

Cost of product sales                 $29,583    $23,439  $23,439    $18,438
Gross margin percentage                   52%        53%       53%       53%

2008 TO 2007:

Cost of product sales was $29.6 million in 2008, which was an increase of $6.1 million from 2007. This increase was due to a $12.7 million increase in product sales combined with an $815,000 charge to costs of sales relating to a provision for loss contingency. The estimated provision for loss contingency was the primary reason for the 1% decrease in our gross margin percentage from the prior year.

Average selling price decreased 22% from 2007 to 2008. This decrease was due primarily to increased sales of custom products that had lower selling prices. However, margin contribution from these products was similar to overall corporate historical margin levels.

2007 TO 2006:

Cost of product sales was $23.4 million, which was an increase of $5 million from 2006. This increase was due primarily to increased product sales of $10.3 million. Our gross margin percentage remained the same for both years at 53%.

Research and Development Expense
================================

                                         December 31,         December 31,
                                      ------------------   ------------------
                                       2008       2007      2007       2006
                                      -------    -------   -------    -------
                                                  (in thousands)

Combined research and development
  expense                             $11,959    $10,837   $10,837    $9,885
Percent of total revenue                  19%       21%       21%        24%

2008 TO 2007:

Combined research and development expenses, which includes research and development and customer-sponsored research and development, was $12 million in 2008 or an increase of $1.1 million from 2007. This increase was due primarily to increased compensation expense of $800,000 for increased headcount for integrated circuit design. Also contributing to the increase was $300,000 increase in contract engineering personnel fees. These increases were offset by a decrease in engineering material costs of $200,000 from the prior year. Research and development expense as a percentage of total revenue decreased by 2% from the prior year.

2007 TO 2006:

Combined research and development expenses was $10.8 million in 2007, which was an increase of $1 million from 2006. This increase was due primarily to increased salaries for additional headcount, increased expenses for masks and wafers associated with our 4-megabit product project, and increased stock- based compensation expense.

General and Administrative Expense
==================================

                                         December 31,         December 31,
                                      ------------------   ------------------
                                       2008       2007      2007       2006
                                      -------    -------   -------    -------
                                                  (in thousands)

General and administrative expense    $6,578     $7,053    $7,053     $5,149
Percent of total revenue                10%        14%       14%        13%

2008 TO 2007:

General and administrative expenses was $6.6 million in 2008, which was a decrease of $500,000 from 2007. This decrease was due primarily to a reduction in stock-based compensation of $900,000, which resulted from the

2007 TO 2006:

General and administrative expenses was $7 million in 2007, which was an increase of $1.9 million from 2006. This increase was due primarily to stock-based compensation expense and management bonus expense.

Sales and Marketing Expense
===========================

                                         December 31,         December 31,
                                      ------------------   ------------------
                                       2008       2007      2007       2006
                                      -------    -------   -------    -------
                                                  (in thousands)

Sales and marketing expense           $8,804     $7,005    $7,005     $6,034
Percent of total revenue                14%        14%       14%       15%

2008 TO 2007:

Sales and marketing expense was $8.8 million in 2008, which was an increase of $1.8 million from 2007. This increase was due primarily to an increase in internal sales commissions of $200,000, and an increase in travel expenses of $400,000. The increased sales in 2008 also increased the representative commission fees $600,000 from 2007. Also contributing to the increase from 2007 was an increase in trade show and promotion expenses of $200,000. Sales and marketing expense as a percentage of total revenue was 14%, the same as 2007.

2007 TO 2006:

Sales and marketing expenses was $7 million in 2007, which was an increase of $1 million from 2007. This increase was due primarily to increased internal sales and sales representative commissions and travel and stock-based compensation expense.

Other Non-Operating Income (Expenses)
=====================================

                                         December 31,         December 31,
                                      ------------------   ------------------
                                       2008       2007      2007       2006
                                      -------    -------   -------    -------
                                                  (in thousands)

Interest expense                      $ (368)    $ (495)   $ (495)    $ (612)
Other income (expense)                  (358)       148       148        154
Income tax (provision) benefit        (2,244)     7,478     7,478        (60)

2008 TO 2007:

Interest expense was $368,000 in 2008, which was a decrease of $127,000 from 2007. This decrease was due primarily to lower debt outstanding in 2008 from 2007.

Other income (expense) changed $506,000 from 2007 to 2008. This change, which was a net expense increase, was due to an increase in foreign exchange transaction losses of $488,000 from 2007.

During 2008, the Company recorded a tax provision approximating 38% of pre- tax income and reduced the deferred tax asset that was recorded in 2007. During the quarter ended December 31, 2007, the Company recorded a deferred income tax benefit of $7.6 million relating to a release of a valuation allowance that we determined is no longer required on specific deferred tax assets.

2007 TO 2006:

. . .