The following discussion and analysis should be read in conjunction with our consolidated financial statements and notes thereto and other financial data included elsewhere herein. 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 reasons including those risks discussed under Part II - Other Information, Item 1A "Risk Factors," elsewhere in this Quarterly Report on Form 10-Q, and in our Annual Report on Form 10-K for the year ended December 31, 2008. Forward-looking statements may be identified by the use of forward-looking words or phrases such as "will," "may," "believe," "expect," "intend," "anticipate," "could," "should," "plan," "estimate," and "potential," or other similar words.

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 (including goodwill), 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 represented an amount within a range of a potential warranty claim that could be reasonably estimated with currently available information at this time.

During the three months ended March 31, 2009, the Company paid $25,000 to our insurance company for our deductible and reduced our liability to $790,000. On September 4, 2009, we entered into a settlement agreement and mutual release that resolved all matters related to this warranty issue. As a result of the settlement and related insurance reimbursement, we recorded a $132,000 credit against cost of sales during the quarter ended September 30, 2009.

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.

Deferred Income Taxes. As part of the process of preparing our consolidated financial statements in conformity with accounting principles generally accepted in the United States of America, we are required to estimate our income taxes on a consolidated basis. We record deferred tax assets and liabilities for the estimated future tax effects of temporary differences between the tax basis of assets and liabilities and amounts recorded in the consolidated financial statements, and for operating loss and tax credit carryforwards. Realization of the recorded deferred tax assets is dependent upon our generating sufficient taxable income in future years to obtain benefit from the reversal of net deductible temporary differences and from tax credit and operating loss carryforwards. A valuation allowance is provided to the extent that management deems it more likely than not that the net deferred tax assets will not be realized. The amount of deferred tax assets considered realizable is subject to adjustment up or down in future periods if estimates of future taxable income are changed. Future adjustments could materially affect our financial results as reported in conformity with accounting principles generally accepted in the United States of America and, among other effects, could cause us not to achieve our projected results.

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.

Goodwill. Goodwill represents the excess of the purchase price over the fair value of identifiable net tangible and intangible assets acquired in a business combination. Goodwill is required to be tested for impairment annually or more frequently if events or changes in circumstances indicate that goodwill may be impaired. We performed our annual goodwill impairment testing as of October 31, 2008, and determined that no impairment existed at that date. We tested goodwill for impairment again on March 1, 2009 and wrote the carrying value to zero. This assessment required estimates of future revenue, operating results and cash flows, as well as estimates of critical valuation inputs such as discount rates, terminal values and similar data.

Share-based Payment Assumptions. We estimate volatility, forfeitures, and expected term of our options granted based upon historical data. All of these variables have an effect on the estimated fair value of our share-based awards.

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.

Business Highlights:

On August 18, 2009, the Company executed an Amended and Restated Loan and Security Agreement ("Amended Loan Agreement") with Silicon Valley Bank ("SVB"). The Amended Loan Agreement provides for a $6 million working capital line of credit with a $1.75 million sublimit for EXIM advances and a sublimit of $3 million for letters of credit and foreign exchange exposure and cash management services. The Amended Loan Agreement replaces the Company's Amended and Restated Loan and Security Agreement dated September 15, 2005. The Amended Loan Agreement provides for interest at a floating rate equal to the SVB prime lending rate plus 1.75% to 2.25% per annum depending upon cash balances and loan availability maintained at SVB. The term is two years expiring on August 18, 2011, with a commitment fee of $40,000 paid at signing and $40,000 on the first anniversary. There is also a .375% unused line fee, payable monthly in arrears. Security for the Amended Loan Agreement includes all of the Company's assets except for real estate and leased equipment. The related borrowing base is comprised of the Company's trade receivables. The Company plans to draw upon loan facility for working capital purposes as required.

On August 18, 2009, the Company also entered into an Amended and Restated Intellectual Property Security Agreement ("Amended IP Security Agreement") with SVB that secures the Company's obligations under the Amended Loan Agreement by granting SVB a security interest in all of the Company's right, title and interest in, to and under its intellectual property.

On September 4, 2009, we has entered into a settlement agreement and mutual release with one of our customers that resolves all matters related to the previously announced in-field failures of one of the Company's semiconductor memory products. As a result of the settlement, and after an insurance reimbursement and a credit for future product deliveries, we recognized a benefit of approximately $132,000 on our third-quarter income statement. We had previously recorded a charge of $815,000 in connection with the matter.

Three-Month Financial Highlights:

Total revenue for the three months ended September 30, 2009 was $11.6 million, which was a decrease of 34% from $17.4 million for the same period in 2008.

The Company recorded a restructuring charge of $40,000 during the three months ended September 30, 2009 related to restructuring and cost saving measures that were implemented in March 2009.

Net income was $131,000, or $0.01 per share, for the three months ended September 30, 2009, compared with net income of $1.4 million, or $0.05 per share, for the three months ended September 30, 2008. Results for the three months ended September 30, 2009 included a restructuring charge of $40,000; no such charges were booked in 2008.

Product gross margin for the three months ended September 30, 2009 was 53%, compared with 54% for the three months ended September 30, 2008.

Nine-Month Financial Highlights:

Total revenue for the nine months ended September 30, 2009 was $33.1 million, which was decrease of 30% from $47.2 million for the same period in 2008.

The Company recorded restructuring expenses and impairment charges of $6.2 million during the nine months ended September 30, 2009, primarily due to severance payments and accruals, and goodwill and intangible asset impairment charges.

Net loss was $6.6 million, or $(0.24) per share, for the nine months ended September 30, 2009, compared with net income of $2.3 million, or $0.10 per share, for the nine months ended September 30, 2008. Results for the nine months ended September 30, 2009 included restructuring and impairment charges of $6.2 million; no such charges were recorded in 2008.

Product gross margin for the nine months ended September 30, 2009 was 49%, compared with 54% for the nine months ended September 30, 2008.

Product Revenue Highlights:

Product revenue was $11.2 million for the three months ended September 30, 2009, which was 34% lower than product revenue of $17 million for the three months ended September 30, 2008.

Integrated product revenue was $2.6 million, or 23% of F-RAM product revenue, compared with $5.1 million, or 30% of F-RAM revenue, for the third quarter of 2008.

Product Highlights:

On July 29, 2009, we launched our second parallel device in a family of new parallel and serial F-RAM products that offer higher-speed read/write performance and lower voltage operation. The latest device in our V-Family of F-RAM products is the FM28V020, a 256-Kilobit (Kb), 2.0 to 3.6-volt, parallel nonvolatile RAM in an industry standard 28-pin SOIC package that features fast access, NoDelay™ writes, virtually unlimited read/write cycles, and low power consumption. The FM28V020 may be used as a drop-in replacement for battery-backed SRAM in industrial control, metering, medical, automotive, military, gaming, and computing applications, among others.

On September 1, 2009, we expanded our line of AEC-Q100-specified F-RAM memory devices, qualifying the FM25L16-GA, a 16-Kilobit (Kb) serial F-RAM to operate over the Grade 1 automotive temperature range of -40 to +125 degrees Celsius. The FM25L16-GA is part of Ramtron's growing family of Grade 1 and Grade 3 AEC-Q100-qualified automotive memory products.

On October 6, 2009, we began beta sampling our first MaxArias™ wireless memory product to customers across several industries. Our MaxArias wireless memory combines the low power, high speed, and high endurance features of our nonvolatile F-RAM memory technology with wireless access to enable innovative data collection capabilities for a broad range of applications. The Company's first family of wireless memory devices, named the MaxArias WM710xx product line, features F-RAM memory with passive UHF EPCglobal Class-1 Generation-2 wireless access in a transponder IC with 4-, 8-, and 16-Kilobit user memory densities. The WM710xx family is ideal for applications spanning many industries including aircraft/industrial manufacturing, inventory control, maintenance tracking, building security, electronic toll collection, pharmaceutical tracking, and product authentication, among others.

                           PERIOD COMPARISONS FOR THE
            THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2009 AND 2008

Revenue
                              Three          Three                         Nine
(in thousands, except        Months          Months     Nine Months       Months
average selling price)        Ended          Ended         Ended          Ended
                            September      September     September      September
                            30, 2009        30, 2008     30, 2009        30, 2008

Product sales                $11,297        $17,095       $31,910        $46,093
% change compared to prior           (34%)                        (31%)
period
Units shipped                14,167          24,700       38,546          62,600
% change compared to prior           (43%)                        (38%)
period
Average selling price         $0.80          $0.71         $0.83          $0.74
% change compared to prior            13%                          12%
period
Other revenue                 $299            $299        $1,208          $1,140
% change compared to prior             0%                           1%
period
Total revenue                $11,596        $17,394       $33,118        $47,233
% change compared to prior           (33%)                        (30%)
period

Three Months:

Average selling price (ASP) increased 13% compared to the three months ended September 30, 2008. This increase was due to lower unpackaged chip sales, which have a lower ASP, combined with increased sales of high density products, which have a higher ASP. Product revenue was $11.3 million, which was a decrease of $5.8 million from 2008. This decrease was due primarily to the poor world-wide economic conditions, combined with our distributors reducing their inventory levels.

Other revenue, consisting of license and development fees, royalty income, and customer-sponsored research and development was $299,000. There was no change from the prior nine-month period.

Nine Months:

ASP increased 12% compared to the nine months ended September 30, 2009. This increase was due to a lower percentage of total sales being unpackaged chip sales, which have a lower ASP and a higher percentage of sales being our high density products that have a higher ASP. Product revenue was $31.9 million, which was a decrease of $14.1 million from 2008. This decrease was due primarily to the poor world-wide economic conditions combined with our distributors reducing their overall inventory levels, which resulted in significantly lower unit sales compared to the prior nine-month period.

Other revenue, consisting of license and development fees, royalty income, and customer-sponsored research and development was $1.2 million, which was an increase of $68,000 from 2008. This increase was due primarily to settlement of past due royalties from one customer.

Cost of Product Sales
                           Three        Three           Nine         Nine
                           Months       Months         Months       Months
(in thousands)             Ended        Ended          Ended        Ended
                         September    September      September    September
                          30, 2009     30, 2008       30, 2009     30, 2008

Cost of product sales      $5,297       $7,781        $16,346      $21,392
Gross margin percentage     53%          54%            49%          54%

Three Months:

Cost of product sales was $5.3 million, which was a decrease of $2.5 million from 2008. This decrease was due to a $5.8 million decrease in product sales. Gross product margin decreased to 53%. The gross product margin decrease was due to higher raw material prices as result of the stronger Japanese Yen currency relative to the US Dollar.

Nine Months:

Cost of product sales was $16.4 million, which was a decrease of $5 million from
2008. This decrease was due to a $14.1 million decrease in product sales. Gross
product margin decreased to 49%. The gross product margin decrease was due to
higher raw material prices because of the stronger Japanese Yen currency
compared to the US Dollar and increased fixed overhead variances due to less
production volume to absorb these costs.

Research and Development
Expense
                           Three        Three           Nine         Nine
                           Months       Months         Months       Months
(in thousands)             Ended        Ended          Ended        Ended
                         September    September      September    September
                          30, 2009     30, 2008       30, 2009     30, 2008

Research and development
expense (including
customer-sponsored         $3,034       $3,235         $8,067       $9,238
research and
development)
Percent of total revenue    26%          19%            24%          20%

Three Months:

Research and development expense, including customer-sponsored research and development expense, was $3 million, which was a decrease of $200,000 from 2008. This decrease was due primarily to a $500,000 reduction in intellectual property amortization, depreciation, rent and compensation expenses as a result of the closure of our Montreal design center during the first quarter of 2009. The Company also reduced headcount at our corporate headquarters in the first quarter coupled with an overall salary reduction initiative, which lowered expenses approximately $100,000 compared to the prior quarter. These amounts were offset by processing expenses of $400,000 relating to our IBM foundry project.

Nine Months:

Research and development expense, including customer-sponsored research and
development expense, was $8.1 million, which was a decrease of $1.1 million from
2008. This decrease was due primarily to a $950,000 reduction in intellectual
property amortization, depreciation, rent and compensation expenses as a result
of the first-quarter 2009 restructuring, combined with less overall salary
expense due to headcount, and salary reductions of $300,000 offset by processing
expenses of $400,000 related to our IBM foundry project.

Sales and Marketing Expense
                              Three        Three           Nine         Nine
                              Months       Months         Months       Months
(in thousands)                Ended        Ended          Ended        Ended
                            September    September      September    September
                             30, 2009     30, 2008       30, 2009     30, 2008

Sales and marketing expense   $1,733       $2,408         $5,433       $6,641
Percent of total revenue       15%          14%            16%          14%

Three Months

Sales and marketing expense was $1.7 million, which was a decrease of $675,000 from 2008. This decrease was due primarily to a $100,000 reduction in sales salaries related to our cost reduction initiative coupled with reduced outside rep commissions and travel expenses of $250,000, which were related to reduced sales and cost reductions. Also, we had major trade show expenditures in the three-month period September 30, 2008 of $150,000 compared to no corresponding expense in 2009.

Nine Months

Sales and marketing expense was $5.4 million, which was a decrease of $1.2
million from 2008. This decrease was due primarily to a $720,000 decrease in
commission and salary expenses combined with a $350,000 reduction in travel
expenses compared to the prior year period.

General and
Administrative Expense
                           Three        Three           Nine         Nine
                           Months       Months         Months       Months
(in thousands)             Ended        Ended          Ended        Ended
                         September    September      September    September
                          30, 2009     30, 2008       30, 2009     30, 2008

General and                $1,213       $1,716         $4,182       $5,273
administrative expense
Percent of total revenue    10%          10%            13%          11%

Three Months

General and administrative expenses were $1.2 million, which was a decrease of $503,000 from 2008. This decrease was due primarily to a $350,000 decrease in management and employee variable compensation accruals, salary, and stock-based compensation, combined with a $200,000 reduction in outside services and fees compared to the year-ago quarter.

Nine Months

General and administrative expenses were $4.1 million, which was a decrease of $1.1 million from 2008. This decrease was due primarily to a $1.1 million decrease in management and employee variable compensation accruals compared to the nine months ended September 30, 2008.

Restructuring and Impairment
                               Three        Three           Nine         Nine
                               Months       Months         Months       Months
(in thousands)                 Ended        Ended          Ended        Ended
                             September    September      September    September
                              30, 2009     30, 2008       30, 2009     30, 2008

Restructuring expense           $40           --            $827          --
Impairment charge                --           --           $5,372         --
. . .