1043639--2/29/2008--SIGMATEL

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{customer, product, revenue}

{product, market, service}

{property, intellectual, protect}

{stock, price, operating}

{acquisition, growth, future}

{competitive, industry, competition}

{operation, international, foreign}

{condition, economic, financial}

{system, service, information}

{cost, operation, labor}

{personnel, key, retain}

{provision, law, control}

{product, liability, claim}

{operation, natural, condition}

{control, financial, internal}

{regulation, change, law}

Our business may be seriously impaired by the announcement of the pending acquisition of us by Freescale or if the acquisition is delayed or is not completed. Restrictions on the conduct of our business prior to the completion of the proposed merger with Freescale may have a negative impact on our operating results. We do not expect to return to our historic growth rate in the future. We have incurred net losses in prior quarterly and annual periods, and we will likely incur losses in the future. If we cannot return to sustained profitability and positive cash flows from our operations, our liquidity and ability to operate our business effectively could be adversely affected. Negative conditions in the global credit markets may impair the value or reduce the liquidity of a portion of our investment portfolio. The average selling prices of our products have in the past and could continue to decrease rapidly which may negatively impact our revenues and gross profits. The recent changes in our organization, including management resignations, acquisitions and dispositions, attrition, reductions in force, and cost cutting measures, have placed a significant strain on our management, personnel, systems and resources, and the continued success of our business depends on our ability to successfully manage these changes. We depend on a few key customers for a majority of our sales and the loss of, or a significant reduction in orders from, any of them would likely significantly reduce our revenues. We depend on our executive officers and other key personnel to manage our business effectively, and if we are unable to retain our current personnel and hire additional personnel, our ability to develop and successfully market our products could be harmed. Failure to manage our distribution relationships could impede our future revenues. Our business is highly dependent on the consumer electronics market, which is characterized by short product life cycles, fluctuations in demand and seasonality, and is subject to risks related to product transitions and supply of other components. Because of the lengthy sales cycles for our products and the fixed nature of a significant portion of our expenses, we may incur substantial expenses before we earn associated revenues and may not ultimately achieve our forecasted sales for our products. We derive a substantial portion of our revenues from our portable multimedia SoCs, the selling prices of which tend to decline over time, and if we are unable to develop and introduce successful new products in a timely and cost-effective manner or to achieve market acceptance of our new products, our operating results and competitive position could be harmed. We rely on third-party contractors to manufacture, assemble and test our products and our failure to successfully manage our relationships with these contractors could damage our relationships with our customers, decrease our sales, and limit our growth. Because future foundry capacity may be limited and because we do not have long-term agreements with our foundries, we may not be able to secure adequate manufacturing capacity to satisfy the demand for our products. If our foundries do not achieve satisfactory yields or quality, our sales could decrease, and our relationships with our customers and our reputation may be harmed. We often build our products based on forecasts provided by customers before receiving purchase orders for the products and may therefore incur product shortages or excess product inventory. The third-party contractors that manufacture, assemble and test our products, and many of our customers and end customers, are concentrated in the same geographic region, which increases the risk that a natural disaster, epidemic, labor strike, war or political unrest could disrupt our operations or sales. We have and continue to experience significant period-to-period quarterly and annual fluctuations in our revenues and operating results, which has and continues to result in volatility in our stock price. We are subject to the highly cyclical nature of the semiconductor industry. Because the markets in which we compete are highly competitive and many of our competitors have greater resources than us, we cannot be certain that our products will compete favorably in the marketplace. The consumer electronics market, which is the principal end market for our ICs, has historically been subject to intense price competition. In many cases, low cost, high volume producers have entered markets and driven down profit margins. If a low cost, high volume producer should develop products that are competitive with our products, our sales and profit margins would suffer. Our products are complex and may require modifications to resolve undetected errors or failures in our hardware and software, which could lead to an increase in our costs, a loss of customers or a delay in market acceptance of our products. Product liability claims may be asserted against us for certain defects in our products and we may not have sufficient liability insurance. We may experience difficulties in transitioning to smaller geometry process technologies or in achieving higher levels of design integration, which may result in reduced manufacturing yields, delays in product deliveries and increased expenses. We have substantial international activities, which expose us to additional business risks including increased logistical complexity and political instability. We may be unable to effectively protect our intellectual property in the U.S. or abroad, which would negatively affect our ability to compete. Significant litigation over intellectual property in our industry may cause us to become involved in costly and lengthy litigation, which could subject us to liability, require us to stop selling our products or force us to redesign our products. Our products incorporate technology licensed from third parties. Our intellectual property indemnification practices may adversely impact our business. The industry standards supported by our products are continually evolving and our success depends on our ability to adapt our products to meet these changing industry standards. If securities or industry analysts do not continue to publish research or reports about our business, our stock price and trading volume could decline. Our stock price may be volatile. Any asset dispositions we make could harm our financial condition and future results of operations. Provisions in our charter documents and Delaware law could prevent or delay a change in control of SigmaTel.

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1043639--2/29/2008--SIGMATEL_INC