INTEGRATED DEVICE TECHNOLOGY INC, 424B3, 1994-12-14

INTEGRATED DEVICE TECHNOLOGY INC
424B3, 1994-12-14
SEMICONDUCTORS & RELATED DEVICES

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3,400,000 SHARES

IDT LOGO GOES HERE

COMMON STOCK

Of the 3,400,000 shares of Common Stock offered hereby, 3,300,000 shares
are being sold by the Company and 100,000 shares are being sold by the
Selling Stockholders. See "Selling Stockholders." The Company will not
receive any of the proceeds from the sale of shares by the Selling
Stockholders.

The Company's Common Stock is quoted on the Nasdaq National Market under
the trading symbol "IDTI." On December 13, 1994, the last reported sale price
of the Common Stock on the Nasdaq National Market was $27.125 per share. See
"Price Range of Common Stock."

SEE "RISK FACTORS" FOR A DISCUSSION OF CERTAIN FACTORS THAT SHOULD BE
CONSIDERED BY PROSPECTIVE PURCHASERS OF THE COMMON STOCK OFFERED HEREBY.

----------

THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.

- -----------------------------------------------------------------------------

Proceeds to
Price to Underwriting Proceeds to Selling
Public Discount(1) Company(2) Stockholders
- ------------ --------------- ---------------- --------------- ----------------
Per Share ... $26.875 $1.20 $25.675 $25.675
Total(3) .... $91,375,000 $4,080,000 $84,727,500 $2,567,500
- -----------------------------------------------------------------------------
(1) See "Underwriting" for information concerning indemnification of the
Underwriters and other matters.
(2) Before deducting expenses payable by the Company estimated at $310,000.
(3) The Company has granted to the Underwriters a 30-day option to purchase
up to 510,000 additional shares of Common Stock solely to cover
over-allotments, if any. If the Underwriters exercise this option in
full, the Price to Public will total $105,081,250, the Underwriting
Discount will total $4,692,000 and the Proceeds to Company will total
$97,821,750.

The shares of Common Stock are offered by the several Underwriters named
herein, subject to receipt and acceptance by them and subject to their right
to reject any order in whole or in part. It is expected that delivery of the
certificates representing such shares will be made against payment therefor
at the office of Montgomery Securities on or about December 20, 1994.

MONTGOMERY SECURITIES
LEHMAN BROTHERS
SMITH BARNEY INC.

December 13, 1994

<PAGE>
AVAILABLE INFORMATION

Integrated Device Technology, Inc. ("IDT" or the "Company") is subject to
the informational requirements of the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), and in accordance therewith files reports,
proxy statements and other information with the Securities and Exchange
Commission (the "Commission"). Such reports, proxy statements and other
information can be inspected and copied at the public reference facilities
maintained by the Commission at Room 1024, 450 Fifth Street, N.W.,
Washington, D.C. 20549, and at the regional offices of the Commission located
at Seven World Trade Center, 13th Floor, New York, New York 10048 and Suite
1400, 500 West Madison Street, Chicago, Illinois 60661. Copies of such
material can be obtained at prescribed rates from the Public Reference
Section of the Commission at 450 Fifth Street, N.W., Washington, D.C. 20549.

The Company has filed with the Commission a Registration Statement on Form
S-3 (herein, together with all amendments and exhibits, referred to as the
"Registration Statement") under the Securities Act of 1933, as amended (the
"Securities Act"), with respect to the shares of Common Stock being offered
pursuant to this Prospectus. This Prospectus, which forms a part of the
Registration Statement, does not contain all of the information set forth in
the Registration Statement, certain items of which are contained in or
incorporated by reference as exhibits to the Registration Statement as
permitted by the rules and regulations of the Commission. For further
information, reference is made to the Registration Statement including the
exhibits filed or incorporated by reference therein. Statements contained
herein concerning the provisions of documents filed with, or incorporated by
reference in, the Registration Statement as exhibits are necessarily
summaries of such documents and each such statement is qualified in its
entirety by reference to the copy of the applicable documents filed with the
Commission.

INFORMATION INCORPORATED BY REFERENCE

The following documents filed by the Company with the Commission pursuant
to the Exchange Act are incorporated herein by reference:

1. The Company's Annual Report on Form 10-K for the fiscal year ended
April 3, 1994;

2. The Company's Quarterly Report on Form 10-Q for the fiscal quarter
ended July 3, 1994;

3. The Company's Quarterly Report on Form 10-Q for the fiscal quarter
ended October 2, 1994;

4. The description of the Company's Common Stock as set forth in its
Registration Statement on Form 8-B dated September 23, 1987, as amended by
the Company's Form 8 dated March 28, 1989, and the Company's Registration
Statement on Form 8-A dated December 20, 1988, as amended by the Company's
Form 8 dated February 27, 1992; and

5. All other documents filed by the Company with the Commission pursuant
to Section 13(a), 13(c), 14 or 15(d) of the Exchange Act after the date of
this Prospectus and prior to the termination of the offering of the Common
Stock.

Any statement contained in a document incorporated or deemed to be
incorporated by reference herein shall be deemed to be modified or superseded
for purposes of this Prospectus to the extent that a statement contained
herein or in any other subsequently filed document which also is or is deemed
to be incorporated by reference herein modifies or supersedes such statement.
Any statement so modified or superseded shall not be deemed, except as so
modified or superseded, to constitute a part of this Prospectus or the
Registration Statement.

The Company will provide without charge, upon written or oral request of
any person to whom a copy of this Prospectus is delivered, a copy of any or
all of the documents which have been or may be incorporated by reference in
this Prospectus, other than exhibits to such documents. Requests for such
copies shall be directed to Integrated Device Technology, Inc., 2975 Stender
Way, Santa Clara, CA 95054, Attention: Chief Financial Officer, telephone
(408) 727-6116.

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IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR
EFFECT TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE
COMMON STOCK OF THE COMPANY AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE
PREVAIL IN THE OPEN MARKET. SUCH STABILIZING, IF COMMENCED, MAY BE
DISCONTINUED AT ANY TIME.

----------

IN CONNECTION WITH THIS OFFERING, CERTAIN UNDERWRITERS AND SELLING GROUP
MEMBERS MAY ENGAGE IN PASSIVE MARKET MAKING TRANSACTIONS IN THE COMMON STOCK
OF THE COMPANY IN THE NASDAQ NATIONAL MARKET IN ACCORDANCE WITH RULE 10B-6A
UNDER THE SECURITIES EXCHANGE ACT OF 1934. SEE "UNDERWRITING."

<PAGE>
PROSPECTUS SUMMARY

The following is qualified in its entirety by reference to the more detailed
information and consolidated financial statements, including the notes
thereto, appearing elsewhere or incorporated by reference in this Prospectus.
The Company's fiscal year ends on the Sunday closest to March 31 and the
first, second and third fiscal quarters end on the Sunday closest to June 30,
September 30 and December 31, respectively. As a result, there were 53 weeks
in fiscal 1994 and 14 weeks in the fourth quarter of fiscal 1994. For ease of
reference, month-end dates are used herein except in the Consolidated
Financial Statements and related notes thereto. Except as otherwise noted,
all information in this Prospectus assumes no exercise of the Underwriters'
over-allotment option.

THE COMPANY

Integrated Device Technology, Inc. ("IDT" or the "Company") designs,
develops, manufactures and markets a broad range of high-performance
semiconductor products for the workstation/server, desktop computer, office
automation and communications markets. The Company focuses its development
efforts on providing proprietary and enhanced industry-standard products that
improve the performance of systems incorporating high-performance
microprocessors. The Company offers over 5,000 product configurations in four
product families: SRAM components and modules, specialty memory products,
logic circuits and RISC microprocessors and subsystems.

The Company has introduced 33 new products in a variety of configurations
since the beginning of fiscal 1994, including the ORION 64-bit microprocessor
and a family of 3.3 volt SRAMs. The Company believes that its ability to
introduce new, higher-performance products has resulted in its becoming a
market leader in SRAMs, SRAM cache modules, FIFO and multi-port specialty
memory products and high-speed CMOS logic circuits. The Company has made
significant investments and commitments in becoming a supplier of RISC based
microprocessors and now offers a family of 20 microprocessor and related
peripheral products for the desktop computing and embedded systems markets.

IDT operates sub-micron wafer fabrication facilities in San Jose and Salinas,
California. The Company's Salinas facility includes a 24,000 square foot,
class 3 fabrication line that is being converted from five-inch to six-inch
wafers. The Company's San Jose facility includes a 24,000 square foot, class
1, six-inch wafer fabrication line. The Company is also building a 192,000
square foot facility containing a 48,000 square foot, class 1, eight-inch
wafer fabrication line in Hillsboro, Oregon. The Company continues to make
significant investments to advance its proprietary CMOS process technologies
in order to improve product performance and lower product costs through
increased yields. The majority of IDT's current products are manufactured
using 0.65 micron process technologies and a 0.5 micron CMOS process
technology is under development. IDT believes that maintaining its own wafer
fabrication capability facilitates the implementation of advanced process
technologies and new higher-performance product designs, provides it with a
reliable source of supply of semiconductors and allows it to be more flexible
in shifting production according to product demand.

The Company markets its products on a worldwide basis primarily to OEMs
through a variety of channels, including a direct sales force, distributors
and independent sales representatives. The Company's end-user customers
include Alcatel, AT&T, Apple Computer, Bay Networks, Canon, Cisco Systems,
Compaq Computer, Dell Computer, Digital Equipment, FORE Systems,
Hewlett-Packard, IBM, Intel, Motorola, Nokia, Olivetti, Radius, Siemens
Nixdorf, Silicon Graphics, Sun Microsystems and Tektronix.

The Company was incorporated in California in 1980 and reincorporated in
Delaware in September 1987. Its principal offices are located at 2975 Stender
Way, Santa Clara, California 95054 and its telephone number is (408)
727-6116.

<PAGE>

THE OFFERING

<TABLE>
<S> <C>
Common Stock offered by the Company ..................3,300,000 shares
Common Stock offered by the Selling Stockholders ....100,000 shares
Common Stock to be outstanding after the offering ...37,166,622 shares(1)
Use of proceeds ......................................For construction of a new wafer
fabrication facility, expansion of
existing wafer fabrication facilities,
acquisition of capital equipment and
general corporate purposes, including
working capital.
Nasdaq National Market symbol ........................IDTI

<FN>
- ----------
(1) Excludes 5,293,537 shares of Common Stock subject to stock options
outstanding at September 30, 1994 and an additional 2,040,227 shares of
Common Stock reserved for issuance under the Company's stock option and
purchase plans. See "Capitalization."
</TABLE>

<TABLE>
<CAPTION>
SUMMARY CONSOLIDATED FINANCIAL DATA
(IN THOUSANDS, EXCEPT PER SHARE DATA)

SIX MONTHS ENDED
FISCAL YEAR ENDED MARCH 31, SEPTEMBER 30,
------------------------------------------------------ ---------------------
1990 1991 1992(1) 1993 1994 1993 1994
---------- ---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENTS OF OPERATIONS DATA:
Revenues ......................$209,475 $198,559 $202,734 $236,263 $330,462 $153,061 $190,628
Gross profit .................. 111,303 98,611 75,915 103,978 170,835 73,915 110,206
Operating income (loss) ...... 29,956 4,138 (29,316) 11,006 52,269 17,427 44,302
Income (loss) before provision
(benefit) for income taxes ... 27,871 836 (34,768) 6,278 50,206 15,444 45,169
Net income (loss)(2) .......... 17,007 1,226 (32,808) 5,336 40,165 12,361 33,884
Net income (loss) per share(2) $ .66 $ .05 $ (1.25) $ .18 $ 1.21 $ .39 $ .94
Shares used in computing net
income (loss) per share ...... 25,668 26,070 26,255 29,701 33,116 31,953 36,040
</TABLE>

SEPTEMBER 30, 1994
--------------------------
ACTUAL AS ADJUSTED(3)
----------- --------------
BALANCE SHEET DATA:
Working capital ......$ 152,611 $237,029
Total assets ......... 397,566 481,984
Total debt ........... 42,924 42,924
Stockholders' equity 260,373 344,791

- ----------
(1) In fiscal 1992, the Company recorded restructuring and other charges of
$24.8 million. See Note 2 of Notes to Consolidated Financial Statements.
(2) The Company's exemption from Malaysian income taxes expired in fiscal
1994. See Note 2 to the table under "Selected Consolidated Financial
Data" and Note 11 of Notes to Consolidated Financial Statements.
(3) Adjusted to give effect to the sale by the Company of 3,300,000 shares of
Common Stock offered hereby and the receipt of the estimated net proceeds
therefrom. See "Use of Proceeds" and "Capitalization."

<PAGE>
RISK FACTORS

In addition to the other information contained in or incorporated by
reference in this Prospectus, the following risk factors should be considered
carefully in evaluating the Company and its business before purchasing the
shares of Common Stock offered hereby.

POTENTIAL FLUCTUATIONS IN OPERATING RESULTS; DEPENDENCE ON COMPUTER AND
COMMUNICATIONS INDUSTRIES

IDT's past operating results have been, and its future operating results may
be, subject to quarterly fluctuations due to a wide variety of factors
including the timing of new product and process technology announcements and
introductions by the Company or its competitors, competitive pricing
pressures, fluctuations in manufacturing yields, changes in the mix of
products sold, availability and costs of raw materials, the cyclical nature
of the semiconductor industry, industry-wide wafer-processing capacity,
economic conditions in various geographic areas and costs associated with
other events, such as an expansion of production capability or litigation.
For example, the Company's results in fiscal 1991 were adversely affected by
a delay in the introduction of a higher-speed 256K (kilobit) SRAM (Static
Random Access Memory) and a 1 Meg (megabit) SRAM, an industry-wide decrease
in demand for logic products and, in late 1991, significant price competition
in the SRAM market. In addition, due primarily to the write-down of excess
inventory and underutilized capital assets, accruals for patent litigation
defense costs and charges related to closure of an older wafer fabrication
facility, the Company incurred a significant loss in fiscal 1992. Since the
end of fiscal 1992, as a result of the introduction of new higher-margin
products, improvement of production processes and expansion of capacity, as
well as the general improvement in the semiconductor market and other
factors, the Company has achieved improved quarterly operating results.
However, any unfavorable changes in manufacturing yields, product mix, supply
or costs of raw materials, delays in new product or process technology
introductions, underutilization of manufacturing capacity, unfavorable market
conditions, increased price competition or other factors could adversely
affect the Company's operating results. In recent periods the pricing
environment for SRAMs has been favorable, notwithstanding the long term trend
of price declines in the market. Significant price declines for SRAM products
in the future could adversely affect the Company's operating results.

The Company's operating results are also affected by the market's
acceptance of the Company's and its customers' products and the level and timing
of orders received. The Company ships a substantial portion of its quarterly
sales in the last month of a quarter. If anticipated shipments in any quarter do
not occur, the Company's operating results for that quarter could be adversely
affected. In addition, a substantial percentage of the Company's products are
incorporated into computer and computer-related products, which have
historically been characterized by significant fluctuations in demand which in
turn have affected the demand for components used in these computers.
Furthermore, the Company's operating results are affected by the demand for
microprocessors, particularly advanced microprocessors that require SRAM cache
memory. Any decline in the demand for microprocessors, such as the Intel Pentium
and the PowerPC, could adversely affect the Company's sales of SRAM components
and modules, which could adversely affect the Company's operating results. In
this regard, any decline in the demand for the Intel Pentium microprocessor,
which has recently been the subject of controversy regarding potential
performance flaws, could adversely affect demand for the Company's products and,
therefore, the Company's operating results. In addition, demand for certain of
the Company's products is dependent upon growth in the communications market. A
slowdown in the computer and related peripherals or communications markets could
adversely affect the Company's operating results. See "Management's Discussion
and Analysis of Financial Condition and Results of Operations."

The Company's operating results will be impacted by a number of risks
associated with the Company's current and planned facilities expansion
programs. See "--Current Capacity Limitations and Risks Associated with
Planned Expansion" and "Management's Discussion and Analysis of Financial
Condition and Results of Operations."

CURRENT CAPACITY LIMITATIONS AND RISKS ASSOCIATED WITH PLANNED EXPANSION

The Company is operating its wafer fabrication facilities in Salinas and San
Jose and its assembly operations in Malaysia near installed equipment
capacity. As a result, the Company has not been able to

<PAGE>

take advantage of all market opportunities presented to it. Due to long
production lead times and current capacity constraints, any failure by the
Company to adequately forecast the mix of product demand could adversely
affect the Company's sales and operating results. For example, the Company's
second quarter fiscal 1995 results were relatively flat compared to its prior
quarter results due to a slowing in demand from networking customers and an
inability to shift production to other product areas where demand exceeded
supply.

To address its capacity requirements, the Company is currently converting its
Salinas wafer fabrication facility from five-inch to six-inch wafers, adding
incremental production equipment to its San Jose wafer fabrication facility
and building an additional 40,000 square foot test and assembly facility in
Penang, Malaysia. In addition, the Company recently commenced construction of
a 192,000 square foot facility containing a 48,000 square foot, class 1,
eight-inch wafer fabrication line in Hillsboro, Oregon. Conversion of the
Salinas facility, while operating near installed equipment capacity,
constrains production scheduling and could impact production output. In
addition, delays in the delivery of wafer fabrication or test equipment to
the Company's Salinas, San Jose, Penang or Oregon facilities could delay
planned increases in the Company's production capacity. In connection with
the construction, equipping and commencement of operations at the new Oregon
facility, the Company faces a number of substantial additional risks
including, but not limited to, delays in construction, cost overruns,
equipment delays or shortages and manufacturing startup or process problems.
In addition, the Company has never operated an eight-inch wafer fabrication
facility and eight-inch facilities and production equipment are relatively
new to the industry. Accordingly, the Company could incur unanticipated
process or production problems.

The Company's capacity additions will result in a significant increase in
fixed and operating expenses. If revenue levels do not increase sufficiently
to offset these additional expense levels, the Company's operating results
could be adversely impacted in future periods. In this regard, IDT has
historically expensed as period costs, rather than capitalized, the operating
expenses associated with bringing a fabrication facility to commercial
production. Although the Company does not expect to generate significant
revenues from its new Oregon fabrication facility until fiscal 1997 at the
earliest, the Company will recognize substantial operating expenses
associated with the facility in fiscal 1996 and 1997. In addition, in fiscal
1997, the Company will begin to recognize substantial depreciation expenses
before production of commercial volume is achieved.

The extensive production expansion programs, including, in particular, the
construction of the new facility in Oregon, could strain the Company's
management and engineering resources. This strain on resources could be
exacerbated by the geographic distance between the Company's Oregon and
California facilities. There can be no assurance that the Company will be
able to hire additional management, engineering and other personnel, as
needed, to manage these expansion programs effectively and to implement new
production capacity in a timely manner and within budget.

The Company believes other manufacturers are also expanding or planning to
expand their fabrication capacity over the next several years. There can be
no assurance that expansion by the Company and its competitors will not lead
to overcapacity in the Company's target markets, which could cause declines
in product prices that would adversely affect the Company's operating
results.

MANUFACTURING RISKS

The Company's CMOS (Complementary Metal Oxide Silicon) and BiCMOS (Bipolar
CMOS) manufacturing processes are highly complex, require advanced and costly
equipment and are continuously being modified in an effort to improve yields
and product performance. Minute impurities or other difficulties in the
manufacturing process can lower yields. From time to time, IDT has
experienced production difficulties that have caused delivery delays and
quality problems. There can be no assurance that the Company will not
experience manufacturing problems and product delivery delays in the future
as a result of, among other things, changes to its process technologies,
ramping production, installing new equipment at its San Jose and Salinas
facilities, converting its Salinas facility from five-inch to six-inch wafers
and constructing its new facilities in Penang and Oregon. See "Current
Capacity Limitations and Risks Associated with Planned Expansion." Further,
the Company's existing wafer fabrication facilities

<PAGE>
are located relatively near each other in northern California. If the Company
were unable to use these facilities, as a result of a natural disaster or
otherwise, the Company's operations would be materially adversely affected
until the Company were able to obtain other production capability. See
"Business--Manufacturing."

INVENTORY VALUATION ISSUES

In connection with the Company's fiscal 1993 audit, the Company's auditors
identified a material weakness in the Company's internal controls with
respect to its inventory management system as it relates to determining the
cost of inventory. A material weakness indicates that a material error or
irregularity may occur in the Company's quarterly financials and may not be
timely detected by the Company's employees in the normal course of performing
their assigned functions, thereby possibly resulting in a misstatement of the
Company's quarterly financial statements. There were no adjustments to the
Company's financial statements in connection with the fiscal 1993 audit and
no restatements of any quarterly periods in that year. Beginning in fiscal
1994, the Company implemented programs aimed at improving its inventory
management and costing systems. The Company's auditors did not identify a
material weakness with respect to these systems in their audit for fiscal
1994, but did indicate to IDT that the Company's systems continue to have
significant limitations. While the Company continues to devote resources to
the improvement of its systems, there can be no assurance that the Company
will successfully implement systems which will completely resolve these
issues. Failure to devote adequate resources to address limitations in the
Company's inventory management and costing systems or to improve such systems
could result in a misstatement of operating results.

DEPENDENCE ON NEW PRODUCTS AND TECHNOLOGIES

The market for the Company's products is characterized by significant price
competition, frequent new product introductions, rapidly changing technology
and evolving industry standards. Average selling prices of the Company's
products have historically declined over time and this trend is expected to
continue. To offset these decreases, the Company relies on manufacturing cost
reductions and on timely introductions of new products that meet customers'
needs. From time to time the Company has experienced delays in product
introductions. For example, IDT's operating results were adversely affected
in fiscal 1991 due to the delay in the introduction of a higher-speed 256K
SRAM and a 1 Meg SRAM. To remain competitive the Company also must continue
to devote significant resources to advancing process technologies to reduce
semiconductor die size, increase performance and improve manufacturing
yields. IDT is currently converting the manufacture of several products to
its newer generation process technologies. Often in the past, such
conversions have temporarily adversely affected yields. In particular, as
process geometries become smaller, implementation becomes more difficult.
There can be no assurance that the Company will be able to develop and
introduce new products in a timely manner, that new products will gain market
acceptance or that new process technologies can be successfully implemented.
See "Management's Discussion and Analysis of Financial Condition and Results
of Operations" and "Business--Research and Development."

COMPETITION

The Company competes with a number of manufacturers in each of its major
product areas. Several of the Company's competitors have substantially
greater technical, marketing, manufacturing and financial resources than the
Company. In addition, several of the Company's foreign competitors receive
assistance from their respective governments, which may give them a
competitive advantage. The Company competes principally on the basis of
technical innovation and product performance, as well as on quality, price
and product availability. The ability of IDT to compete successfully depends
upon a number of factors, including new product and process technology
introductions by IDT and its competitors, customer acceptance of the
Company's products, cost effective manufacturing, assertion of intellectual
property rights and general market and economic conditions. Some of these
factors are outside the Company's control. There can be no assurance that the
Company will be able to compete successfully in the future against existing
or potential competitors or that the Company's operating results will not be
adversely affected by increased price competition. See
"Business--Competition."

<PAGE>
CAPITAL NEEDS

The semiconductor industry is extremely capital intensive. To remain
competitive, the Company must continue to invest in advanced manufacturing and
test equipment. During the past three fiscal years, cash flow from operations
has been insufficient to fund fully the Company's needs for capital equipment,
mandatory debt repayment and working capital. The Company currently plans to
make approximately $60 to $70 million in capital expenditures during the second
half of fiscal 1995. In addition, the construction and purchase of equipment for
the Company's new Oregon facility, together with ongoing capital expenditures,
are expected to require $200 million in fiscal 1996, with significant continuing
expenditures in the following years. The Company is in negotiations with a
financial institution concerning a facilities lease arrangement to provide up to
$60 million in financing for the purchase, construction and equipping of the
Company's new Oregon facility. The Company may consider additional forms of
financing to help meet its anticipated capital needs for its new Oregon
facility, including a possible bond financing through the State of Oregon, which
could yield proceeds of up to $20 million or more. While the Company believes
that the proceeds from this offering, together with existing cash and cash
equivalents, cash flow from operations, existing credit facilities and possible
other financing arrangements for the new Oregon facility, will be adequate to
fund its anticipated capital expenditures and working capital needs, including
mandatory debt repayments through fiscal 1996, there can be no assurance that
the Company will not be required to seek other financing sooner or that such
financing, if required, would be available on terms satisfactory to the Company.
In this regard, any adverse effect upon the Company's operating results due to a
significant downturn in industry pricing or otherwise could accelerate the
Company's need to seek additional outside capital. See "Management's Discussion
and Analysis of Financial Condition and Results of Operations--Liquidity and
Capital Resources."

INTELLECTUAL PROPERTY RISKS

The Company has been notified that it may be infringing patents or other
intellectual property rights of others. The semiconductor industry is
characterized by vigorous protection and pursuit of intellectual property
rights or positions, which have resulted in significant and often protracted
and expensive litigation. During fiscal 1993, IDT settled outstanding patent
litigation with both AT&T and Texas Instruments and obtained five-year
cross-licenses from both parties. Costs associated with these litigation
matters adversely affected IDT's results of operations for fiscal 1992. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and Notes 3 and 13 of Notes to Consolidated Financial Statements.
There can be no assurance that additional claims alleging infringement of
intellectual property rights, including infringement of patents that have
been or may be issued in the future, will not be asserted in the future. Any
assertions of intellectual property claims could require IDT to discontinue
the use of certain processes or cease the manufacture, use and sale of
infringing products, to incur significant litigation costs and damages, and
to develop noninfringing technology or to acquire licenses to the alleged
infringed technology. There can be no assurance that the Company would be
able to obtain such licenses on acceptable terms or to develop noninfringing
technology. IDT has received patent licenses from a number of companies. The
failure to renew certain of these licenses or significant increases in
amounts payable under these licenses could have an adverse effect on the
Company. In addition, there can be no assurance that any patents issued to
the Company will not be challenged, invalidated or circumvented or that
rights granted thereunder will provide competitive advantages to the Company.
Furthermore, the laws of certain countries do not protect the Company's
intellectual property rights to the same extent as do the laws of the United
States. See "Business--Intellectual Property and Licensing."

CYCLICALITY OF SEMICONDUCTOR INDUSTRY

The semiconductor industry is highly cyclical and has been subject to
significant downturns at various times that have been characterized by
diminished product demand, production overcapacity and accelerated erosion of
average selling prices. During fiscal 1992, the Company's operating results
were adversely affected by a general decline in demand for semiconductor
products and significant price competition. While semiconductor demand has
been strong in recent periods, and the Company's existing manufacturing
equipment capacity is operating near installed equipment capacity, there can
be no assurance that IDT will not be adversely affected in the future by
cyclical conditions in the semiconductor industry.

<PAGE>
MANAGEMENT OF GROWTH

The Company has experienced, and expects to experience in the future, growth
in the number of employees, the scope of its operations and the geographic
area of its operations. This growth has resulted in new and increased
reponsibilities for management personnel and has placed added pressures on
the Company's operating and financial systems. To manage future growth
effectively, the Company must hire additional management and technical
personnel, integrate its new employees into its overall operations and
continue to improve its operational, financial and management systems. If the
Company is unable to manage growth effectively or hire or retain qualified
personnel, the Company's business and results of operations could be
materially and adversely affected. See "Business--Employees."

DEPENDENCE ON THIRD PARTIES

The Company's manufacturing operations depend upon obtaining adequate raw
materials on a timely basis. The number of vendors of certain raw materials,
such as silicon wafers, ultra-pure metals and certain chemicals and gases, is
very limited. In addition, certain packages used by the Company require long
lead times and are available from only a few suppliers. From time to time,
vendors have extended lead times or limited supply to the Company due to
capacity constraints. The Company's results of operations would be adversely
affected if it were unable to obtain adequate supplies of raw materials in a
timely manner or if there were significant increases in the costs of raw
materials. IDT has been dependent on the design capabilities of Quantum
Effect Design, Inc. ("QED"), a majority-owned subsidiary, for the design and
development of derivatives of MIPS RISC based microprocessors, including the
ORION R4600. There can be no assurance that the Company will be able to
maintain this design relationship with QED or that QED will continue to be
successful in developing new microprocessors. See "Business--Manufacturing"
and "--Research and Development."

INTERNATIONAL OPERATIONS

Substantially all of the Company's test operations and a significant portion
of its assembly operations are performed at IDT's facility in Penang,
Malaysia. IDT also uses subcontractors in Korea, the Philippines and Malaysia
for certain assembly operations. The Company's reliance on these facilities
entails certain risks generally associated with doing business abroad, such
as foreign governmental regulations, currency fluctuations, political unrest
and disruptions or delays in shipments. The Company's operations in Penang
are subject to other specific risks. There is currently a very low
unemployment rate, and accordingly a limited pool of skilled workers, in
Penang. There can be no assurance that the Company will be able to hire
sufficient skilled personnel as it expands its operations in Penang. In
addition, due to current limitations on electrical power availability in
Penang, certain large consumers of power have been subject to brief shutdowns
on a weekly basis. While the Company is not a large consumer of power and
therefore has not been affected by such scheduled shutdowns, there can be no
assurance that, as IDT's and other manufacturers' operations in Penang
expand, electrical power shortages will not adversely affect the Company's
Malaysian operations. The Company's tax rate in fiscal 1996 will increase as
a result of the expiration of the Company's exemption from Malaysian income
taxes. This will contribute to an increase in the Company's overall income
tax rate in the future. See Note 2 to the table under "Selected Consolidated
Financial Data" and Note 11 of Notes to Consolidated Financial Statements. If
the Company were unable to assemble or test products offshore, or if air
transportation to these foreign facilities were curtailed, the Company's
operations could be materially adversely affected.

A substantial percentage of the Company's revenues are derived from export
sales. In fiscal 1994 and the first six months of fiscal 1995, export sales
accounted for 32% and 38%, respectively, of IDT's revenues. See Note 12 of
Notes to Consolidated Financial Statements. Export sales are generally
denominated in local currencies. The Company's offshore assembly and test
operations and export sales are subject to risks associated with foreign
operations, including currency controls and fluctuations, changes in local
economic conditions, import and export controls, as well as changes in tax
laws, tariffs and freight rates. The Company attempts to hedge against a
portion of its short-term exposure to currency fluctuations. There can be no
assurance that the above factors will not adversely affect the Company's
operations in the future or that the Company will be successful in its
hedging efforts. See "Business--Marketing and Sales" and "--Manufacturing"
and Note 1 of Notes to Consolidated Financial Statements.

<PAGE>
ENVIRONMENTAL REGULATIONS

The Company is subject to a variety of foreign, federal, state and local
governmental regulations related to the discharge and disposal of toxic,
volatile or otherwise hazardous materials used in its manufacturing process.
While the Company believes that it has all environmental permits necessary to
conduct its business and that its activities conform to present environmental
regulations, increasing public attention has been focused on the
environmental impact of semiconductor operations. Any failure by the Company
to control the use of, or to restrict adequately the discharge of, hazardous
materials under present or future regulations could subject it to substantial
liability or could cause its manufacturing operations to be suspended. In
addition, IDT could be held financially responsible for remedial measures if
its properties were found to be contaminated whether or not the Company was
responsible for such contamination.

VOLATILITY OF STOCK PRICE

The Company's Common Stock has experienced substantial price volatility and
such volatility may occur in the future, particularly as a result of quarter
to quarter variations in the actual or anticipated financial results of the
Company or other companies in the semiconductor industry or in the markets
served by the Company, or announcements by the Company or its competitors
regarding new product introductions. In addition, the stock market has
experienced extreme price and volume fluctuations that have affected the
market price of many technology companies' stocks in particular and that have
often been unrelated or disproportionate to the operating performance of
these companies. These factors may adversely affect the market price of the
Common Stock. See "Price Range of Common Stock."

<PAGE>
USE OF PROCEEDS

The net proceeds to the Company from the sale of the 3,300,000 shares of
Common Stock offered by the Company are estimated to be approximately
$84,418,000 ($97,512,000 if the Underwriters' over-allotment option is
exercised in full).

The Company intends to use the net proceeds of the offering for construction
of a new wafer fabrication facility in Hillsboro, Oregon, expansion of existing
wafer fabrication facilities in San Jose and Salinas, California, acquisition of
capital equipment and general corporate purposes, including working capital. The
Company believes that the proceeds of this offering, together with existing cash
and cash equivalents, cash flow from operations, existing credit facilities and
possible other financing arrangements for the construction and equipping of its
new Oregon facility, will be adequate to fund its anticipated capital
expenditures and working capital needs through fiscal 1996. See "Management's
Discussion and Analysis of Financial Condition and Results of
Operations--Liquidity and Capital Resources." Pending their application, the
proceeds will be invested in short-term, interest bearing instruments.

The Company will not receive any proceeds from the sale of shares of
Common Stock by the Selling Stockholders. See "Selling Stockholders."

PRICE RANGE OF COMMON STOCK

The Common Stock is traded on the Nasdaq National Market under the symbol
"IDTI." The following table sets forth the high and low last reported sale
prices for the Common Stock as reported by the Nasdaq National Market during
the fiscal quarters indicated.

HIGH LOW
-------- -------
Fiscal 1993:
First Quarter ..............................$ 5 3/4 $ 3 7/8
Second Quarter ............................. 5 3 5/8
Third Quarter .............................. 6 3/4 4 1/8
Fourth Quarter ............................. 8 3/8 6 1/4

Fiscal 1994:
First Quarter .............................. 11 1/8 6 1/2
Second Quarter ............................. 19 5/8 10 1/2
Third Quarter .............................. 18 7/8 12 3/8
Fourth Quarter ............................. 33 5/8 16 3/4

Fiscal 1995:
First Quarter .............................. 31 3/8 23 7/8
Second Quarter ............................. 28 7/8 16 1/4
Third Quarter (through December 13, 1994) .. 29 11/16 18 1/2

On December 13, 1994, the last reported sale price of the Common Stock was
$27.125 per share. As of November 8, 1994, there were approximately 965 record
holders of the Common Stock.

DIVIDEND POLICY

The Company intends to retain any future earnings for use in its business
and, accordingly, does not anticipate paying any cash dividends on its Common
Stock in the foreseeable future.

11
<PAGE>
CAPITALIZATION

The following table sets forth the capitalization of IDT at September 30,
1994 and as adjusted to reflect the sale by the Company of the 3,300,000
shares of Common Stock offered hereby and the receipt of the estimated net
proceeds therefrom.

<TABLE>
<CAPTION>
SEPTEMBER 30, 1994
------------------------
ACTUAL AS ADJUSTED
---------- -------------
(IN THOUSANDS)
<S> <C> <C>
Current portion of long term obligations(1) .....................$ 8,608 $ 8,608
========== =============
Long-term obligations excluding current portion(1) ..............$ 34,316 $ 34,316
---------- -------------
Stockholders' equity:
Preferred Stock; $.001 par value: 5,000,000 shares authorized;
no shares issued ................................................ -- --
Common Stock; $.001 par value: 65,000,000 shares authorized;
33,652,361 shares issued and outstanding; 36,952,361 shares
issued and outstanding as adjusted(2) ........................... 34 37
Additional paid-in capital ...................................... 162,109 246,524
Retained earnings ............................................... 98,401 98,401
Cumulative translation adjustment ............................... (171) (171)
Total stockholders' equity ......................................$260,373 $344,791
---------- -------------
Total capitalization ............................................$294,689 $379,107
========== =============

<FN>
- ----------
(1) See Notes 4 and 5 of Notes to Consolidated Financial Statements.
(2) Excludes 5,293,537 shares of Common Stock subject to stock options
outstanding at September 30, 1994 and an additional 2,040,227 shares of
Common Stock reserved for issuance under the Company's stock option and
stock purchase plans. See Note 9 of Notes to Consolidated Financial
Statements.
</TABLE>

<PAGE>
SELECTED CONSOLIDATED FINANCIAL DATA

The following selected financial data as of March 31, 1993 and 1994 and for
each of the years in the three-year period ended March 31, 1994 have been
derived from IDT's Consolidated Financial Statements included elsewhere in
this Prospectus, which have been audited by Price Waterhouse LLP, independent
accountants, as indicated in their report thereon appearing elsewhere herein.
The following selected financial data as of March 31, 1990, 1991 and 1992 and
for each of the years in the two-year period ended March 31, 1991 have been
derived from audited consolidated financial statements not included herein.
The consolidated financial data as of September 30, 1994 and for the six
months ended September 30, 1993 and 1994 have been derived from unaudited
condensed consolidated financial statements, which, in the opinion of
management of IDT, reflect all adjustments (consisting only of normal
recurring adjustments) necessary for the fair statement of the financial data
for such periods. The results of operations for the six months ended
September 30, 1994 are not necessarily indicative of results that may be
expected for any other period or for the full year. The data set forth below
are qualified in their entirety by reference to, and should be read in
conjunction with, "Management's Discussion and Analysis of Financial
Condition and Results of Operations" and the Consolidated Financial
Statements and related notes thereto included elsewhere in this Prospectus.

<TABLE>
<CAPTION>
SIX MONTHS ENDED
FISCAL YEAR ENDED MARCH 31, SEPTEMBER 30,
------------------------------------------------------- ---------------------
1990 1991 1992(1) 1993 1994 1993 1994
---------- ---------- ----------- ---------- ---------- ---------- ----------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENTS OF OPERATIONS DATA:
Revenues ............................$209,475 $198,559 $202,734 $236,263 $330,462 $153,061 $190,628
Cost of revenues .................... 98,172 99,948 126,819 132,285 159,627 79,146 80,422
---------- ---------- ----------- ---------- ---------- ---------- ----------
Gross profit ........................ 111,303 98,611 75,915 103,978 170,835 73,915 110,206
---------- ---------- ----------- ---------- ---------- ---------- ----------
Operating expenses:
Research and development ............ 41,644 50,848 52,044 53,461 64,237 31,182 35,536
Selling, general and administrative 39,703 43,625 48,721 39,511 54,329 25,306 30,368
Restructuring charge ................ -- -- 4,466 -- -- -- --
---------- ---------- ----------- ---------- ---------- ---------- ----------
Total operating expenses ............ 81,347 94,473 105,231 92,972 118,566 56,488 65,904
---------- ---------- ----------- ---------- ---------- ---------- ----------
Operating income (loss) ............. 29,956 4,138 (29,316) 11,006 52,269 17,427 44,302
Interest expense .................... (3,519) (6,507) (7,045) (5,855) (5,165) (2,778) (1,854)
Interest income and other, net ..... 1,434 3,205 1,593 1,127 3,102 795 2,721
---------- ---------- ----------- ---------- ---------- ---------- ----------
Income (loss) before provision
(benefit) for income taxes .......... 27,871 836 (34,768) 6,278 50,206 15,444 45,169
Provision (benefit) for income taxes 10,864 (390) (1,960) 942 10,041 3,083 11,285
---------- ---------- ----------- ---------- ---------- ---------- ----------
Net income (loss)(2) ................$ 17,007 $ 1,226 $ (32,808) $ 5,336 $ 40,165 $ 12,361 $ 33,884
========== ========== =========== ========== ========== ========== ==========
Net income (loss) per share(2) .....$ .66 $ .05 $ (1.25) $ .18 $ 1.21 $ .39 $ .94
========== ========== =========== ========== ========== ========== ==========
Shares used in computing net
income (loss) per share ............. 25,668 26,070 26,255 29,701 33,116 31,953 36,040
========== ========== =========== ========== ========== ========== ==========
</TABLE>

<TABLE>
<CAPTION>
MARCH 31,
------------------------------------------------------ SEPTEMBER 30,
1990 1991 1992 1993 1994 1994
---------- ---------- ---------- ---------- ---------- ---------------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Working capital ......$ 68,139 $ 63,539 $ 40,493 $ 50,885 $143,248 $152,611
Total assets ......... 261,538 258,626 229,730 239,994 349,571 397,566
Total debt ........... 78,733 73,858 66,100 62,295 51,646 42,924
Stockholders' equity 130,704 134,524 104,602 117,760 224,367 260,373
<FN>
- ----------
(1) In fiscal 1992, the Company recorded restructuring and other charges of
$24.8 million. See Note 2 of Notes to Consolidated Financial Statements.
(2) As described in Note 11 of Notes to Consolidated Financial Statements,
the Company's Malaysian subsidiary was granted a tax holiday which
extended through June 30, 1993. Such status had the effect of reducing
the Company's provision for taxes by approximately $0.8 million, $0.9
million, $1.0 million, and $1.5 million, or $0.03, $0.04, $0.04 and $0.05
per share, for the years ended March 31, 1990, 1991, 1992 and 1993,
respectively. Management believes it is likely that carryovers of
depreciation from the tax holiday period along with expected additional
depreciation grants will defer the time beyond March 31, 1995 when the
Malaysian subsidiary will first begin to pay local taxes. The corporate
income tax rate in Malaysia which would otherwise be applicable for the
Company's fiscal year ending April 2, 1995 and for subsequent periods is
34%.
</TABLE>

<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS

OVERVIEW

IDT designs, develops, manufactures and markets a broad range of
high-performance semiconductor products for the workstation/server, desktop
computer, office automation and communications markets. The Company's
revenues have increased from $203 million in fiscal 1992 to $236 million in
fiscal 1993 and to $330 million in fiscal 1994. This growth has been due to
increasing market acceptance of new products, the expansion of production
output through additions of capital equipment and improved manufacturing
processes and associated die shrinks and yield improvements, and improvements
in overall market conditions. In particular, the Company has introduced 33
new products in a variety of configurations since the beginning of fiscal
1994, including the ORION 64-bit microprocessor and the Company's family of
3.3 volt SRAMs. During these periods, the Company has achieved unit volume
growth across all of its market segments.

The Company's gross profit and operating profit margins have improved
significantly from 43.5% and 3.5%, respectively, in the first quarter of
fiscal 1993 to 58.1% and 23.1%, respectively, in the second quarter of fiscal
1995. These improvements have been attributable to economies of scale
associated with increased unit shipments, higher utilization of manufacturing
capacity, wafer fabrication process improvements, and a mix shift to higher
margin products, including microprocessors.

The Company is currently operating near installed equipment capacity. To
address this situation, the Company initiated a significant capacity
expansion program, including conversion of the Company's Salinas wafer
fabrication facility from five-inch to six-inch wafers, the purchase of
incremental wafer fabrication equipment for the Company's San Jose facility,
expansion of assembly and test facilities in Penang, Malaysia, and
construction of a new eight-inch wafer fabrication facility in Oregon. These
programs will require substantial capital expenditures in the balance of
fiscal 1995, in fiscal 1996 and beyond. See "Business--Manufacturing." The
Company expects that the equipment conversion in the Salinas facility will be
completed near the end of fiscal 1995 and the addition of equipment to the
San Jose facility and the expansion of the Penang facility will be completed
in fiscal 1996. It is expected that the Oregon facility will commence
production during fiscal 1996; however, the Oregon facility is not expected
to achieve significant revenues until fiscal 1997 at the earliest and will
not achieve commercial volume production until fiscal 1998 at the earliest.

The increased operating expenses associated with the Company's capacity
expansion programs will adversely affect operating results until the Company
achieves volume production utilizing the new facilities and equipment.
Although the Company does not expect to generate significant revenues from
its new Oregon fabrication facility until fiscal 1997 at the earliest, the
Company will recognize substantial operating expenses associated with the
facility in fiscal 1996 and 1997. In addition, in fiscal 1997 the Company
will begin to recognize substantial depreciation expenses before production
in commercial volumes is achieved.

<PAGE>
The following table sets forth certain amounts, as a percentage of revenues,
from the Company's consolidated statements of operations for the three fiscal
years ended March 31, 1992, 1993 and 1994 and for the six months ended
September 30, 1993 and 1994.

<TABLE>
<CAPTION>
SIX MONTHS
ENDED SEPTEMBER
FISCAL YEAR ENDED MARCH 31, 30,
--------------------------- -----------------
1992 1993 1994 1993 1994
--------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Revenues ................................100.0% 100.0% 100.0% 100.0% 100.0%
Cost of revenues ........................ 62.6 56.0 48.3 51.7 42.2
--------- -------- -------- -------- --------
Gross margin ............................ 37.4 44.0 51.7 48.3 57.8
--------- -------- -------- -------- --------
Operating expenses:
Research and development ................ 25.7 22.6 19.4 20.4 18.6
Selling, general and administrative .... 24.0 16.7 16.5 16.5 15.9
Restructuring charge .................... 2.2 -- -- -- --
--------- -------- -------- -------- --------
Total operating expenses ................ 51.9 39.3 35.9 36.9 34.6
--------- -------- -------- -------- --------
Operating income (loss) .................(14.5) 4.7 15.8 11.4 23.2
Net interest (expense) income ........... (2.7) (2.0) (0.6) (1.3) 0.5
--------- -------- -------- -------- --------
Income (loss) before provision (benefit)
for income taxes ........................(17.2) 2.7 15.2 10.1 23.7
Provision (benefit) for income taxes ... (1.0) 0.4 3.0 2.0 5.9
--------- -------- -------- -------- --------
Net income (loss) .......................(16.2)% 2.3% 12.2% 8.1% 17.8%
========= ======== ======== ======== ========
</TABLE>

<TABLE>
<CAPTION>
Set forth below are selected financial data from the Company's consolidated
statements of operations for the last ten fiscal quarters, reflecting
continued improvements in the Company's operating results:

FISCAL 1993 FISCAL 1994 FISCAL 1995
--------------------------------------- --------------------------------------- -------------------
FIRST SECOND THIRD FOURTH FIRST SECOND THIRD FOURTH FIRST SECOND
QUARTER QUARTER QUARTER QUARTER QUARTER QUARTER QUARTER QUARTER QUARTER QUARTER
--------- --------- --------- --------- --------- --------- --------- --------- --------- ---------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Revenues ......$53,758 $57,479 $60,590 $64,436 $72,766 $80,295 $85,330 $92,071 $95,043 $95,585
Gross profit . 23,366 24,734 27,234 28,645 33,948 39,967 45,419 51,501 54,632 55,574
Net income .... 475 838 1,493 2,530 4,628 7,733 11,625 16,179 16,878 17,006
Net income per
share ........$ .02 $ .03 $ .05 $ .08 $ .15 $ .24 $ .35 $ .45 $ .47 $ .47
</TABLE>

RESULTS OF OPERATIONS

Six months ended September 30, 1993 and 1994. Revenues for the first six
months of fiscal 1995 increased 24.5% to $190.6 million as compared to
revenues of $153.1 million for the first six months of fiscal 1994. This
increase was attributable to higher unit volumes across most product
families, geographic regions and sales channels. Significant unit volume
growth was experienced in SRAM memories, particularly 3.3 volt devices, RISC
based microprocessors, logic circuits and specialty memory products. The
higher unit volumes were offset in part by lower average unit selling prices
on certain products due to competitive pricing and the maturation of certain
products. In the second quarter of fiscal 1995, revenues were relatively flat
compared to the first quarter of fiscal 1995 due to a slowing in demand from
networking customers and an inability to shift production to other product
areas where demand exceeded supply.

Gross profit for the first six months of fiscal 1995 increased 49.1% to
$110.2 million, or 57.8% of revenues, as compared to $73.9 million, or 48.3%
of revenues, for the comparable period of the prior year. The improvements in
gross profit and gross margins were primarily attributable to higher capacity
utilization and increased unit volumes. In addition, the Company continued a
shift to more advanced designs and wafer fabrication processes which resulted
in increased die per wafer yields and therefore lower unit costs. More
efficient test and burn-in procedures also contributed to improved yields and
reduced manufacturing costs. In addition, selective acceptance of new orders
as a result of continued strong demand

<PAGE>
allowed the Company to shift manufacturing capacity to higher-margin
products. Due primarily to the Company reaching a cap on certain royalty
obligations, gross profit also benefited in the first six months of fiscal
1995 compared to the first six months of fiscal 1994 from a $1 million
reduction in patent and royalty expenses relating to cross-license
agreements. However, the Company's industry is characterized by patent claims
and license agreements, and there can be no assurance royalty expenses will
not increase in the future.

Research and development ("R&D") expenses for the first six months of fiscal
1995 increased 14.0% to $35.5 million, but decreased as a percentage of
revenues to 18.6% from 20.4% in the corresponding period of the prior year.
The Company continues to invest in the development of new products and
process technologies. In the first six months of fiscal 1995, the Company
introduced 11 new products and continued to develop its 0.5 micron CMOS
processes. The Company expects that it will continue to increase R&D spending
in the future, although such expenses may vary as a percentage of revenues.

Selling, general and administrative ("SG&A") expenses increased 20.0% to
$30.4 million for the first six months of fiscal 1995, but declined as a
percentage of revenues to 15.9% from 16.5% in the comparable period of the
prior year. The increase in SG&A expenses was attributable to higher costs
associated with the higher level of sales, including higher sales
commissions, employee profit sharing and management bonuses, although SG&A
expenses did not increase as rapidly as sales. The Company anticipates that
SG&A expenses will continue to increase, but may vary as a percentage of
revenues.

Interest expense for the first six months of fiscal 1995 decreased 33.3% to
$1.9 million. The decrease was the result of lower debt balances coupled with
lower interest rates. Interest income and other, net, increased to $2.7
million for the six-month period as compared to $0.8 million for the same
period of the prior year. The increase in interest income was attributable to
significantly higher average cash balances, partially offset by lower
interest rates.

Income taxes for the first six months of fiscal 1995 were provided at an
effective rate of 25%. This compares to an effective rate of 20% in the
corresponding period of fiscal 1994. The increase in the effective tax rate
in fiscal 1995 as compared to fiscal 1994 is primarily due to higher
utilization in fiscal 1994 of certain deferred tax benefits. The Company
believes that its effective tax rate will increase in the future as the tax
holiday associated with the Company's Malaysia facility expires and the
Company will have exhausted its deferred tax benefits.

Fiscal Years 1992, 1993 and 1994. Revenues increased 39.9% to $330.5 million
in fiscal 1994, as compared to revenues of $236.3 million in fiscal 1993,
which in turn represented a 16.6% increase over revenues of $202.7 million in
fiscal 1992. Growth in fiscal 1994 was due to increased unit sales across all
product segments, with the largest percentage increase in the microprocessor
segment, as well as favorable pricing during the fiscal year on certain
products, offset in part by lower selling prices for some products. Revenue
growth in fiscal 1993 was attributed to increases in product shipments across
all market segments, offset in part by price reductions on several major
products. Toward the end of fiscal 1993, pricing firmed in the memory
business segment, reversing a trend of steady price erosion over several
years, which had been driven in part by increased demand across all market
segments.

Gross profit increased 64.3% to $170.8 million, or 51.7% of revenues in
fiscal 1994 as compared to $104.0 million or 44.0% of revenues in fiscal
1993. Gross profit increased 37.0% in fiscal 1993 from $75.9 million or 37.4%
of revenues in fiscal 1992. The improvement in fiscal 1994 was primarily
attributable to greater capacity utilization, which lowered average wafer
manufacturing costs, significant increases in die per wafer due to wafer
fabrication process improvements, and a mix shift to products with higher
average selling prices, particularly microprocessors. In fiscal 1992, gross
profit was negatively impacted principally by write-offs of inventory,
including approximately $14.9 million of charges to operations in the second
quarter, and underutilization of capital assets.

Research and development expenses increased 20.2% to $64.2 million or 19.4%
of revenues in fiscal 1994, as compared to $53.5 million or 22.6% of revenues
in fiscal 1993. In fiscal 1992, R&D expenses were $52.0 million or 25.7% of
revenues. The increases in R&D expenses were due primarily to continued
investments by the Company in both process technology and new product design
and development.

<PAGE>
Selling, general and administrative expenses increased 37.5% to $54.3 million
in fiscal 1994 or 16.5% of revenues, as compared to $39.5 million or 16.7% of
revenues in fiscal 1993. In fiscal 1992, SG&A expenses were $48.7 million or
24.0% of revenues. The fiscal 1994 increase was primarily due to increases in
management bonuses, employee profit sharing and the variable selling expenses
associated with the revenue increase. Fiscal 1992 SG&A expenses were
significantly impacted by patent litigation expenses and an increase in the
provision for bad debt. Patent litigation expenses accrued in fiscal 1992
were resolved in fiscal 1993 and, as a consequence, the reversal of a portion
of the 1992 accruals benefited fiscal 1993 results.

IDT incurred approximately $4.5 million of restructuring charges in fiscal
1992 associated with the closing of its oldest wafer fabrication line and a
reduction in workforce.

Interest expense totaled $5.2 million in fiscal 1994, compared to $5.9
million in fiscal 1993 and $7.0 million in fiscal 1992. Interest expense has
decreased as IDT's asset-secured debt has declined. IDT continues to incur
interest on a long-term obligation associated with a patent cross-license
which did not exist in fiscal 1992 and was insignificant in fiscal 1993.

Interest income and other, net, increased to $3.1 million in fiscal 1994
compared to $1.1 million and $1.6 million in fiscal years 1993 and 1992,
respectively. Fiscal 1994 was favorably impacted by higher cash balances
available for investment, gains on the disposition of assets and royalty
income.

The Company adopted Statement of Financial Accounting Standards No. 109 (FAS
109) during fiscal 1993, retroactively to March 30, 1991. The effective tax
rates for fiscal 1994 and 1993 of 20% and 15%, respectively, differed from
the U.S. statutory rate of 34% primarily due to earnings of foreign
subsidiaries being taxed at lower rates, as well as the utilization of
research and development credits. In addition, fiscal 1994 benefited from the
realization of certain deferred tax benefits for which a valuation allowance
was previously required. The tax benefit for fiscal 1992 reflected the
ability of the Company to apply fiscal 1992 pretax losses against taxes paid
for prior years

LIQUIDITY AND CAPITAL RESOURCES

The Company's financial condition improved during fiscal 1994 and the first
six months of fiscal 1995. Cash and cash equivalents and short-term
investments increased from $24.4 million at the end of fiscal 1993 to $121.8
million at the end of fiscal 1994 and to $125.9 million at September 30,
1994. Working capital increased from $51.4 million at March 31, 1993 to
$143.2 million at March 31, 1994 and to $152.6 million at September 30, 1994.
These increases were due to improved profitability, as well as a public stock
offering in fiscal 1994 yielding net proceeds of approximately $46.8 million.
As of September 30, 1994, the Company had $4.4 million available under
unsecured lines of credit, all of which are overseas. See Note 6 of Notes to
Consolidated Financial Statements.

During fiscal 1992, 1993 and 1994 and the first six months of fiscal 1995,
the Company generated $31.9 million, $37.2 million, $100.1 million and $51.5
million, respectively, of cash flow from operations. The largest single
factor influencing cash flow from operations during fiscal 1992 and 1993 was
the depreciation resulting from the Company's San Jose wafer fabrication
facility. The improved operating results in fiscal 1993, 1994 and the first
six months of fiscal 1995 also had a significant impact on cash flow during
those periods. Cash flow during fiscal 1992 was affected negatively by the
operating loss for the year. The Company anticipates that significant
depreciation relating to the San Jose facility will continue through at least
fiscal 1996.

During fiscal 1992, 1993 and 1994, and the first six months of fiscal 1995,
the Company's net cash used in investing activities was $16.1 million, $28.8
million, $68.9 million and $45.0 million, respectively, of which $25.7
million, $28.2 million, $38.1 million and $40.6 million, respectively, were
used for capital equipment and property and plant improvements. During fiscal
1992 and 1993, the Company's net cash used in financing activities was $7.4
million and $5.9 million, respectively, due primarily to net repayments of
$9.8 million and $8.8 million, respectively, related primarily to capital
equipment financing. For fiscal 1994, financing activities provided net cash
of $34.8 million as a result of the Company's public offering, offset by net
repayments of equipment financing of $20.5 million. For the six months ended
September 30, 1994 the Company used $7.2 million in net cash for financing
activities, including net repayments of

<PAGE>
$9.1 million. See Notes 4, 5, 6 and 7 of Notes to Consolidated Financial
Statements for information regarding the Company's various financing
arrangements. IDT expects capital equipment financing to be reduced and
borrowing and repayment levels to decrease over the next few years as a
portion of the proceeds of this offering is used to purchase capital
equipment.

In view of current and anticipated capacity requirements, the Company
anticipates capital expenditures of $60 to $70 million for the last six
months of fiscal 1995 and approximately $200 million in fiscal 1996,
principally in connection with its capacity expansion programs. The Company
is in negotiations with a financial institution concerning a facilities lease
arrangement to provide up to $60 million in financing for the purchase,
construction and equipping of the Company's new Oregon wafer fabrication
facility. The Company may consider additional forms of financing to help meet
its anticipated capital needs for its new Oregon facility, including a
possible bond financing through the State of Oregon, which could yield
proceeds of up to $20 million or more. See "Risk Factors--Current Capacity
Limitations and Risks Associated with Planned Expansion" and "--Capital
Needs."

The Company believes that the proceeds from this offering, together with
existing cash and cash equivalents, cash flow from operations, existing
credit facilities and possible other financing arrangements for the new Oregon
facility, will be adequate to fund its anticipated capital expenditures and
working capital needs through fiscal 1996. There can be no assurance,
however, that the Company will not be required to seek other financing sooner
or that such financing, if required, will be available on terms satisfactory
to the Company.

<PAGE>
BUSINESS

IDT designs, develops, manufactures and markets a broad range of
high-performance semiconductor products for the workstation/server, desktop
computer, office automation and communications markets. The Company focuses
its development efforts on providing proprietary and enhanced
industry-standard products that improve the performance of systems
incorporating high-performance microprocessors. The Company offers over 5,000
product configurations in four product families: SRAM components and modules,
specialty memory products, logic circuits and RISC microprocessors and
subsystems. The Company has made significant investments and commitments in
becoming a supplier of RISC based microprocessors and now offers a family of
20 microprocessor and related peripheral products for the desktop computing
and embedded systems markets. For example, the Company offers the 64-bit
ORION R4600 microprocessor and recently announced ORION derivatives.

BACKGROUND

Virtually all electronic systems--whether in personal computers, telephone
switches or automobiles--are designed around microprocessors. Memory and
input/output devices surround and control the flow of data to and from the
microprocessor. Continuing improvements in the speed and performance of
microprocessors have facilitated a trend toward making electronic systems
smaller, faster, more powerful and more accessible to users. However, in
order to take advantage of the full capabilities of the new generations of
microprocessors, electronic systems require faster and higher performance
memory and logic devices. In addition, the decreasing size of electronic
systems has led in many cases to the use of modules or subsystems that
integrate a number of semiconductor components. The foregoing trends are
driving the demand for the Company's four product families.

o RISC Microprocessors and Subsystems. Microprocessors manipulate and
control data in electronic systems through a fixed set of instructions.
Some microprocessor architectures use complex instruction set computing
("CISC") while other architectures focus on a reduced number, or subset,
of instructions ("RISC"). Substantially all personal computer systems
today use CISC microprocessors based on the Intel x86 architecture. RISC
microprocessors, however, generally operate at higher speeds than CISC
microprocessors, which has led to the increasing acceptance of RISC
microprocessors in workstations, servers and other high-performance
computers as well as in embedded controllers for printers, copiers,
facsimile machines and other electronic products.

o SRAM Components and Modules. Today's higher-performance microcomputers
that use advanced microprocessors and more complex operating systems and
applications software require more memory, including SRAM cache memory,
DRAM (Dynamic Random Access Memory) main memory and disk memory. SRAM
cache memory provides intermediate storage between fast microprocessors
and relatively slow DRAM main memory. By serving as an intermediate
high-speed memory, SRAM cache memory significantly increases overall
system speed and performance. Personal computers based on Intel
microprocessor architectures through the 386 family generally did not
utilize SRAM cache memory. The high-performance 32-bit Intel 486 family of
microprocessors and new 64-bit microprocessors, such as the Intel Pentium
microprocessor and the PowerPC microprocessor, have some on-chip, or
internal, SRAM cache memory. The increased speed of these newer
microprocessors, however, will continue to require additional external
SRAM cache memory for enhanced performance. The Company believes that a
large portion of Intel 486-based PCs require SRAM cache memory and that
substantially all Intel Pentium-based PCs will require such memory. In
addition, low voltage (3.3 volt) SRAM cache memories are increasingly
being used to reduce power consumption in desktop and laptop computers.

<PAGE>
o Specialty Memory Products. Complex electronic systems that have different
data transfer rates within the system or use multiple microprocessors may
utilize specialty memory products, such as FIFOs (First In/First Out
memory products) and multi-port memory devices, to enhance performance.
For example, communications systems increasingly use specialty memory
products to improve the flexibility and throughput of the systems. The
trend toward linking computer users within an office or an enterprise so
that they can share data and peripherals has led to the rapid growth of
high-performance local area networks ("LANs") and wide area networks
("WANs") and therefore the increased use of specialty memory products.

o Logic Circuits. The increasing speed, complexity and reduced size of
microprocessor-based systems often require the use of high-speed,
high-performance logic devices to interconnect the various elements in a
system. While many general logic functions are increasingly being
integrated through the use of programmable logic devices, many specialized
logic elements, such as buffers, clock drivers and memory drivers,
continue to be implemented as discrete functions.

STRATEGY

IDT's strategy is to be a leading supplier of products that improve the
performance of microprocessor-based systems. The Company seeks to offer
innovative products with superior cost/performance by utilizing its expertise
in memory design and process technologies. Key elements of the Company's
strategy are:

o Develop High Performance Solutions for Growing Markets. IDT focuses its
development efforts on providing proprietary products and enhanced
industry-standard products for use in applications in the growing
workstation/server, desktop computer, office automation and communications
markets. Since the beginning of fiscal 1994, the Company has introduced 33
new products in a variety of configurations to meet the needs of these
markets. The Company believes that its emphasis on high-performance,
innovative products has resulted in its becoming a market leader in SRAMs,
SRAM cache modules, FIFOs, multi-port memory products and high-speed CMOS
logic circuits.

o Leverage Expertise in SRAM and Subsystem Design. IDT uses the extensive
experience it has gained in the design of SRAMs and subsystems since its
founding in 1980 to develop new memory products that provide higher
value-added solutions to IDT's customers. The Company is increasingly
integrating components from its various product families into single
devices or modules that provide increased functionality and can in turn be
more easily integrated into its customers' systems. For example, IDT
offers cache memory modules that include cache controller, cache tag SRAM
and cache SRAM components for personal computer applications, and the
SARAM device that incorporates both logic and memory functions for
enhanced functionality in network applications.

o Maintain Process Technology Leadership. The Company is committed to
continuously improving its CMOS process technologies in order to improve
product performance and lower product costs through improved yields. The
Company invests a substantial portion of its research and development
expenditures in order to advance its process technologies. The majority of
IDT's current products are manufactured using its 0.65 micron process
technologies and a 0.5 micron CMOS process technology is under
development. IDT believes that its advanced process technology capability
allows it to design and manufacture state-of-the-art products, thereby
providing it with a competitive advantage.

o Control and Expand Production Capability. IDT believes that maintaining
its own wafer fabrication capability facilitates the implementation of
advanced process technologies and new higher- performance product designs,
provides it with a reliable source of supply of semiconductors and allows
it to be more flexible in shifting production according to product demand.
In addition, the Company has a greater ability to lower costs at
production volumes by matching manufacturing flow to the process
technology being used. The Company has undertaken a significant program to
invest in new capital equipment and facilities in order to increase and
improve its capacity, including the construction of the new Oregon
facility. Through operating its own test facilities, the Company believes
it is able to maintain quality while controlling costs.

20
<PAGE>
PRODUCTS AND MARKETS

IDT offers over 5,000 product configurations in four product families: SRAM
components and modules, specialty memory products, logic circuits, and RISC
microprocessors and subsystems. During fiscal 1994, these product families
accounted for 33%, 29%, 21% and 17%, respectively, of total revenues. The
Company markets its products primarily to OEMs in the workstation/server,
desktop computer, office automation and communications markets. IDT's product
design efforts are focused on developing proprietary components and
integrating its components into single devices, modules or subsystems to meet
the needs of customers.

SRAMs. SRAMs are memory circuits used for storage and retrieval of data
during a computer system's operation. SRAMs do not require electrical
refreshment of the memory contents to ensure data integrity, allowing them to
operate at high speeds. SRAMs include substantially more circuitry than
DRAMs, resulting in higher production costs for a given amount of memory, and
generally command higher selling prices than the equivalent density DRAM. The
market for SRAMs is fragmented by differing demands for speed, power,
density, organization and packaging. As a result, there are a number of niche
markets for SRAMs.

The Company's SRAM product strategy is to offer high-performance 5 volt and
3.3 volt SRAM components and modules that have differentiated features
optimized to work with specified microprocessors, such as the Intel 486 and
Pentium families of microprocessors, the PowerPC microprocessor and the MIPS
RISC microprocessors. The Company is focused primarily on the cache memory
segment of the SRAM market. Cache memory provides an intermediate storage
solution between fast microprocessors and relatively slow DRAM main memory.
Cache memory operates at the speed of the microprocessor and increases the
microprocessor's efficiency by temporarily storing the most frequently used
instructions and data. Special cache tag SRAMs provide a look-up table
function that tells the cache controller which blocks of data are currently
stored in the cache SRAMs.

IDT is a leading supplier of cache SRAM components and modules to personal
computer manufacturers. The Company offers a range of cache SRAMs, including
burst-mode cache SRAMs that support the Intel and PowerPC microprocessors,
and cache tag SRAMs . The Company's cache SRAM components are often
integrated into cache memory modules. These modules include the cache
controller, cache tag SRAM and cache SRAM components and are ready to plug
into sockets on a computer system's motherboard. IDT offers a series of
standard and custom cache memory modules for IBM and IBM- compatible PCs and
PowerPC-based personal computers as well as for certain RISC microprocessor-
based systems.

The Company continues to develop its next generation SRAM products to meet
the growing cache memory needs of increasingly faster microprocessors. IDT's
new products are being designed to operate at higher speeds and provide
greater levels of integration.

In order to provide SRAM products that meet the varying needs of its
customers, IDT uses both CMOS and BiCMOS process technologies and offers 16K,
64K, 256K and 1 Meg density SRAMs in a number of speed, power and packaging
configurations.

Specialty Memory Products. The Company's proprietary specialty memory
products include FIFOs and multi-port memory products that offer
high-performance features which allow communications and computer systems to
operate more effectively. FIFOs are used as rate buffers to transfer large
amounts of data at high speeds between separate devices or pieces of
equipment operating at different speeds within a system. Multi-port memory
products are used to speed data transfers and act as the link between
multiple microprocessors or between microprocessors and peripherals when the
order of the data to be transferred needs to be controlled. These products
are currently used primarily in peripheral interface, communications and
networking products, including hubs, bridges and routers.

<PAGE>
IDT is a leading supplier of both synchronous and asynchronous FIFOs and has
increasingly focused its resources on the design of synchronous FIFOs.
Synchronous FIFOs have been gaining greater market acceptance because they
are faster and provide an easier user interface. IDT's family of 9-bit
SyncFIFOs are being used in many of the newer networking products.

The Company is a leading supplier of multi-port memory products. IDT's family
of multi-port memory products is composed primarily of dual-port asynchronous
devices. The Company also offers four-port products, a synchronous dual-port
device and a new device, known as a SARAM, that combines the flexibility of a
multi-port product with the ease of a FIFO. In addition, the Company is
developing a family of specialty memory products for the emerging
asynchronous transfer mode ("ATM") market. The first members of this ATM
family will be a highly integrated, low cost interface device for ATM network
cards and two transceiver chip sets providing low-cost physical media
interface to ATM networks.

Logic Circuits. IDT is a leading manufacturer of high-speed byte-wide and
double-density 16-bit CMOS logic circuits for high-performance applications.
Logic circuits control data communication between various elements of
electronic systems, such as between a microprocessor and a memory circuit.
IDT offers a wide range of logic circuit products, which support bus and
backplane interfaces, memory interfaces and other logic support applications
where high-speed, low power and high-output drive are critical. IDT's logic
circuits are used in a broad range of markets.

IDT's 16-bit family of logic products is available in small packages,
enabling board area to be reduced, and has gained increasing market
acceptance. These products are designed for new applications in which small
size, low power and extra low noise are as important as high speeds. IDT also
supplies a series of 8-bit and 16-bit 3.3 volt logic products and a 3.3 volt
to 5 volt translator circuit directed at the growing requirements for 3.3
volt systems in the notebook and laptop computer and other markets. The
Company also offers a family of clock drivers and clock generators. These
devices, placed at critical positions in a system, correct the degradation of
timing that occurs the further the impulses travel from the main system
clock.

RISC Microprocessor Components and Subsystems. IDT is a licensed manufacturer
of MIPS RISC microprocessors. IDT now manufactures MIPS architecture 32-bit
and 64-bit standard microprocessors and IDT derivative products for the
office automation, communications, server/workstation and desktop computer
markets.

The Company focuses its RISC microprocessor design and marketing efforts
primarily on the embedded controller market. Embedded controllers are
microprocessors that control a single device such as a printer, copier or
network router. The Company sells several proprietary 32-bit derivative
products for the embedded controller market, including devices with
on-circuit SRAM cache memory and floating point functions.

In 1993, the Company introduced its ORION R4600 microprocessor, which is
capable of clock speeds of up to 150 MHz. The R4600 is a higher performance,
lower cost version of the 64-bit R4000 and R4400 microprocessors developed by
MIPS Computer Systems, which was acquired by Silicon Graphics in 1992
("MIPS"), and introduced by the Company and other MIPS licensees in 1992 and
1993, respectively. The R4600 was developed for the Company and to the
Company's specifications by Quantum Effect Design, Inc. ("QED"), a
consolidated subsidiary. Systems based on the ORION family of microprocessors
are targeted at applications that require high speed computing and complex
graphics, such as scientific research, engineering design and advanced visual
computing.

The Company also manufactures RISC subsystems, which are board level products
that contain MIPS RISC architecture microprocessors, cache SRAMs, logic
circuits and supporting software. These products are used in development
systems for the evaluation and design of hardware and software or are
integrated into customers' end-user systems, thereby reducing design cycle
time.

CUSTOMERS

The Company markets and sells its products primarily to OEMs in the
workstation/server, desktop computer, office automation and communications
markets. Customers often purchase products from more than one of the
Company's product families.

<PAGE>

The following is an alphabetical listing of current representative end-user
customers of the Company, by market:

WORKSTATION/SERVER DESKTOP COMPUTER OFFICE AUTOMATION COMMUNICATIONS
- ------------------- ----------------- ------------------------ ---------------
<S> <C> <C> <C>
Digital Equipment Apple Computer AGFA Alcatel
EMC AST Research Canon AT&T
Pyramid Technology Compaq Computer Electronics For Imaging Bay Networks
NEC Dell Computer Hewlett-Packard Cabletron
Siemens Nixdorf Gateway Computers QMS Cisco Systems
Silicon Graphics Groupe Bull Radius Ericsson
Sun Microsystems IBM Samsung FORE Systems
Tandem Computers ICL Tektronix Fujitsu
Intel Texas Instruments Motorola
Olivetti Toshiba Nokia
Xerox Siemens
</TABLE>

MARKETING AND SALES

IDT markets and sells its products primarily to OEMs through a variety of
channels, including a direct sales force, distributors and independent sales
representatives.

The Company had 58 direct sales personnel in the United States at September
30, 1994. They are located at the Company's headquarters and in 17 sales
offices in Alabama, California, Colorado, Florida, Illinois, Maryland,
Massachusetts, Minnesota, New Jersey, New York, Oregon and Texas, and are
primarily responsible for marketing and sales in those areas. IDT also
utilizes three national distributors, Hamilton Hallmark, Future Electronics
and Wyle Laboratories, and several regional distributors in the United
States. Hamilton Hallmark accounted for 15% and 14% of the Company's revenues
in fiscal 1994 and the first six months of fiscal 1995, respectively. In
addition, IDT uses independent sales representatives, which generally take
orders on an agency basis while the Company ships directly to the customer.
The representatives receive commissions on all products shipped to customers
in their geographic area.

The Company had 41 direct sales personnel and eight sales offices located
outside of the United States at September 30, 1994. Sales activities outside
North America are generally controlled by IDT's subsidiaries located in
France, Germany, Hong Kong, Italy, Japan, Sweden, Taiwan and the United
Kingdom. The Company has recently increased its direct marketing efforts to
OEMs in Europe and to United States companies with operations in the
Asia/Pacific area. The majority of export sales, however, continues to be
made through international distributors, which tend not to carry inventory or
carry significantly smaller levels compared to domestic distributors. During
fiscal 1992, 1993, 1994 and the first six months of fiscal 1995, export sales
accounted for 30%, 36%, 32% and 38% of total revenues. Sales outside the
United States are generally denominated in local currencies. Export sales are
subject to certain risks, including currency controls and fluctuations,
changes in local economic conditions, import and export controls, and changes
in tax laws, tariffs and freight rates.

The Company's distributors typically maintain an inventory of a wide variety
of products, including products offered by IDT's competitors, and often
handle small or rush orders. Pursuant to distribution agreements, the Company
grants distributors the right to return slow-moving products for credit
against other products and offers protection to the distributors against
inventory obsolescence or price reductions. Revenue recognition of sales to
distributors is deferred until the products are resold by the distributor.

MANUFACTURING

IDT believes that maintaining its own wafer fabrication capability
facilitates the implementation of advanced process technologies and new
higher-performance product designs, provides it with a reliable source of
supply of semiconductors and allows it to be more flexible in shifting
production according to product demand. The Company operates sub-micron wafer
fabrication facilities in San Jose and Salinas, California. The Salinas
facility, first placed in production in fiscal 1986, includes a 24,000 square
foot, class

<PAGE>
3 fabrication line. The Company is converting this facility from five-inch to
six-inch wafers. The San Jose facility includes a 24,000 square foot, class 1
(less than one particle 0.5 micron or greater in size per cubic foot),
six-inch wafer fabrication line that was first placed in production in March
1991. IDT also operates a 100,000 square foot component assembly and test
facility in Penang, Malaysia. Substantially all of the Company's test
operations and a significant portion of its assembly operations are performed
at its Malaysian facility. IDT also uses subcontractors, principally in
Korea, the Philippines and Malaysia, to perform certain assembly operations.
If IDT were unable to assemble or test products offshore, or if air
transportation to these locations were curtailed, the Company's operations
could be materially adversely affected. Additionally, foreign manufacturing
exposes IDT to certain risks generally associated with doing business abroad,
including foreign governmental regulations, currency controls and
fluctuation, changes in local economic conditions and changes in tax rates,
tariffs and freight rates. In addition to this offshore assembly and test
capability, the Company has the capacity for low-volume, quick-turn assembly
in Santa Clara as well as limited test capability in Santa Clara, San Jose
and Salinas. Assembly and test of memory modules and RISC subsystems takes
place in both San Jose and Santa Clara.

The Company is operating its wafer fabrication facilities in Salinas and San
Jose and its assembly operations in Malaysia near installed equipment
capacity. To address its capacity requirements, the Company is currently
converting its Salinas wafer fabrication facility from five-inch to six-inch
wafers, adding incremental production equipment to its San Jose facility and
building an additional 40,000 square foot test and assembly facility in
Penang, Malaysia. In addition, the Company recently commenced construction of
a 192,000 square foot facility containing a 48,000 square foot, class 1,
eight-inch wafer fabrication line in Hillsboro, Oregon. The Company also
believes the construction of a facility in Oregon reduces the Company's risk
of a natural disaster affecting all of its wafer fabrication facilities which
are currently located in northern California. The Company faces a number of
risks in order to accomplish its goals to increase production in its existing
plants and to construct, equip and commence operations of its new Oregon
facility. See "Risk Factors--Current Capacity Limitations and Risks
Associated with Planned Expansion" and "Management's Discussion and Analysis
of Financial Condition and Results of Operations."

The Company utilizes proprietary CMOS and BiCMOS process technologies
permitting sub-micron geometries. BiCMOS is a combination of bipolar and CMOS
technologies and is used for applications requiring higher speeds. The
majority of IDT's current products are manufactured using its proprietary
0.65 micron process technologies and the Company is currently developing 0.5
micron process technologies.

Wafer fabrication involves a highly sophisticated, complex process that is
extremely sensitive to contamination. Integrated circuit manufacturing costs
are primarily determined by circuit size because the yield of good circuits
per wafer generally increases as a function of smaller die. Other factors
affecting costs include wafer size, number of process steps, costs and
sophistication of manufacturing equipment, packaging type, process complexity
and cleanliness. IDT's manufacturing process is complex, involving a number
of steps including wafer fabrication, plastic or ceramic packaging, burn-in
and final test. The Company continuously makes changes to its manufacturing
process to lower costs and improve yields. From time to time the Company has
experienced manufacturing problems that have caused delays in shipments or
increased costs. There can be no assurance that IDT will not experience
manufacturing problems in the future.

The Company generally has been able to arrange for multiple sources of raw
materials, but the number of vendors capable of delivering certain raw
materials, such as silicon wafers, ultra-pure metals and certain chemicals
and gases is very limited. Some of the Company's packages, while not unique,
have very long lead times and are available from only a few suppliers. While
IDT has not experienced any difficulties recently, from time to time vendors
have extended lead times or limited supply to the Company due to capacity
constraints. These circumstances could reoccur and could adversely affect
IDT.

BACKLOG

IDT manufactures and markets primarily standard products. Sales are generally
made pursuant to standard purchase orders, which are frequently revised
during the agreement term to reflect changes in

<PAGE>
the customer's requirements. The Company has also entered into master
purchase agreements with several of its OEM customers. These agreements do
not require the OEMs to purchase minimum quantities of the Company's
products. Product deliveries are scheduled upon the Company's receipt of
purchase orders under the related OEM agreements. Generally, these purchase
orders and OEM agreements also allow customers to reschedule delivery dates
and cancel purchase orders without significant penalties. Orders are
frequently rescheduled, revised or cancelled. In addition, distributor orders
are subject to price adjustments both prior to, and occasionally after,
shipment. For these reasons, IDT believes that its backlog, while useful for
scheduling production, is not necessarily a reliable indicator of future
revenues.

RESEARCH AND DEVELOPMENT

IDT's competitive position has been established, to a large extent, through
its emphasis on the development of proprietary and enhanced performance
industry-standard products, and the development of advanced CMOS and BiCMOS
process technologies. IDT believes that its focus on continually advancing
its process technologies has allowed the Company to achieve cost reductions
in the manufacture of most of its products. The Company believes that a
continued high level of research and development expenditures is necessary to
retain its competitive position. Research and development expenditures as a
percentage of revenues were 26%, 23%, 19% and 19% in fiscal 1992, 1993 and
1994 and the first six months of fiscal 1995, respectively.

The Company's product development activities are focused on the design of new
circuits and modules that provide enhanced performance for growing
applications. In the SRAM family, IDT is utilizing its 5 volt and 3.3 volt
SRAM and subsystem design expertise to develop advanced SRAM cache memories
and modules for microcomputer systems based on Intel's 486 and Pentium
families of microprocessors and the PowerPC microprocessors, as well as MIPS
RISC microprocessors. IDT's efforts in the specialty memory products area are
concentrated on the development for the communications market of advanced
synchronous FIFOs and more sophisticated multi-port memory products. The
Company is also developing a family of specialty memory products for the
emerging ATM market, and a family of lower voltage logic devices for a broad
range of applications. In the RISC component and subsystems product family,
the Company is designing products for embedded control applications, such as
printers and telecommunications switches. The Company also continues to
refine its CMOS and BiCMOS process technologies to increase the speed and
density of circuits in order to provide customers with advanced products at
competitive prices, thus enhancing their competitive positions. The Company
is currently refining its CMOS process technology to achieve 0.5 micron
geometries and converting the production of many products, particularly 3.3
volt devices, to newer generation process technologies.

In fiscal 1992, the Company purchased an equity interest in QED, a newly
formed corporation. Pursuant to a development agreement between QED and the
Company, QED developed the ORION R4600 microprocessor for IDT. The Company
recently announced two new ORION derivative products being designed for IDT
by QED, the R4700 microprocessor targeted to desktop systems running
WindowsNT or UNIX operating systems, and the R4650 microprocessor targeted to
embedded applications. The Company owns such products, subject to the payment
of royalties and other fees to QED. IDT has licensed Toshiba and NKK to
manufacture and market certain of these products. There can be no assurance
that QED will continue to design products for the Company or be successful in
developing such products.

COMPETITION

The semiconductor industry is intensely competitive and is characterized by
rapid technological advances, cyclical market patterns, price erosion,
evolving industry standards, occasional shortages of materials and high
capital equipment costs. Many of the Company's competitors have substantially
greater technical, marketing, manufacturing and financial resources than IDT.
In addition, several foreign competitors receive assistance from their
governments in the form of research and development loans and grants and
reduced capital costs, which could give them a competitive advantage. The
Company competes in different product areas, to varying degrees, on the basis
of technical innovation and performance of its products, as well as quality,
price and product availability.

<PAGE>
IDT's competitive strategy is to differentiate its products through
high-performance, innovative configurations and proprietary features or to
offer industry-standard products with higher speeds and/or lower power
consumption. There can be no assurance that price competition, introductions
of new products by IDT's competitors, delays in product introductions by IDT
or other competitive factors will not have a material adverse effect on the
Company in the future.

INTELLECTUAL PROPERTY AND LICENSING

IDT has obtained 44 patents in the United States and several abroad and has
numerous inventions in various stages of the patent application process. The
Company intends to continue to increase the scope of its patents. There can
be no assurance that any patents issued to the Company will not be
challenged, invalidated or circumvented, or that the rights granted
thereunder will provide competitive advantages to the Company. The Company
also relies on trade secret, copyright and trademark laws to protect its
products, and a number of the Company's circuit designs are registered
pursuant to the Semiconductor Chip Protection Act of 1984. This Act gives
protection similar to copyright protection for the patterns which appear on
integrated circuits and prohibits competitors from making photographic copies
of such circuits.

In recent years, there has been a growing trend of companies to resort to
litigation to protect their semiconductor technology from unauthorized use by
others. IDT has been notified that it may be infringing patents issued to
others and in the past has been involved in patent litigation, which
adversely affected its operating results. There can be no assurance that
additional intellectual property claims will not be made against the Company
in the future. The Company believes that licenses, to the extent required,
will be available in connection with intellectual property claims. No
assurance can be given, however, that the Company will be able to obtain such
a license on acceptable terms. Should licenses from any such claimant be
unavailable, the Company may be required to discontinue its use of certain
processes or the manufacture, use and sale of certain of its products or to
develop noninfringing technology. If IDT is unable to obtain any necessary
licenses, pass any increased cost of patent licenses on to its customers or
develop noninfringing technology, the Company could be materially adversely
affected. In addition, IDT has received patent licenses from several
companies, and the failure to renew certain of these licenses as they expire
or significant increases in amounts payable under these licenses could have
an adverse effect on the Company.

On January 16, 1988, IDT entered into a manufacturing, marketing and purchase
agreement with MIPS that allows IDT to manufacture and market the complete
MIPS family of RISC microprocessors and related software and to modify the
MIPS microprocessors to create subsets and supersets.

On May 1, 1992, IDT and AT&T entered into a five-year royalty-free patent
cross-license agreement. As part of this agreement, patent litigation
instituted by AT&T was settled and dismissed. Under the agreement, IDT made a
lump sum payment and issued shares of its Common Stock to AT&T, granted a
discount on future purchases, and gave credit for future purchases of
technology on a nonexclusive basis.

On December 10, 1992, IDT and Texas Instruments ("TI") entered into a
five-year patent cross- license agreement. As part of this agreement, patent
litigation instituted by TI was dismissed. Under the agreement, IDT granted
to TI a license to certain IDT technology and products and guaranteed TI that
it will realize certain revenues from the technology and products, and IDT
will develop certain products which will be manufactured and sold by both IDT
and TI. See Note 13 of Notes to Consolidated Financial Statements.

EMPLOYEES

At September 30, 1994, IDT and its subsidiaries employed approximately 2,750
people worldwide, of whom approximately 980 were in Penang. IDT's success
depends in part on its ability to attract and retain qualified personnel, who
are generally in great demand. Since its founding, the Company has
implemented policies enabling its employees to share in IDT's success.
Examples are stock option, stock purchase, profit sharing and special bonus
plans for key contributors. IDT has never had a work stoppage, no employees
are represented by a collective bargaining agreement, and the Company
considers its employee relations to be good.

<PAGE>

PROPERTIES

The Company presently occupies six major facilities in California and
Malaysia as follows:

LOCATION FACILITY USE SQUARE FEET
- ---------------- ------------------------------------- -------------
Salinas ......... Wafer fabrication, SRAM and multi-
port memory operations 98,000
Santa Clara ..... Logic and RISC microprocessor
operations 62,000
Santa Clara ..... Administration and sales 43,700
Santa Clara ..... Administration and RISC subsystems
operations 50,000
Penang, Malaysia . Assembly and test 100,000
San Jose ........ Wafer fabrication, process technology
development, FIFO and memory
subsystems operations, and research
and development 135,000

The Company leases its Salinas facility from Carl E. Berg, a director, and
in October 1994 purchased a 5.5 acre parcel adjacent to its Salinas facility
for $653,000 from Mr. Berg. IDT leases its Salinas and Santa Clara facilities
under leases expiring in 1999 through 2005. The lease for the Salinas
facility has two five-year renewal options. The Company owns its Malaysian
and San Jose facilities, although the Malaysian facility is subject to
long-term ground leases and the San Jose facility is subject to a mortgage.
IDT leases offices for its sales force in 17 domestic locations as well as
Hong Kong, London, Milan, Munich, Paris, Stockholm, Taipei and Tokyo. See
Note 7 of Notes to Consolidated Financial Statements for information
concerning IDT's obligations under operating and capital leases. The Company
is building an additional 40,000 square foot facility in Malaysia in order to
add additional assembly and test capacity. This expansion is planned to be
completed in early fiscal 1996. The Company has purchased a 23 acre parcel in
Hillsboro, Oregon and has commenced construction of a 192,000 square foot
facility containing a 48,000 square foot, class 1, eight-inch wafer
fabrication line, which the Company plans to be operational in fiscal 1997.
See "Risk Factors--Current Capacity Limitations and Risks Associated With
Planned Expansion."

<PAGE>
MANAGEMENT

The executive officers and directors of the Company, and their respective
ages as of October 31, 1994, are as follows:

NAME AGE POSITION
- -------------------- ----- -----------------------------------------------
D. John Carey ....... 58 Chairman of the Board
Leonard C. Perham .. 51 Chief Executive Officer, President and Director
William B. Cortelyou 38 Vice President, Wafer Operations
Robin H. Hodge ...... 54 Vice President, Assembly and Test
Alan H. Huggins .... 41 Vice President, Memory Division
Larry T. Jordan .... 50 Vice President, Marketing
Daniel L. Lewis .... 45 Vice President, Sales
Chuen-Der Lien ...... 38 Vice President, Technology Development
Jack Menache ........ 51 Vice President, General Counsel and Secretary
Vice President, Logic and Microprocessor
Richard R. Picard .. 46 Products
Vice President, Finance and Chief Financial
William D. Snyder .. 50 Officer
Carl E. Berg(1) .... 57 Director
John C. Bolger(1) .. 48 Director
Federico Faggin .... 52 Director
- ----------
(1) Member of the Audit, Compensation and Stock Option Committees.

Mr. Carey was elected to the Board of Directors in 1980 and has been
Chairman of the Board since 1982. He served as Chief Executive Officer from
1982 until his resignation in April 1991 and was President from 1982 until
1986. Mr. Carey was a founder of Advanced Micro Devices ("AMD") in 1969 and
was an executive officer there until 1978.

Mr. Perham joined IDT in October 1983 as Vice President and General
Manager, SRAM Division. In October 1986, Mr. Perham was appointed President
and Chief Operating Officer and a director of the Company. In April 1991, Mr.
Perham was elected Chief Executive Officer. Prior to joining IDT, Mr. Perham
held executive positions at Optical Information Systems Incorporated and
Zilog Inc.

Mr. Cortelyou joined IDT in 1982. In January 1990, he was elected Vice
President, Wafer Operations, Salinas. Mr. Cortelyou currently serves as Vice
President, Wafer Operations. Prior to joining IDT, Mr. Cortelyou was an
engineer at AMD.

Mr. Hodge joined IDT as Director of Assembly Operations in March 1989. In
January 1990, Mr. Hodge was elected Vice President, Assembly Operations. Mr.
Hodge currently serves as Vice President, Assembly and Test. From 1983 until
joining IDT, Mr. Hodge was Director of Assembly Operations for Maxim
Integrated Products.

Mr. Huggins joined IDT in 1983 and was elected Vice President in 1987. Mr.
Huggins currently serves as Vice President, Memory Division. Prior to joining
the Company, Mr. Huggins held various engineering positions at AMD.

Mr. Jordan joined IDT in July 1987 as Vice President, Marketing. Prior to
joining the Company, Mr. Jordan held management positions in marketing and
sales at SEEQ Technology, Inc. and Intel Corporation.

Mr. Lewis joined IDT in 1984 as Eastern Area Sales Manager. In June 1991,
he was elected Vice President, Sales. Prior to joining IDT, Mr. Lewis held
management positions at Avatar Technologies, Inc., Data General and Zilog.

<PAGE>
Dr. Lien joined IDT in 1987 and was elected Vice President, Technology
Development in April 1992. Prior to joining the Company, he held engineering
positions at Digital Equipment Corporation and AMD.

Mr. Menache joined IDT as Vice President, General Counsel and Secretary in
September 1989. From April 1989 until joining IDT, he was General Counsel of
Berg & Berg Developers. From 1986 until April 1989, he was Vice President,
General Counsel and Secretary of The Wollongong Group Inc.

Mr. Picard joined IDT in 1985. In 1989 he was elected Vice President,
Static RAM Product Line. In April 1990 he was appointed Vice President and
General Manager, Logic Products. He was elected Vice President, Logic and
Microprocessor Products in May 1993. Prior to joining IDT, Mr. Picard held
management positions at International Micro Circuits, Zilog and AMD.

Mr. Snyder joined the Company as Treasurer in 1985. In May 1990, he was
elected Vice President, Corporate Controller, and in September 1990 Mr.
Snyder was elected Vice President, Finance and Chief Financial Officer. Prior
to joining the Company, Mr. Snyder held financial management positions at
Actrix Computer, Zilog and Digital Equipment Corporation.

Mr. Berg has been a director of the Company since 1982. Mr. Berg has been
a partner of Berg & Berg Developers, a real estate development partnership,
since 1979. He is a director of Valence Technology.

Mr. Bolger has been a director of the Company since January 1993. Mr.
Bolger is a private investor. He was Vice President--Finance and
Administration of Cisco Systems, Inc., an internetworking systems
manufacturer, from 1989 to 1992 and Vice President--Finance and
Administration of KLA Instruments, Inc., an optical inspection equipment
manufacturer, from 1988 to 1989. Mr. Bolger is a director of Data Race, Inc.,
Integrated Systems, Inc., Sanmina Corporation and Teknekron Communications
Systems, Inc.

Mr. Faggin has been a director of the Company since 1992. Mr. Faggin has
been President, Chief Executive Officer and Director of Synaptics, Inc., a
neural network research and development company, since 1986. He is a director
of Aptix, Inc., Atesla, Inc. and Orbit Semiconductor.

CERTAIN TRANSACTIONS

The Company leases its Salinas facility from Carl E. Berg, a director and,
prior to this offering, a more than 5% shareholder of the Company. The
Company paid rental expense of $1,396,000 during fiscal 1994, under a lease
agreement that expires in July 1995, with options to renew for successive
five-year periods through 2015. In September 1994 the Company exercised its
option to renew the lease at an annual rental expense of $927,000 from July
1995 through July 2005. In connection with the lease renewal, the Company was
granted a right of first refusal to purchase the Salinas facility on the same
terms as a third party offeree and an option to purchase the facility for a
purchase price of approximately $8,509,000 in a tax-free stock exchange.
IDT's option is exercisable for six months beginning on July 1, 2000.

In October 1994, the Company purchased from Mr. Berg a 5.5 acre parcel of
undeveloped land adjacent to its Salinas facility for $653,000.

The Company holds an approximately 57% equity interest in QED, a corporation
formed in 1991. Leonard C. Perham, the President and Chief Executive Officer
and a director of the Company, and Carl E. Berg are members of the board of
directors of QED. Mr. Berg also holds a minority equity interest in QED.
Pursuant to a development agreement between the Company and QED, QED is
developing for the Company derivative products based on MIPS' 64-bit
microprocessor architecture. During fiscal 1994, the Company paid QED a total
of $3,075,000 for product development and nonrecurring engineering. During
the first six months of fiscal 1995, the Company paid QED a total of
$2,025,000 for product development and nonrecurring engineering and $232,450
in royalties. See "Business--Research and Development."

The Company holds an approximately 16% equity interest in Monolithic System
Technology, Inc. ("MoSys"). Leonard C. Perham and Carl E. Berg are members of
the board of directors of MoSys. Mr. Berg also holds an equity interest of
approximately 18% of MoSys. MoSys is developing certain technology that, if
successfully reduced to practice, could relate to the Company's business.
During fiscal

<PAGE>
1993 and 1994, the Company purchased a total of 333,500 shares of MoSys
preferred stock for a total of $667,000. During the first six months of
fiscal 1995, the Company purchased 400,000 shares of MoSys preferred stock
for a total of $2,000,000 and paid MoSys $125,000 for technical support.

The Company has from time to time retained Phillip Perham, a contractor and
the brother of Leonard C. Perham, as an independent contractor to perform
certain construction services in connection with improvements and repairs to
various Company facilities. The Company paid Phillip Perham an aggregate of
approximately $177,570 and $9,160 for such services in fiscal 1994 and the
first six months of fiscal 1995, respectively.

SELLING STOCKHOLDERS

The following table and notes thereto set forth certain information regarding
beneficial ownership of the Company's Common Stock as of October 31, 1994,
and as adjusted to reflect the sale of the shares offered by this Prospectus,
by each Selling Stockholder.

SHARES BENEFICIALLY SHARES BENEFICIALLY
OWNED PRIOR TO OWNED AFTER
OFFERING OFFERING(2)
--------------------- --------------------
SELLING SHARES TO
STOCKHOLDERS(1) NUMBER PERCENT BE SOLD NUMBER PERCENT
- -------------------- --------------- --------- ----------- ----------- ---------
D. John Carey ....... 867,308(3) 2.6% 50,000 817,308 2.2%
Leonard C. Perham .. 279,546(4) * 50,000 229,546 *
--------------- --------- ----------- ----------- ---------
Total ...............1,146,854(5) 3.3% 100,000 1,046,854 2.8%
=============== ========= =========== =========== =========
- ----------
* Less than one percent.
(1) The persons named in the table have sole voting and investment power
with respect to all shares of Common Stock beneficially owned by them,
subject to community property laws where applicable and the information
contained in the footnotes to the table.
(2) Assumes no exercise of the Underwriters' over-allotment option.
(3) Includes 245,962 shares subject to options exercisable within 60 days of
October 31, 1994.
(4) Includes 269,903 shares subject to options exercisable within 60 days of
October 31, 1994.
(5) Includes the 515,865 shares subject to options as described in footnotes
(2)-(4) above.

<PAGE>
UNDERWRITING

Montgomery Securities, Lehman Brothers Inc. and Smith Barney Inc. (the
"Underwriters") have severally agreed, subject to the terms and conditions
set forth in the Underwriting Agreement, to purchase from the Company and the
Selling Stockholders the number of shares of Common Stock indicated below
opposite their respective names at the public offering price less the
underwriting discount set forth on the cover page of this Prospectus. The
Underwriting Agreement provides that the obligations of the Underwriters are
subject to certain conditions precedent and that the Underwriters are
committed to purchase all of such shares if any are purchased.

NUMBER
UNDERWRITER OF SHARES
--------------------- -----------
Montgomery Securities 1,133,334
Lehman Brothers Inc. 1,133,333
Smith Barney Inc. ... 1,133,333
-----------
Total ............... 3,400,000
===========

The Underwriters have advised the Company and the Selling Stockholders
that the Underwriters propose initially to offer the Common Stock to the
public on the terms set forth on the cover page of this Prospectus. The
Underwriters may allow to selected dealers a concession of not more than
$0.70 per share, and the Underwriters may allow, and such dealers may
reallow, a concession of not more than $0.10 per share to certain other
dealers. After the initial public offering, the offering price and other
selling terms may be changed by the Underwriters. The Common Stock is offered
subject to receipt and acceptance by the Underwriters and to certain other
conditions, including the right to reject orders in whole or in part.

The Company has granted an option to the Underwriters, exercisable during
the 30-day period after the date of this Prospectus, to purchase up to a
maximum of 510,000 additional shares of Common Stock to cover
over-allotments, if any, at the same price per share as the initial 3,400,000
shares to be purchased by the Underwriters. To the extent that the
Underwriters exercise this option, the Underwriters will be committed,
subject to certain conditions, to purchase such additional shares in the same
proportion as set forth in the table above. The Underwriters may purchase
such shares only to cover over-allotments made in connection with this
offering.

The Underwriting Agreement provides that the Company and the Selling
Stockholders will indemnify the Underwriters against certain liabilities,
including civil liabilities under the Securities Act, or will contribute to
payments that the Underwriters may be required to make in respect thereof.

All of the Company's executive officers and directors and the Selling
Stockholders have agreed that, for a period of 90 days after the date of this
Prospectus, they will not, without the prior written consent of Montgomery
Securities, directly or indirectly offer to sell, sell or otherwise dispose
of Common Stock of the Company (except for shares offered hereby by the
Selling Stockholders), or any securities convertible or exchangeable for
shares of Common Stock, owned by them. Notwithstanding the foregoing,
officers of the Company may sell up to an aggregate of 150,000 shares of
Common Stock of the Company without the prior written consent of Montgomery
Securities. In addition, the Company has agreed that for a period of 90 days
after the date of this Prospectus, it will not, without the prior written
consent of Montgomery Securities, directly or indirectly offer to sell,
issue, distribute or otherwise dispose of any equity securities or securities
convertible into or exchangeable for equity securities or any options, rights
or warrants with respect to any equity securities except for shares of Common
Stock offered hereby or shares of Common Stock or options issued pursuant to
existing benefit plans of IDT.

In connection with this offering, the Underwriters and selling group
members may engage in passive market making transactions in the Company's
Common Stock on the Nasdaq National Market immediately prior to the
commencement of the sale of the shares in this offering, in accordance with
Rule 10b-6A under the Exchange Act. Passive market making consists of
displaying bids on the Nasdaq National Market limited by the bid prices of
market makers not connected with this offering and purchases limited by such
prices and effected in response to order flow. Net purchases by a passive
market maker on each

<PAGE>
day are limited in amount to a specified percentage of the passive market
maker's average daily trading volume in the Common Stock during a specified
period prior to the filing with the Commission of the Registration Statement
of which this Prospectus is a part and must be discontinued when such limit
is reached. Passive market making may stabilize the market price of the
Common Stock at a level above that which might otherwise prevail and, if
commenced, may be discontinued at any time.

LEGAL MATTERS

Certain legal matters with respect to the Common Stock will be passed upon
for the Company and the Selling Stockholders by Fenwick & West, Palo Alto,
California. Certain legal matters will be passed upon for the Underwriters by
Wilson, Sonsini, Goodrich & Rosati, Professional Corporation ("WSGR"), Palo
Alto, California. In December 1994, the Company engaged WSGR as special
counsel to the Company in connection with the proposed facilities lease
arrangement associated with the Company's new Oregon wafer fabrication
facility. See "Management's Discussion and Analysis of Financial Condition
and Results of Operations--Liquidity and Capital Resources."

EXPERTS

The consolidated financial statements of IDT as of April 3, 1994 and March
28, 1993 and for each of the three years in the period ended April 3, 1994
included in this Prospectus have been audited by Price Waterhouse LLP,
independent accountants, given on the authority of said firm as experts in
auditing and accounting.

<PAGE>

REPORT OF PRICE WATERHOUSE LLP, INDEPENDENT ACCOUNTANTS

To the Stockholders and Board of Directors of Integrated Device Technology,
Inc.

In our opinion, the accompanying balance sheets and the related
consolidated statements of operations, cash flows and stockholders' equity
present fairly, in all material respects, the financial position of
Integrated Device Technology, Inc. and its subsidiaries at March 28, 1993 and
April 3, 1994, and the results of their operations and their cash flows for
each of the three years in the period ended April 3, 1994, in conformity with
generally accepted accounting principles. These financial statements are the
responsibility of the Company's management; our responsiblity is to express
an opinion on these financial statements based on our audits. We conducted
our audits of these statements in accordance with generally accepted auditing
standards which require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements, assessing
the accounting principles used and significant estimates made by management,
and evaluating the overall financial statement presentation. We believe that
our audits provide a reasonable basis for the opinion expressed above.

PRICE WATERHOUSE LLP
San Jose, California
April 27, 1994

F-1

<PAGE>

<TABLE>
<CAPTION>
INTEGRATED DEVICE TECHNOLOGY, INC.
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE AMOUNTS)

MARCH 28, APRIL 3, OCTOBER 2,
1993 1994 1994
----------- ---------- ------------
(UNAUDITED)
<S> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents ............................$ 22,529 $ 88,490 $ 87,774
Short-term investments ............................... 1,877 33,351 38,120
Accounts receivable, net of allowance for returns and
doubtful accounts of $2,994, $4,129 and $3,728 ...... 43,190 40,643 59,872
Inventory ............................................ 27,237 29,855 32,755
Deferred tax assets .................................. 15,270 26,276 24,068
Prepayments and other current assets ................. 2,825 3,858 4,382
----------- ---------- ------------
Total current assets ................................. 112,928 222,473 246,971
----------- ---------- ------------
Property, plant and equipment, net ................... 118,837 120,838 143,170
Other assets ......................................... 8,229 6,260 7,425
----------- ---------- ------------
Total assets .........................................$239,994 $349,571 $397,566
=========== ========== ============

LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable .....................................$ 15,819 $ 15,925 $ 25,954
Accrued compensation and related expense ............. 7,399 16,528 15,851
Deferred income on shipments to distributors ........ 10,450 17,592 25,829
Income taxes payable ................................. 878 1,964 8,052
Other accrued liabilities ............................ 7,524 13,032 10,066
Current portion of long-term obligations ............. 19,467 14,184 8,608
----------- ---------- ------------
Total current liabilities ............................ 61,537 79,225 94,360
----------- ---------- ------------
Long-term obligations ................................ 48,987 37,462 34,316
----------- ---------- ------------
Deferred tax liabilities ............................. 11,710 8,517 8,517
----------- ---------- ------------
Commitments and contingencies
Stockholders' equity:
Preferred stock; $.001 par value: 5,000,000 shares
authorized; no shares issued .........................
Common stock; $.001 par value: 65,000,000 shares
authorized; 28,377,721, 33,405,552 and 33,652,361
shares issued and outstanding ........................ 28 33 34
Additional paid-in capital ........................... 93,731 160,221 162,109
Retained earnings .................................... 24,352 64,517 98,401
Cumulative translation adjustment .................... (351) (404) (171)
----------- ---------- ------------
Total stockholders' equity ........................... 117,760 224,367 260,373
----------- ---------- ------------
Total liabilities and stockholders' equity ..........$239,994 $349,571 $397,566
=========== ========== ============
<FN>

The accompanying notes are an integral part of these financial statements.
</TABLE>

F-2

<PAGE>

INTEGRATED DEVICE TECHNOLOGY, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE DATA)

FISCAL YEAR ENDED SIX MONTHS ENDED
---------------------------------- ----------------------------
MARCH 29, MARCH 28, APRIL 3, SEPTEMBER 26, OCTOBER 2,
1992 1993 1994 1993 1994
----------- ----------- ---------- --------------- ------------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Revenues ................................$202,734 $236,263 $330,462 $153,061 $190,628
Cost of revenues ........................ 126,819 132,285 159,627 79,146 80,422
----------- ----------- ---------- --------------- ------------
Gross profit ............................ 75,915 103,978 170,835 73,915 110,206
----------- ----------- ---------- --------------- ------------
Operating expenses:
Research and development ................ 52,044 53,461 64,237 31,182 35,536
Selling, general and administrative .... 48,721 39,511 54,329 25,306 30,368
Restructuring charge .................... 4,466 -- -- -- --
----------- ----------- ---------- --------------- ------------
Total operating expenses ................ 105,231 92,972 118,566 56,488 65,904
----------- ----------- ---------- --------------- ------------
Operating income (loss) ................. (29,316) 11,006 52,269 17,427 44,302
Interest expense ........................ (7,045) (5,855) (5,165) (2,778) (1,854)
Interest income and other, net .......... 1,593 1,127 3,102 795 2,721
----------- ----------- ---------- --------------- ------------
Income (loss) before provision (benefit)
for income taxes ........................ (34,768) 6,278 50,206 15,444 45,169
Provision (benefit) for income taxes ... (1,960) 942 10,041 3,083 11,285
----------- ----------- ---------- --------------- ------------
Net income (loss) .......................$(32,808) $ 5,336 $ 40,165 $ 12,361 $ 33,884
=========== =========== ========== =============== ============
Net income (loss) per share .............$ (1.25) $ .18 $ 1.21 $ .39 $ .94
=========== =========== ========== =============== ============
Shares used in computing net income
(loss) per share ........................ 26,255 29,701 33,116 31,953 36,040
=========== =========== ========== =============== ============
<FN>
The accompanying notes are an integral part of these financial statements.
</TABLE>

F-3

<PAGE>

<TABLE>
<CAPTION>
INTEGRATED DEVICE TECHNOLOGY, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)

Net income (loss) ..........................$(32,808) $ 5,336 $ 40,165 $ 12,361 $ 33,884
Adjustments:
Depreciation and amortization .............. 40,787 37,140 37,594 18,809 19,089
Provision for losses on accounts receivable 1,222 (742) 476 392 290
Restructuring charges ...................... 4,466 -- -- -- --
Changes in assets and liabilities:
Accounts receivable ........................ (1,926) (6,167) 2,071 (668) (19,519)
Inventory .................................. 8,670 (3,843) (2,618) (1,882) (2,900)
Deferred tax assets ........................ 2,324 2,616 (10,897) -- --
Other assets ............................... 2,180 (391) (1,247) (1,417) (2,874)
Accounts payable ........................... 5 (804) 106 385 10,029
Accrued compensation and related expense .. (157) 3,158 9,799 2,559 (677)
Deferred income to distributors ............ 610 1,093 7,142 1,695 8,237
Income taxes payable ....................... 722 477 11,574 2,940 8,296
Other accrued liabilities .................. 5,816 (679) 5,885 143 (2,348)
----------- ----------- ---------- --------------- ------------
Net cash provided by operating activities . 31,911 37,194 100,050 35,317 51,507
----------- ----------- ---------- --------------- ------------
Investing activities:
Additions to property, plant and equipment (25,706) (28,188) (38,083) (16,061) (40,636)
Proceeds from sale of equipment ............ 416 178 671 591 400
Purchases of short-term investments ....... (18,458) (4,927) (40,221) (2,007) (24,456)
Proceeds from sales of short-term
investments ................................ 27,624 4,110 8,747 460 19,687
----------- ----------- ---------- --------------- ------------
Net cash used for investing activities .... (16,124) (28,827) (68,886) (17,017) (45,005)
----------- ----------- ---------- --------------- ------------
Financing activities:
Issuance of common stock, net .............. 2,358 2,981 55,337 3,946 1,889
Proceeds from borrowings ................... 11,665 32,161 2,731 2,731 --
Payment on capital leases and other debt .. (21,423) (41,006) (23,271) (12,744) (9,107)
----------- ----------- ---------- --------------- ------------
Net cash provided by (used for) financing
activities ................................. (7,400) (5,864) 34,797 (6,067) (7,218)
----------- ----------- ---------- --------------- ------------
Net increase (decrease) in cash and cash
equivalents ................................ 8,387 2,503 65,961 12,233 (716)
Cash and cash equivalents at beginning of
period ..................................... 11,639 20,026 22,529 22,529 88,490
----------- ----------- ---------- --------------- ------------
Cash and cash equivalents at end of period $ 20,026 $ 22,529 $ 88,490 $ 34,762 $ 87,774
=========== =========== ========== =============== ============
Supplemental disclosure of cash flow
information:
Interest paid ..............................$ 6,876 $ 5,893 $ 4,713 $ 2,711 $ 1,526
Income taxes paid (refunded) ............... (5,638) (2,050) 9,163 151 2,841
Issuance of common stock for acquisition of
technology ................................. -- 7,738 -- -- --
Tax benefits from exercise of stock options 477 582 10,488 -- --

<FN>

The accompanying notes are an integral part of these financial statements.
</TABLE>
F-4

<PAGE>

<TABLE>
<CAPTION>
INTEGRATED DEVICE TECHNOLOGY, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(IN THOUSANDS, EXCEPT SHARE DATA)

ADDITIONAL CUMULATIVE TOTAL
COMMON STOCK PAID-IN RETAINED TRANSLATION STOCKHOLDERS'
SHARES AMOUNT CAPITAL EARNINGS ADJUSTMENT EQUITY
------------ -------- ------------ ---------- ------------- ---------------
<S> <C> <C> <C> <C> <C> <C>
Balance, March 31, 1991 ................25,889,601 $26 $82,834 $51,824 $(160) $134,524
Issuance of common stock ............... 664,130 1 2,358 -- -- 2,359
Tax benefits of stock option
transactions ........................... -- -- 477 -- -- 477
Translation adjustment ................. -- -- -- -- 50 50
Net loss ............................... -- -- -- (32,808) -- (32,808)
------------ -------- ------------ ---------- ------------- ---------------
Balance, March 29, 1992 ................26,553,731 27 85,669 19,016 (110) 104,602
Issuance of common stock ............... 1,823,990 1 7,480 -- -- 7,481
Tax benefits of stock option
transactions ........................... -- -- 582 -- -- 582
Translation adjustment ................. -- -- -- -- (241) (241)
Net income ............................. -- -- -- 5,336 -- 5,336
------------ -------- ------------ ---------- ------------- ---------------
Balance, March 28, 1993 ................28,377,721 28 93,731 24,352 (351) 117,760
Issuance of common stock ............... 2,027,831 2 9,241 -- -- 9,243
Issuance of common stock at $15.71 per
share, pursuant to public offering, net
of expenses of $366 .................... 3,000,000 3 46,761 -- -- 46,764
Tax benefits of stock option
transactions ........................... -- -- 10,488 -- -- 10,488
Translation adjustment ................. -- -- -- -- (53) (53)
Net income ............................. -- -- -- 40,165 -- 40,165
------------ -------- ------------ ---------- ------------- ---------------
Balance, April 3, 1994 .................33,405,552 33 160,221 64,517 (404) 224,367
Issuance of common stock (unaudited) .. 246,809 1 1,888 -- -- 1,889
Translation adjustment (unaudited) .... -- -- -- -- 233 233
Net income (unaudited) ................. -- -- -- 33,884 -- 33,884
------------ -------- ------------ ---------- ------------- ---------------
Balance, October 2, 1994 (unaudited) ..33,652,361 $34 $162,109 $ 98,401 $(171) $ 260,373
============ ======== ============ ========== ============= ===============
<FN>
The accompanying notes are an integral part of these financial statements.
</TABLE>

F-5

<PAGE>
INTEGRATED DEVICE TECHNOLOGY, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation. The consolidated financial statements include the
accounts of Integrated Device Technology, Inc. (IDT or "the Company") and all
of its subsidiaries. All significant intercompany accounts and transactions
have been eliminated.

Fiscal Year. The Company's fiscal year ends on the Sunday nearest March
31. Fiscal years 1993, 1992 and 1991 each included 52 weeks. The fiscal year
ended on April 3, 1994 was a 53-week year. The fiscal year-end of certain of
the Company's foreign subsidiaries is March 31, and the results of their
operations as of their fiscal year end have been combined with the Company's
results of operations as of April 3, 1994. Transactions during the
intervening period were not significant.

Cash, Cash Equivalents and Short-term Investments. Cash equivalents are
highly liquid investments with original maturities of three months or less at
the time of acquisition or with guaranteed on-demand buy-back provisions.
Short-term investments are valued at amortized cost, which approximates
market and consist primarily of time deposits, corporate notes and
treasuries. Cash equivalents and short-term investments included certificates
of deposit totaling $9,349,000 and $10,603,000 at March 28, 1993 and April 3,
1994, respectively.

The Company adopted Statement of Financial Accounting Standards (FAS) 115,
"Accounting for Certain Investments in Debt and Equity Securities" effective
April 4, 1994 as required by that pronouncement. The Statement requires
reporting of investments as either held to maturity, trading or available for
sale. The Company's investments are classified as available for sale. The
effect of adoption was not material.

Inventory. Inventory is stated at the lower of standard cost (which
approximates actual cost on a first-in, first-out basis) or market. Market is
based upon estimated realizable value reduced by normal gross margin.
Inventory at March 28, 1993, April 3, 1994 and October 2, 1994 was:

MARCH 28, 1993 APRIL 3, 1994 OCTOBER 2, 1994
-------------- --------------- ---------------
(IN THOUSANDS) (UNAUDITED)
Inventory:
Raw materials ..$ 3,117 $ 2,834 $ 3,076
Work-in-process 13,494 10,201 15,056
Finished goods . 10,626 16,820 14,621
-------------- --------------- ---------------
$27,237 $29,855 $32,755
============== =============== ===============

Property, Plant and Equipment. Property, plant and equipment are stated at
cost. Depreciation is computed for property, plant and equipment using the
straight-line method over estimated useful lives of the assets. Leasehold
improvements and leasehold interests are amortized over the shorter of the
estimated useful lives of the assets or the remaining term of the lease.
Accelerated methods of depreciation are used for tax computations. Property,
plant and equipment at March 28, 1993 and April 3, 1994 were:

MARCH 28, 1993 APRIL 3, 1994
-------------- ---------------
(IN THOUSANDS)
Property, plant and equipment:

Land ...................................... $ 4,382 $ 4,382
Machinery and equipment ................... 217,167 248,095
Building and leasehold improvements ...... 39,896 40,063
Construction-in-progress .................. 10 76
-------------- ---------------
261,455 292,616
Accumulated depreciation and amortization (142,618) (171,778)
-------------- ---------------
$ 118,837 $ 120,838
============== ===============

F-6

<PAGE>
Income Taxes. The Company adopted Statement of Financial Accounting
Standards (FAS) 109, "Accounting for Income Taxes," in fiscal 1993, electing
to apply the provisions of FAS 109 retroactively to the beginning of fiscal
1992. The adoption of FAS 109 changed the Company's method of accounting for
income taxes from the deferred method to an asset and liability approach. The
asset and liability approach requires that the expected future tax
consequences of temporary differences between book and tax bases of assets
and liabilities be recognized as deferred tax assets and liabilities.

Net Income (Loss) Per Share. Net income (loss) per share is computed using
the weighted average number of shares of common stock outstanding during the
year, plus incremental common equivalent shares, if dilutive. Common stock
equivalents consist of stock options (using the treasury stock method).

Revenue Recognition. Revenue from product sales is generally recognized
upon shipment and a reserve is provided for estimated returns and discounts.
A portion of the Company's sales is made to distributors under agreements
which allow certain rights of return and price protection on products unsold
by the distributors; such sales and profits thereon are deferred until the
products are resold by the distributors.

Reclassifications. Certain amounts in prior fiscal years' consolidated
financial statements and notes have been reclassified to conform with fiscal
1994 presentation.

Translation of Foreign Currencies. Accounts denominated in foreign
currencies have been translated in accordance with Statement of Financial
Accounting Standard (FAS) 52. The functional currency for the Company's sales
operations is the applicable local currency with the exception of the Hong
Kong sales subsidiary whose functional currency and reporting currency is the
U.S. dollar. For subsidiaries whose functional currency is the local
currency, gains and losses resulting from translation of these foreign
currencies into U.S. dollars are accumulated in a separate component of
stockholders' equity. For the Malaysian manufacturing and the Hong Kong sales
subsidiaries, where the functional currency is the U.S. dollar, gains and
losses resulting from the process of remeasuring foreign currency financial
statements into U.S. dollars are included in income. Aggregate net foreign
currency transaction gains (losses) totaled $(141,000), $(93,000) and
$(232,000) in fiscal 1992, 1993 and 1994, respectively. The effect of foreign
currency exchange rate fluctuations on cash balances held in foreign
currencies have not been material.

Foreign Exchange Contracts. The Company enters into forward exchange
contracts to hedge against the short-term impact of foreign currency
fluctuations on certain assets denominated in foreign currencies. The total
amount of these contracts is offset by the underlying assets denominated in
foreign currencies. The gains or losses on these contracts are included in
income as the exchange rates change and are offset by gains and losses on the
underlying assets being hedged. At April 3, 1994, the Company had $12 million
of forward exchange contracts outstanding, with maturity dates through July
1994. The Company does not anticipate non-performance by the counterparties
to these contracts.

Concentration of Credit Risk and Off-Balance-Sheet Risk. The Company
markets high-speed integrated circuits to OEMs and distributors primarily in
the United States, Europe and the Far East. The Company performs on-going
credit evaluations of its customers' financial conditions and limits the
amount of credit extended when deemed necessary but generally does not
require collateral. Management believes that any risk of loss is
significantly reduced due to the diversity of its products, customers and
geographic sales areas. The Company maintains a provision for potential
credit losses.

The Company sells a significant portion of its products through
third-party distributors. As a result of the merger of two of the Company's
national distributors, the receivable balance from the merged company is
significant in aggregate for fiscal 1994. If the financial condition and
operations of this distributor deteriorate below critical levels, the
Company's operating results could be adversely affected. This distributor's
receivable balance represented 9% of total accounts receivable at March 28,
1993 on a pro forma combined basis and 11% of total accounts receivable at
April 3, 1994, following the merger.

F-7

<PAGE>
The Company invests its cash and cash equivalents in cash deposits, money
market funds and commercial paper. Securities comprising cash equivalents and
short-term investments are maintained with high quality institutions, the
composition and maturities of which are regularly monitored by management.
Generally, a highly liquid market exists for these securities and they may be
redeemed upon demand and, therefore, bear minimal risk. The Company has not
experienced any material losses on its investments.

Unaudited Interim Information. The accompanying consolidated balance sheet
at October 2, 1994 and the consolidated statements of operations, cash flows
and stockholders' equity for fiscal quarters ended September 26, 1993 and
October 2, 1994 are unaudited. In the opinion of management these financial
statements have been prepared on the same basis as the audited consolidated
financial statements and reflect all adjustments, consisting of normal
recurring adjustments, necessary to present fairly the financial data of IDT
and its subsidiaries for such periods. The results of operations and cash
flows for the fiscal quarters are not necessarily indicative of the results
to be expected for any other fiscal quarter or for the year ending April 2,
1995. The data disclosed in the notes to the consolidated financial
statements for these periods is unaudited.

NOTE 2--RESTRUCTURING AND SIGNIFICANT OTHER EVENTS

In fiscal year 1992, the Company recorded $4.5 million of charges to net
income relating to the abandonment of IDT's original wafer processing
facility and product line reorganizations. The Company has substantially
completed this restructuring.

Also in fiscal 1992, due to changes in the market, the Company revised its
estimated useful lives and future realizable values of several assets. These
charges included a $7.2 million writeoff of excess inventory and $5.4 million
of writeoffs and changes in useful lives of underutilized capital assets.
Also, due to specific events during the second fiscal quarter, the Company
provided a $1.3 million reserve for doubtful accounts and recorded $6.4
million of accrued legal expenses. Subsequent developments and resolution of
one of these legal matters led the Company to recognize a $1 million benefit
during fiscal 1993.

NOTE 3--OTHER ASSETS--INTANGIBLES

During fiscal 1993, IDT entered into various royalty-free patent
cross-license agreements. The patents licenses granted to IDT under these
agreements have been recorded at their cost of approximately $8,200,000 and
will be amortized on a straight-line basis over five years. The amortization
relating to patents licenses was $780,000 and $1,647,000 at March 28, 1993
and April 3, 1994, respectively.

NOTE 4--LONG-TERM OBLIGATIONS

The Company leases certain equipment under long-term leases or finances
purchases of equipment under bank financing agreements. Leased assets and
assets pledged under financing agreements which are included under property,
plant and equipment are as follows:

MARCH 28, 1993 APRIL 3, 1994
-------------- ---------------
(IN THOUSANDS)
Building improvements .......$ 6,907 $ 6,907
Machinery and equipment .... 86,091 65,403
-------------- ---------------
Accumulated depreciation and
amortization ............... (49,001) (43,949)
-------------- ---------------
$ 43,997 $ 28,361
============== ===============

The capital lease agreements and equipment financings are collateralized
by the related leased equipment and contain certain restrictive covenants.

F-8

<PAGE>
Future minimum payments under capital leases and equipment financing
agreements, at varying interest rates (4.9%-11.0%) are as follows:

FISCAL YEAR (IN THOUSANDS)
- -------------------------------------- --------------
1995 .................................. $14,339
1996 .................................. 5,898
1997 .................................. 3,075
1998 .................................. 1,486
1999 .................................. 3
--------------
Total minimum payments ................ 24,801
Less interest ......................... 2,420
--------------
Present value of net minimum payments 22,381
Less current portion .................. 12,878
--------------
$ 9,503
==============

During fiscal 1993, IDT recorded a long-term obligation in connection with
the dismissal of certain litigation and entering into a patent cross-license
agreement. Under this cross license/technology agreement, the Company
recorded, at March 28, 1993, a long-term obligation of $7,041,000
representing the present value discounted at 8% of amounts due at the end of
the five-year license. The present values of the amount due at the end of the
license term were $7,041,000 and $7,471,000 at March 28, 1993 and April 3,
1994, respectively. During the year, this amount payable has been reduced by
an amount of royalty income pursuant to certain guaranteed revenues realized
on sales of IDT's products. The Company is accreting $3.3 million in future
interest charges from the recorded amount at April 3, 1994 to the amount due
at the end of the term using the effective interest method.

NOTE 5--LONG-TERM DEBT

Long-term debt consists of the following:

MARCH 28, 1993 APRIL 3, 1994
-------------- ---------------
(IN THOUSANDS)
Mortgage payable bearing interest at 9.625%
due in monthly installments of $142,000
including interest through April 1, 2005.
The note is secured by property and
improvements in San Jose, California ....... $ 12,152 $11,543
Term loan payable to a Malaysian bank at 8%
due in monthly installments of $54,000 ..... 1,448 791
-------------- ---------------
13,600 12,334
Less current portion ......................... 1,188 1,306
-------------- ---------------
$ 12,412 $11,028
============== ===============

Principal payments required in the next five years are as follows (in
thousands): $1,306 (1995), $790 (1996), $752 (1997), $828 (1998) and $8,658
(beyond 1998).

NOTE 6--LINES OF CREDIT

The Company's Malaysian subsidiary has unsecured revolving lines of credit
that allow borrowings up to $2,500,000 with three local banks. These lines
have no expiration date. At April 3, 1994 there were no outstanding
borrowings against these lines. The borrowing rate for these lines would be
incurred at the local bank's cost of funds plus 0.75% to 1% (8.80%-9.25% on
April 3, 1994).

F-9

<PAGE>
In fiscal 1994, the Company's Japanese subsidiary had a secured revolving
line of credit that allowed borrowings up to approximately $1,940,000. The
line of credit automatically extends until the Company requests termination.
As of April 3, 1994, no amounts were outstanding under this line of credit.
The borrowing rate for this line of credit is the local bank's short-term
prime rate existing at the borrowing date plus 0.2%. At April 3, 1994 this
short-term borrowing rate was 3.2%.

The Company also has foreign exchange facilities with several banks that
allow the Company to enter into foreign exchange contracts of up to
$30,000,000, of which $18,026,000 was available at April 3, 1994.

NOTE 7--COMMITMENTS

Lease Commitments. The Company leases most of its administrative and
manufacturing facilities under operating lease agreements which expire
through 1996. Two facilities were leased from a principal shareholder. The
annual rent paid to this shareholder totaled approximately $1,995,000,
$1,396,000 and $1,396,000 in fiscal 1992, 1993 and 1994, respectively. One
stockholder lease expired during fiscal 1992 and the other will expire in
June 1995.

The aggregate minimum rent commitments under all operating leases are as
follows:

(FISCAL YEAR) (IN THOUSANDS)
-------------------- --------------
1995 ................$ 4,122
1996 ................ 2,902
1997 ................ 2,217
1998 ................ 1,924
1999 ................ 1,933
2000 and thereafter 1,980
--------------
$ 15,078
==============

Rent expense for the years ended March 29, 1992, March 28, 1993 and April
3, 1994 totaled approximately $3,839,000, $3,303,000 and $3,488,000,
respectively.

As of April 3, 1994, four secured standby letters of credit were
outstanding totaling $1,937,000. Three letters of credit are held in
connection with the Company's workers compensation insurance and mature on
June 30, 1994, June 30, 1995 and June 30, 1996. The fourth letter of credit
secures the credit facility for the Company's Japanese subsidiary and matured
on April 4, 1994.

NOTE 8--FAIR VALUE DISCLOSURES OF FINANCIAL INSTRUMENTS

The estimated fair value of financial instruments has been determined by the
Company, using available market information and valuation methodologies.
However, considerable judgment is required in interpreting market data to
develop the estimates of fair value. Accordingly, the estimates presented
herein are not necessarily indicative of the amounts that the Company could
realize in a current market exchange. The use of different market assumptions
and/or estimation methodologies could have a material effect on the estimated
fair value amounts.

The amount reported for cash and cash equivalents, short-term investments,
foreign exchange contracts and the Malaysian term loan were considered to be
reasonable estimates of their fair value.

The fair values of short-term and long-term debt were based upon estimated
interest rates available to the Company for issuance of debt with similar
terms and remaining maturities for existing asset-secured equipment loans and
capital leases. The estimated fair value of the Company's short-term and
long-term debt at April 3, 1994 was $20,784,000. The fair value for the
mortgage loan is $10,748,000 estimated using discounted cash flow analysis
based on an estimated interest rate of 7.5 percent for similar types of
borrowing arrangements.

F-10

<PAGE>
The fair value estimates presented herein were based upon information
available to management as of April 4, 1994. Although management is not aware
of any factors that would materially affect the estimated fair value amounts,
such amounts have not been comprehensively revalued for purposes of the
consolidated financial statements since that date, and current estimates of
fair value may differ significantly from the amounts presented herein.

NOTE 9--STOCKHOLDERS' EQUITY

Stock Option Plans. The Company has stock option plans under which key
employees, officers, directors and consultants may be granted options to
purchase shares of the Company's common stock at prices which are not less
than fair market value at the date of grant. Options granted are generally
exercisable in 25% increments each year beginning one year after the grant
date.

At April 3, 1994, options for 1,172,000 shares were exercisable at an
aggregate exercise price of $4,856,000. At March 28, 1993, options for
2,093,853 shares were exercisable at an aggregate exercise price of
$7,692,000.

<TABLE>
<CAPTION>
Activity under the plans is summarized as follows:

OPTIONS OUTSTANDING
--------------------------------------------
AVAILABLE AGGREGATE
FOR ISSUANCE NUMBER PRICE PER SHARE PRICE
-------------- ------------- --------------- --------------
<S> <C> <C> <C> <C>
Balance, March 31, 1991 ......... 1,463,734 4,391,764 $ 3.25-$ 14.25 $ 16,832,000
Additional authorization ........ 1,500,000
Granted .........................(2,697,815) 2,697,815 $ 3.75-$ 9.50 14,459,000
Surrendered, canceled or expired 1,807,581 (1,809,971) $ 3.25-$ 14.25 (11,321,000)
Exercised ....................... -- (464,036) $ 3.25-$ 5.13 (1,683,000)
-------------- ------------- --------------- --------------
Balance, March 29, 1992 ......... 2,073,500 4,815,572 $ 3.25-$ 13.25 18,287,000
Additional authorization ........
Granted .........................(1,358,323) 1,358,323 $3.625-$ 8.25 6,701,000
Surrendered, canceled or expired 254,930 (447,625) $ 3.25-$ 13.25 (1,810,000)
Exercised ....................... -- (529,371) $ 3.25-$ 7.50 (1,933,000)
-------------- ------------- --------------- --------------
Balance, March 28, 1993 ......... 970,107 5,196,899 $ 3.25-$12.125 21,245,000
Additional authorization ........ 975,000
Granted .........................(1,850,234) 1,850,234 $ 7.00-$25.375 26,599,000
Surrendered, canceled or expired 284,010 (287,423) $ 3.25-$22.125 (1,738,000)
Exercised ....................... -- (1,780,613) $ 3.25-$17.625 (6,695,000)
-------------- ------------- --------------- --------------
Balance, April 3, 1994 .......... 378,883 4,979,097 $ 3.25-$25.375 $ 39,411,000
============== ============= =============== ==============
</TABLE>

Stock Purchase Plan. The Company has a stock purchase plan under which
employees and officers may purchase shares of the Company's common stock. The
purchase price at which shares may be purchased under this plan is 85% of the
lower of the fair market value on the first or last day of each quarterly
plan period. As of March 28, 1993 and April 3, 1994, 1,277,328 and 1,457,771
shares, respectively, had been purchased by employees, net of repurchases by
the Company, under the terms of the plan agreements. At April 3, 1994,
567,229 shares were reserved and available for issuance under this plan.

Stockholder Rights Plan. In February 1992, the Board approved certain
amendments to the Company's Stockholder Rights Plan. Under the plan, the
Company declared a dividend of one preferred share purchase right (a "Right")
for each outstanding share of common stock. Each Right entitles the holder,
under certain circumstances, to purchase common stock of the Company with a
value of twice the exercise

F-11

<PAGE>
price of the Right. In addition, the Board of Directors may, under certain
circumstances, cause each Right to be exchanged for one share of common stock
or substitute consideration. The Rights are redeemable by the Company and
expire in 1998.

NOTE 10--EMPLOYEE BENEFITS PROFIT SHARING PLAN

Prior to September 24, 1993, under the Company's Profit Sharing Plan, the
Board of Directors could authorize semiannual contributions for the benefit
of employees of up to 10% of pre-tax earnings, before profit sharing. Half of
the annual contribution, net of expenses, was in the form of cash payments
directly to all domestic and Malaysian employees meeting certain service
criteria, and the residual half was contributed directly to the Company's
Long-Term Incentive Plan for the purchase of IDT Common Stock on behalf of
the Company's employees.

The Company received approval from the IRS to terminate the Long-Term
Incentive Plan effective September 24, 1993. Effective this date, all shares
were 100% vested and no additional shares of IDT stock will be added to this
account. Beginning September 27, 1993, all IDT employees will receive an
increase in their cash profit sharing from 5% to 7% and the Company will
contribute an additional 1% of pre-tax profits to the Company's 401(k) plan.

Administrative expenses are netted against the Profit Sharing Plan
contribution. Contributions for the years ended March 28, 1993 and April 3,
1994 for this plan were $477,000 and $5,128,000, respectively. There were no
contributions for the year ended March 29, 1992.

NOTE 11--INCOME TAXES

The components of income before provision (benefit) for income taxes are as
follows:

MARCH 29, MARCH 28, APRIL 3,
1992 1993 1994
- -------------- ------------ ----------- ----------
(IN THOUSANDS)
United States $ (37,858) $ 2,240 $44,808
Foreign. ...... 3,090 4,038 5,398
------------ ----------- ----------
$ (34,768) $ 6,278 $50,206
============ =========== ==========

The provisions (benefits) for income taxes consist of the following:

MARCH 29, MARCH 28, APRIL 3,
1992 1993 1994
----------- ----------- ----------
(IN THOUSANDS)
Current income taxes (benefits):
United States ........................$ 242 $ (2,467) $14,699
State ................................ -- -- 4,039
Foreign .............................. 161 102 798
----------- ----------- ----------
403 (2,365) 19,536
----------- ----------- ----------
Deferred (prepaid) income taxes:
United States ........................ (2,363) 3,307 (5,379)
State ................................ -- -- (4,116)
----------- ----------- ----------
(2,363) 3,307 (9,495)
----------- ----------- ----------
Provision (benefit) for income taxes $(1,960) $ 942 $ 10,041
=========== =========== ==========

F-12

<PAGE>
Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amounts of assets and liabilities for financial
reporting purposes and the amounts used for income tax purposes. The
significant components of deferred assets and liabilities are as follows:

MARCH 28, APRIL 3,
1993 1994
- --------------------------------------------- ----------- ----------
(IN THOUSANDS)
Deferred tax assets:
Deferred income on shipments to distributors $ 4,330 $ 7,466
Non-deductible accruals and reserves ........ 8,313 13,527
Capitalized inventory and other expenses .... 6,014 4,071
Capitalized research and development ........ 752 825
Other ........................................ 746 273
Refund receivables ........................... 3,560 2,451
----------- ----------
Total deferred tax asset ..................... 23,715 28,613
Valuation allowance .......................... (8,445) (2,337)
----------- ----------
Net deferred tax asset ....................... 15,270 26,276
----------- ----------
Deferred tax liabilities:

Depreciation ................................. (11,710) (8,517)
----------- ----------
Total deferred tax liability ................. (11,710) (8,517)
----------- ----------
Net deferred tax asset .......................$ 3,560 $ 17,759
=========== ==========

The provision (benefit) for income taxes differs from the amount computed
by applying the U.S. statutory income tax rate of 35% for the year ended
April 3, 1994 (34% for the years ended March 28, 1993 and March 29, 1992) to
income before the provision (benefit) for income taxes as follows:

MARCH 29, MARCH 28, APRIL 3,
1992 1993 1994
- ------------------------------------------------ ------------ ----------- ----------
(IN THOUSANDS)
<S> <C> <C> <C>
Provision at U.S. statutory rate of 34% ........$(11,821) $ 2,134 $ 17,572
Earnings of foreign subsidiaries considered
permanently reinvested, less foreign taxes .... (232) (1,701) (951)
General business credits ........................ (660) 0 (2,710)
Tax rate differential ........................... 3,220 574 (1,167)
State tax ....................................... -- -- 3,558
Valuation allowance ............................. 8,031 414 (6,108)
Other ...........................................$ (498) (479) (153)
------------ ----------- ----------
Provision (benefit) for income taxes ............$ (1,960) $ 942 $ 10,041
============ =========== ==========
</TABLE>

The Company's Malaysian subsidiary operates under a tax holiday which
extended through July 1993. Management believes it is likely that carryovers
of depreciation from the tax holiday period along with expected additional
depreciation grants will defer the time when the Malaysian subsidiary will
first begin to pay local taxes beyond its year ended April 3, 1994.

The provision for income taxes for the six month period ended October 2,
1994 reflects the estimated annualized effective tax rate of 25%. This rate
differs from the U.S. statutory rate of 35% primarily due to earnings of
foreign subsidiaries being taxed at lower rates, utilization of research and
development credits and utilization of certain deferred tax benefits for
which a valuation allowance was previously required.

F-13

<PAGE>
The Company's intention is to permanently reinvest its earnings in all of
its foreign subsidiaries. Accordingly, U.S. taxes have not been provided on
approximately $19,700,000 of unremitted earnings, of which approximately
$17,100,000 were earned by the Company's Malaysian subsidiary. Upon
distribution of those earnings in the form of dividends or otherwise, the
Company will be subject to both U.S. income taxes and various foreign country
withholding taxes.

NOTE 12--INDUSTRY SEGMENT, FOREIGN OPERATIONS

IDT operates predominantly in one industry segment and is engaged in the
design, development, manufacture and marketing of high-performance integrated
circuits. No single customer or distributor accounted for more than 10% of
net revenues in fiscal 1992 and 1993. During fiscal 1994, two of the
Company's national distributors became one entity and accounted for 15% of
net revenues. If these two distributors had been a single entity during
fiscal 1992 and 1993, it would have accounted for 17% and 16%, respectively,
of IDT's total revenues.

Major operations outside the United States include manufacturing facilities
in Malaysia and sales subsidiaries in Japan, the Pacific Rim, and throughout
Europe.

At March 28, 1993 and April 3, 1994, total liabilities for operations outside
of the United States were $20,152,000 and $20,704,000, respectively.

F-14

<PAGE>

The following is a summary extract of IDT's foreign operations by geographic
areas for fiscal 1992, 1993 and 1994:

TRANSFERS
SALES TO BETWEEN OPERATING
UNAFFILIATED GEOGRAPHIC INCOME IDENTIFIABLE
CUSTOMERS AREAS NET REVENUE (LOSS) ASSETS
-------------- ------------ ------------- ------------ --------------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Fiscal year ended March 29, 1992
United States ...................$140,999 $ 21,616 $ 162,615 $ (4,800) $ 190,801
Japan ........................... 23,018 23,018 41 6,192
Europe .......................... 26,861 2,838 29,699 303 5,703
Asia-Pacific .................... 11,856 15,230 27,086 3,234 18,838
Eliminations .................... -- (39,684) (39,684) (71) (26,172)
Corporate ....................... -- -- -- (28,023) 34,368
-------------- ------------ ------------- ------------ --------------
Consolidated ....................$202,734 $ -- $ 202,734 $ (29,316) $ 229,730
============== ============ ============= ============ ==============
Fiscal year ended March 28, 1993
United States ...................$152,303 $ 23,585 $ 175,888 $ 22,159 $ 198,993
Japan ........................... 23,022 23,022 (419) 5,651
Europe .......................... 33,907 2,847 36,754 374 8,028
Asia-Pacific .................... 27,031 20,566 47,597 4,715 24,155
Eliminations .................... -- (46,998) (46,998) (94) (24,081)
Corporate ....................... -- -- -- (15,729) 27,248
-------------- ------------ ------------- ------------ --------------
Consolidated ....................$236,263 $ -- $236,263 $ 11,006 $ 239,994
============== ============ ============= ============ ==============
Fiscal year ended April 3, 1994
United States ...................$223,600 $ 42,500 $266,100 $ 70,788 $ 197,385
Japan ........................... 29,959 29,959 (257) 8,033
Europe .......................... 60,064 3,274 63,338 677 8,182
Asia-Pacific .................... 16,839 24,869 41,708 5,146 27,202
Eliminations .................... -- (70,643) (70,643) (408) (24,470)
Corporate ....................... -- -- -- (23,677) 133,239
-------------- ------------ ------------- ------------ --------------
Consolidated ....................$330,462 $ -- $330,462 $ 52,269 $ 349,571
============== ============ ============= ============ ==============
</TABLE>

Transfers between geographic areas are accounted for at amounts which are
generally above cost and consistent with the rules and regulations of
governing tax authorities. Such transfers are eliminated in the consolidated
financial statements. Operating income by geographic areas reflect foreign
earnings reported by the foreign entities and does not include an allocation
of general corporate expenses. Identifiable assets are those assets that can
be directly associated with a particular foreign entity and thus do not
include assets used for general corporate purposes: cash and cash
equivalents, short-term investments and prepaid income taxes.

F-15

<PAGE>
NOTE 13--CROSS-LICENSE AGREEMENT

During fiscal 1993, the Company entered into a patent cross-license agreement
which obligated the payment of an amount of royalties dependent upon the
level of the Company's profitability. The amount of royalties accrued during
fiscal 1994 was approximately $4.4 million and has been included in other
accrued liabilities. The Company will not be negatively impacted by any
further royalty payment from this agreement beginning fiscal 1995.

F-16

<PAGE>

======================================= ==================================

No dealer, sales representative or any
other person has been authorized to give 3,400,000 SHARES
any information or to make any
representation not contained in this
Prospectus in connection with the offer
made by this Prospectus and, if given or
made, such information or representation #################
must not be relied upon as having been
authorized by the Company, any Selling
Stockholder or any Underwriter. This IDT LOGO GOES HERE
Prospectus does not constitute an offer
to sell or a solicitation of an offer to
buy any securities other than the
registered securities to which it ################
relates or an offer to sell or a
solicitation of an offer to buy such
securities in any circumstances in which
such offer or solicitation is unlawful.
Neither the delivery of this Prospectus
nor any sale made hereunder shall, under
any circumstances, create any
implication that there has been no
change in the affairs of the Company COMMON STOCK
since the date hereof or that the
information contained herein is correct
as of any time subsequent to the date
hereof.

-----------------
TABLE OF CONTENTS
-----------------

PAGE
--------
Available Information ....................2
Information Incorporated by Reference ...2
Prospectus Summary .......................3 ----------------
Risk Factors .............................5 PROSPECTUS
Use of Proceeds ..........................11 ----------------
Price Range of Common Stock ..............11
Dividend Policy ..........................11
Capitalization ...........................12
Selected Consolidated Financial Data ....13
Management's Discussion and Analysis of
Financial Condition and Results of
Operations ..............................14 MONTGOMERY SECURITIES
Business .................................19
Management ...............................28 LEHMAN BROTHERS
Certain Transactions .....................29
Selling Stockholders .....................30 SMITH BARNEY INC.
Underwriting .............................31
Legal Matters ............................32
Experts ..................................32
Report of Independent Accountants ........F-1
Consolidated Financial Statements ........F-2 December 13, 1994

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