<PAGE>
Filed by Microchip Technology Incorporated
Pursuant to Rule 425 under the Securities Act of 1933
Subject Company: Telcom Semiconductor, Inc.
Commission File No. 0-21184
NEWS RELEASE
A. October 27, 2000 Press Release
[LOGO OF MICROCHIP]
INVESTOR RELATIONS CONTACT:
Gordon Parnell - CFO (Microchip)...(480) 786-7374
Bob Gargus - CEO (TelCom)..........(650) 215-5206
MICROCHIP TECHNOLOGY ANNOUNCES ACQUISITION
OF TELCOM SEMICONDUCTOR
EXPANDED ANALOG PORTFOLIO ACCELERATES MICROCONTROLLER-ATTACH STRATEGY
CHANDLER, Arizona -- October 27, 2000 -- (NASDAQ:MCHP) -- Microchip Technology
Incorporated and TelCom Semiconductor, Inc. (NASDAQ:TLCM) today announced that
Microchip will acquire TelCom in a stock-for-stock transaction valued at
approximately $300 million on a fully-diluted basis based on Thursday's closing
prices. TelCom is a provider of a broad spectrum of high performance linear and
mixed-signal integrated circuits solutions that are used worldwide in a range of
applications in the wireless communications, computing, consumer electronics,
networking, industrial and other markets.
Under the terms of the definitive merger agreement, if the average closing price
of Microchip's common stock for the ten trading days preceding the closing of
the transaction is between $28.30 and $32.61, Microchip will issue a number of
shares of its common stock for each outstanding share of TelCom equal to $15.00
divided by such 10 day average price. If Microchip's ten-day average closing
price prior to the merger is less than $28.30, then each TelCom stockholder will
receive .53 shares of Microchip, and if the ten-day average price is greater
than $32.61, then each TelCom stockholder will receive .46 shares of Microchip.
Microchip expects the transaction to be completed during the first calendar
quarter of 2001 and to be immediately accretive.
--more--
<PAGE>
"This acquisition is an important milestone for Microchip in that it greatly
accelerates our internal efforts to expand our portfolio of stand-alone analog
products as well as provide additional product functionality to our embedded
control customers. We estimate that there is approximately $1.50 of analog
product embedded around each $1.00 of our microcontrollers. One and a half years
ago, we began exploiting this opportunity by building and attaching our stand-
alone analog products to our microcontrollers. TelCom brings to us a highly
synergistic portfolio of analog products which will accelerate our ability to
capture this significant revenue opportunity," said Steve Sanghi, Microchip's
President and CEO.
TelCom's high performance analog expertise will substantially expand Microchip's
product initiatives and position the Company as a leading producer of power
management, thermal management and other linear/mixed-signal integrated
circuits. "TelCom's product position and experienced analog team accelerates our
analog product roadmap by several years and gives us critical mass in all major
market segments. Analog resources are very scarce in the current industry
environment, and this acquisition will double our analog focused resources.
Together, we will expand Microchip's analog product portfolio and accelerate our
microcontroller-attach strategy much faster than we could do alone," Sanghi
said.
"We are pleased to join forces with an industry leader like Microchip," said Bob
Gargus, President and CEO of TelCom. "This is an excellent fit from both a
customer and technology perspective. We believe our strength in analog products
will further Microchip's leadership in embedded control applications.
Microchip's larger sales force, much larger customer base and strong OEM and
distributor relationships will significantly expand the market opportunity for
TelCom's products."
TelCom will become a subsidiary of Microchip and TelCom's team of over 250
employees will become part of Microchip's existing analog product group.
Microchip expects to keep all of TelCom's employees, and no reductions in
workforce are expected.
The acquisition is intended to qualify as a pooling of interests for accounting
purposes and to be tax-free to stockholders of TelCom. Completion of the
acquisition is contingent upon approval by TelCom stockholders, on the
expiration or termination of the applicable waiting period under the Hart-Scott-
Rodino Antitrust Improvements Act, and on other customary conditions.
-- more --
<PAGE>
Microchip will host a teleconference call on Friday, October 27 at 8:00 a.m.
(Pacific time)/11:00 a.m. (Eastern time) to discuss this merger. This call will
be simulcast over the World Wide Web at www.microchip.com. The webcast will be
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available for replay at www.microchip.com until 5:00 p.m. (Pacific time) on
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Monday, October 30, 2000.
A telephonic replay of the teleconference will also be available at
approximately 11:00 a.m. (Pacific time) on October 27. The telephonic replay
will be available until 5:00 p.m. (Pacific time) on Monday, October 30, 2000.
Interested parties may listen to the replay by dialing 719-457-0820 and entering
access code 456421.
This release contains forward-looking statements relating to the synergies of
Microchip's and TelCom's products, growth of Microchip's customer base,
acceleration of Microchip's analog product development, and development of
Microchip's and TelCom's products and services and future operating results that
are based upon the current expectations and beliefs of the management of
Microchip and TelCom and are subject to certain risks and uncertainties that
could cause actual results to differ materially from those described in the
forward looking statements. In particular, the following factors, among others,
could cause actual results to differ materially from those described in the
forward-looking statements: failure of the transaction to close due to the
failure to obtain required regulatory or stockholder approvals; difficulties
associated with successfully integrating Microchip and TelCom's businesses and
technologies; costs related to the transaction; failure of the combined company
to retain and hire key executives, technical personnel and other employees;
failure of the combined company to manage its growth and the difficulty of
successfully managing a larger organization; failure of the combined company to
successfully manage its changing relationships with customers, suppliers, value
added resellers, and strategic partners; failure of the combined company's
customers to accept new product offerings; and failure to achieve anticipated
synergies in the merger. Other factors that could affect the combined company's
actual results include the progress and costs of the development of its products
and services and the timing of market acceptance of those products and services.
-- more --
<PAGE>
For a detailed discussion of these other cautionary statements, please refer to
each company's respective filings with the Securities and Exchange Commission,
including, where applicable, their most recent filings on Form 10-K and 10-Q,
both companies' registration statements on Form S-3, as amended, and the joint
proxy statement/prospectus to be filed by the companies as described below.
Microchip's and TelCom's filings with the SEC are available to the public from
commercial document retrieval services and at the website maintained by the SEC
at http://www.sec.gov.
------------------
WHERE YOU CAN FIND ADDITIONAL INFORMATION:
Investors and security holders of TelCom are advised to read the proxy
statement/prospectus regarding the proposed merger when it becomes available
because it will contain important information about the transaction. The proxy
statement/prospectus will be filed with the Securities and Exchange Commission
by Microchip and TelCom. Investors and security holders of TelCom may obtain a
free copy of the proxy statement/prospectus when it is available and other
documents filed by Microchip and TelCom with the Securities and Exchange
Commission at the Securities and Exchange Commission's website at www.sec.gov.
The proxy statement/prospectus and these other documents may also be obtained
for free from Microchip and TelCom.
TelCom and its executive officers and directors may be deemed to be participants
in the solicitation of proxies from stockholders of TelCom with respect to the
transactions contemplated by the merger agreement. Information regarding such
officers and directors is included in TelCom's Proxy Statement for its 2000
Annual Meeting of Stockholders filed with the Securities and Exchange Commission
on March 10, 2000. This document is available free of charger at the Securities
and Exchange Commission's website at http://www.sec.gov and from TelCom.
------------------
Microchip Technology Inc. manufactures the widely popular PICmicro(R) RISC
microcontrollers that serve 8- and 16-bit embedded control applications.
Specializing in field-programmable and mixed-signal solutions, the company also
offers complementary microperipheral products including stand-alone analog,
interface and microID RFID devices; serial EEPROMs; and the patented KEELOQ(R)
security devices. This synergistic product portfolio targets thousands of
applications and a growing demand for high-performance designs in the
automotive, communications, computing, consumer and industrial control markets.
-- more --
<PAGE>
The Company's quality systems are ISO 9001 (1994 version) and QS9000 (1998
version) certified. Microchip is headquartered near Phoenix in Chandler, with
semiconductor fabrication facilities in Arizona and Washington; and assembly and
test operations near Bangkok, Thailand. Microchip employs approximately 3,100
people worldwide and has sales offices throughout Asia, Europe, Japan and the
Americas. More information on the Company can be found at www.microchip.com.
TelCom Semiconductor, Inc. designs, develops and markets a broad spectrum of
high-performance linear and mixed-signal integrated circuit solutions. The
company's product offering is focused in three main product families: power
management, thermal management, and linear/mixed signal devices. These
integrated circuits are used worldwide in a range of applications in the
wireless communications, computing, consumer electronics, networking, industrial
and other markets. The company's revenue for 1999 was $57.3 million. Company
and product information can be accessed on the company's website at www.telcom-
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semi.com.
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The Microchip name and logo, PIC, PICmicro, and KEELOQ are registered trademarks
of Microchip Technology Inc. in the USA and other countries. microID is a
trademark of Microchip Technology Inc. in the USA and other countries. All other
trademarks are the property of their respective owners.
-- end --
<PAGE>
B. The following FAQ was prepared for Microchip Technology Incorporated senior
executives for internal use.
Question and Answer:
1) Why is Microchip buying Telcom?
Eighteen months ago Microchip went public with our strategy to attach analog
product sales to our PICmicro microcontroller products. TelCom accelerates this
strategy several years by extending Microchip's analog product offering. TelCom
adds an impressive line of power management, thermal management and linear/mixed
signal devices. The combination of Microchip and TelCom's analog products has
virtually no overlap. The addition of TelCom's products significantly expands
our sales channel and distribution partners ability to attach analog products to
sales of our PICmicro microcontrollers.
TelCom is a strong strategic and cultural fit. Both companies have a strong
belief and similar values in creating great products and developing strong
customer relationships.
2) Why is this acquisition good for Microchip?
Microchip is a world leader in 8-bit microcontrollers where analog products are
used at a rate of $1.5usd for every $1.00usd of microcontroller sold. With
Microchip's strong presence in an impressive number of markets, the addition of
TelCom's analog offering to our own opens doors at a much faster rate.
Microchip's existing analog line has been very successful to date, growing to
over 1700 customers in just 18 months, by leveraging our 30,000 PICmicro users
world wide, and attaching our analog products. The combined customers provide a
significant opportunity for growth by attaching TelCom's analog products with
our PICmicro microcontroller sales.
3) What Does TelCom manufacture and sell?
TelCom is a strong supplier of power management, thermal management and
linear/mixed signal devices. They have an especially strong position in power
management products, which sell into a broad range of applications in all market
segments.
4) Who Approached Whom?
Microchip and TelCom have been looking for opportunities to expand their
respective businesses for sometime. Microchip and TelCom both feel strongly
about our long-term strategy of "selling more analog around the PICmicro."
5) How much of Microchip will TelCom shareholders own?
<PAGE>
Depending on the collar 6.6% at .46, and 7.6% at .53 of Microchip on fully
diluted basis.
6) What Is the History between Microchip and TelCom?
Microchip has been researching and evaluating analog companies for many years.
We became impressed with TelCom's quality and rate of product introductions over
the past 2 years. Microchip strongly believes that Telcom's products broad
market appeal combined with the ubiquitous nature of our PICmicro
microcontrollers would make a great combination.
7) Will TelCom become a part of Microchip or remain a separate entity?
TelCom will become a wholly owned subsidiary of Microchip, and will become a
part of the Analog Products Group at Microchip.
8) What are TelCom's revenues, net income and operating profits for the last
three years?
Year Revenue Income Operating profit
------ ------- ------- -----------------
1999 57.3 13.1 8.6
1998 54.3 (3.5) (3.0)
1997 55.4 (1.7) 1.0
Projected revenue for 2000 according to analysts is around 74 million. TelCom's
3Q00 revenue was 18.2 million, a 22% increase over last year's 3/rd/ quarter.
9) What is TelCom's growth outlook?
Current analyst forecasts put CY2001 revenue at 90 million, or 22% growth.
10) How will the acquisition affect Microchip's operating results?
Excluding transaction costs, the acquisition is expected to be immediately
accretive, without synergies, to Microchip's earning per share in 2001.
11) How does the premium on this acquisition compare to other similar
transactions?
The premium paid in the transaction is in line with industry practice.
Microchip is very comfortable with the purchase price given the quality of
analog expertise, products and Microchip's ability to offer their products to
our loyal base of 30,000 PICmicro users worldwide.
12) What are the strategic benefits of acquiring TelCom?
<PAGE>
- Microchip greatly enhances its analog footprint to our existing customer
base that use analog in most of their designs.
- There is essentially no product overlap, therefore greatly enhancing our
current analog offering.
- Microchip's strong sales/distribution channels will now be able to offer a
broad range of analog products to existing and new Microchip customers.
- Together we will introduce over 100 new analog products in the next year;
most of those will be directly synergistic with existing PICmicro
applications.
- TelCom's strong design talent and manufacturing partnerships will greatly
accelerate Microchip's analog presence
13) What are the synergies and associated cost savings? What will you have to
do to attain the synergies?
After the close, we anticipate the synergies will come from our accelerated
revenue growth based on our strong sales and distribution channels by attaching
more analog sales with our PICmicro microcontrollers. Our sales and FAE
resources are already trained on our existing analog products. Since the TelCom
products are highly complementary, we will add the new products to our product
line card and offer additional training on the new products.
14) How will the transaction be accounted for? What does this do to
goodwill/amortization?
There is no goodwill, since this is a pooling-of-interests transaction. There
will however be a one-time transaction-related expense in the quarter of
closure.
15) When will the acquisition be closed?
We expect to close in CYQ1 2001.
16) When will Microchip's revenues reflect TelCom's revenues?
Only after we close.
17) What are the terms by which either party could terminate this agreement?
The agreement has customary termination provisions and is subject to the
approval from TelCom's shareholders. There is no requirement that our
shareholders vote.
18) Has Microchip completed its due diligence?
Microchip has completed the due diligence required to enter into the
transaction, and there are not conditions to closing related to additional due
diligence.
<PAGE>
Between signing and closing, Microchip will continue to work with the TelCom
team to gather information appropriate to planning for the transition after
closing.
19) Are there any specific requirements for TelCom's next quarterly financial
results in this agreement?
No.
20) Are there any collars around the stock exchange rate? What if Microchip's
stock significantly increases for falls prior to closing?
Yes there is a collar. Under the terms of the definitive merger agreement, if
the average closing price of Microchip's common stock of the ten trading days
preceding the closing of the transaction is between $28.30 and $32.61, Microchip
will issue a number of shares of its common stock for each outstanding share of
TelCom equal to $15.00 divided by as such 10 day average price. If Microchip's
ten-day average price prior to the merger is less than $28.30, then each TelCom
stockholder will receive .53 shares of Microchip, and if the ten-day average
price is greater than $32.61, then each TelCom stockholder will receive .46
shares of Microchip.
21) How much overlap is there of Microchip and TelCom's products?
There is essentially no overlap between the two companies' analog products.
Microchip has been focusing on A to D converters, low power system Supervisors,
operational amplifiers and CAN controllers, etc. TelCom's strengths are in
power management, thermal management, power drivers, and other related linear
and mixed signal where Microchip has little presence at this time.
22) Does this impact the roadmap for each company's products?
Since there is essentially no overlap between the two product lines there is an
acceleration in all product family roadmaps. Together our analog market
footprint grows substantially, thus covering a much larger part of the
marketplace.
23) Did you buy TelCom because you could not develop additional analog products
inside Microchip?
No. Our current product offering of ADCs, CMOS OpAmps, System Supervisors and
Interface products have been embraced by our existing customers as well as by
new customers to Microchip. With the addition of TelCom's products and strong
design staff, we will continue to grow the analog product families of the
combined companies.
<PAGE>
24) Will TelCom benefit from Microchip's process technology, packaging and
manufacturing strengths?
Yes. Microchip's technology in mixing analog, flash, E/2/ and digital provide
TelCom's research and development additional opportunities to expand their
proprietary product offering. With Microchip manufacturing expertise the
combined packaging volumes of both companies will be beneficial to both parties
in the small pincount packages. Long term Microchip will develop all new analog
products on our state of the art .5micron, mixed signal, flash technology on 8"
wafers. Microchip will also benefit from TelCom's foundry relationships.
25) Are you planning on closing down TelCom's manufacturing?
No. Their Hong Kong facility is well managed and experienced with TelCom's
existing analog products. We will continue using the Hong Kong manufacturing
facility to support their existing strong and growing analog business.
26) What is the expected combined growth for analog in 2000?
In 1999 the analog market was $21B, and is expected to grow to $35B by 2003.
27) How will this affect TelCom's distribution network?
Microchip and TelCom's distribution channels have high overlap. We don't expect
any significant changes in the distribution network at this time. Many of the
key distribution channels are common to Microchips', which should minimize
potential revenue disruptions.
28) When will Microchip customers be able to order TelCom products directly
from Microchip?
Until close, both companies will continue to support their respective customers
through the current channels. Long term we will evaluate the channels and make
only changes as deemed necessary to facilitate the easiest access to our
products.
29) What happens to the TelCom trademarks?
Microchip retains all rights to use all of TelCom's trademarks.
30) Will you keep all of the TelCom's technical staff? Manufacturing?
At close, all TelCom employees will become Microchip employees. Analog
resources are very scarce in the current industry environment, and this
acquisition will double our analog focused resources. Together, we will expand
<PAGE>
Microchip's analog product portfolio and accelerate our microcontroller-attach
strategy much faster than we could alone.
31) How many employees does TelCom have? Are there any plans for layoffs?
TelCom has approximately 250 employees worldwide. There are no plans for any
layoffs. Being in such a tight hiring marketplace, we anticipate we will need
every employee of the combined companies, and will likely open additional
positions as needed to support the combined companies.
32) Will TelCom employees have to move Chandler?
Any relocations are expected to be very limited and are expected to be on a
voluntary basis.
33) Where are TelCom's operations?
TelCom corporate headquarters are in Mt. View California, which houses
administration, design, marketing and sales. They have an additional design
location in Switzerland. Front-end manufacturing is done at multiple fabrication
partners' sites. Back end is done at TelCom's manufacturing facility in Hong
Kong.
34) How are TelCom's sales divided by region?
Telcom's revenue base is split 2% Consumer, 0% Automotive,28% Industrial 57%
Communications, and 13% Computing. In contrast Microchip's revenue split is 36%
Consumer, 19% Automotive, 15% Industrial, 15% Communications, and 15% Computing.
We find this difference highly complementary to both companies, and believe each
of the markets have similar product needs.
These questions and answers contain forward-looking statements relating to the
synergies of Microchip's and TelCom's products, growth of Microchip's customer
base, acceleration of Microchip's analog product development, and development of
Microchip's and TelCom's products and services and future operating results that
are based upon the current expectations and beliefs of the management of
Microchip and TelCom and are subject to certain risks and uncertainties that
could cause actual results to differ materially from those described in the
forward looking statements. In particular, the following factors, among others,
could cause actual results to differ materially from those described in the
forward-looking statements: failure of the transaction to close due to the
failure to obtain required regulatory or stockholder approvals; difficulties
associated with successfully integrating Microchip and TelCom's businesses and
technologies; costs related to the transaction; failure of the combined company
to retain and hire key executives, technical personnel and other employees;
failure of the combined company to manage its growth and the difficulty of
successfully managing a larger organization; failure of the combined company to
successfully manage its changing relationships with customers, suppliers, value
added resellers, and strategic partners; failure of the combined company's
customers to accept new product offerings; and failure to achieve anticipated
synergies in the merger. Other factors that could affect the combined company's
actual results include the progress and costs of the development of its products
and services and the timing of market acceptance of those products and services.
For a detailed discussion of these other cautionary statements, please refer to
each company's respective filings with the Securities and Exchange Commission,
including, where applicable, their most recent filings on Form 10-K and 10-Q,
both companies' registration statements on Form S-3, as amended, and the joint
proxy statement/prospectus to be filed by the companies as described below.
Microchip's and TelCom's filings with the SEC are available to the public from
commercial document retrieval services and at the website maintained by the SEC
at http://www.sec.gov.
------------------
WHERE YOU CAN FIND ADDITIONAL INFORMATION:
Investors and security holders of TelCom are advised to read the proxy
statement/prospectus regarding the proposed merger when it becomes available
because it will contain important information about the transaction. The proxy
statement/prospectus will be filed with the Securities and Exchange Commission
by Microchip and TelCom. Investors and security holders of TelCom may obtain a
free copy of the proxy statement/prospectus when it is available and other
documents filed by Microchip and TelCom with the Securities and Exchange
Commission at the Securities and Exchange Commission's website at www.sec.gov.
The proxy statement/prospectus and these other documents may also be obtained
for free from Microchip and TelCom.
TelCom and its executive officers and directors may be deemed to be participants
in the solicitation of proxies from stockholders of TelCom with respect to the
transactions contemplated by the merger agreement. Information regarding such
officers and directors is included in TelCom's Proxy Statement for its 2000
Annual Meeting of Stockholders filed with the Securities and Exchange Commission
on March 10, 2000. This document is available free of charger at the Securities
and Exchange Commission's website at http://www.sec.gov and from TelCom.
------------------
<PAGE>
C. On October 27, Steve Sanghi utilized the following script in connection with
his discussion of the merger during his conference call with analysts.
Conference Call Notes
---------------------
Good Morning
During the course of this conference call, we will be making projections and
other forward-looking statements regarding future events or the future financial
performance of the Company. We wish to caution you that such statements are
predictions and that actual events or results may differ materially. We refer
you to the Company's recent S-3, 10-Q's and 10K filed with the SEC which
identify important risk factors, which may affect Microchip's business.
As we announced in our Press Release earlier today, we have entered into an
agreement to acquire TelCom Semiconductor (Inc.) in a stock-for-stock
transaction valued at approximately $300 million. TelCom is a provider of a
broad spectrum of high performance linear and mixed-signal integrated circuits
solutions that are used by 6,000 customers worldwide in a range of applications
in the wireless communications, computing, consumer electronics, networking,
industrial and other markets.
Microchip expects the transaction to be completed during the first calendar
quarter of 2001 and to be immediately accretive.
This acquisition is an important milestone for Microchip in that it greatly
accelerates our internal efforts to expand our portfolio of stand-alone analog
products as well as provide additional analog product functionality to our
embedded control customers. This acquisition will also accelerate our analog
product roadmap by several years, by doubling Microchip's current resources with
analog expertise. As we all know this resource is extremely scarce in the
current industry environment.
TelCom's products are very synergistic with our own "stand alone" analog
products and we believe they will increase the "attach rate" of analog to our
Microcontroller product offering. Many of you maybe aware that there is nearly
1.5 dollars of analog product for every dollar of microcontroller in the
embedded control boards of our customers. We believe we are well positioned to
capitalize on this opportunity because our field engineers already spend nearly
50% of their time integrating our microcontrollers with third party analog
devices.
I also believe that Microchip's larger sales force, much larger customer base
and strong OEM and distributor relationships will significantly expand the
market for TelCom's products.
You can probably sense my excitement in the announcement of this acquisition.
While I am excited about their products, technical expertise and combined
synergies I am also pleased that this is a accretive transaction from Day One
and that it will add approximately $115 million of cash to our balance sheet,
confirming the sound basis for this acquisition.
With me this morning is Rich Simoncic, VP, Microperipheral Products Division and
Gordon Parnell, VP, Chief Financial Officer. We are all available to take your
questions. With that ---- please poll for questions.
