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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM 8-K

CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of report (Date of earliest event reported) January 27, 2004
PDF Solutions, Inc.

(Exact Name of Registrant as Specified in its Charter)
Delaware | | 000-31311 | | 25-1701361
(State or Other Jurisdiction of Incorporation) | | (Commission File Number) | | (IRS Employer Identification No.)
333 West San Carlos Street, Suite 700, San Jose, CA (Address of Principal Executive Offices) | | 95110 (Zip Code)
Registrant’s telephone number, including area code (408) 280-7900
Not Applicable

(Former Name or Former Address, if Changed Since Last Report)

TABLE OF CONTENTS
| Item 7. Financial Statements and Exhibits
| Item 12. Results of Operations and Financial Condition
SIGNATURES
EXHIBIT INDEX
EXHIBIT 99.1
EXHIBIT 99.2

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TABLE OF CONTENTS

Item 7. Financial Statements and Exhibits.

Item 12. Results of Operations and Financial Condition.

Signatures

Exhibit 99.1

Exhibit 99.2

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Item 7. Financial Statements and Exhibits.

     (c)  Exhibits.
| 99.1 | | Press Release dated January 27, 2004 regarding financial results and certain other information related to the fourth quarter and fiscal year end of 2003
| 99.2 | | Press Release dated January 27, 2004 regarding the financial outlook for the first and second quarters of fiscal 2004

Item 12. Results of Operations and Financial Condition.

     On January 27, 2004, PDF Solutions, Inc. issued a press release regarding its financial results and certain other information related to the fourth quarter and fiscal year end of 2003. Also on January 27, 2004, PDF Solutions, Inc. issued a press release regarding the financial outlook for the first and second quarters of fiscal year 2004. A copy of each press release is attached as Exhibit 99.1 and Exhibit 99.2, respectively.

Use of Non-GAAP Information

     In addition to providing results that are determined in accordance with Generally Accepted Accounting Principles (GAAP), PDF Solutions also provides certain non-GAAP financial measures that exclude certain charges as additional information relating to its operating results. PDF’s management believes that the presentation of these measures provides useful information to investors regarding certain additional financial and business trends relating to its financial condition and results of operations. PDF has also chosen to provide this information to investors to enable them to perform meaningful comparisons of its past, present and future operating results. These measures are not in accordance with, or an alternative to, GAAP and may be different from non-GAAP measures used by other companies. The calculations of non-GAAP financial measures have been adjusted to exclude the effects of amortization of stock-based compensation and intangibles.

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SIGNATURES

     Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
| | PDF Solutions, Inc.
| | By: | | /s/ P. Steven Melman
| | Name: | | P. Steven Melman
| | Title: | | Vice President, Finance and Administration
| | | | and Chief Financial Officer
Dated: January 27, 2004 | | | |
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EXHIBIT INDEX
Number | | Exhibit
99.1 | | Press Release dated January 27, 2004 regarding financial results and certain other information related to the fourth quarter and fiscal year end of 2003
99.2 | | Press Release dated January 27, 2004 regarding the financial outlook for the first and second quarters of fiscal year 2004

EXHIBIT 99.1

NEWS RELEASE

Investor Relations Contact:               Corporate Communications Contact:
Michael Buehler-Garcia                    Abbie Kendall
PDF Solutions, Inc.                       Armstrong Kendall, Inc.
Tel: (408) 938-4497                       Tel: (503) 672-4681
Email: mbg@pdf.com                        Email: abbie@akipr.com

PDF SOLUTIONS(R) REPORTS FOURTH QUARTER AND TOTAL
YEAR 2003 FINANCIAL RESULTS

SAN JOSE, Calif.--January 27, 2004--PDF Solutions, Inc. (Nasdaq: PDFS)
the leading provider of process-design integration technologies to enhance IC
manufacturability, today announced financial results for its fourth fiscal
quarter and full fiscal year ended December 31, 2003.

Revenue for the fourth fiscal quarter of 2003 totaled $12.1 million, an
increase of 34% compared with revenue of $9.0 million for the fourth fiscal
quarter of 2002. Pro forma net loss for the fourth fiscal quarter of 2003,
excluding amortization of stock-based compensation and acquired intangible
assets, totaled $135,000, or $0.01 per diluted share, compared with a pro forma
net loss of $264,000, or $0.01 per diluted share, for the fourth fiscal quarter
of 2002. Reported net loss for the fourth fiscal quarter of 2003 totaled $1.3
million, or $0.05 per diluted share, compared with a reported net loss of
$806,000, or $0.04 per diluted share, for the fourth fiscal quarter of 2002.
Revenue for the full fiscal year ended December 31, 2003 totaled $42.5 million
with reported net loss for the fiscal year totaling $4.5 million or $0.19 per
diluted share.

"During 2003, we strengthened our competitive position by adding more
of the world's leading semiconductor companies to our customer list and
broadening our technology offering through both acquisition and new product
development, while maintaining our healthy balance sheet," said John Kibarian,
PDF's President and Chief Executive Officer.

As previously announced, the company will hold a live conference call
beginning at 3:00 p.m. PDT/6:00 p.m. EDT today to discuss the quarterly results.
A live webcast of this conference call will be available on the company's
website at http://ir.pdf.com/medialist.cfm. A

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replay of the call will be available at the same website address beginning
approximately two hours after completion of the live call. Further, a copy of
this press release, including the disclosure and reconciliation of certain
non-GAAP financial measures to the most directly comparable GAAP measure, which
non-GAAP measures may be used periodically by the company's management when
discussing financial results with investors and analysts, will be available on
the company's website at http://www.pdf.com/news_archive.phtml following the
date of this release.

ABOUT PDF SOLUTIONS

PDF Solutions, Inc. (Nasdaq: PDFS) is the leading provider of process-design
integration technologies for manufacturing integrated circuits (ICs). PDF's
software, methodologies and services enable semiconductor companies to create IC
designs that can be more easily manufactured using manufacturing processes that
are more capable. By simulating deep sub-micron product and process
interactions, the PDF solution offers clients reduced time to market, increased
IC yield and performance, and enhanced product reliability and profitability.
Headquartered in San Jose, Calif., PDF Solutions operates worldwide with
additional offices in Europe and Japan. For more information, visit www.pdf.com.

PDF Solutions(R) is a registered trademark of PDF Solutions, Inc.

FORWARD-LOOKING STATEMENTS

Some of the statements in this press release are forward looking, including the
statement regarding PDF's competitive positioning in the semiconductor industry.
The words "strengthen", "adding", "broadening" and similar expressions also 
identify forward looking statements. Actual results could differ materially from
those expressed in any forward-looking statements. Risks and uncertainties that
could cause results to differ materially include risks associated with: any
unforeseen industry changes; difficulties in modifying PDF's solutions on a
timely basis; and changes in the marketplace for our solutions, including the
introduction of products or services competitive with PDF's products and
services. Readers should also refer to the risk disclosures set forth in PDF's
periodic public filings with the Securities and Exchange Commission, including,
without limitation, its annual report on Form 10-K, most recently filed on
March 26, 2003, and on its quarterly reports Form 10-Q, most recently filed on
November 20, 2003 as amended. The forward-looking statements contained in this
release are made as of the date hereof, and PDF does not assume any obligation
to update such statements nor the reasons why actual results could differ
materially from those projected in such statements.

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PDF SOLUTIONS, INC.
CONSOLIDATED BALANCE SHEETS (Unaudited)
(IN THOUSANDS)

DECEMBER 31,    DECEMBER 31,
2003            2002
------------    ------------

ASSETS
Current assets:
Cash and cash equivalents ..........................   $     39,110    $     71,490
Accounts receivable, net of allowances .............         11,869           7,924
Prepaid expenses and other current assets ..........          2,614           2,413
Deferred tax assets ................................          1,808           1,993
------------    ------------
Total current assets ..........................         55,401          83,820
Property and equipment, net .............................          4,110           3,533
Goodwill ................................................         40,548             662
Intangible assets, net ..................................         22,906             220
Deferred tax assets .....................................             --           1,053
Other assets ............................................          1,002             511
------------    ------------
Total assets ..................................   $    123,967    $     89,799
============    ============

LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:
Accounts payable ...................................   $        835    $        499
Accrued compensation and related benefits ..........          1,952           1,143
Other accrued liabilities ..........................          1,757           1,669
Other acquisition obligations ......................          1,608              --
Taxes payable ......................................          2,871           1,838
Deferred revenues ..................................          3,300           4,496
Billings in excess of recognized revenue ...........            465             606
------------    ------------
Total current liabilities .....................         12,788          10,251
Long term liabilities ...................................            287              54
Deferred tax liabilities ................................          4,340             752
------------    ------------
Total liabilities .............................         17,415          11,057
------------    ------------

Stockholders' equity:
Common stock ..................................               4               3
Additional paid-in-capital ....................         129,568          99,884
Deferred stock-based compensation .............            (688)         (1,340)
Notes receivable from stockholders ............          (3,025)         (4,998)
Accumulated deficit ...........................         (19,362)        (14,845)
Accumulated other comprehensive income ........              55              38
------------    ------------

Total stockholders' equity ....................        106,552          78,742
------------    ------------

Total liabilities and stockholders' equity ....   $    123,967    $     89,799
============    ============

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PDF SOLUTIONS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)

THREE MONTHS ENDED               TWELVE MONTHS ENDED
------------------------------    ------------------------------
DECEMBER 31,     DECEMBER 31,     DECEMBER 31,     DECEMBER 31,
2003             2002             2003             2002
-------------    -------------    -------------    -------------

Revenue:
Design-to-silicon-yield solutions .....................   $      10,454    $       7,587    $      35,629    $      33,685
Gain share ............................................           1,615            1,407            6,897           10,039
-------------    -------------    -------------    -------------
Total revenue ....................................          12,069            8,994           42,526           43,724
-------------    -------------    -------------    -------------

Cost and expenses:
Cost of design-to-silicon-yield solutions:
Direct costs of design-to-silicon yield solutions ...           3,686            3,362           14,412           14,986
Amortization of acquired core technology ............           1,350               41            2,168              164
Research and development ..............................           5,318            4,104           18,441           15,247
Selling, general and administrative ...................           3,739            2,472           12,459           10,188
Stock-based compensation amortization* ................             411              513            1,755            2,711
Amortization of other acquired intangible assets ......             410               --              547               --
Write-off of in-process research and development ......              --               --              800               --
-------------    -------------    -------------    -------------
Total costs and expenses .........................          14,914           10,492           50,582           43,296
-------------    -------------    -------------    -------------

Income (loss) from operations ..............................          (2,845)          (1,498)          (8,056)             428
Interest and other income ..................................             197              409            1,195            1,549
-------------    -------------    -------------    -------------
Income (loss) before taxes .................................          (2,648)          (1,089)          (6,861)           1,977
Tax (benefit) provision ....................................          (1,373)            (283)          (2,345)           1,453
-------------    -------------    -------------    -------------
Net income (loss) ..........................................   $      (1,275)   $        (806)   $      (4,516)   $         524
=============    =============    =============    =============

Net income (loss) per share:
Basic .................................................   $       (0.05)   $       (0.04)   $       (0.19)   $        0.02
=============    =============    =============    =============
Diluted ...............................................   $       (0.05)   $       (0.04)    $      (0.19)   $        0.02
=============    =============    =============    =============

Weighted average common shares:
Basic .................................................          25,010           22,271           23,278           21,962
=============    =============    =============    =============
Diluted ...............................................          25,010           22,271           23,278           23,199
=============    =============    =============    =============

* Stock-based compensation amortization:
Cost of design-to-silicon yield solutions ..............   $          52    $         154    $         345    $         826
Research and development ...............................             314              230            1,099            1,341
Selling, general and administrative ....................              45              129              311              544
-------------    -------------    -------------    -------------
$         411    $         513    $       1,755    $       2,711
=============    =============    =============    =============

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PDF SOLUTIONS, INC.
RECONCILIATION OF REPORTED GAAP NET LOSS TO PRO FORMA NET LOSS
(UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)

THREE MONTHS ENDED
----------------------------
DECEMBER 31,    DECEMBER 31,
2003            2002
------------    ------------

Net loss .........................................   $     (1,275)   $       (806)

Stock-based compensation amortization ............            411             513

Amortization of intangibles, net of taxes ........            729              29

------------    ------------
Pro forma net loss ...............................   $       (135)   $       (264)
============    ============

Pro forma net loss per share - diluted ...........   $      (0.01)   $      (0.01)
============    ============

Weighted average common shares - diluted .........         25,010          22,271
============    ============

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EXHIBIT 99.2

NEWS RELEASE

Investor Relations Contact:                    Corporate Communications Contact:
Michael Buehler-Garcia                         Abbie Kendall
PDF Solutions, Inc.                            Armstrong Kendall, Inc.
Tel: (408) 938-4497                            Tel: (503) 672-4681
Email: mbg@pdf.com                             Email: abbie@akipr.com

PDF SOLUTIONS(R) PROVIDES FINANCIAL OUTLOOK FOR
THE FIRST AND SECOND FISCAL QUARTERS OF 2004

SAN JOSE, Calif.--January 27, 2003--PDF Solutions, Inc. (Nasdaq:
PDFS), the leading provider of process-design integration technologies to
enhance IC manufacturability, today provided its financial outlook for the first
fiscal quarter ending March 31, 2004 and the second fiscal quarter ending June
30, 2004.

PDF Solutions expects total revenue in the range of $12.5 million to
$13.0 million for the first fiscal quarter ending March 31, 2004. Pro forma net
income (loss) for the first fiscal quarter of 2004, excluding amortization of
stock-based compensation and acquired intangible assets, is projected in a range
of ($145,000) to $205,000, or ($0.01) to $0.01 per diluted share. Reported net
loss, on a GAAP basis, for the first fiscal quarter of 2004 is projected in a
range of $1.5 million to $1.1 million, or $0.06 to $0.04 per diluted share.

PDF Solutions expects total revenue in the range of $14.4 million to
$15.2 million for the second fiscal quarter ending June 30, 2004. Pro forma net
income for the second fiscal quarter of 2004, excluding amortization of
stock-based compensation and acquired intangible assets, is projected in a range
of $950,000 to $1.4 million, or $0.03 to $0.05 per diluted share. Reported net
income (loss), on a GAAP basis, for the second fiscal quarter of 2004 is
projected in a range of ($265,000) to $230,000, or ($0.01) to $0.01 per diluted
share.

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As previously announced, the company will hold a live conference call
beginning at 3:00 p.m. PDT/6:00 p.m. EDT today to discuss the fourth quarter
2003 results and financial outlook for the first and second quarters of 2004. A
live webcast of this conference call will be available on the company's website
at http://ir.pdf.com/medialist.cfm. A replay of the call will be available at
the same website address beginning approximately two hours after completion of
the live call. Further, a copy of this press release, including the disclosure
and reconciliation of certain non-GAAP financial measures to the most directly
comparable GAAP measure, which non-GAAP measures may be used periodically by the
company's management when discussing financial results with investors and
analysts, will be available on the company's website at
http://www.pdf.com/news_archive.phtml following the date of this release.

EFFECTIVENESS OF GUIDANCE

The outlook set forth above represents PDF Solutions' expectations only as of
the date of this release, and should not be viewed as a statement about PDF
Solutions' expectations after this date. Although this release will remain
available on PDF Solutions' website, its continued availability does not
indicate that PDF Solutions is reaffirming or confirming its continued validity.
PDF Solutions does not intend to report on its progress, or provide comments to
analysts or investors on or otherwise update such guidance until it releases its
quarterly results.

ABOUT PDF SOLUTIONS

PDF Solutions, Inc. (Nasdaq: PDFS) is the leading provider of process-design
integration technologies for manufacturing integrated circuits (ICs). PDF's
software, methodologies and services enable semiconductor companies to create IC
designs that can be more easily manufactured using manufacturing processes that
are more capable. By simulating deep sub-micron product and process
interactions, the PDF solution offers clients reduced time to market, increased
IC yield and performance, and enhanced product reliability and profitability.
Headquartered in San Jose, Calif., PDF Solutions operates worldwide with
additional offices in Europe and Japan. For more information, visit www.pdf.com.

PDF Solutions(R) is a registered trademark of PDF Solutions, Inc.

FORWARD-LOOKING STATEMENTS

Some of the statements in this press release are forward looking, including the
statements regarding PDF's 2004 first and second fiscal quarter outlook, the
expected growth in revenue, the pro forma net loss and net income and pro forma
net loss and net income per share and the reported net loss and net loss per
share. The words "estimate", "project", "expect", "believe" and similar
expressions also identify forward-looking statements. Actual results could
differ materially from those expressed in any forward-looking statements. Risks
and uncertainties that could cause results to differ materially include risks
associated with: any unforeseen industry changes; difficulties in modifying
PDF's solutions on a timely basis; and changes in the marketplace for our
solutions, including the introduction of products or services competitive with
PDF's products and services. Readers should also refer to the risk disclosures
set forth in PDF's periodic public filings with the Securities and Exchange 
Commission, including, without limitation, its annual report on Form 10-K,

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most recently filed on March 26, 2003, and its quarterly reports on Form 10-Q,
most recently filed on November 20, 2003 as amended. The forward-looking
statements contained in this release are made as of the date hereof, and PDF
does not assume any obligation to update such statements nor the reasons why
actual results could differ materially from those projected in such statements.

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PDF SOLUTIONS, INC.
RECONCILIATION OF PROJECTED REPORTED GAAP NET INCOME ( LOSS) TO
PROJECTED PRO FORMA NET INCOME ( LOSS)
(IN THOUSANDS, EXCEPT PER SHARE DATA)

THREE MONTHS ENDING
PROJECTED RESULTS                           MARCH 31, 2004
-----------------------------------------------------    -----------------------

Net loss per share - diluted.........................    $ (0.06)  to   $ (0.04)
=======        =======

Net loss.............................................    $(1,485)  to   $(1,135)

Stock-based compensation amortization................        250            250

Amortization of acquired intangibles, net of taxes...      1,090          1,090

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

Pro forma net income (loss)..........................    $  (145)  to   $   205
=======        =======

Pro forma net income (loss) per share - diluted......    $ (0.01)  to   $  0.01
=======        =======

Weighted average common shares - basic...............     25,400         25,400
=======        =======
Weighted average common shares - diluted.............     25,400         27,000
=======        =======

THREE MONTHS ENDING
PROJECTED RESULTS                             JUNE 30, 2004
-----------------------------------------------------    -----------------------

Net income (loss) per share - diluted................    $ (0.01)  to   $  0.01
=======        =======

Net income (loss)....................................    $  (265)  to   $   230

Stock-based compensation amortization................        140            140

Amortization of acquired intangibles, net of taxes...      1,075          1,075

-------        -------
Pro forma net income.................................    $   950   to   $ 1,445
=======        =======

Pro forma net income per share - diluted.............    $  0.03   to   $  0.05
=======        =======

Weighted average common shares - basic...............     25,500         25,500
=======        =======
Weighted average common shares - diluted.............     27,300         27,300
=======        =======

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