content: <PAGE>
   
                        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
  
                                  March 12, 1999
               ----------------------------------------------------
                (Date of Report;   Date of Earliest Event Reported)
  
  
                             Power Integrations, Inc.
              --------------------------------------------------------  
               (Exact name of registrant as specified in its charter)
  
  
  
                                     Delaware
                  ------------------------------------------------
                   (State or other jurisdiction of incorporation)
  
  
             0-23441                                      94-3065014
  -----------------------------------          ---------------------------------
       (Commission File Number)                (IRS Employer Identification No.)
  
  
         477 N. Mathilda Ave., Sunnyvale, CA                        94086
   -------------------------------------------------------------------------
        (address of principal executive offices)                  (Zip Code)
  
  
                                  (408) 523-9200
              -------------------------------------------------------
                (Registrant's telephone number, including area code)
  
                                         1
  <PAGE>
   
  Item 5.  Other Events.
  
       (a)    Adoption of Rights Agreement.
              ---------------------------- 
  
       On February 24, 1999, the Board of Directors of Power Integrations, Inc.
  (the "Company") declared a dividend distribution of one Preferred Stock Purchase
  Right (each a "Right" and collectively the "Rights") for each outstanding share
  of Common Stock, $0.001 par value ("Common Stock"), of the Company.  The
  distribution was paid as of March 12, 1999, (the "Record Date"), to stockholders
  of record on that date.  Each Right entitles the registered holder to purchase
  from the Company one one-thousandth of a share of the Company's Series A
  Preferred Stock, $0.001 par value (the "Preferred Stock"), at a price of $150.00
  per Right (the "Purchase Price").  The description and terms of the Rights are
  set forth in the Rights Agreement dated as of February 24, 1999 (the "Rights
  Agreement"), between the Company and BankBoston N.A. (the "Rights Agent").
  
       Until the earlier to occur of (i) the tenth day following the first date of
  public announcement by the Company or by a person or group of affiliated or
  associated persons (each an "Acquiring Person"), other than certain exempt
  persons or entities (each an "Exempt Person"), that such an Acquiring Person has
  acquired, or obtained the right to acquire, without approval of the Board of
  Directors or good faith determination of the Board of Directors that such a
  person or group of affiliated or associated persons has inadvertently become an
  Acquiring Person, beneficial ownership of 15% or more of the Company's
  outstanding Common Stock (other than solely as a result of a reduction in the
  outstanding shares of the Common Stock of the Company) or such earlier date as a
  majority of the Board of Directors shall become aware of such acquisition of the
  Common Stock (the "Stock Acquisition Date") (or, if the tenth day after the
  Stock Acquisition Date occurs before the Record Date, the close of business on
  the Record Date) or (ii) the tenth business day (subject to extension by the
  Board prior to the time a person becomes an Acquiring Person) following the
  commencement of, or public announcement of an intention to commence, a tender or
  exchange offer by any person (other than by an Exempt Person), the consummation
  of which would result in the beneficial ownership of 15% or more of the
  outstanding Common Stock by such person, together with its affiliates and
  associates (the earlier of such dates being called the "Distribution Date"), the
  Rights will be evidenced, with respect to all shares of Common Stock that are
  issued after the Record Date prior to the Distribution Date (or earlier
  redemption or expiration of the Rights), by certificates representing such
  shares of Common Stock together with the Summary of Rights attached thereto.
  For purposes of the foregoing, each of the following is an Exempt Person: the
  Company or Subsidiary of the Company, including, without limitation, in its
  fiduciary capacity, any employee benefit plan or employee stock plan of the
  Company or of any Subsidiary of the Company, or any Person, organized,
  appointed, established or holding Common Stock for or pursuant to the terms of
  any such plan or any Person funding other employee benefits for employees of the
  Company or any Subsidiary of the Company.
  
       The Rights Agreement provides that, until the Distribution Date (or earlier
  redemption or expiration of the Rights), the Rights will be represented by and
  transferred with, and only with, the Common Stock.  Until the Distribution Date
  (or earlier redemption or expiration of the
  
                                         2
  <PAGE>
   
  Rights), new certificates issued for Common Stock (including, without
  limitation, certificates issued upon transfer or exchange of Common Stock) after
  the Record Date, will contain a legend incorporating the Rights Agreement by
  reference. Until the Distribution Date (or earlier redemption or expiration of
  the Rights), the surrender for transfer of any of the Company's Common Stock
  certificates, with or without the aforesaid legend or the Summary of Rights
  attached thereto, will also constitute the transfer of the Rights associated
  with the Common Stock represented by such certificate. As soon as practicable
  following the Distribution Date, separate certificates evidencing the Rights
  ("Right Certificates") will be mailed to holders of record of the Company's
  Common Stock as of the close of business on the Distribution Date, and such
  separate certificates alone will evidence the Rights from and after the
  Distribution Date.
  
       The Rights are not exercisable until the Distribution Date.  The Rights
  will expire upon the earlier of (i) ten years after the date of issuance, or
  February 23, 2009 or (ii) redemption or exchange by the Company.
  
       The Purchase Price payable, and the number of shares of Preferred Stock or
  other securities or property issuable, upon exercise of the Rights are subject
  to adjustment from time to time to prevent dilution (i) in the event of a stock
  dividend on, or a subdivision, combination or reclassification of the Preferred
  Stock, (ii) upon the grant to holders of the Preferred Stock of certain rights
  or warrants to subscribe for Preferred Stock or convertible securities at less
  than the current market price of the Preferred Stock or (iii) upon the
  distribution to holders of the Preferred Stock of evidences of indebtedness or
  assets (excluding dividends payable in Preferred Stock) or of subscription
  rights or warrants (other than those referred to above).  The number of Rights
  associated with each share of Common Stock is also subject to adjustment in the
  event of a stock split of the Common Stock or a stock dividend on the Common
  Stock payable in Common Stock or subdivisions, consolidations or combinations of
  the Common Stock occurring, in any such case, prior to the Distribution Date.
  
       The Preferred Stock purchasable upon exercise of the Rights will be
  nonredeemable and junior to any other series of preferred stock the Company may
  issue (unless otherwise provided in the terms of such other series).  Each share
  of Preferred Stock will have a preferential cumulative quarterly dividend in an
  amount equal to the greater of (a) $3,750.00 or (b) 1,000 times the dividend
  declared on each share of Common Stock.  In the event of liquidation, the
  holders of Preferred Stock will receive a preferred liquidation payment equal to
  the greater of (a) $150,000.00 per share, plus accrued dividends to the date of
  distribution whether or not earned or declared, or (b) an amount per share equal
  to 1,000 times the aggregate payment to be distributed per share of Common
  Stock.  Each share of Preferred Stock will have 1,000 votes, voting together
  with the shares of Common Stock.  In the event of any merger, consolidation or
  other transaction in which shares of Common Stock are exchanged for or changed
  into other securities, cash and/or other property, each share of Preferred Stock
  will be entitled to receive 1,000 times the amount and type of consideration
  received per share of Common Stock.  The rights of the Preferred Stock as to
  dividends, liquidation and voting, and in the event of mergers and
  consolidations, are protected by customary anti-dilution provisions.  Fractional
  shares (in integral multiples of one one-thousandth) of Preferred Stock will be
  issuable; however, the Company may elect to distribute depository receipts in
  lieu of such fractional shares.  In lieu of
  
                                         3
  <PAGE>
   
  fractional shares other than fractions that are multiples of one one-thousandth
  of a share, an adjustment in cash will be made based on the market price of the
  Preferred Stock on the last trading date prior to the date of exercise. Because
  of the nature of the Preferred Stock's dividend, liquidation and voting rights,
  the value of one one-thousandth of a share of Preferred Stock purchasable upon
  exercise of each Right should approximate the value of one share of Common
  Stock.
  
       In the event (i) any person becomes an Acquiring Person or (ii) any
  Acquiring Person or any of its Affiliates or Associates, directly or indirectly,
  (1) consolidates with or merges into the Company or any of its subsidiaries or
  otherwise combines with the Company or any of its subsidiaries in a transaction
  in which the Company or such subsidiary is the continuing or surviving
  corporation of such merger or combination and the Common Stock of the Company
  remains outstanding and no shares thereof shall be changed into or exchanged for
  stock or other securities of any other person or of the Company or cash or any
  other property, (2) transfers, in on one or more transactions, any assets to the
  Company or any of its subsidiaries in exchange for capital stock of the Company
  or any of its subsidiaries or for securities exercisable for or convertible into
  capital stock of the Company or any of its subsidiaries or otherwise obtains
  from the Company or any of its subsidiaries, with or without consideration, any
  capital stock of the Company or any of its subsidiaries or securities
  exercisable for or convertible into capital stock of the Company or any of its
  subsidiaries (other than as part of a pro rata offer or distribution to all
  holders of such stock), (3) sells, purchases, leases, exchanges, mortgages,
  pledges, transfers or otherwise disposes to, from or with the Company or any of
  its subsidiaries, as the case may be, assets on terms and conditions less
  favorable to the Company or such subsidiary than the Company or such subsidiary
  would be able to obtain in arm's-length negotiation with an unaffiliated third
  party, (4) receives any compensation from the Company or any of its subsidiaries
  for services other than compensation for employment as a regular or part-time
  employee, or fees for serving as a director at rates in accordance with the
  Company's (or its subsidiary's) past practice, (5) receives the benefit (except
  proportionately as a stockholder) of any loans, advances, guarantees, pledges or
  other financial assistance or tax credit or advantage, or (6) engages in any
  transaction with the Company (or any of its subsidiaries) involving the sale,
  license, transfer or grant of any right in, or disclosure of, any patents,
  copyrights, trade secrets, trademarks or know-how (or any other intellectual or
  industrial property rights recognized under any country's intellectual property
  rights laws) which the Company (including its subsidiaries) owns or has the
  right to use on terms and conditions not approved by the Board of Directors of
  the Company, or (iii) while there is an Acquiring Person, there shall occur any
  reclassification of securities (including any reverse stock split), any
  recapitalization of the Company, or any merger or consolidation of the Company
  with any of its subsidiaries or any other transaction or transactions involving
  the Company or any of its subsidiaries (whether or not involving the Acquiring
  Person) which have the effect of increasing by more than 1% the proportionate
  share of the outstanding shares of any class of equity securities of the Company
  or any of its subsidiaries which is directly or indirectly owned or controlled
  by the Acquiring Person (such events are collectively referred to herein as the
  "Flip-In Events"), then, and in each such case, each holder of record of a
  Right, other than the Acquiring Person, will thereafter have the right to
  receive, upon payment of the then current Purchase Price, in lieu of one one-
  thousandth of a share of Preferred Stock per outstanding Right, that number of
  shares of Common Stock having a 
  
                                         4
  <PAGE>
   
  market value at the time of the transaction equal to the Purchase Price (as
  adjusted to the Purchase Price in effect immediately prior to the Flip-In Event
  multiplied by the number of one one-thousandths of a share of Preferred Stock
  for which a Right was exercisable immediately prior to such Flip-In Event)
  divided by one-half the average of the daily closing prices per share of the
  Common Stock for the thirty consecutive trading days ("Current Market Price") on
  the date of such Flip-In Event. Notwithstanding the foregoing, Rights held by
  the Acquiring Person or any Associate or Affiliate thereof or certain
  transferees will be null and void and no longer be transferable.
  
       The Company may at its option substitute for a share of Common Stock
  issuable upon the exercise of Rights in accordance with the foregoing paragraph
  such number or fractions of shares of Preferred Stock having an aggregate
  current market value equal to the Current Market Price of a share of Common
  Stock.  In the event that insufficient shares of Common Stock are available to
  permit the exercise in full of the Rights in accordance with the foregoing
  paragraph, the Board of Directors shall, to the extent permitted by applicable
  law and any material agreements then in effect to which the Company is a party,
  (A) determine the excess (such excess, the "Spread") of (1) the value of the
  shares of Common Stock issuable upon the exercise of a Right in accordance with
  this paragraph (the "Current Value") over (2) the Purchase Price, and (B) with
  respect to each Right (other than Rights which have become void pursuant to the
  foregoing paragraph), make adequate provision to substitute for the shares of
  Common Stock issuable in accordance with this paragraph upon exercise of the
  Right and payment of the Purchase Price, (1) cash, (2) a reduction in such
  Purchase Price, (3) shares of Preferred Stock or other equity securities of the
  Company (including, without limitation, shares or fractions of shares of
  preferred stock which, by virtue of having dividend, voting and liquidation
  rights substantially comparable to those of the shares of Common Stock, are
  deemed in good faith by the Board of Directors to have substantially the same
  value as the shares of Common Stock, (4) debt securities of the Company, (5)
  other assets, or (6) any combination of the foregoing, having a value which,
  when added to the value of the shares of Common Stock actually issued upon
  exercise of such Right, shall have an aggregate value equal to the Current Value
  (less the amount of any reduction in such Purchase Price); provided, however,
                                                             --------  ------- 
  that if the Company shall not make adequate provision to deliver value pursuant
  to clause (B) above within thirty (30) days following the Flip-In Event, then
  the Company shall be obligated to deliver, to the extent permitted by applicable
  law and any material agreements then in effect to which the Company is a party,
  upon the surrender for exercise of a Right and without requiring payment of such
  Purchase Price, shares of Common Stock (to the extent available), and then, if
  necessary, such number or fractions of shares of Preferred Stock (to the extent
  available) and then, if necessary, cash, which shares and/or cash have an
  aggregate value equal to the Spread.  Rights are not exercisable following the
  occurrence of the events set forth in the foregoing paragraph until the
  expiration of the period during which the Rights may be redeemed as described
  below.
  
       Unless the Rights are earlier redeemed, in the event that following the
  first occurrence of a Flip-In Event, the Company were to be acquired in a merger
  or other business combination in which any shares of the Company's Common Stock
  are exchanged or converted for other securities or assets (other than a merger
  or other business combination in which the voting power represented by the
  Company's securities outstanding immediately prior thereto continues to
  
                                         5
  <PAGE>
   
  represent all of the voting power represented by the securities of the Company
  thereafter and the holders of such securities have not changed as a result of
  such transaction), or 50% or more of the assets or earning power of the Company
  and its subsidiaries (taken as a whole) were to be sold or transferred in one or
  a series of related transactions (such transactions being collectively referred
  to herein as the "Flip-Over Events"), the Rights Agreement provides that proper
  provision shall be made so that each holder of record of a Right (other than an
  Acquiring Person, or affiliates or associates thereof) will from and after such
  date have the right to receive, upon payment of the then current Purchase Price,
  that number of shares of common stock of the acquiring company having a market
  value at the time of such transaction equal to the Purchase Price divided by
  one-half the Current Market Price of such common stock.
  
       No fractional shares of Common Stock will be issued upon exercise of the
  Rights and, in lieu thereof, a payment in cash will be made to the holder of
  such Rights equal to the same fraction of the current market value of a share of
  Common Stock.
  
       At any time until the occurrence of a Flip-In Event, the Board may redeem
  the Rights in whole, but not in part, at a price of $.001 per Right.
  Immediately upon the action of the Board of Directors of the Company authorizing
  redemption of the Rights, the right to exercise the Rights will terminate, and
  the only right of the holders of Rights will be to receive the Redemption Price
  without any interest thereon.
  
       At any time after the occurrence of a Flip-In Event and prior to the
  earlier of a Flip-Over Event or such time as any Person (other than an Exempt
  Person), together with all Affiliates and Associates, becomes the Beneficial
  Owner of more than 50% of the Common Stock outstanding, the Board of Directors
  of the Company may, at its option, exchange all or any portion of the
  outstanding Rights (other than Rights held by any Acquiring Person which have
  become void) for shares of Common Stock on a pro rata basis, at an exchange
  ratio of one share of Common Stock or one one-thousandth of a share of Preferred
  Stock (or of a share of a class or series of the Company's Preferred Stock
  having equivalent rights, preferences and privileges) per Right.  Immediately
  upon the ordering of such exchange and without any notice, the right to exercise
  such Rights shall terminate and the only right thereafter of a holder of such
  Rights shall be to receive shares of Common Stock or Common Stock Equivalents
  pursuant to the exchange.  In the event there are insufficient shares of Common
  Stock issued but not outstanding or authorized but unissued to permit any
  exchange of Rights, the Company shall take all actions necessary to authorize
  additional shares.
  
       Until the Rights become nonredeemable the Company may, except with respect
  to the redemption price of the Rights, amend the Rights Agreement in any manner.
  After the Rights become nonredeemable, the Company may amend the Rights
  Agreement to cure any ambiguity, to correct or supplement any provision which
  may be defective or inconsistent with any other provisions, to shorten or
  lengthen any time period under the Rights Agreement, or to arrange or supplement
  the provisions thereunder in any manner which the Company may deem necessary or
  desirable, provided that no such amendment may adversely affect the interests of
  the holders of the Rights (other than the Acquiring Person or its affiliates or
  associates) or cause the Rights to again be redeemable or the Agreement to again
  be freely amendable.
  
                                         6
  <PAGE>
   
       Until a Right is exercised, the holder, as such, will have no rights as a
  stockholder of the Company, including, without limitation, the right to vote or
  to receive dividends.
  
       The issuance of the Rights is not taxable to the Company or to stockholders
  under presently existing federal income tax law, and will not change the way in
  which stockholders can presently trade the Company's shares of Common Stock.  If
  the Rights should become exercisable, stockholders, depending on then existing
  circumstances, may recognize taxable income.
  
       The Rights have certain anti-takeover effects.  Under certain circumstances
  the Rights could cause substantial dilution to a person or group who attempts to
  acquire the Company on terms not approved by the Company's Board of Directors.
  However, the Rights should not interfere with any merger or other business
  combination approved by the Board.
  
       The form of Rights Agreement between the Company and the Rights Agent
  (including as Exhibit A the form of Certificate of Designation, Preferences and
  Rights of the Terms of the Series A Preferred Stock, as Exhibit B the form of
  Right Certificate, and as Exhibit C the Summary of Terms of Rights Agreement),
  the Company's press release dated February 26, 1999 and a form of letter to the
  Company's stockholders dated March 12, 1999 are attached hereto as Exhibit 1,
                                                                     ---------  
  Exhibit 2 and Exhibit 3, respectively, and incorporated herein by reference.
  ---------     ---------                                                      
  The foregoing description of the Rights is qualified in its entirety by
  reference to such exhibits.
  
  Item 6.  Amendment of Bylaws.
  
       On February 24, 1999, the Board of Directors amended the Bylaws of the
  Company to (i) provide that a special meeting of stockholders may by called only
  by the Board of Directors, and (ii) set forth provisions regulating the conduct
  of stockholders' meetings. The amendment to the Bylaws of the Company is
  attached hereto as Exhibit 4 and is incorporated herein by reference.
                     ---------
  
  Item 7.  Financial Statements and Exhibits.
  
       The form of Rights Agreement between the Company and the Rights Agent
  (including as Exhibit A the form of Certificate of Designation, Preferences and
  Rights of the Terms of the Series A Preferred Stock, as Exhibit B the form of
                             --------                                          
  Right Certificate, and as Exhibit C the Summary of Terms of Rights Agreement),
  the Company's press release dated February 26, 1999 and a form of letter to the
  Company's stockholders dated March 12, 1999 are attached hereto as Exhibit 1,
                                                                     ---------  
  Exhibit 2 and Exhibit 3, respectively, and incorporated herein by reference.
  ---------     ---------                                                     
  
       The amendment to the Bylaws of the Company is attached hereto as Exhibit 4.
                                                                        --------- 
  
                                         7
  <PAGE>
   
                                    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.
  
  
                                               POWER INTEGRATIONS, INC.
  
  
  Date:  March 12, 1999                        By: /s/ Robert G. Staples
                                                  ----------------------------
                                                       Robert G. Staples
                                                       Chief Financial Officer
  
                                         8
  <PAGE>
   
                                   EXHIBIT INDEX
                                   -------------
  
  
  <TABLE>
  <CAPTION>
   
                                   
                                   
    Exhibit                       Description
    -------                       ----------- 
  <S>            <C>
       1         Form of Rights Agreement between the Company and           
                 BankBoston, N.A., as Rights Agent (including as Exhibit A  
                 the form of Certificate of Designation, Preferences and    
                 Rights of the Terms of the Series A Preferred Stock, as    
                 Exhibit B the form of Right Certificate, and as Exhibit C  
                 the Summary of Terms of Rights Agreement).                  
                                                                            
       2         Press Release, dated February 26, 1999.                    
                                                                            
       3         Form of Letter to Power Integrations, Inc. stockholders,   
                 dated March 12, 1999.                                      
                                                                            
       4         Amendment to Bylaws.                                        
  </TABLE>
  
                                         9
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text: 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
  
                                  March 12, 1999
               ----------------------------------------------------
                (Date of Report;   Date of Earliest Event Reported)
  
                             Power Integrations, Inc.
              --------------------------------------------------------  
               (Exact name of registrant as specified in its charter)
  
                                     Delaware
                  ------------------------------------------------
                   (State or other jurisdiction of incorporation)
  
             0-23441                                      94-3065014
  -----------------------------------          ---------------------------------
       (Commission File Number)                (IRS Employer Identification No.)
  
         477 N. Mathilda Ave., Sunnyvale, CA                        94086
   -------------------------------------------------------------------------
        (address of principal executive offices)                  (Zip Code)
  
                                  (408) 523-9200
              -------------------------------------------------------
                (Registrant's telephone number, including area code)
  
                                         1
  Item 5.  Other Events.
  
       (a)    Adoption of Rights Agreement.
              ---------------------------- 
  
       On February 24, 1999, the Board of Directors of Power Integrations, Inc.
  (the "Company") declared a dividend distribution of one Preferred Stock Purchase
  Right (each a "Right" and collectively the "Rights") for each outstanding share
  of Common Stock, $0.001 par value ("Common Stock"), of the Company.  The
  distribution was paid as of March 12, 1999, (the "Record Date"), to stockholders
  of record on that date.  Each Right entitles the registered holder to purchase
  from the Company one one-thousandth of a share of the Company's Series A
  Preferred Stock, $0.001 par value (the "Preferred Stock"), at a price of $150.00
  per Right (the "Purchase Price").  The description and terms of the Rights are
  set forth in the Rights Agreement dated as of February 24, 1999 (the "Rights
  Agreement"), between the Company and BankBoston N.A. (the "Rights Agent").
  
       Until the earlier to occur of (i) the tenth day following the first date of
  public announcement by the Company or by a person or group of affiliated or
  associated persons (each an "Acquiring Person"), other than certain exempt
  persons or entities (each an "Exempt Person"), that such an Acquiring Person has
  acquired, or obtained the right to acquire, without approval of the Board of
  Directors or good faith determination of the Board of Directors that such a
  person or group of affiliated or associated persons has inadvertently become an
  Acquiring Person, beneficial ownership of 15% or more of the Company's
  outstanding Common Stock (other than solely as a result of a reduction in the
  outstanding shares of the Common Stock of the Company) or such earlier date as a
  majority of the Board of Directors shall become aware of such acquisition of the
  Common Stock (the "Stock Acquisition Date") (or, if the tenth day after the
  Stock Acquisition Date occurs before the Record Date, the close of business on
  the Record Date) or (ii) the tenth business day (subject to extension by the
  Board prior to the time a person becomes an Acquiring Person) following the
  commencement of, or public announcement of an intention to commence, a tender or
  exchange offer by any person (other than by an Exempt Person), the consummation
  of which would result in the beneficial ownership of 15% or more of the
  outstanding Common Stock by such person, together with its affiliates and
  associates (the earlier of such dates being called the "Distribution Date"), the
  Rights will be evidenced, with respect to all shares of Common Stock that are
  issued after the Record Date prior to the Distribution Date (or earlier
  redemption or expiration of the Rights), by certificates representing such
  shares of Common Stock together with the Summary of Rights attached thereto.
  For purposes of the foregoing, each of the following is an Exempt Person: the
  Company or Subsidiary of the Company, including, without limitation, in its
  fiduciary capacity, any employee benefit plan or employee stock plan of the
  Company or of any Subsidiary of the Company, or any Person, organized,
  appointed, established or holding Common Stock for or pursuant to the terms of
  any such plan or any Person funding other employee benefits for employees of the
  Company or any Subsidiary of the Company.
  
       The Rights Agreement provides that, until the Distribution Date (or earlier
  redemption or expiration of the Rights), the Rights will be represented by and
  transferred with, and only with, the Common Stock.  Until the Distribution Date
  (or earlier redemption or expiration of the
  
                                         2
  Rights), new certificates issued for Common Stock (including, without
  limitation, certificates issued upon transfer or exchange of Common Stock) after
  the Record Date, will contain a legend incorporating the Rights Agreement by
  reference. Until the Distribution Date (or earlier redemption or expiration of
  the Rights), the surrender for transfer of any of the Company's Common Stock
  certificates, with or without the aforesaid legend or the Summary of Rights
  attached thereto, will also constitute the transfer of the Rights associated
  with the Common Stock represented by such certificate. As soon as practicable
  following the Distribution Date, separate certificates evidencing the Rights
  ("Right Certificates") will be mailed to holders of record of the Company's
  Common Stock as of the close of business on the Distribution Date, and such
  separate certificates alone will evidence the Rights from and after the
  Distribution Date.
  
       The Rights are not exercisable until the Distribution Date.  The Rights
  will expire upon the earlier of (i) ten years after the date of issuance, or
  February 23, 2009 or (ii) redemption or exchange by the Company.
  
       The Purchase Price payable, and the number of shares of Preferred Stock or
  other securities or property issuable, upon exercise of the Rights are subject
  to adjustment from time to time to prevent dilution (i) in the event of a stock
  dividend on, or a subdivision, combination or reclassification of the Preferred
  Stock, (ii) upon the grant to holders of the Preferred Stock of certain rights
  or warrants to subscribe for Preferred Stock or convertible securities at less
  than the current market price of the Preferred Stock or (iii) upon the
  distribution to holders of the Preferred Stock of evidences of indebtedness or
  assets (excluding dividends payable in Preferred Stock) or of subscription
  rights or warrants (other than those referred to above).  The number of Rights
  associated with each share of Common Stock is also subject to adjustment in the
  event of a stock split of the Common Stock or a stock dividend on the Common
  Stock payable in Common Stock or subdivisions, consolidations or combinations of
  the Common Stock occurring, in any such case, prior to the Distribution Date.
  
       The Preferred Stock purchasable upon exercise of the Rights will be
  nonredeemable and junior to any other series of preferred stock the Company may
  issue (unless otherwise provided in the terms of such other series).  Each share
  of Preferred Stock will have a preferential cumulative quarterly dividend in an
  amount equal to the greater of (a) $3,750.00 or (b) 1,000 times the dividend
  declared on each share of Common Stock.  In the event of liquidation, the
  holders of Preferred Stock will receive a preferred liquidation payment equal to
  the greater of (a) $150,000.00 per share, plus accrued dividends to the date of
  distribution whether or not earned or declared, or (b) an amount per share equal
  to 1,000 times the aggregate payment to be distributed per share of Common
  Stock.  Each share of Preferred Stock will have 1,000 votes, voting together
  with the shares of Common Stock.  In the event of any merger, consolidation or
  other transaction in which shares of Common Stock are exchanged for or changed
  into other securities, cash and/or other property, each share of Preferred Stock
  will be entitled to receive 1,000 times the amount and type of consideration
  received per share of Common Stock.  The rights of the Preferred Stock as to
  dividends, liquidation and voting, and in the event of mergers and
  consolidations, are protected by customary anti-dilution provisions.  Fractional
  shares (in integral multiples of one one-thousandth) of Preferred Stock will be
  issuable; however, the Company may elect to distribute depository receipts in
  lieu of such fractional shares.  In lieu of
  
                                         3
  fractional shares other than fractions that are multiples of one one-thousandth
  of a share, an adjustment in cash will be made based on the market price of the
  Preferred Stock on the last trading date prior to the date of exercise. Because
  of the nature of the Preferred Stock's dividend, liquidation and voting rights,
  the value of one one-thousandth of a share of Preferred Stock purchasable upon
  exercise of each Right should approximate the value of one share of Common
  Stock.
  
       In the event (i) any person becomes an Acquiring Person or (ii) any
  Acquiring Person or any of its Affiliates or Associates, directly or indirectly,
  (1) consolidates with or merges into the Company or any of its subsidiaries or
  otherwise combines with the Company or any of its subsidiaries in a transaction
  in which the Company or such subsidiary is the continuing or surviving
  corporation of such merger or combination and the Common Stock of the Company
  remains outstanding and no shares thereof shall be changed into or exchanged for
  stock or other securities of any other person or of the Company or cash or any
  other property, (2) transfers, in on one or more transactions, any assets to the
  Company or any of its subsidiaries in exchange for capital stock of the Company
  or any of its subsidiaries or for securities exercisable for or convertible into
  capital stock of the Company or any of its subsidiaries or otherwise obtains
  from the Company or any of its subsidiaries, with or without consideration, any
  capital stock of the Company or any of its subsidiaries or securities
  exercisable for or convertible into capital stock of the Company or any of its
  subsidiaries (other than as part of a pro rata offer or distribution to all
  holders of such stock), (3) sells, purchases, leases, exchanges, mortgages,
  pledges, transfers or otherwise disposes to, from or with the Company or any of
  its subsidiaries, as the case may be, assets on terms and conditions less
  favorable to the Company or such subsidiary than the Company or such subsidiary
  would be able to obtain in arm's-length negotiation with an unaffiliated third
  party, (4) receives any compensation from the Company or any of its subsidiaries
  for services other than compensation for employment as a regular or part-time
  employee, or fees for serving as a director at rates in accordance with the
  Company's (or its subsidiary's) past practice, (5) receives the benefit (except
  proportionately as a stockholder) of any loans, advances, guarantees, pledges or
  other financial assistance or tax credit or advantage, or (6) engages in any
  transaction with the Company (or any of its subsidiaries) involving the sale,
  license, transfer or grant of any right in, or disclosure of, any patents,
  copyrights, trade secrets, trademarks or know-how (or any other intellectual or
  industrial property rights recognized under any country's intellectual property
  rights laws) which the Company (including its subsidiaries) owns or has the
  right to use on terms and conditions not approved by the Board of Directors of
  the Company, or (iii) while there is an Acquiring Person, there shall occur any
  reclassification of securities (including any reverse stock split), any
  recapitalization of the Company, or any merger or consolidation of the Company
  with any of its subsidiaries or any other transaction or transactions involving
  the Company or any of its subsidiaries (whether or not involving the Acquiring
  Person) which have the effect of increasing by more than 1% the proportionate
  share of the outstanding shares of any class of equity securities of the Company
  or any of its subsidiaries which is directly or indirectly owned or controlled
  by the Acquiring Person (such events are collectively referred to herein as the
  "Flip-In Events"), then, and in each such case, each holder of record of a
  Right, other than the Acquiring Person, will thereafter have the right to
  receive, upon payment of the then current Purchase Price, in lieu of one one-
  thousandth of a share of Preferred Stock per outstanding Right, that number of
  shares of Common Stock having a 
  
                                         4
  market value at the time of the transaction equal to the Purchase Price (as
  adjusted to the Purchase Price in effect immediately prior to the Flip-In Event
  multiplied by the number of one one-thousandths of a share of Preferred Stock
  for which a Right was exercisable immediately prior to such Flip-In Event)
  divided by one-half the average of the daily closing prices per share of the
  Common Stock for the thirty consecutive trading days ("Current Market Price") on
  the date of such Flip-In Event. Notwithstanding the foregoing, Rights held by
  the Acquiring Person or any Associate or Affiliate thereof or certain
  transferees will be null and void and no longer be transferable.
  
       The Company may at its option substitute for a share of Common Stock
  issuable upon the exercise of Rights in accordance with the foregoing paragraph
  such number or fractions of shares of Preferred Stock having an aggregate
  current market value equal to the Current Market Price of a share of Common
  Stock.  In the event that insufficient shares of Common Stock are available to
  permit the exercise in full of the Rights in accordance with the foregoing
  paragraph, the Board of Directors shall, to the extent permitted by applicable
  law and any material agreements then in effect to which the Company is a party,
  (A) determine the excess (such excess, the "Spread") of (1) the value of the
  shares of Common Stock issuable upon the exercise of a Right in accordance with
  this paragraph (the "Current Value") over (2) the Purchase Price, and (B) with
  respect to each Right (other than Rights which have become void pursuant to the
  foregoing paragraph), make adequate provision to substitute for the shares of
  Common Stock issuable in accordance with this paragraph upon exercise of the
  Right and payment of the Purchase Price, (1) cash, (2) a reduction in such
  Purchase Price, (3) shares of Preferred Stock or other equity securities of the
  Company (including, without limitation, shares or fractions of shares of
  preferred stock which, by virtue of having dividend, voting and liquidation
  rights substantially comparable to those of the shares of Common Stock, are
  deemed in good faith by the Board of Directors to have substantially the same
  value as the shares of Common Stock, (4) debt securities of the Company, (5)
  other assets, or (6) any combination of the foregoing, having a value which,
  when added to the value of the shares of Common Stock actually issued upon
  exercise of such Right, shall have an aggregate value equal to the Current Value
  (less the amount of any reduction in such Purchase Price); provided, however,
                                                             --------  ------- 
  that if the Company shall not make adequate provision to deliver value pursuant
  to clause (B) above within thirty (30) days following the Flip-In Event, then
  the Company shall be obligated to deliver, to the extent permitted by applicable
  law and any material agreements then in effect to which the Company is a party,
  upon the surrender for exercise of a Right and without requiring payment of such
  Purchase Price, shares of Common Stock (to the extent available), and then, if
  necessary, such number or fractions of shares of Preferred Stock (to the extent
  available) and then, if necessary, cash, which shares and/or cash have an
  aggregate value equal to the Spread.  Rights are not exercisable following the
  occurrence of the events set forth in the foregoing paragraph until the
  expiration of the period during which the Rights may be redeemed as described
  below.
  
       Unless the Rights are earlier redeemed, in the event that following the
  first occurrence of a Flip-In Event, the Company were to be acquired in a merger
  or other business combination in which any shares of the Company's Common Stock
  are exchanged or converted for other securities or assets (other than a merger
  or other business combination in which the voting power represented by the
  Company's securities outstanding immediately prior thereto continues to
  
                                         5
  represent all of the voting power represented by the securities of the Company
  thereafter and the holders of such securities have not changed as a result of
  such transaction), or 50% or more of the assets or earning power of the Company
  and its subsidiaries (taken as a whole) were to be sold or transferred in one or
  a series of related transactions (such transactions being collectively referred
  to herein as the "Flip-Over Events"), the Rights Agreement provides that proper
  provision shall be made so that each holder of record of a Right (other than an
  Acquiring Person, or affiliates or associates thereof) will from and after such
  date have the right to receive, upon payment of the then current Purchase Price,
  that number of shares of common stock of the acquiring company having a market
  value at the time of such transaction equal to the Purchase Price divided by
  one-half the Current Market Price of such common stock.
  
       No fractional shares of Common Stock will be issued upon exercise of the
  Rights and, in lieu thereof, a payment in cash will be made to the holder of
  such Rights equal to the same fraction of the current market value of a share of
  Common Stock.
  
       At any time until the occurrence of a Flip-In Event, the Board may redeem
  the Rights in whole, but not in part, at a price of $.001 per Right.
  Immediately upon the action of the Board of Directors of the Company authorizing
  redemption of the Rights, the right to exercise the Rights will terminate, and
  the only right of the holders of Rights will be to receive the Redemption Price
  without any interest thereon.
  
       At any time after the occurrence of a Flip-In Event and prior to the
  earlier of a Flip-Over Event or such time as any Person (other than an Exempt
  Person), together with all Affiliates and Associates, becomes the Beneficial
  Owner of more than 50% of the Common Stock outstanding, the Board of Directors
  of the Company may, at its option, exchange all or any portion of the
  outstanding Rights (other than Rights held by any Acquiring Person which have
  become void) for shares of Common Stock on a pro rata basis, at an exchange
  ratio of one share of Common Stock or one one-thousandth of a share of Preferred
  Stock (or of a share of a class or series of the Company's Preferred Stock
  having equivalent rights, preferences and privileges) per Right.  Immediately
  upon the ordering of such exchange and without any notice, the right to exercise
  such Rights shall terminate and the only right thereafter of a holder of such
  Rights shall be to receive shares of Common Stock or Common Stock Equivalents
  pursuant to the exchange.  In the event there are insufficient shares of Common
  Stock issued but not outstanding or authorized but unissued to permit any
  exchange of Rights, the Company shall take all actions necessary to authorize
  additional shares.
  
       Until the Rights become nonredeemable the Company may, except with respect
  to the redemption price of the Rights, amend the Rights Agreement in any manner.
  After the Rights become nonredeemable, the Company may amend the Rights
  Agreement to cure any ambiguity, to correct or supplement any provision which
  may be defective or inconsistent with any other provisions, to shorten or
  lengthen any time period under the Rights Agreement, or to arrange or supplement
  the provisions thereunder in any manner which the Company may deem necessary or
  desirable, provided that no such amendment may adversely affect the interests of
  the holders of the Rights (other than the Acquiring Person or its affiliates or
  associates) or cause the Rights to again be redeemable or the Agreement to again
  be freely amendable.
  
                                         6
  Until a Right is exercised, the holder, as such, will have no rights as a
  stockholder of the Company, including, without limitation, the right to vote or
  to receive dividends.
  
       The issuance of the Rights is not taxable to the Company or to stockholders
  under presently existing federal income tax law, and will not change the way in
  which stockholders can presently trade the Company's shares of Common Stock.  If
  the Rights should become exercisable, stockholders, depending on then existing
  circumstances, may recognize taxable income.
  
       The Rights have certain anti-takeover effects.  Under certain circumstances
  the Rights could cause substantial dilution to a person or group who attempts to
  acquire the Company on terms not approved by the Company's Board of Directors.
  However, the Rights should not interfere with any merger or other business
  combination approved by the Board.
  
       The form of Rights Agreement between the Company and the Rights Agent
  (including as Exhibit A the form of Certificate of Designation, Preferences and
  Rights of the Terms of the Series A Preferred Stock, as Exhibit B the form of
  Right Certificate, and as Exhibit C the Summary of Terms of Rights Agreement),
  the Company's press release dated February 26, 1999 and a form of letter to the
  Company's stockholders dated March 12, 1999 are attached hereto as Exhibit 1,
                                                                     ---------  
  Exhibit 2 and Exhibit 3, respectively, and incorporated herein by reference.
  ---------     ---------                                                      
  The foregoing description of the Rights is qualified in its entirety by
  reference to such exhibits.
  
  Item 6.  Amendment of Bylaws.
  
       On February 24, 1999, the Board of Directors amended the Bylaws of the
  Company to (i) provide that a special meeting of stockholders may by called only
  by the Board of Directors, and (ii) set forth provisions regulating the conduct
  of stockholders' meetings. The amendment to the Bylaws of the Company is
  attached hereto as Exhibit 4 and is incorporated herein by reference.
                     ---------
  
  Item 7.  Financial Statements and Exhibits.
  
       The form of Rights Agreement between the Company and the Rights Agent
  (including as Exhibit A the form of Certificate of Designation, Preferences and
  Rights of the Terms of the Series A Preferred Stock, as Exhibit B the form of
                             --------                                          
  Right Certificate, and as Exhibit C the Summary of Terms of Rights Agreement),
  the Company's press release dated February 26, 1999 and a form of letter to the
  Company's stockholders dated March 12, 1999 are attached hereto as Exhibit 1,
                                                                     ---------  
  Exhibit 2 and Exhibit 3, respectively, and incorporated herein by reference.
  ---------     ---------                                                     
  
       The amendment to the Bylaws of the Company is attached hereto as Exhibit 4.
                                                                        --------- 
  
                                         7
  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.
  
                                               POWER INTEGRATIONS, INC.
  
  Date:  March 12, 1999                        By: /s/ Robert G. Staples
                                                  ----------------------------
                                                       Robert G. Staples
                                                       Chief Financial Officer
  
                                         8
  EXHIBIT INDEX
                                   -------------
  Exhibit                       Description
    -------                       -----------
  1         Form of Rights Agreement between the Company and           
                 BankBoston, N.A., as Rights Agent (including as Exhibit A  
                 the form of Certificate of Designation, Preferences and    
                 Rights of the Terms of the Series A Preferred Stock, as    
                 Exhibit B the form of Right Certificate, and as Exhibit C  
                 the Summary of Terms of Rights Agreement).                  
                                                                            
       2         Press Release, dated February 26, 1999.                    
                                                                            
       3         Form of Letter to Power Integrations, Inc. stockholders,   
                 dated March 12, 1999.                                      
                                                                            
       4         Amendment to Bylaws.
  9