<PAGE>   1
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                                  UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

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

                                    FORM 10-Q

             [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
                       THE SECURITIES EXCHANGE ACT OF 1934

                  FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2001

                                       OR

            [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
                       THE SECURITIES EXCHANGE ACT OF 1934

             FOR THE TRANSITION PERIOD FROM            TO
                                            ----------    ----------

                          COMMISSION FILE NO. 000-28695

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

                            C-CUBE MICROSYSTEMS INC.
             (Exact name of registrant as specified in its charter)

<TABLE>
         <S>                                                  <C>
                    DELAWARE                                      77-0528024
         (State or other jurisdiction of                       (I.R.S. Employer
          incorporation or organization)                      Identification No.)
</TABLE>

                             1778 MCCARTHY BOULEVARD
                           MILPITAS, CALIFORNIA 95035
              (Address and zip code of principal executive offices)

                                 (408) 490-8000
              (Registrant's telephone number, including area code)

                            C-CUBE SEMICONDUCTOR INC.
(Former name, former address and former fiscal year, if changed since last year)

INDICATE BY CHECK MARK WHETHER THE REGISTRANT (1) HAS FILED ALL REPORTS REQUIRED
TO BE FILED BY SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 DURING
THE PRECEDING 12 MONTHS (OR FOR SUCH SHORTER PERIOD THAT THE REGISTRANT WAS
REQUIRED TO FILE SUCH REPORTS), AND (2) HAS BEEN SUBJECT TO SUCH FILING
REQUIREMENTS FOR THE PAST 90 DAYS. [X] YES [ ] NO

INDICATE THE NUMBER OF SHARES OUTSTANDING OF EACH OF THE ISSUER'S CLASSES OF
COMMON STOCK, AS OF THE LATEST PRACTICABLE DATE.

      AS OF MAY 1, 2001, 48,438,621 SHARES OF THE REGISTRANT'S COMMON STOCK WERE
OUTSTANDING.

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


<PAGE>   2
                            C-CUBE MICROSYSTEMS INC.

                                TABLE OF CONTENTS


<TABLE>
<CAPTION>
                                                                                      Page
                                                                                      ----
<S>      <C>                                                                          <C>
Part I.  Financial Information

Item 1.  Financial Statements:
         Condensed Consolidated Balance Sheets
         March 31, 2001 (unaudited) and December 31, 2000 .........................     3

         Condensed Consolidated Statements of Income
         Three months ended March 31, 2001 and 2000 (unaudited)....................     4

         Condensed Consolidated Statements of Cash Flows
         Three months ended March 31, 2001 and 2000 (unaudited)....................     5

         Notes to Condensed Consolidated Financial Statements (unaudited) .........     7

Item 2.  Management's Discussion and Analysis of Financial
         Condition and Results of Operations ......................................    11

Item 3.  Quantitative and Qualitative Disclosures about Market Risk ...............    17


Part II. Other Information

Item 1.  Legal Proceedings ........................................................    18

Item 2.  Changes in Securities and Use of Proceeds ................................    18

Item 3.  Defaults Upon Senior Securities ..........................................    18

Item 4.  Submission of Matters to a Vote of Security Holders ......................    18

Item 5.  Other Information ........................................................    18

Item 6.  Exhibits and Reports on Form 8-K .........................................    18

Signatures ........................................................................    19
</TABLE>


                                      -2-
<PAGE>   3
PART I.  FINANCIAL INFORMATION
ITEM 1.  Financial Statements

                            C-CUBE MICROSYSTEMS INC.
                      CONDENSED CONSOLIDATED BALANCE SHEETS
                                 (IN THOUSANDS)

<TABLE>
<CAPTION>
                                                                MARCH 31,      DECEMBER 31,
                                                                  2001            2000*
                                                               -----------     ------------
                                                               (UNAUDITED)
     <S>                                                       <C>             <C>
                                     ASSETS
     Current assets:
       Cash and equivalents ..............................      $  59,787       $  49,736
       Short-term investments ............................          6,875           2,798
       Receivables - net .................................         22,197          23,273
       Inventories .......................................         13,218          17,505
       Other current assets ..............................         22,150          21,620
                                                                ---------       ---------
               Total current assets ......................        124,227         114,932
     Property and equipment - net ........................         16,364          17,908
     Production capacity rights ..........................         23,115          23,560
     Distribution rights - net ...........................          1,112           1,153
     Purchased technology - net ..........................          1,393           1,466
     Deferred taxes and other assets .....................         57,953          63,540
                                                                ---------       ---------
               Total .....................................      $ 224,164       $ 222,559
                                                                =========       =========

                      LIABILITIES AND STOCKHOLDERS' EQUITY
     Current liabilities:
       Accounts payable ..................................      $   9,905       $  19,435
       Accrued liabilities ...............................         21,324          29,979
       Income taxes payable ..............................            866           5,863
       Current portion of long-term obligations ..........         23,566          28,744
                                                                ---------       ---------
               Total current liabilities .................         55,661          84,021
     Long-term obligations ...............................          1,221           1,299
                                                                ---------       ---------
               Total liabilities .........................         56,882          85,320
                                                                ---------       ---------
     Minority interest in subsidiary .....................            408             543
     Stockholders' equity:
       Common stock ......................................        165,331         136,209
       Accumulated other comprehensive loss ..............         (1,913)         (1,757)
       Accumulated earnings ..............................          3,456           2,244
                                                                ---------       ---------
               Total stockholders' equity ................        166,874         136,696
                                                                ---------       ---------
               Total .....................................      $ 224,164       $ 222,559
                                                                =========       =========
</TABLE>

* Derived from the audited balance sheet included in Company's report on 10K for
the year ended December 31, 2000.

            See notes to condensed consolidated financial statements.


                                      -3-
<PAGE>   4
                            C-CUBE MICROSYSTEMS INC.
                   CONDENSED CONSOLIDATED STATEMENTS OF INCOME
                    (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
                                   (UNAUDITED)

<TABLE>
<CAPTION>
                                                                                       QUARTER ENDED
                                                                                         MARCH 31,
                                                                                   -----------------------
                                                                                     2001           2000
                                                                                   --------       --------
<S>                                                                                <C>            <C>
Net revenues ................................................................      $ 50,052       $ 61,002
                                                                                   --------       --------
Costs and expenses:
  Cost of product revenues ..................................................        23,066         26,754
  Research and development ..................................................        14,795         14,154
  Selling, general and administrative:
    Selling, general and administrative .....................................        11,721         10,748
    Stock-based compensation and merger/spin-off related
    payroll taxes ...........................................................            --          3,413
                                                                                   --------       --------
     Total ..................................................................        49,582         55,069
                                                                                   --------       --------
Income from operations ......................................................           470          5,933
Other income, net ...........................................................         1,004          3,775
                                                                                   --------       --------
Income from continuing operations before income taxes and minority interest .         1,474          9,708
Income tax expense for continuing operations ................................           397          2,621
                                                                                   --------       --------
Income from continuing operations before minority interest ..................         1,077          7,087
Minority interest in net income (loss) of subsidiary ........................          (135)             7
                                                                                   --------       --------
Income from continuing operations ...........................................         1,212          7,080
Discontinued operations:
    Income from operations of DiviCom business, net of taxes ................            --          1,552
    Loss on disposal of DiviCom business, net of taxes ......................            --         (7,348)
                                                                                   --------       --------
Net income ..................................................................         1,212          1,284
                                                                                   ========       ========
Basic earnings per share amounts:
    Income from continuing operations .......................................      $   0.02       $   0.16
    Income (loss) from discontinued operations ..............................            --           0.04
    Loss on disposal of DiviCom (net of tax) ................................            --          (0.17)
                                                                                   --------       --------
    Net income (loss) .......................................................      $   0.02       $   0.03
                                                                                   ========       ========
Diluted earnings per share amounts:
    Income from continuing operations .......................................      $   0.02       $   0.14

    Income (loss) from discontinued operations ..............................            --           0.03
    Loss on disposal of DiviCom (net of tax) ................................            --          (0.15)
                                                                                   --------       --------
    Net income (loss) .......................................................      $   0.02       $   0.03
                                                                                   ========       ========
Basic shares used in computation ............................................        49,979         43,884
                                                                                   ========       ========
Diluted shares used in computation ..........................................        51,433         49,449
                                                                                   ========       ========
</TABLE>


            See notes to condensed consolidated financial statements.


                                      -4-
<PAGE>   5
                            C-CUBE MICROSYSTEMS INC.
                 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                                 (IN THOUSANDS)
                                   (UNAUDITED)

<TABLE>
<CAPTION>
                                                                         THREE MONTHS ENDED
                                                                              MARCH 31,
                                                                      -------------------------
                                                                        2001            2000
                                                                      ---------       ---------
<S>                                                                   <C>             <C>
Cash flows from operating activities:
  Net income ...................................................      $   1,212       $   1,284
  Adjustments to reconcile net income to net cash provided
     by operating activities:
     Minority interest in subsidiary ...........................           (135)              7
     Depreciation and amortization .............................          3,497           3,415
     Deferred income taxes .....................................          5,573           1,707
     Tax benefit from employee stock transactions ..............          1,370          44,817
     Changes in assets and liabilities:
        Receivables ............................................            899           5,575
        Inventories ............................................          4,223         (10,848)
        Other current assets ...................................           (830)          2,094
        Accounts payable .......................................         (9,292)         (8,057)
        Accrued liabilities ....................................         (8,969)         (3,190)
        Income taxes payable ...................................         (4,997)        (44,779)
        Deferred revenue .......................................            500              --
        Production capacity rights .............................             --         (20,000)
                                                                      ---------       ---------
  Net cash used in continuing operations .......................         (6,949)        (27,975)
  Net cash provided by discontinued operations .................             --             736
                                                                      ---------       ---------
  Net cash used in operations ..................................         (6,949)        (27,239)
                                                                      ---------       ---------
Cash flows from investing activities:
  Sales and maturities of short-term investments ...............         10,415          82,100
  Purchases of short-term investments ..........................        (14,662)         (3,941)
  Capital expenditures .........................................         (1,150)           (947)
  Other assets .................................................              2            (408)
                                                                      ---------       ---------
  Net cash provided by (used in) investing activities ..........         (5,395)         76,804
                                                                      ---------       ---------
Cash flows from financing activities:
  Income tax refund related to the spin-off of the semiconductor
     business ..................................................         22,500              --
  Repayment of bank loan .......................................         (5,000)             --
  Repayments of capital lease obligations ......................           (351)            (18)
  Sale of common stock .........................................          5,252          41,080
  Repurchase of convertible subordinated notes .................             --             (10)
                                                                      ---------       ---------
  Net cash provided by financing activities ....................         22,401          41,052
                                                                      ---------       ---------
Exchange rate impact on cash and equivalents ...................             (6)           (165)
                                                                      ---------       ---------
Net increase in cash and equivalents ...........................         10,051          90,452
Cash and equivalents, beginning of period ......................         49,736         123,145
                                                                      ---------       ---------
Cash and equivalents, end of period ............................      $  59,787       $ 213,597
                                                                      =========       =========
</TABLE>


                                      -5-
<PAGE>   6
<TABLE>
<S>                                                                    <C>             <C>
Supplemental schedule of non-cash investing and financing activities:
  Unrealized gain (loss) on investments ...........                    $   (170)       $     15
  Equipment acquired under lease ..................                          --           1,500
  Conversion of convertible debt into common stock                           --          17,560
Supplemental schedule of cash flow information:
  Cash paid during the period for:
    Interest ......................................                    $    124        $    184
    Income taxes ..................................                      12,727            (108)
</TABLE>

            See notes to condensed consolidated financial statements.


                                      -6-
<PAGE>   7
                            C-CUBE MICROSYSTEMS INC.
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                   (UNAUDITED)

1. Basis of Presentation

      The unaudited condensed consolidated financial statements contained in
this report have been prepared by C-Cube Microsystems Inc. ("C-Cube" or the
"Company"). In the opinion of management, such financial statements include all
normal recurring adjustments and accruals necessary for a fair presentation of
the Company's financial position as of March 31, 2001, and the results of
operations for the three months ended March 31, 2001 and 2000 and cash flows for
the three months ended March 31, 2001 and 2000. Certain information and footnote
disclosures normally included in financial statements prepared in accordance
with generally accepted accounting principles have been condensed or omitted in
accordance with the rules and regulations of the Securities and Exchange
Commission (SEC). This unaudited quarterly information should be read in
conjunction with the audited consolidated financial statements of C-Cube and the
notes thereto included in the Company's Form 10-K for the year ended December
31, 2000.

    The results of operations for the three months ended March 31, 2001 are not
necessarily indicative of the results to be expected for the fiscal year ending
December 31, 2001. These financial statements should be read in conjunction with
the consolidated financial statements and the accompanying notes included in the
Company's Form 10-K for the year ended December 31, 2000.

2. Significant Events

    On March 26, 2001, the Company entered into an Agreement and Plan of
Reorganization (the "Reorganization Agreement") with LSI Logic Corporation
("LSI") and Clover Acquisition Corp. ("Merger Sub"), a wholly-owned subsidiary
of LSI. Under the terms of the Reorganization Agreement, Merger Sub will
commence an exchange offer whereby it will offer 0.79 of a share of common stock
for each outstanding share of the Company's common stock. Under the terms of the
Merger Agreement, the exchange offer will be followed by a merger in which
Merger Sub would acquire, at the same exchange ratio, the remaining shares of
the Company's common stock not previously acquired in the exchange offer. Upon
completion of the merger, LSI has agreed to assume all options and warrants to
purchase shares of C-Cube common stock and convert them into options and
warrants to purchase shares of LSI common stock. The merger is subject to
customary closing conditions, including the tender for exchange of at least a
majority of the Company's outstanding shares of common stock (including for
purposes of the calculation of the majority of shares, certain outstanding
options and warrants to purchase the Company's shares.) On April 24, 2001, the
Federal Trade Commission granted early termination of the waiting period under
the Hart-Scott-Rodino Antitrust Improvements Act. On April 26, 2001, the Form
S-4 registration statement filed on April 13, 2001 in connection with the
exchange offer was declared effective by the Securities and Exchange Commission.
The initial exchange offer commenced on April 13, 2001 and expired at midnight
on May 10, 2001. Approximately 43.6 million shares of the Company's common stock
(including shares tendered through notice of guaranteed delivery) were validly
tendered and not properly withdrawn prior to the expiration of the initial
exchange offer, which constitutes approximately 86% of the total number of
outstanding shares of the Company's common stock. The Merger Sub has elected to
provide a subsequent offering period in connection with the exchange offer. The
subsequent offering period commenced on May 11, 2001 and will expire at midnight
on May 24, 2001. During the subsequent offering period, the Merger Sub would
exchange each share of the Company's common stock at the same exchange ratio
offered in the initial exchange offer. Shares of the Company's common stock
tendered during the subsequent offering period may not be withdrawn.


                                      -7-
<PAGE>   8
3. Inventories

      Inventories are stated at the lower of cost (first-in, first-out) or
   market. Cost is computed using standard costs which approximate actual cost
   on a first-in, first-out basis. Inventories consist of:

<TABLE>
<CAPTION>
                                                 MARCH 31,   DECEMBER 31,
                                                   2001          2000
                                                 ---------   ------------
                                                     (IN THOUSANDS)
                   <S>                           <C>         <C>
                   Finished goods ..........      $ 8,300      $ 7,213
                   Work-in-process .........          726        1,130
                   Raw materials ...........        4,192        9,162
                                                  -------      -------
                             Total .........      $13,218      $17,505
                                                  =======      =======
</TABLE>

4. Bank Line of Credit

      At March 31, 2001, the Company had a $28.0 million bank line of credit
   facility ($22.0 million outstanding at March 31, 2001) that expires on May
   31, 2002. Under the terms of the commitment, the total amount available for
   borrowing by the Company under the facility will be reduced to $25.0 million
   at the end of the second quarter of 2001. The $22.0 million of borrowed funds
   outstanding at March 31, 2001 bears interest at LIBOR plus 2.0% (8.4% at
   March 31, 2001). The line of credit agreement requires that the Company,
   among other things, maintain a minimum tangible net worth and certain
   financial ratios and is collateralized by the current assets of the Company.
   At March 31, 2001, the Company was in compliance with the covenants.

5. Stockholders' Equity

      The following table represents the changes to stockholders' equity for the
   three-month period ended March 31, 2001:

<TABLE>
<CAPTION>
                                                                      ACCUMULATED
                                                                         OTHER
                                                        COMMON       COMPREHENSIVE   ACCUMULATED
                                                         STOCK        GAIN (LOSS)     EARNINGS         TOTAL
                                                       ---------     -------------   -----------     ---------
<S>                                                    <C>           <C>             <C>             <C>
     BALANCES, DECEMBER 31, 2000 ................      $ 136,209      $  (1,757)      $   2,244      $ 136,696
     Net income .................................             --             --           1,212          1,212
     Accumulated translation adjustments ........             --             14              --             14
     Unrealized loss on investments .............             --           (170)             --           (170)
     Common stock issued under stock plans ......          5,252             --              --          5,252
     Tax benefit from employee stock
       transactions .............................          1,370             --              --          1,370
     Income tax refund related to the spin-off of
       the semiconductor business ...............         22,500             --              --         22,500
                                                       ---------      ---------       ---------      ---------
     BALANCES, MARCH 31, 2001 ...................      $ 165,331      $  (1,913)      $   3,456      $ 166,874
                                                       =========      =========       =========      =========
</TABLE>


                                      -8-
<PAGE>   9
6. Earnings Per Share

      The following table sets forth the computation of basic and diluted
   earnings per share (in thousands, except per share amounts):

<TABLE>
<CAPTION>
                                                                      QUARTER ENDED
                                                                        MARCH 31,
                                                                  ----------------------
                                                                    2001          2000
                                                                  --------      --------
<S>                                                               <C>           <C>
     Numerator:
      Income from continuing operations ....................      $  1,212      $  7,080
      Income (loss) from discontinued DiviCom business .....            --         1,552
      Loss on disposal of DiviCom business .................            --        (7,348)
                                                                  --------      --------
      Numerator for basic and diluted earnings per share ...      $  1,212      $  1,284
                                                                  ========      ========
     Denominator:
      Weighted-average shares - denominator for basic
         earnings per share ................................        49,979        43,884
      Dilutive common stock equivalents, using treasury
         stock method ......................................         1,454         5,565
                                                                  --------      --------
      Denominator for diluted earnings per share ...........      $ 51,433      $ 49,449
                                                                  ========      ========

      Basic earnings (loss) per share ......................      $   0.02      $   0.03
                                                                  ========      ========
      Diluted earnings (loss) per share ....................      $   0.02      $   0.03
                                                                  ========      ========
</TABLE>

      Options to purchase 14,454,456 shares of common stock were outstanding
   during the three months ended March 31, 2001 but were not included in the
   computation of diluted EPS because the options' exercise price was greater
   than the average market price of the common shares.

7. Comprehensive Income

      For the three months ended March 31, 2001 and 2000, comprehensive income,
   which was comprised of the Company's net income for the periods, changes in
   accumulated translation adjustments and unrealized gains/loss on investments,
   was $1.1 million and $1.1 million, respectively.

8. Other Significant Transactions

      Merger/Spin-Off

      On December 9, 1999, C-Cube entered into an Amended and Restated Agreement
   and Plan of Merger and Reorganization with Harmonic Inc. In accordance with
   this agreement, on May 2, 2000, C-Cube's semiconductor division was spun-off
   into an independent company, and on May 3, 2000, C-Cube's DiviCom division
   was merged with Harmonic Inc. Accordingly, as required by Accounting
   Principles Board Opinion No. 30 and Emerging Issues Task Force Issue No.
   95-18, the results of operations of the Semiconductor division (the
   continuing entity) are reported separately from the results of operations of
   the DiviCom division (the discontinued entity).

      The results of discontinued operations are presented on two line items on
   the face of the Condensed Consolidated Statements of Income included herein.
   Through March 31, 2000, income from operations of DiviCom includes revenues
   of $36.8 million and tax benefit of $6.8 million. Loss


                                      -9-
<PAGE>   10
   on disposal of DiviCom includes direct costs, net of taxes, associated with
   the merger/spin-off transaction which were incurred by the Company.

      In 2000, in connection with the merger, the Company transferred the net
   assets of DiviCom to Harmonic, incurred and paid a tax liability in
   connection with the spin-off of the semiconductor business and recorded a
   deferred tax asset relating to an increase in the tax basis of the Company's
   assets. The transfer of the net assets and the tax liability has been
   reflected as a return of capital to the stockholders.

      In the first quarter of 2001, the Company received an income tax refund of
   $22.5 million for amounts previously paid in 2000 for income taxes related to
   the spin-off of the semiconductor business. The receipt of the income tax
   refund has been reflected as an increase to stockholders' equity.

      Merger/spin-off related payroll taxes

      As a condition of the Amended and Restated Agreement and Plan of Merger
   and Reorganization with Harmonic Inc., all vested employee stock options were
   to be exercised before the merger date or they would be forfeited. The
   resulting exercises generated an additional payroll tax expense, within
   selling, general and administrative, of $3.4 million dollars in the first
   quarter of 2001.

9. Recently Issued Accounting Standards

      In June 1998, the Financial Accounting Standards Board issued Statement
    No. 133, "Accounting for Derivative Instruments and Hedging Activities"
    ("SFAS 133"). SFAS 133 was amended by SFAS 137, which modified the effective
    date of SFAS 133 to all fiscal quarters of all fiscal years beginning after
    June 15, 2000. In June 2000, SFAS 133 was further amended by SFAS 138,
    "Accounting for Certain Derivative Instruments and Certain Hedging
    Activities". SFAS 133, as amended, requires that every derivative
    instrument, including certain derivative instruments embedded in other
    contracts, be recorded on the balance sheet at its fair value. Changes in
    the fair value of derivatives are recorded each period in current earnings
    or other comprehensive income, depending on whether a derivative is
    designated as part of a hedge transaction and, if it is, the type of hedge
    transaction. SFAS 133, as amended, requires that the Company formally
    document, designate, and assess the effectiveness of transactions that
    receive hedge accounting. The Company adopted SFAS 133, as amended, on
    January 1, 2001 and did not elect hedge accounting. The adoption of this
    statement did not have an impact on the financial position or results of
    operations of the Company.

      During the period ended March 31, 2001 the Company's derivative contracts
    consisted only of foreign exchange forward contracts to hedge certain
    balance sheet exposures to future foreign current rate movements. Such
    derivative contracts did not have a material impact on the financial
    position or results of operations for the quarter then ended.

10. Reclassifications

      Certain reclassifications have been made to previously reported amounts in
   order to conform to the March 31, 2001 presentation.


                                      -10-
<PAGE>   11
ITEM 2.               MANAGEMENT'S DISCUSSION AND ANALYSIS
                OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

      This report contains forward-looking statements within the meaning of
Section 27A of the Securities Act of 1933 and Section 21E of the Securities
Exchange Act of 1934. The forward-looking statements involve risks and
uncertainties. Actual results could differ materially from those projected in
the forward-looking statements as a result of certain factors, including those
set forth in this Item 2, those described elsewhere in this report and those
described in the Company's Amendment No. 2 to its Registration Statement on Form
S-1 filed with the Securities and Exchange Commission on March 22, 2000, the
Company's Form 10-K for the year ended December 31, 2000, other Form 10-Qs and
other reports submitted under the Securities Exchange Act of 1933 and the
Securities Exchange Act of 1934. Such forward-looking statements include, but
are not limited to, those statements marked with an asterisk (*) in this report.
The Company assumes no obligation to update any forward-looking statements.

QUARTER ENDED MARCH 31, 2001

      The following table sets forth certain operating data as a percentage of
net revenues for the three months ended March 31, 2001 and 2000:

<TABLE>
<CAPTION>
                                                                            QUARTER ENDED
                                                                              MARCH 31,
                                                                          ------------------
                                                                          2001         2000
                                                                          -----        -----
        <S>                                                               <C>          <C>
        Net revenues .............................................        100.0%       100.0%
        Costs and expenses:
          Cost of revenues .......................................         46.1         43.9
          Research and development ...............................         29.6         23.2
           Selling, general and administrative ...................         23.4         17.6
           Stock-based compensation and merger/spin-off
             related payroll taxes ...............................           --          5.6
                                                                          -----        -----
                  Total ..........................................         99.1         90.3
                                                                          -----        -----
        Income from operations ...................................          0.9          9.7
        Other income, net ........................................          2.0          6.2
                                                                          -----        -----
        Income from continuing operations before income
           taxes and minority interest ...........................          2.9         15.9
        Income tax expense for continuing operations .............          0.8          4.3
                                                                          -----        -----
        Income from continuing operations before minority
           interest ..............................................          2.2         11.6
        Minority interest in net income (loss) of subsidiary .....         (0.3)          --
                                                                          -----        -----
        Income from continuing operations ........................          2.4         11.6
        Discontinued operations:
          Income from operations of DiviCom business, net
           of taxes ..............................................           --         (9.5)
                                                                          -----        -----
        Net income ...............................................          2.4%         2.1%
                                                                          =====        =====
</TABLE>

      NET REVENUES

      Net revenues decreased 18.0% from $61.0 million in the first quarter of
2000 to $50.1 million in the first quarter of 2001. The decrease in net revenues
was primarily due to a decline in volume shipments of decoder chips used in VCD
and Chaoji VCD applications and increased price competition, and to a lesser
extent, a decline in the average selling price of codecs (single chip
encoder/decoder). The decrease in net revenues discussed above was partially
offset by higher volume shipments of DVD chips used in consumer applications.
The Company believes the markets for chips used in DVD players, chips used in
digital set-top boxes and codecs will continue to grow, while the market for
decoder chips used in VCD and Chaoji VCD applications will gradually decline as
the market becomes saturated and as consumers choose DVD players over VCD
players.*


                                      -11-
<PAGE>   12
     GROSS MARGIN

     Gross margins decreased from 56.1% in the first quarter of 2000 to 53.9% in
the first quarter of 2001. The decrease in margins was principally attributable
to a decline in the average selling price as a result of competitive pricing
pressures in the DVD, S-VCD and VCD markets without similar manufacturing cost
reductions. The decline in gross margins discussed above was partially offset by
changes in product mix with a shift toward sales of higher gross margin products
such as chips used in digital set-top boxes.

     RESEARCH AND DEVELOPMENT EXPENSES

     Research and development expenses increased 4.5% from $14.2 million in the
first quarter of 2000 to $14.8 million in the first quarter of 2001. The
increase in research and development expenses was primarily attributable to
non-labor related product development costs. The Company anticipates that
research and development expenses will continue to increase in future periods. *

     SELLING, GENERAL AND ADMINISTRATIVE EXPENSES

     Selling, general and administrative expenses excluding stock-based
compensation and merger/spin-off related payroll taxes, increased 9.1% from
$10.7 million in the first quarter of 2000 to $11.7 million in the first quarter
of 2001. The increase was primarily due to increased headcount and related
expenses, in connection with the Company's increased international coverage in
sales and marketing.

      OTHER INCOME

     Other income, decreased from $3.8 million in the first quarter of 2000 to
$1.0 million in the first quarter of 2001 because of lower average cash and
investment balances.

     INCOME TAX EXPENSE

     The Company's effective tax rate for continuing operations in the first
quarter of 2001 was 27%. The Company's effective tax rate is less than the
combined federal and state statutory rate primarily due to tax credits and lower
foreign tax rates.



FACTORS THAT MAY AFFECT FUTURE RESULTS

     International revenues accounted for 92.4% of net revenues for the first
quarter of 2001, as compared to 87.4% for the first quarter of 2000. The Company
expects that international revenues will continue to represent a significant
portion of net revenues. The Company believes that its success will depend in
part upon its ability to manage international marketing and sales operations.*
In addition, the Company purchases a substantial portion of its manufacturing
services from foreign suppliers. The Company's international manufacturing and
sales are subject to changes in foreign political and economic conditions and to
other risks including currency or export/import controls, changes in tax laws,
tariffs and freight rates and changes in the ownership and/or leadership of
international customers that may result in delayed or canceled orders.

     The Asian consumer electronics markets accounted for approximately 52.6%
and 62.2% of total sales in the first quarters of 2001 and 2000, respectively,
and are expected to continue to account for a substantial, though declining,
percentage of sales in the future.* Asia has experienced economic instability in
the past few years, which has resulted in currency devaluation, falling consumer
spending



                                      -12-
<PAGE>   13

and domestic price deflation. The company believes that any of these
factors could significantly reduce the demand for the end-user goods in which
the Company's products are incorporated. A significant portion of the Company's
first quarter 2001 sales in Asia were of decoder chips, which are used in DVD,
VideoCD and Chaoji VCD players. The Company believes purchases of these products
are not as likely to be deferred as are purchases of higher priced consumer
durables and production equipment, which have dramatically impacted U.S. export
sales.* However, there can be no assurance that the Company will not experience
reduced sales of its semiconductor products into Asia because of declining
consumer spending or because of its customers' increasing difficulty in
obtaining letters of credit, which the Company generally requires prior to
shipment.

     The markets into which the Company sells its products are subject to
extreme price competition. Thus, the Company expects to continue to experience
declines in the selling prices of its products over the life cycle of each
product.* In particular, the Company expects to continue to experience
significant price competition in the markets for decoder chips.* In order to
offset or partially offset declines in the selling prices of its products, the
Company believes that it must continue to reduce the costs of products through
product design changes, manufacturing process changes, volume discounts, yield
improvements and other savings negotiated with its manufacturing subcontractors.
Since the Company does not believe that it can continually achieve cost
reductions, which fully offset the price declines of its products, it expects
gross margin percentages to decline for existing products over their life
cycles.*

     The Company does not operate its own manufacturing facilities and must make
volume commitments to subcontractors at prices that remain fixed over certain
periods of time. Therefore, the Company may not be able to reduce its costs as
rapidly as its competitors who perform their own manufacturing. Failure of the
Company to design and introduce, in a timely manner, lower cost versions of
existing products or higher gross margin new products, or to successfully manage
its manufacturing subcontractor relationships, would have a material adverse
effect on the Company's gross margins.

     The Company's foundry capacity is in Taiwan and is subject to the risk of
political instability and natural disasters in Taiwan, including but not limited
to the potential for conflict between Taiwan and the People's Republic of China
and earthquakes.

     In addition, the Company sells certain of its products in international
markets and, as a result, currency fluctuations could have a material adverse
effect on the Company's business and results of operations. The Company
mitigates this risk through the use of foreign currency hedges for transactions
denominated in foreign currencies. However, with respect to international sales
that are denominated in U.S. dollars, increases in the value of the U.S. dollar
relative to foreign currencies can increase the effective price of and reduce
demand for the Company's products relative to competitive products priced in the
local currency.

     The United States of America has considered trade sanctions against Japan
and has had disputes with China relating to trade and human rights issues. If
trade sanctions were imposed, Japan or China could enact trade sanctions in
response. Because a number of the Company's current and prospective customers
and suppliers are located in Japan and China, trade sanctions, if imposed, could
have a material adverse effect on the Company's business and results of
operations. Similarly, protectionist trade legislation in either the United
States of America or foreign countries could have a material adverse effect on
the Company's ability to manufacture or sell its products in foreign markets.

     The Company's quarterly and annual operating results have been, and will
continue to be, affected by a wide variety of factors that could have a material
adverse effect on revenues and profitability during any particular period,
including the level of orders which are received and can be shipped in a
quarter, the rescheduling or cancellation of orders by its customers,
competitive pressures on selling prices, changes in product or customer mix,
availability and cost of foundry capacity and raw materials,



                                      -13-
<PAGE>   14

fluctuations in yield, loss of any strategic relationships, the Company's
ability to introduce new products and technologies on a timely basis,
unanticipated problems in the performance of the Company's next generation or
cost-reduced products, the ability to successfully introduce products in
accordance with OEM design requirements and design cycles, new product
introductions by the Company's competitors, market acceptance of products of
both the Company and its customers, compatibility of new products with emerging
digital video standards, purchase commitments for customized components procured
in advance of anticipated systems contracts, supply constraints for other
components incorporated into its customers' products, credit risk for
international customers not using letters of credit, fluctuations in foreign
currency exchange rates to the U.S. dollar, the level of expenditures in
manufacturing, research and development, and sales, general and administrative
functions, and a recent trend of mergers and acquisitions creating larger
competitors which may have established market share or greater financial or
technical resources than the Company.*

     In addition, the Company's operating results are subject to fluctuations in
the markets for its customers' products, particularly the consumer electronics
and personal computer markets, which have been extremely volatile in the past,
and the digital satellite broadcast, cable and wireless cable markets, which are
in an early stage, creating uncertainty with respect to product volume and
timing. To the extent the Company is unable to fulfill its customers' purchase
orders on a timely basis, these orders may be canceled due to changes in demand
in the markets for its customers' products. Historically, the Company has
shipped a substantial portion of its product in the last month of a given
quarter. A significant portion of the Company's expenses is fixed in the short
term, and the timing of increases in expenses is based in large part on the
Company's forecast of future revenues. As a result, if revenues do not meet the
Company's expectations, it may be unable to quickly adjust expenses to levels
appropriate to actual revenues, which could have a material adverse effect on
the Company's business and results of operations.

          The Company's dependence on the Chinese consumer electronics market
has started to decline, and the Company believes it will either remain stable or
continue to decline in the future, as growth in the encoder, digital satellite
broadcast, non-linear editing, digital cable and wireless cable markets generate
larger contributions to revenues.* Nevertheless, the substantial seasonality of
sales in the consumer electronics market could impact the Company's revenues and
net income. In particular, the Company believes that there may be seasonality in
the Asia-Pacific region related to the Chinese New Year, which falls within the
first calendar quarter, which could result in relatively lower product demand
during the second and third quarters of each year.* If in the future the
geographic mix of the Company's sales shifts towards the U.S. and Europe, the
Company would anticipate higher revenues and net income in the third and fourth
calendar quarters as system manufacturers in these regions make purchases in
preparation for the holiday season, and comparatively less revenues and net
income in the first and second calendar quarters.*

     As a result of the foregoing, the Company's operating results and stock
price may be subject to significant volatility, particularly on a quarterly
basis. Any shortfall in net revenues or net income could have an immediate and
significant adverse effect on the trading price of the Company's common stock.

     The market price of the Company's common stock has fluctuated significantly
since its spin-off from the DiviCom business in 2000. The market price of the
common stock could be subject to significant fluctuations in the future based on
factors such as announcements of new products by the Company or its competitors,
quarterly fluctuations in the Company's financial results, quarterly
fluctuations in other semiconductor or digital video networking companies'
financial results, general conditions in the semiconductor and digital video
networking industries, conditions in the financial markets and general
conditions in the global economy which might adversely affect consumer
purchasing. In addition, the stock market in general has experienced extreme
price and volume



                                      -14-
<PAGE>   15

fluctuations, which have particularly affected the market prices for many high
technology companies and which have often been unrelated to the operating
performance of the specific companies.


LIQUIDITY AND CAPITAL RESOURCES

     Cash, cash equivalents and short-term investments were $49.7 million at the
end of 2000, as compared to $59.8 million at March 31, 2001. Working capital
increased from $30.9 million at the end of 2000 to $68.6 million at March 31,
2001.

     The Company's operating activities used cash of $6.9 million in the first
quarter of 2001, primarily due to a decrease in accounts payable, accrued
liabilities and income taxes payable of $9.3 million, $9.0 million, and $5.0
million, respectively, partially offset by a decrease in inventory of $4.2
million and a decrease in deferred tax assets of $5.6 million.

     The Company investing activities, exclusive of purchases and sales and
maturities of short-term investments, used cash of $1.1 million, primarily for
capital expenditures.

     Cash provided by financing activities was $22.4 million in the first
quarter of 2001, primarily from an income tax refund related to the spin-off of
the semiconductor business of $22.5 million and sale of common stock of $5.3
million, partially offset by repayments on bank borrowings of $5.0 million.

       At March 31, 2001, the Company had a $28.0 million bank line of credit
facility ($22.0 million outstanding at March 31, 2001) that expires on May 31,
2002. Under the terms of the commitment, the total amount available for
borrowing by the Company under the facility will be reduced to $25.0 million at
the end of the second quarter of 2001. The $22.0 million of borrowed funds
outstanding at March 31, 2001 bears interest at LIBOR plus 2.0% (8.4% at March
31, 2001). The line of credit agreement requires that the Company, among other
things, maintain a minimum tangible net worth and certain financial ratios and
is collateralized by the current assets of the Company. At March 31, 2001, the
Company was in compliance with the covenants.

     The spin-off on May 2, 2000 created an estimated tax obligation of
approximately $413.3 million as calculated under the tax-sharing agreement
between the Company and Harmonic that was partially offset by tax benefits
totaling $100.4 million. In the first quarter of 2001, as a result of its income
tax filing, the Company received a $22.5 million refund of the estimated taxes
paid. The tax was determined by the volume weighted-average trading price of
each company share - $21.81 - on the first day after the distribution. Under the
tax-sharing agreement, the Company issued to Harmonic a promissory note of
$118.0 million, due and payable on June 29, 2000 at 15% interest per annum.
Subsequent to the receipt of a $40.0 million bank line of credit and the receipt
of $9.4 million by Thomson Multimedia S.A. in May 2000, the Company settled the
promissory note. See the Company's Amendment No. 2 to its Registration Statement
on Form S-1 filed with the Securities and Exchange Commission on March 22, 2000
and the Company's Form 8-K filed with the Securities and Exchange Commission on
May 3, 2000 for further details of the tax-sharing agreement and promissory note
with Harmonic.

     Based on current plans and business conditions, the Company expects that
its cash, cash equivalents and short-term investments together with any amounts
generated from operations will be sufficient to meet the Company's cash
requirements for operations and capital commitments for at least the next 12
months.* However, there can be no assurance that the Company will not be
required to seek other financing sooner or that such financing, if required,
will be available on terms satisfactory to the Company, or at all. In addition,
the Company has considered and will continue to consider various possible
transactions with foundries to secure additional foundry capacity, which could
include, without limitation, equity investments, prepayments, non-refundable
deposits or loans in exchange for guaranteed



                                      -15-
<PAGE>   16
capacity, "take or pay" contracts that commit the Company to purchase specified
quantities of wafers over extended periods, joint ventures or other partnership
relationships.

    On March 26, 2001, the Company entered into an Agreement and Plan of
Reorganization (the "Reorganization Agreement") with LSI Logic Corporation
("LSI") and Clover Acqusition Corp. ("Merger Sub"), a wholly-owned subsidiary of
LSI. Under the terms of the Reorganization Agreement, Merger Sub will commence
an exchange offer whereby it will offer 0.79 of a share of common stock for each
outstanding share of the Company's common stock. Under the terms of the Merger
Agreement, the exchange offer will be followed by a merger in which Merger Sub
would acquire, at the same exchange ratio, the remaining shares of the Company's
common stock not previously acquired in the exchange offer. Upon completion of
the merger, LSI has agreed to assume all options and warrants to purchase shares
of C-Cube common stock and convert them into options and warrants to purchase
shares of LSI common stock. The merger is subject to customary closing
conditions, including the tender for exchange of at least a majority of the
Company's outstanding shares of common stock (including for purposes of the
calculation of the majority of shares, certain outstanding options and warrants
to purchase the Company's shares.) On April 24, 2001, the Federal Trade
Commission granted early termination of the waiting period under the
Hart-Scott-Rodino Antitrust Improvements Act. On April 26, 2001, the Form S-4
registration statement filed on April 13, 2001 in connection with the exchange
offer was declared effective by the Securities and Exchange Commission. The
initial exchange offer commenced on April 13, 2001 and expired at midnight on
May 10, 2001. Approximately 43.6 million shares of the Company's common stock
(including shares tendered through notice of guaranteed delivery) were validly
tendered and not properly withdrawn prior to the expiration of the initial
exchange offer, which constitutes approximately 86% of the total number of
outstanding shares of the Company's common stock. The Merger Sub has elected to
provide a subsequent offering period in connection with the exchange offer. The
subsequent offering period commenced on May 11, 2001 and will expire at midnight
on May 24, 2001. During the subsequent offering period, the Merger Sub would
exchange each share of the Company's common stock at the same exchange ratio
offered in the initial exchange offer. Shares of the Company's common stock
tendered during the subsequent offering period may not be withdrawn.



                                      -16-
<PAGE>   17
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

      The following discussion about the Company's market risk disclosures
involves forward-looking statements. Actual results could differ materially from
those projected in the forward-looking statements. The Company is exposed to
market risk related to changes foreign currency exchange rates. The Company does
not use derivative financial instruments for speculative or trading purposes.

     Interest Rate Sensitivity. The Company maintains a short-term investment
portfolio consisting mainly of U.S. government securities and debt securities
with an average maturity of less than one year. The market value of this
portfolio was $6.9 million at March 31, 2001. These available-for-sale
securities are subject to interest rate risk and will fall in value if market
interest rates increase. If market interest rates were to increase immediately
and uniformly by 10% from current levels at March 31, 2001, the fair value of
the portfolio would not be affected materially. The Company has the ability to
hold its fixed income investments until maturity, and therefore the Company
would not expect its operating results or cash flows to be affected to any
significant degree by the effect of a sudden change in market interest rates on
our securities portfolio.*

     The Company has a variable-rate line of credit of $22.0 million outstanding
at March 31, 2001 and a hypothetical 10% increase or decrease in interest rates
would not have a material impact on the fair market value of this debt. The
Company does not hedge any interest rate exposures.

    Foreign Currency Exchange Risk. The Company enters into foreign exchange
forward contracts to hedge certain economic exposures, balance sheet exposures
and inter-company balances against future movements in the dollar/yen exchange
rate. Gains and losses on the forward contracts are largely offset by gains and
losses on the underlying exposure. A hypothetical 10% appreciation of the U.S.
dollar from March 31, 2001 market rates would increase the fair value of the
Company's forward contracts by $0.2 million. Conversely, a hypothetical 10%
depreciation of the U.S. dollar from March 31, 2001 market rates would decrease
the fair value of the Company's forward contracts by $0.2 million. In either
scenario, the gains or losses on the forward contracts are largely offset by the
gains or losses on the underlying transactions and consequently a sudden or
significant change in foreign exchange rates would not be expected to have a
material impact on future net income or cash flows.

      All of the potential changes noted above are based on sensitivity analyses
performed on the Company's financial positions at March 31, 2001. Actual results
may differ materially.



                                      -17-
<PAGE>   18
                           PART II. OTHER INFORMATION


ITEM 1.  Legal Proceedings

         From time to time the Company is party to certain litigation or legal
         claims. Management has reviewed all pending legal matters and believes
         that the resolution of such matters will not have a significant adverse
         effect on the Company's financial position or results of operations.

ITEM 2.  Changes in Securities and Use of Proceeds

         None.

ITEM 3.  Defaults Upon Senior Securities

         None.

ITEM 4.  Submission of Matters to a Vote of Security Holders

         None.

ITEM 5.  Other Information

         Not applicable.

ITEM 6.  Exhibits and Reports on Form 8-K

         (a)   Exhibits

               None.

         (b)   Reports on Form 8-K

               On March 26, 2001, LSI Logic Corporation ("LSI") and C-Cube
               Microsystems Inc. ("C-Cube") issued a press release announcing
               that they had signed an Agreement and Plan of Reorganization (the
               "Reorganization Agreement") by and among LSI, Clover Acquisition
               Corp. ("Merger Sub"), a wholly owned subsidiary of LSI, and
               C-Cube.

               Readers are referenced to C-Cube's Form 8-K filed with the
               Securities and Exchange Commission on March 30, 2001 and to the
               "Liquidity and Capital Resources" discussion included herein for
               further information on the Reorganization Agreement.



                                      -18-
<PAGE>   19
                                   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 thereunto duly authorized.


                                                 C-Cube Microsystems Inc.
                                                      (Registrant)

Dated:  May 15, 2001                         By: /s/ CHRIS FARRELL
       -------------                            --------------------------------
                                                Chris Farrell
                                                Corporate Controller



                                      -19-