SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                   FORM 10-Q
(Mark One)

     [ x ] Quarterly  report  pursuant to Section 13 or 15(d) of the  Securities
Exchange Act of 1934

For the quarterly period ended    September 30, 1995 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 number     0-18090

                               CAERE CORPORATION
             (Exact name of registrant as specified in its charter)

Delaware                                                          94-2250509
(State or other jurisdiction of                                (I.R.S. Employer
incorporation or organization)                              Identification No.)

                 100 Cooper Court, Los Gatos, California, 95030
                    (Address of principal executive offices)

                                 (408) 395-7000
              (Registrant's telephone number, including area code)
----------------------------------------------------------------------
(Former name, former address and former fiscal year, if changed since last
 report)

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.

                                   Yes x No_____

                     APPLICABLE ONLY TO CORPORATE ISSUERS:

Indicate the number of shares  outstanding  of each of the  issuer's  classes of
common stock.

                                                        Outstanding          
Class                                                September 30, 1995

Common Stock
$.001 par value                                          13,232,154

                           This is page 1 of 13 pages


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<TABLE>
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                               CAERE CORPORATION
                                     INDEX

                         PART I. Financial Information
<S>               <C>                                                                                    <C> 
                                                                                                         Page
ITEM 1.           Financial Statements

                  Condensed Consolidated Balance Sheets - September 30, 1995
                      and December 31, 1994                                                                 3

                  Condensed Consolidated Statements of Operations -- Three 
                      Months and Nine Months Ended September 30, 1995 and 1994                              4

                  Condensed Consolidated Statements of Cash Flows - Nine Months
                      Ended September 30, 1995 and 1994                                                     5

                  Notes to Condensed Consolidated Financial Statements                                      6

ITEM 2.           Management's Discussion and Analysis of Financial
                      Condition and Results of Operations                                                7-11


                           PART II. Other Information


ITEM 6.           Exhibits and Reports on Form 8-K                                                         12


SIGNATURES        12


Exhibit 11        Statement Regarding Computation of Net Earnings
                      Per Share                                                                            13


</TABLE>

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<TABLE>
<CAPTION>



                                      PART I. FINANCIAL INFORMATION
                                       ITEM I. FINANCIAL STATEMENTS
                                            CAERE CORPORATION
                                  CONDENSED CONSOLIDATED BALANCE SHEETS
                                    (In thousands, except share data)
                                               (Unaudited)
<S>                                                                            <C>              <C>
                                                                               September 30,    December 31,
                                                                                    1995            1994
                                                  ASSETS

Cash and cash equivalents ................................................      $   4,219       $   3,995
Short-term investments ...................................................         41,195          47,104
Receivables ..............................................................          7,538           6,040
Income tax receivable ....................................................          1,100            --
Inventories (Note B) .....................................................          2,315           2,555
Other current assets .....................................................          3,620           3,459
                                                                                ---------          ------
         Total current assets ............................................         59,987          63,153

Property and equipment, net ..............................................          5,590           3,615
Other assets .............................................................          1,794           1,134
                                                                                ---------          ------

         Total assets ....................................................      $  67,371       $  67,902
==========================================================================      =========       =========       

                                   LIABILITIES AND STOCKHOLDERS' EQUITY

Accrued expenses and other payables ......................................      $   5,668       $   7,882
Accrued merger related costs .............................................            509           2,267
                                                                                ---------          ------
         Total current liabilities .......................................          6,177          10,149

Preferred stock, $.001 par value:  authorized 2,000,000
  shares; none issued or outstanding .....................................           --              --
Common stock, $.001 par value:  authorized 30,000,000
  shares; issued and outstanding 13,232,154 and 13,046,419
  shares .................................................................             13              13
Additional paid-in capital ...............................................         61,648          60,597
Notes receivable from stockholders .......................................           (179)           (400)
Accumulated deficit ......................................................           (288)         (2,457)
                                                                                ---------          ------

         Total stockholders' equity ......................................         61,194          57,753
                                                                                ---------          ------

         Total liabilities and stockholders' equity ......................      $  67,371       $  67,902
==========================================================================      =========       =========      
</TABLE>

The  accompanying  notes  are an  integral  part of the  condensed  consolidated
financial statements.


<PAGE>
<TABLE>
<CAPTION>



                                            CAERE CORPORATION
                             CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
                                  (In thousands, except per share data)
<S>                                        <C>          <C>          <C>          <C>
                                               (Unaudited)

                                             Three Months Ended        Nine Months Ended
                                               September 30,             September 30,
                                             1995         1994         1995         1994
                                             ----         ----         ----         ----


Net revenues ........................      $13,057      $17,575      $38,453      $42,868

Cost of revenues ....................        4,228        5,257       11,810       12,582
                                           -------      -------      -------      -------

                                             8,829       12,318       26,643       30,286
                                           -------      -------      -------      -------

Operating expenses:
  Research and development ..........        2,157        2,429        6,643        7,385
  Selling, general and administrative        6,135        6,500       18,722       19,434
  Merger related costs ..............         --           --            297         --
                                           -------      -------      -------      -------

                                             8,292        8,929       25,662       26,819
                                           -------      -------      -------      -------

  Operating earnings ................          537        3,389          981        3,467

Interest income, net ................          538          342        1,571          936

  Earnings before income taxes ......        1,075        3,731        2,552        4,403

Income tax expense ..................          161        1,183          383        1,396
                                           -------      -------      -------      -------

  Net earnings ......................      $   914      $ 2,548      $ 2,169      $ 3,007
                                           =======      =======      =======      =======


Net earnings per common and
 common equivalent share (Note C)          $  0.07      $  0.20      $  0.16      $  0.23
                                             =====        =====         ====        =====

Shares used in per share calculation        13,608       12,917       13,477       12,932
                                            ======       ======       ======       ======
</TABLE>



The  accompanying  notes  are an  integral  part of the  condensed  consolidated
financial statements.


<PAGE>

<TABLE>
<CAPTION>

                               CAERE CORPORATION
                CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                                 (In thousands)
                                  (Unaudited)
                                                                                             Nine Months Ended
                                                                                               September 30,
                                                                                          1995               1994
<S>                                                                               <C>     <C>       <C>     <C>    
Cash flows from operating activities:
  Net earnings                                                                    $       2,169     $        3,007
  Adjustments to reconcile net earnings to net cash
  provided by operating activities:
    Depreciation and amortization                                                         1,636              1,501
    Merger related costs                                                                 (1,758)                 -
    Amortization of capitalized software development costs                                  458                464
    Changes in operating assets and liabilities:
      Receivables                                                                        (1,498)               472
      Income tax receivable                                                              (1,100)             1,002
      Inventories                                                                           240               (768)
      Other current assets                                                                 (161)                62
      Accrued expenses and other payables                                                (2,214)             1,869
                                                                                         -------             -----
        Net cash provided by (used for) operations                                       (2,228)             7,609
                                                                                         -------             -----
Cash flows from investing activities:
  Short-term investments, net                                                             5,909                (87)
  Capital expenditures                                                                   (3,425)              (832)
  Capitalized software development costs                                                   (389)              (360)
  Other assets                                                                             (915)               220
                                                                                           -----               ---
        Net cash provided by (used for) investing activities                              1,180             (1,059)
                                                                                          -----             -------
Cash flows from financing activities:
  Proceeds from issuances of common stock, net                                            1,051                335
  Proceeds from repayment of shareholder notes                                              221                  -
                                                                                            ---                  -
        Net cash provided by financing activities                                         1,272                335
Net increase in cash and cash equivalents                                                   224              6,885
Cash and cash equivalents, beginning of period                                            3,995             20,671
                                                                                          -----             ------
Cash and cash equivalents, end of period                                          $       4,219     $       27,556
                                                                                          =====             ======
Supplemental disclosures:
  Cash paid for income taxes                                                      $         603     $        1,102
</TABLE>

The  accompanying  notes  are an  integral  part of the  condensed  consolidated
financial statements.


<PAGE>


                               CAERE CORPORATION

              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                  (Unaudited)

A)       Basis of Presentation

         The  accompanying  unaudited  condensed  consolidated  balance  sheets,
statements of operations  and  statements of cash flows reflect all  adjustments
(consisting of only normal recurring  adjustments)  which are, in the opinion of
management,  necessary  to present the  financial  position of the Company as of
September 30, 1995, and the results of operations and cash flows for the periods
indicated.

         The accompanying  unaudited condensed consolidated financial statements
have  been  prepared  in  accordance  with the  instructions  for Form  10-Q and
therefore  certain  information and footnote  disclosure  normally  contained in
financial  statements  prepared in accordance with generally accepted accounting
principles have been condensed or omitted.  The Company filed audited  financial
statements  with the  Securities  and  Exchange  Commission  which  included all
information and footnotes necessary for a complete presentation of the Company's
financial  position,  results of  operations  and cash flows for the years ended
December 31,  1994,  1993 and 1992 in its report on Form 10-K for the year ended
December  31, 1994 ("the Form 10-K").  These  condensed  consolidated  financial
statements should be read in conjunction with the financial statements contained
in the Company's Form 10-K.  The results of operations  for the interim  periods
ended  September 30, 1995, are not  necessarily  indicative of the results to be
expected for the full year.
<TABLE>
<CAPTION>

<S>                                                                   <C>                     <C> 
B)       Inventories                                                  September 30, 1995      December 31, 1994
         -----------                                                  ------------------      -----------------
                                                                                   (In thousands)
A summary of inventories follows:

    Raw materials .................................................        $ 1,710               $ 1,235
    Work in process ...............................................            239                   520
    Finished goods ................................................            366                   800
-------------------------------------------------------------------        -------               -------
                                                                           $ 2,315               $ 2,555
                                                                           =======               =======

</TABLE>


(C)      Net Earnings Per Share

         Net earnings per common and common  equivalent share are computed using
the weighted  average  number of common and dilutive  common  equivalent  shares
outstanding  during the period.  Common  equivalent shares consist of options to
purchase common stock calculated using the treasury stock method.  Fully diluted
earnings per share for all periods presented were not materially  different from
primary earnings per share.



<PAGE>



                                                  Item 2

                                 MANAGEMENT'S DISCUSSION AND ANALYSIS OF
                              FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Results of Operations

Revenues
Net revenues for the third quarter of 1995 were $13,057,000  compared
to  $17,575,000  for the  third  quarter  of 1994.  For the nine  months  ending
September 30, 1995, net revenues were $38,453,000 compared to $42,868,000 in the
comparable  1994 period.  The revenue  breakdown  between  Desktop  Products and
Business Products was as follows:
<TABLE>
<CAPTION>

                                        Third Quarter                           Year to Date

<S>                                  <C>             <C>                   <C>                  <C> 
                                      1995            1994                  1995                 1994
                                      ----            ----                  ----                 ----
Business Products                     2,407           2,676                 5,899                5,991
Desktop Products                     10,650          14,899                32,554               36,877
                                     ------          ------                ------               ------
      Total                          13,057          17,575                38,453               42,868
                                     ======          ======                ======               ======
</TABLE>


The decrease in Desktop  Products revenue for both the third quarter of 1995 and
the nine months ending September 30, 1995, was caused by the continuing shift in
the business  model brought about by the bundling of OCR software with scanners.
The  effect of this shift is to lower the  average  unit  selling  price for the
OmniPage and WordScan  lines of  software.  Unit sales of the bundled  (OEM) and
upgrade  versions of the OmniPage and WordScan lines were up  approximately  19%
during the third quarter of 1995  compared to the third quarter of 1994.  During
the same period, unit sales for fully priced retail versions of Desktop Products
software,  which consist of the  OmniPage,  WordScan,  PageKeeper,  and OmniForm
products,  decreased  approximately 39%. On a year-to-date  basis, unit sales of
bundles and upgrades were up  approximately  92% in 1995 compared to 1994, while
unit sales of retail versions  declined  approximately 24% over the same period.
The  Company  expects  that  this  trend in the  business  model  will  continue
throughout 1995.

The  decrease in the  Company's  transaction  processing  Business  Products net
revenues  for  both the  third  quarter  and  year-to-date  comparisons  was due
primarily to lower  average unit selling  prices and a decrease in unit sales of
bar code  products.  The Company  has not  experienced  any uniform  seasonality
patterns with these products,  and quarterly revenues  fluctuate  throughout the
year.


Gross Margins
Gross margins were 67.6% for the third quarter,  compared to 70.1% for the third
quarter of 1994.  For the  nine-month  period,  gross margins were 69.3% in 1995
compared  to 70.6% in 1994.  The  decrease  in gross  margins  is  caused by the
reduction  in average  selling  prices of OCR software  products  related to the
bundling business. The primary factors affecting gross margins in the future are
likely to be  continuing  shifts in product mix between  bundled,  upgrade,  and
retail software, as well as changes in product mix between software and hardware
products.

The microcomputer  software market has been subject to rapid changes,  including
significant  price  competition,  which  can be  expected  to  continue.  Future
technology  or market  changes  may cause  certain  products  to rapidly  become
obsolete,  necessitating  increased  inventory  write-offs  or  reserves  and  a
corresponding decrease in gross margins.

Operating Expenses
Research  and  Development  (R&D)  expense  for the  third  quarter  of 1995 was
$2,157,000, an 11% decrease compared to the third quarter of 1994 R&D expense of
$2,429,000. Included in the third quarter R&D expense was approximately $150,000
of costs  associated  with the merger of the  Company  with  Calera  Recognition
Systems  (Calera).  The Company  acquired  Calera in December 1994. For the nine
months ending  September 30, 1995,  R&D expense was down 10% to $6,643,000  from
$7,385,000 in 1994. The decrease in both the third quarter and  year-to-date R&D
spending  on a  comparative  basis was the  result of  synergies  related to the
Calera acquisition.  The Company expects to continue  significant  investment in
R&D during 1995.

Selling,  general and administrative (SG&A) expenses decreased  approximately 6%
to  $6,135,000  for the third  quarter of 1995  compared to  $6,500,000  for the
comparable  quarter of 1994.  Included in SG&A for the third quarter of 1995 was
approximately  $28,000 of merger-related costs for transitional  employees.  For
the nine  months  ended  September  30,  1995,  SG&A was down 4% to  $18,722,000
compared to  $19,434,000  for the same period in 1994. The decrease in 1995 SG&A
for both the third  quarter and  year-to-date  comparisons  was also a result of
synergies realized from the Calera acquisition.

The Company incurred an additional integration charge of $297,000 related to the
Calera  merger in the second  quarter of 1995.  These merger  related  costs are
shown  as a  separate  line  item  in  operating  expenses  in the  accompanying
Statements of Earnings.  This charge included  severance  payments,  legal,  and
other transactions costs and were somewhat offset by a savings resulting from an
early buyout of the lease for the  building  that Calera  occupied  prior to the
acquisition.


Interest Income
Interest  income was $538,000 for the third quarter of 1995 compared to $342,000
for the third quarter of 1994.  For the nine months  ending  September 30, 1995,
interest income was $1,571,000 compared to $936,000 for the comparable period of
1994.  The increases  were the result of higher average cash balances and higher
interest rates earned on the Company's short-term investments.

Income Taxes
The effective income tax rate for the year is expected to approximate 15%, based
on utilization of net operating loss carryforwards  assumed with the acquisition
of Calera, the Company's Foreign Sales  Corporation,  and the tax-free nature of
most interest earned on the Company's short-term investments.

Net Earnings and Earnings Per Share
Net earnings decreased 64% to $914,000 for the third quarter of 1995 compared to
$2,548,000 for the third quarter of 1994.  For the nine months ending  September
30, 1995,  net earnings  decreased 28% to  $2,169,000  from  $3,007,000  for the
comparable  period  of  1994.  The  primary  reason  for the  decreases  was the
declining  revenues  associated with the shift in the business model to a bundle
and upgrade strategy. Earnings per share were $.07 for the third quarter of 1995
compared  to $.20 for the third  quarter of 1994.  For the first nine  months of
1995, earnings per share were $.16 compared to $.23 for the same period of 1994.
The effect of the merger  related costs  commingled in R&D and SG&A in operating
expenses,  along with the additional  integration  charge incurred in the second
quarter of 1995, was to reduce  earnings per share by $.01 and $.08,  during the
third  quarter  of  1995  and  the  nine  months  ending   September  30,  1995,
respectively.

Certain Trends
The  Company's  future  operating  results may be affected by various  uncertain
trends and factors beyond the Company's  control.  These include adverse changes
in general economic conditions,  rapid or unexpected changes in the technologies
affecting optical character recognition,  rising costs, or the unavailability of
needed  components.  The  industry  has  become  increasingly  competitive,  and
accordingly, the Company's results may also be adversely affected by the actions
of  existing  or  future   competitors,   including  the   development   of  new
technologies,  the introduction of new products,  and the reduction of prices by
such competitors to gain or retain market share.

During 1994,  the Company began to bundle  versions of its OmniPage and WordScan
software recognition products with various scanner manufacturers.  These bundled
products began shipping in quantities  during the fourth quarter of 1994.  While
the Company expects to aggressively  market upgrade products to these customers,
and  believes  that  these  bundles  will  provide a greater  number of  scanner
purchasers with experience in the advantages of optical  character  recognition,
there is no assurance  that the Company will be  successful in this new business
model.  In  addition,  use of the  bundled  products  may cause  deferral of the
purchase of the Company's  fully priced retail  version of OmniPage and WordScan
products for a period of time or may adversely  impact the Company's  results of
operations.

Future  operating  results of the Company are dependent  upon the ability of the
combined  Company to realize  the  synergies  expected to result from the merger
with Calera  Recognition  Systems,  Inc.,  consummated  in the fourth quarter of
1994.  The  Company  intends  to seek to  reduce  operating  costs  over time by
eliminating duplicative facilities, repositioning competitive product lines, and
reducing overall the number of employees that would have otherwise been required
by each of the two  companies  operating  separately.  There can be no assurance
that these steps will reduce costs to the extent, or as quickly, as planned. The
Company  anticipates  that the combined  revenues of the two companies after the
merger may be less than the sum of their respective  revenues before the merger,
at least in the short term,  as a result of potential  disruption  in the market
place and competitive responses to the merger.

The Company's  future  earnings and stock price could be subject to  significant
volatility,  particularly  on a quarterly  basis.  The  Company's  revenues  and
earnings are unpredictable due to the Company's shipment patterns.  As is common
in  the  software   industry,   the  Company's   experience   has  been  that  a
disproportionately  large  percentage  of shipments  occur in the third month of
each fiscal quarter, and shipments tend to be concentrated in the latter half of
that month.  Because the  Company's  backlog early in a quarter is not generally
large enough to assure that it will meet its revenue  targets for any particular
quarter,  quarterly  results  are  difficult  to  predict  until  the end of the
quarter. A shortfall in shipments at the end of any particular quarter may cause
operating  results for that quarter to fall  significantly  short of anticipated
levels. Due to analysts' expectations of continued growth, any such shortfall in
operating  results could have a very significant  effect on the trading price of
the Company's common stock in any given period.

As a result of the foregoing  factors and other  factors  arising in the future,
the market price of the  Company's  common  stock may be subject to  significant
fluctuations  over a short  period  of time.  These  fluctuations  may be due to
factors specific to the Company, to changes in analysts' earnings estimates,  or
to factors affecting the computer industry or the securities markets in general.

Liquidity and Capital Resources

The  Company's  financial  position  remains  strong,  with  working  capital of
$53,810,000 and no long-term debt.  Cash and short-term  investments  aggregated
approximately  $45,414,000  at September  30, 1995.  The Company  believes  that
existing cash balances will be sufficient to meet its cash  requirements for the
foreseeable future.

The Company  offers  credit terms to  qualifying  customers  and also sells on a
prepay,  credit card and  cash-on-delivery  basis. With respect to credit sales,
the Company  attempts to control its bad debt  exposure  through  monitoring  of
customers'  creditworthiness  and, where practicable,  through  participation in
credit  associations that provide credit rating information about its customers.
The Company has also  purchased  credit  insurance  for certain key  accounts to
eliminate the potential for catastrophic losses.


Recent Developments

On October 8, 1995,  the Board of  Directors  approved,  subject to  stockholder
approval,  the  Agreement  and Plan of  Reorganization  between  the Company and
ViewStar Corporation ("ViewStar"), and a related Agreement of Merger between the
Company and ViewStar.  In the proposed merger,  the Company will issue 3,437,000
shares of Common Stock for all the outstanding  capital stock and vested options
to purchase common stock of ViewStar.  The proposed merger will be effected such
that  ViewStar  will  become a wholly  owned  subsidiary  of the Company and the
combination will be accounted for as a pooling of interests.  ViewStar develops,
markets, and sells software for workflow and document and image management.

On November 1, 1995, the Company announced that it is investing $2.4 million for
approximately  20% ownership in ZyLAB  International,  Inc., a developer of full
text indexing and retrieval software.




<PAGE>



                                                  Item 6

Exhibits and Reports on Form 8-K

(a) Exhibits
      Exhibit 11 - Statement  Regarding  Computation of Net Earnings
    (Loss) Per Share - page 13

(b) Reports on Form 8-K
      No reports on Form 8-K were  filed by the  Company  during the period 
    covered by this Report.




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.

                                            CAERE CORPORATION

Date:  November 13, 1995

                                            /S/ Blanche M. Sutter
                                            Blanche M. Sutter, Vice President
                                            Finance and Chief Financial Officer

                                            (Principal Financial and Accounting
                                            Officer and Duly Authorized Officer)



<PAGE>


                                                                   EXHIBIT 11
<TABLE>
<CAPTION>


                               CAERE CORPORATION
                        STATEMENT REGARDING COMPUTATION
                        OF NET EARNINGS (LOSS) PER SHARE
                                  (Unaudited)
<S>                                              <C>                <C>               <C>               <C>   

                                                       Three Months Ended                   Nine Months Ended
                                                          September 30,                        September 30,
                                                     1995               1994               1995            1994

Net earnings                                       $914,000         $2,548,000        $2,169,000        $3,007,000
                                                   ========         ==========        ==========        ==========

Weighted average shares outstanding during
the period                                       13,215,958         10,610,707        13,140,976        10,590,369

Common equivalent shares using the
treasury stock method                               392,012          2,306,730           336,397         2,341,552
                                                   --------          ---------          --------         ---------

Common and common equivalent shares
outstanding for purposes of calculating
net earnings per share                           13,607,970         12,917,437        13,477,373        12,931,921
                                                 ==========         ==========        ==========        ==========

Net earnings per common and common
equivalent share                                      $0.07              $0.20             $0.16             $0.23
                                                  =========          =========    ==============      ============
</TABLE>