<PAGE>


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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, 1997

                                       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 0-19654

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

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

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


           DELAWARE                                      77-0138960         
   (State or other jurisdiction of                     (I.R.S. Employer
    incorporation or organization)                    Identification No.)
                                     
                 
      
                                741 CALLE PLANO
                              CAMARILLO, CA  93012
                    (Address of principal executive offices)
                                 (805) 388-3700
              (Registrant's telephone number, including area code)

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


       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 AND (2) HAS BEEN SUBJECT TO SUCH FILING
REQUIREMENTS FOR THE PAST 90 DAYS:  YES [x]  NO [_]

       AS OF MARCH 31, 1997, THERE WERE 34,902,687 SHARES OF $0.01 PAR VALUE
COMMON STOCK OUTSTANDING.


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<PAGE>
 
                       VITESSE SEMICONDUCTOR CORPORATION


                               TABLE OF CONTENTS
                               -----------------


                                                                 Page Number

PART I         FINANCIAL INFORMATION
 
   Item 1      Financial Statements:
 
               Balance Sheets as of March 31, 1997 and                2
               September 30, 1996
 
               Statements of Operations for the Three Months          3
               ended March 31, 1997, March 31, 1996,
               and December 31, 1996, and the Six Months
               ended March 31, 1997 and March 31, 1996.
 
               Statements of Cash Flows for the Six Months            4
               ended March 31, 1997 and March 31, 1996
 
               Notes to Financial Statements                          5
 
   Item 2      Management's Discussion and Analysis of                6
               Financial Condition and Results of Operations
 
PART II        OTHER INFORMATION
 
   Item 4      Submission of Matters to a Vote of Security Holders   15
 
   Item 6      Exhibits and Reports on Form 8-K                      15
 

                                       1
<PAGE>
 
                                    PART I
                             FINANCIAL INFORMATION

                       VITESSE SEMICONDUCTOR CORPORATION
                                BALANCE SHEETS
                       (in thousands, except share data)

<TABLE> 
<CAPTION> 
                                                           Mar. 31, 1997  Sept. 30, 1996 
                                                           -------------  --------------
                                                            (Unaudited)
                                     ASSETS
<S>                                                           <C>          <C> 
Current assets:
 Cash and cash equivalents                                    $112,232     $ 52,436
 Short-term investments                                         65,371          ---
 Trade accounts receivable, net                                 18,639       18,423
 Other receivables                                                 134          196
 Inventories, net:                                                                 
  Raw material                                                   1,797        1,678
  Work in process                                                5,685        5,436
  Finished goods                                                 2,752        2,845
                                                              --------     --------
                                                                10,234        9,959
 Prepaid expenses                                                1,076          841
 Deferred tax asset                                              4,000          ---
                                                              --------     --------
 Total current assets                                          211,686       81,855
                                                              --------     --------
Property and equipment, net                                     23,457       17,892
Long-term investment                                             6,300          ---
Other assets                                                       747          669
                                                              --------     --------
                                                              $242,190     $100,416
                                                              ========     ======== 
                      LIABILITIES AND SHAREHOLDERS' EQUITY

Current liabilities:
 Current installments of capital lease obligations            $    428     $    767
 Current installments of term loans                                172          164
 Accounts payable                                                6,917        6,731
 Accrued expenses and other current liabilities                  7,166        3,728
 Deferred revenue                                                  530          250
                                                              --------     --------
     Total current liabilities                                  15,213       11,640
                                                              --------     --------
Capital lease obligations, less current installments               ---           91
Term loans, less current installments                              226          315
Shareholders' equity:
 Common stock, $.01 par value.  Authorized 50,000,000
  shares; issued and outstanding 34,902,687 shares on
  Mar. 31, 1997, and 29,109,791 shares on Sept. 30, 1996           349          291
 Additional paid-in capital                                    257,931      133,393
 Accumulated deficit                                           (31,529)     (45,314)
                                                              --------     --------
     Net shareholders' equity                                  226,751       88,370
                                                              --------     --------
                                                              $242,190     $100,416
                                                              ========     ========
</TABLE>

                                       2
<PAGE>
 
                       VITESSE SEMICONDUCTOR CORPORATION
                           STATEMENTS OF OPERATIONS
                                  (UNAUDITED)
                (in thousands, except share and per share data)
<TABLE>
<CAPTION>
 
 
                                                    Three Months Ended                       Six Months Ended
                                       ---------------------------------------------   -----------------------------
                                       Mar 31, 1997    Mar 31, 1996    Dec 31, 1996    Mar 31, 1997    Mar 31, 1996
                                       -------------   -------------   -------------   -------------   -------------
<S>                                    <C>             <C>             <C>             <C>             <C>
Revenues, net:
 Production                             $    23,303     $    14,021     $    20,406     $    43,709     $    26,088
 Development                                  1,259           1,607           1,426           2,685           3,562
                                        -----------     -----------     -----------     -----------     -----------
  Total revenues                             24,562          15,628          21,832          46,394          29,650
                                        -----------     -----------     -----------     -----------     -----------
Costs and expenses:
 Cost of revenues                            10,833           7,616           9,858          20,691          14,600
 Engineering, research and devel.             3,914           2,658           3,480           7,394           5,156
 Selling, general and admin.                  3,273           2,406           2,932           6,205           4,672
                                        -----------     -----------     -----------     -----------     -----------
  Total costs and expenses                   18,020          12,680          16,270          34,290          24,428
                                        -----------     -----------     -----------     -----------     -----------
Income from operations                        6,542           2,948           5,562          12,104           5,222
Other income (expense):
 Interest income                              2,222             119           1,199           3,421             146
 Interest expense                               (36)           (250)            (98)           (134)           (551)
 Other                                          (83)             30               7             (76)              5
                                        -----------     -----------     -----------     -----------     -----------
  Total other income (expense)                2,103             101           1,108           3,211             400
                                        -----------     -----------     -----------     -----------     -----------
Income before income taxes                    8,645           2,847           6,670          15,315           4,822
Income taxes                                    863             285             667           1,530             482
                                        -----------     -----------     -----------     -----------     -----------
Net income                              $     7,782     $     2,562     $     6,003     $    13,785     $     4,340
                                        ===========     ===========     ===========     ===========     ===========
 
Net income per share                    $      0.20     $      0.09     $      0.17     $      0.37     $      0.16
                                        ===========     ===========     ===========     ===========     ===========
 
Weighted average common and
 common equivalent shares
 outstanding                             38,472,727      28,153,190      35,805,873      36,923,609      27,632,349
                                        ===========     ===========     ===========     ===========     ===========
</TABLE>

                                       3
<PAGE>
 
                       VITESSE SEMICONDUCTOR CORPORATION
                           STATEMENTS OF CASH FLOWS
                                  (UNAUDITED)
                                (in thousands)
<TABLE>
<CAPTION>
 
                                                                Six Months Ended
                                                         -------------------------------
                                                         Mar. 31, 1997    Mar. 31, 1996
                                                         --------------   --------------
<S>                                                      <C>              <C>
Cash flows from operating activities:
Net income                                                    $ 13,785          $ 4,340
Adjustments to reconcile net income to net cash
provided by operating activities:
 Depreciation and amortization                                   2,893            2,400
 Change in assets and liabilities:
  (Increase) decrease in:
   Receivables, net                                               (154)            (426)
   Inventories                                                    (275)             194
   Prepaid expenses                                               (235)            (273)
   Other assets                                                    (78)               4
  Increase (decrease) in:
   Accounts payable                                                186              977
   Accrued expenses and other current liabilities                3,438            1,093
   Deferred revenue                                                280              (20)
                                                              --------          -------
     Net cash provided by operating activities                  19,840            8,289
                                                              --------          -------
 
Cash flows from investing activities:
 Short-term investments                                        (65,371)             ---
 Capital expenditures                                           (8,458)          (3,350)
 Long-term investment                                           (6,300)             ---
                                                              --------          -------
     Net cash used in investing activities                     (80,129)          (3,350)
                                                              --------          -------
 
Cash flows from financing activities:
 Principal payments under capital lease obligations               (430)          (1,475)
 Principal payments under term loan                                (81)          (2,456)
 Short-term borrowings (payments)                                  ---           (2,950)
 Proceeds from issuance of common stock, net                   120,596           41,468
                                                              --------          -------
     Net cash provided by financing activities                 120,085           34,587
                                                              --------          -------
 
     Net increase in cash & cash equivalents                    59,796           39,526
Cash & cash equivalents at beginning of period                  52,436            6,315
                                                              --------          -------
Cash & cash equivalents at end of period                      $112,232          $45,841
                                                              ========          =======
 
Supplemental disclosures of cash flow information:
 Cash paid during the period for:
  Interest                                                    $     36          $   413
                                                              ========          =======
  Income Taxes                                                $     56          $    76
                                                              ========          =======
 
</TABLE>

                                       4
<PAGE>
 
                       VITESSE SEMICONDUCTOR CORPORATION
                         NOTES TO FINANCIAL STATEMENTS

NOTE 1.  GENERAL

   In management's opinion, all adjustments (consisting only of normal recurring
accruals) which are necessary for a fair presentation of financial condition and
results of operations are reflected in the attached interim financial
statements.  All amounts are unaudited except the September 30, 1996 balance
sheet.  This report should be read in conjunction with the audited financial
statements presented in the 1996 Annual Report.   Footnotes and other
disclosures which would substantially duplicate the disclosures in the Company's
audited financial statements for fiscal year 1996 contained in the Annual Report
have been omitted.  The interim financial information herein is not necessarily
representative of the results to be expected for any subsequent period.


NOTE 2.  COMPLETION OF PUBLIC OFFERING

   During the quarter ended December 31, 1996, the Company completed a public
offering of 3,450,000 shares of Common Stock at a price to the public of $36 per
share which resulted in net proceeds before expenses of $118,611,000.  For
complete information regarding this offering, please see the Company's
Prospectus dated November 13, 1996.


NOTE 3.  STOCK SPLIT

   On January 28, 1997, the Board of Directors approved a 3 for 2 stock split of
the Company's Common Stock that was effected on February 28, 1997.  All
references to the number of common shares, weighted average number of common
shares and per share data for all periods presented have been adjusted to
reflect the stock split.

                                       5
<PAGE>
 
                     MANAGEMENT'S DISCUSSION AND ANALYSIS
               OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS


   The information set forth in "Management's Discussion and Analysis of
Financial Condition and Results of Operations" below includes "forward looking
statements" within the meaning of Section 27A of the Securities Act of 1933, as
amended and Section 21E of the Securities Exchange Act of 1934, as amended, and
is subject to the safe harbor created by those sections.  Factors that
realistically could cause results to differ materially from those projected in
the forward looking statements are set forth below in "Management's Discussion
and Analysis of Financial Condition and Results of Operations" and "Factors
Affecting Future Operating Results."

RESULTS OF OPERATIONS

   Revenues

   Total revenues in the second quarter of fiscal 1997 were $24,562,000, a 57%
increase over the $15,628,000 recorded in the second quarter of fiscal 1996 and
a 13% increase over the $21,832,000 recorded in the prior quarter.  For the six
months ended March 31, 1997, total revenues were $46,394,000, a 56% increase
over the $29,650,000 recorded in the six months ended March 31, 1996.  The
increase in total revenues in the second quarter of 1997 and in the six months
ended March 31, 1997 was due to an increase in production revenues as a result
of increased shipments to customers in the telecommunications and automatic test
equipment markets.  Production revenues for the second quarter of 1997 were
$23,303,000, a 66% increase over the $14,021,000 recorded in the second quarter
of fiscal 1996 and a 14% increase over the $20,406,000 recorded in the prior
quarter.  For the six months ended March 31, 1997, production revenues were
$43,709,000, a 68% increase over the $26,088,000 recorded in the six months
ended March 31, 1996.

   Development revenues in the second quarter of fiscal 1997 were $1,259,000
compared to $1,607,000 in the second quarter of fiscal 1996 and $1,426,000 in
the prior quarter.  For the six months ended March 31, 1997, development
revenues were $2,685,000 compared to $3,562,000 in the comparable period a year
ago.  Fluctuations in development revenues from quarter to quarter are typically
due to the variability in the timing of design wins and development milestones.

   Cost of Revenues

   Cost of revenues as a percentage of total revenues in the second quarter of
fiscal 1997 was 44.1% compared to 48.7% in the second quarter of fiscal 1996 and
45.2% in the prior quarter.  For the six months ended March 31, 1997 and 1996,
cost of revenues as a percentage of total revenues was 44.6% and 49.2%,
respectively.  The decrease in cost of revenues as a percentage of total
revenues was due to a reduction in per unit costs associated with increased
production, as well as an improvement in manufacturing yields.

                                       6
<PAGE>
 
   The Company's manufacturing yields vary significantly among products,
depending on a particular IC's complexity and the Company's experience in
manufacturing it.  Historically, the Company has experienced difficulties
achieving acceptable yields on some ICs, which  has resulted in shipment delays.
The Company's overall yields are lower than yields experienced in a silicon
process because of the large number of different products manufactured in
limited volume and because the Company's H-GaAs process technology is
significantly less developed.  The Company expects that many of its current and
future products may never be produced in volume.

   Regardless of the process technology used, the fabrication of semiconductors
is a highly complex and precise process.  Defects in masks, impurities in the
materials used, contamination of the manufacturing environment, equipment
failure and other difficulties in the fabrication process can cause a
substantial percentage of wafers to be rejected or numerous die on each wafer to
be nonfunctional.

   Because the majority of the Company's costs of manufacturing are relatively
fixed, maintenance of the number of shippable die per wafer is critical to the
Company's results of operations.  Yield decreases can result in substantially
higher unit costs and may result in reduced gross profit and net income.  There
can be no assurance that the Company will not suffer periodic yield problems in
connection with new or existing products which could cause the Company's
business, operating results and financial condition to be materially adversely
affected.

   Inventory is valued at the lower of cost or market.  Because allocable
manufacturing costs can be high, new product inventory is often valued at
market.  In addition, a portion of work-in-process inventory consists of wafers
in various stages of fabrication.  Consequently, the Company estimates yields
per wafer in order to estimate the value of inventory.  If yields are materially
different than projected, work-in-process inventory may need to be revalued.  In
addition, the ability of customers to change designs and to cancel or reschedule
orders can also result in adverse adjustments to inventory.  There can be no
assurance that such adjustments will not occur in the future and have a material
adverse effect on the Company's results of operations.

   Engineering, Research and Development Costs

   Engineering, research and development expenses were $3,914,000 in the second
quarter of fiscal 1997 compared to $2,658,000 in the second quarter of fiscal
1996 and $3,480,000 in the prior quarter.  For the six months ended March 31,
1997, engineering, research and development costs were $7,394,000 compared to
$5,156,000 in the six months ended March 31, 1996.  The increases in
engineering, research and development costs were principally due to increased
headcount and higher costs to support the Company's continuing efforts to
develop new products.  As a percentage of total revenues, engineering, research
and development costs decreased to 16% in the second quarter of 1997 from 17% in
the second quarter of 1996 and was unchanged from the prior quarter.  For the
six months ended March 31, 1997, engineering, research and development costs as
a percentage of total revenues decreased to 16% from 17% in the comparable
period a year ago.  These decreases were the result of the Company's revenues
growing faster than engineering, research and development costs.  The Company's
engineering, research and development costs are expensed as incurred.

                                       7
<PAGE>
 
   Selling, General and Administrative Expenses

   Selling, general and administrative expenses (SG&A) were $3,273,000 in the
second quarter of 1997, compared to $2,406,000 in the second quarter of 1996 and
$2,932,000 in the prior quarter.  For the six months ended March 31, 1997, SG&A
expenses were $6,205,000 compared to $4,672,000 in the same period in 1996.  The
increase in SG&A expenses was due to increased headcount, salary increases,
higher commissions resulting from increased sales, and increased advertising.
As a percentage of total revenues, SG&A expenses decreased to 13% in the second
quarter of 1997 from 15% in the second quarter of 1996 and was unchanged from
the prior quarter.  For the six months ended March 31, 1997, SG&A expenses as a
percentage of total revenues decreased to 13% from 16% in the comparable period
a year ago.  These decreases were the result of the Company's revenues growing
faster than SG&A expenses.

   Interest Income

   Interest income increased to $2,222,000 in the second quarter of fiscal 1997
from $119,000 in the second quarter of 1996 and $1,199,000 in the prior quarter.
For the six months ended March 31, 1997, interest income increased to $3,421,000
from $146,000 in the comparable period a year ago.  These increases were the
result of a higher average cash balance in the second quarter of fiscal 1997 as
compared to the prior periods, primarily due to the proceeds from two public
offerings which were completed in March 1996 and November 1996, respectively.

   Interest Expense

   Interest expense decreased to $36,000 in the second quarter of fiscal 1997
from $250,000 in the second quarter of fiscal 1996 and $98,000 in the prior
quarter.  For the six months ended March 31, 1997, interest expense declined to
$134,000 from $551,000 in the comparable period a year ago.  These decreases
were caused by a decrease in the Company's average debt balance, primarily due
to an accelerated repayment of certain debt following the Company's public
offering in March 1996.

   Income Taxes

   The Company recorded a provision for income taxes in the amount of $863,000
in the second quarter of fiscal 1997 and $285,000 in the second quarter of
fiscal 1996 principally for federal alternative minimum taxes, state income
taxes, and taxes due to foreign jurisdictions, in light of the Company's
existing net operating loss carryforwards.

LIQUIDITY AND CAPITAL RESOURCES

   Operating Activities

   The Company generated $19,840,000 and $8,289,000 from operating activities in
the six month periods ended March 31,1997 and 1996, respectively.  The increase
in operating cash flow was principally due to an improvement in profitability.

                                       8
<PAGE>
 
   Investing Activities

   Capital expenditures, principally for manufacturing and test equipment, were
$8,458,000 in the six month period ended March 31, 1997 compared to $3,350,000
in the six month period ended March 31, 1996.  The Company intends to continue
investing in manufacturing, test and engineering equipment and currently expects
to spend an additional $7 to $10 million for capital expenditures at its
Camarillo facility and an additional $20 to $25 million for its Colorado Springs
facility in fiscal 1997, which the Company intends to finance with working
capital.

   Financing Activities

   In the six month period ended March 31, 1997, the Company generated
$120,085,000 in financing activities.  Net  proceeds from the issuance of common
stock, principally through a public offering completed in November 1996, was
$120,596,000, offset by $511,000 in payments on debt obligations.

   The Company has a revolving line of credit agreement with a bank, which
expires on January 5, 1998.  The maximum amount available under the revolving
line of credit is $12,500,000.  The interest rate on borrowings under this
revolving line of credit is equal to the bank's prime rate.  As of March 31,
1997, there were no borrowings outstanding under this agreement.

   Management believes that the Company's cash flow from operations and
revolving line of credit agreement are adequate to finance its planned growth
and operating needs for the next 12 months.  The Company believes it can meet
its wafer fabrication  needs through fiscal 1998 at its Camarillo facility
assuming that the Company successfully completes planned substantial incremental
increases in production capacity at the facility.  The Company is currently in
the process of constructing a new wafer fabrication facility.  The Company
estimates that the cost of the new wafer fabrication facility in Colorado
Springs, Colorado (the "Facility"), will be at least $70 million, of which
approximately $25 million relates to the purchase of land and the construction
of the building and $45 million relates to capital equipment purchases.  In
October 1996, the Company entered into a synthetic lease transaction pursuant to
a Master Lease Agreement (the "Lease") providing for the financing of $27.5
million for the acquisition and construction of the new facility, as well as the
acquisition of certain capital equipment.  The Lease is an operating lease for
accounting purposes, but a conditional sale for Federal tax purposes.  The
obligations of the Company are secured by the Company's interest in the
Facility.  The Company's obligations are also secured by cash collateral in an
amount equal to 84% of all amounts advanced by the lessor under the lease for
the acquisition and construction of the Facility (the "Lease Balance").  The
Lease requires that all interest earned by the Company on the cash collateral be
paid to the lessor to satisfy a portion of the Company's rental obligation.  The
Lease also requires monthly payments calculated on a payment date by multiplying
16% of the then amount advanced by the lessor times a rate equal to the three-
month Eurodollar Rate plus a spread of 1.75%.  The Company is responsible for
all costs of ownership and operation of the Facility, and has guaranteed certain
obligations of the lessor until such time as all of the Company's obligations
under the Lease are performed.  The Lease provides the Company with the option
at the end of the lease term of either acquiring the Facility for a price equal
to outstanding advances made by the lessor, or arranging for the Facility to be
acquired by a third 

                                       9
<PAGE>
 
party. The Company is contingently liable at the end of the lease term to the
extent the lessor is not able to realize 84% of the Lease Balance upon sale or
other disposition of the Facility. Under the Lease, the Company is required to
meet certain financial and other covenants, including a restriction on the
payment of cash dividends to its shareholders. If certain financial covenants
are not maintained, the Company must provide additional cash collateral equal to
16% of the Lease Balance.


                  FACTORS AFFECTING FUTURE OPERATING RESULTS

ACCEPTANCE OF H-GAAS BY TARGET MARKETS

   ECL and BiCMOS are currently the dominant process technologies for high-
performance ICs.  Vitesse's prospective customers are principally systems
designers and manufacturers in the telecommunications, data communications and
ATE industries that may use ECL or BiCMOS ICs in their existing systems and
evaluate Vitesse H-GaAs ICs for use in their next-generation systems.  These
customers may be reluctant to adopt Vitesse's products because of perceived
risks relating to GaAs technology generally and concerns about the relative
speed, complexity, power dissipation and cost-effectiveness of the Company's H-
GaAs products compared to ECL and BiCMOS ICs.  In addition, these customers may
be reluctant to rely upon a relatively small company such as Vitesse for a
critical sole-sourced component.  There can be no assurance that additional
companies in Vitesse's target markets will adopt its H-GaAs technology or that
the companies that currently use the Company's H-GaAs products will continue to
do so in the future.

CUSTOMER AND INDUSTRY CONCENTRATION

   The Company is, and intends to continue, focusing its sales efforts on a
relatively small number of companies in the telecommunications, data
communications and ATE markets that require high performance ICs.  Certain of
these companies are also competitors of Vitesse.

VARIABILITY OF QUARTERLY RESULTS

   The Company's quarterly results of operations have varied significantly in
the past and may continue to do so in the future.  These variations have been
due to a number of factors, including: the loss of major customers; variations
in manufacturing yields; the timing and level of new product and process
development costs; changes in inventory levels; changes in the type and mix of
products being sold; changes in manufacturing capacity and variations in the
utilization of this capacity; and customer design changes, delays or
cancellations.  The Company has also from time to time incurred significant new
product and process development costs due to the Company's policy of expensing
costs as incurred relating to the manufacture of new products and the
development of new process technology.  There can be no assurance that the
Company will not incur such charges or experience revenue declines in the
future.

                                       10
<PAGE>
 
MANUFACTURING CAPACITY LIMITATIONS; NEW PRODUCTION FACILITY

   The Company currently manufactures all of its ICs at its four-inch wafer
fabrication facility located in Camarillo, California.  The Company believes
that this facility should be able to satisfy its production needs through the
end of fiscal 1998, assuming that the Company successfully completes planned
substantial incremental increases in production capacity at the facility through
such date.  The Company plans to expend up to $10 million for the purchase of
equipment relating to this expansion.  In addition to the purchase of equipment,
the Company will be required to successfully hire, train and manage additional
production personnel in order to successfully increase its production capacity
in accordance with its time schedule.  In the event the Company's expansion
plans were not implemented on a timely basis for any reason, the Company could
be subject to production capacity constraints.  Such constraints could have a
material adverse effect on the Company's business, operating results or
financial condition.

   The Company is currently in the process of constructing a new six-inch wafer
fabrication facility in Colorado Springs, Colorado, to supplement its existing
facility in Camarillo.  As planned, the facility will initially include a 10,000
square foot Class 1 clean room with the capability for future expansion to
15,000 square feet.  The Company has initiated construction of the new facility
and plans to complete the physical plant during the fourth quarter of fiscal
1997.  Following the completion of the physical plant, the Company must install
equipment and perform necessary testing prior to commencing commercial
production at the facility, a process which the Company anticipates will take at
least nine months.  Accordingly, the Company believes the new facility will not
begin commercial production prior to the fourth quarter of fiscal 1998.  The
Company estimates that the cost of the new wafer fabrication facility will be at
least $70 million, of which approximately $25 million relates to the purchase of
land and construction of the building and approximately $45 million relates to
capital equipment purchases.  In the event the Company were to decide to expand
the Class 1 clean room in the future, substantial additional expenditures would
be required.

   The construction of the new wafer fabrication facility entails significant
risks, including shortages of materials and skilled labor, unavailability or
late delivery of process equipment, unforeseen environmental or engineering
problems, work stoppages, weather interferences and unanticipated cost
increases, any of which could have a material adverse effect on the building,
equipping and production start-up of the new facility.  In addition, unexpected
changes or concessions required by local, state or federal regulatory agencies
with respect to necessary licenses, land use permits, site approvals and
building permits could involve significant additional costs and delay the
scheduled opening of the facility.  As a result of the foregoing and other
factors, there can be no assurance that the project will be successfully
completed within its current budget or within the timeframe currently scheduled
by the Company.  The inability of the Company to successfully complete the new
facility as currently budgeted and scheduled could have a material adverse
effect on its business, operating results or financial condition.

   The successful operation of the new wafer fabrication facility, if completed,
as well as the Company's overall production operations, will also be subject to
numerous risks.  The Company has no prior experience with the operation of
equipment or the processes involved in producing finished six-inch wafers, which
differ significantly from those involved in the production of four-inch wafers.
The Company will be required to hire, train and manage production personnel

                                       11
<PAGE>
 
successfully in order to effectively operate the new facility.  The Company does
not have excess production capacity at its Camarillo facility to offset any
failure of the new facility to meet planned production goals.  As a result of
these and other factors, the failure of the Company to successfully operate the
new wafer fabrication facility could have a material adverse effect on its
business, operating results or financial condition.   The Company will also have
to effectively coordinate and manage the Colorado Springs and Camarillo
facilities to successfully meet its overall production goals.  The Company has
no experience in coordinating and managing full scale production facilities
which are located at different sites.  The failure to successfully coordinate
and manage the two sites could adversely affect the Company's overall production
and could have a material adverse effect on its business, operating results or
financial condition.

COMPETITION

   The high-performance semiconductor market is highly competitive and subject
to rapid technological change, price erosion and heightened international
competition.  The telecommunications, data communications and ATE industries,
which are the primary target markets for the Company, are also becoming
intensely competitive because of deregulation and heightened international
competition, among other factors.  In the telecommunications market, the Company
currently competes primarily against other GaAs-based companies such as Triquint
Semiconductor and the GaAs fabrication operations of system companies such as
Rockwell.  In the data communications and the ATE markets, the Company competes
primarily against silicon ECL and BiCMOS products offered principally by
semiconductor manufacturers such as Fujitsu, Hewlett Packard, Motorola, National
Semiconductor and Texas Instruments and bipolar silicon IC manufacturers such as
Applied Micro Circuits Corporation and Synergy Semiconductor Corporation.  Many
of these companies have significantly greater financial, technical,
manufacturing and marketing resources than the Company.  In addition, in lower-
frequency applications, the Company faces increasing competition from CMOS-based
products, particularly as the performance of such products continues to improve.

   Competition in the Company's markets for high-performance ICs is primarily
based on price/performance, product quality and the ability to deliver products
in a timely fashion.  Some prospective customers may be reluctant to adopt
Vitesse's products because of perceived risks relating to GaAs technology.  In
addition, product qualification is typically a lengthy process and certain
prospective customers may be unwilling to invest the time or incur the costs
necessary to qualify suppliers such as the Company.  Prospective customers may
also have concerns about the relative speed, complexity and power advantages of
the Company's products compared to more familiar ECL of BiCMOS semiconductors or
about the risks associated with relying on a relatively small company for a
critical sole-sourced component.

PRODUCT AND PROCESS DEVELOPMENT AND TECHNOLOGICAL CHANGE

   The market for the Company's products is characterized by rapid changes in
both product and process technologies.  The Company believes that its future
success will depend, in part, upon its ability to continue to improve its
product and process technologies and develop new technologies in order to
maintain its competitive position, to adapt its products and processes to
technological changes and to adopt emerging industry standards.  There can be no
assurance that the Company will be able to improve its product and process
technologies and develop new 

                                       12
<PAGE>
 
technologies in a timely manner or that such improvements or developments will
result in products that achieve market acceptance. The failure to successfully
improve its existing technologies or develop new technologies in a timely manner
could adversely affect the Company's business, operating results and financial
condition.

DEPENDENCE ON THIRD PARTIES

   The Company depends upon third parties for performing certain processes and
providing a variety of components and materials necessary for the production of
its H-GaAs ICs.  The Company packages certain of its ICs in its Camarillo
facility using customized ceramic packaging which is presently available from
only one source.  The balance of the Company's ICs are packaged in plastic by
third parties since the Company has no internal capability to perform such
plastic packaging.  Other components and materials for H-GaAs ICs are available
from only a limited number of sources.  The inability to obtain sufficient sole-
or limited-source services or components as required could result in delays or
reductions in product shipments which could adversely affect the Company's
business, operating results and financial condition.

ENVIRONMENTAL REGULATIONS

   The Company is subject to a variety of federal, state and local governmental
regulations related to the use, storage, discharge and disposal of toxic,
volatile or otherwise hazardous chemicals used in its manufacturing process.
Any failure to comply with present or future regulations could result in the
imposition of fines on the Company, the suspension of production or a cessation
of operations.  In addition, such regulations could restrict the Company's
ability to expand its facilities at its present location or could require the
Company to acquire costly equipment or to incur other significant expenses to
comply with environmental regulations or to clean up prior discharges.

   The Company uses significant amounts of water throughout its manufacturing
process.  Previous droughts in California and Colorado have resulted in
restrictions being placed on water use by manufacturers and residents in the
states.  In the event of future drought, reductions in water use may be mandated
generally, and it is unclear how such reductions will be allocated among
California's or Colorado's different users.  No assurance can be given that near
term reductions in water allocations to manufacturers will not occur, possibly
requiring a reduction in the Company's level of production, and materially and
adversely affecting the Company's operations.  See "Business--Environmental
Matters."

MANAGEMENT OF GROWTH

   The management of the Company's growth requires qualified personnel and
systems.  In particular, the construction and operation of the Company's planned
wafer fabrication facility in Colorado Springs and its integration with the
Company's current facility will require significant management, technical and
administrative resources.  There can be no assurance that the Company will be
able to manage its growth or effectively integrate its planned wafer fabrication
facility, and failure to do so could have a material adverse effect on the
Company's business, operating results or financial condition.

                                       13
<PAGE>
 
DEPENDENCE ON KEY PERSONNEL

   The Company's success depends in part upon attracting and retaining the
services of its managerial and technical personnel.  The competition for
qualified personnel is intense.  There can be no assurance that the Company can
retain its key managerial and technical employees or that it can attract,
assimilate or retain other skilled technical personnel in the future, and
failure to do so could have a material adverse effect on the Company's business,
operating results or financial condition.

                                       14
<PAGE>
 
                                    PART II
                               OTHER INFORMATION

ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

     On January 28, 1997, the Company held its regular Annual Meeting of
Stockholders.  The purpose of the meeting was to elect Directors to serve for
the ensuing year, to approve a proposal to amend the Company's Restated
Certificate of Incorporation to authorize an increase in the authorized shares
of the Company's Common Stock from 25,000,000 to 50,000,000, and to ratify the
appointment of KPMG Peat Marwick LLP as independent auditors for the Company for
the 1997 fiscal year.  The following individuals were elected to serve as
Directors for the ensuing year:
<TABLE>
<CAPTION>
 
             Name               Age               Principal Occupation                     
             ----               ---               --------------------                     
      <S>                       <C>      <C>                                                                  
      Pierre R. Lamond          67       General Partner of Sequoia Capital and Chairman                         
                                         of the Board of Directors of the Company                                
      James A. Cole             54       General Partner of Spectra Enterprise Associates                        
      John C. Lewis             61       Chief Executive Officer and Chairman of Amdahl                          
                                         Corporation                                                             
      Thurman J. Rodgers        48       President and Chief Executive Officer of Cypress                        
                                         Semiconductor Corporation                                               
      Louis R. Tomasetta        48       President, Chief Executive Officer and Director of                      
                                         the Company                                        
</TABLE> 
Additionally, the following items were voted upon and approved by the
shareholders:

<TABLE> 
<CAPTION> 
 
                                                                         Against or            Votes                   
                                                         Votes for        Withheld           Abstained                 
                                                         ---------        --------           ---------                 
<S>                                                     <C>               <C>                 <C>                      
Amendment of the Company's Restated                                                                                    
Certificate of Incorporation to increase                                                                               
the number of authorized shares from                                                                                   
25,000,000 to 50,000,000                                18,955,689         743,190             228,021                 
                                                                                                                       
Ratification of appointment of KPMG                                                                                    
Peat Marwick LLP as independent auditors                                                                               
for the fiscal year ending September 30, 1997           19,822,434          11,122              93,344                 
</TABLE>

ITEM 6.  EXHIBITS & REPORTS ON FORM 8-K

     (a) EXHIBITS
 
         Exhibit 27 Financial Data Schedule.

     (b) REPORTS ON FORM 8-K

         None.

                                       15
<PAGE>
 
                                  SIGNATURES


   Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.



                           VITESSE SEMICONDUCTOR CORPORATION


                           By:  /s/ Eugene F. Hovanec
                                ---------------------
                                    Eugene F. Hovanec
                                    Vice President, Finance and
                                    Chief Financial Officer

                                       16