<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, 1998

                                       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, 1998, THERE WERE 36,313,319 SHARES OF $0.01 PAR VALUE
COMMON STOCK OUTSTANDING.


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<PAGE>
 
                       VITESSE SEMICONDUCTOR CORPORATION

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

<TABLE>
<CAPTION>
                                                                 Page Number

<S>            <C>                                                   <C>

PART I         FINANCIAL INFORMATION

 
   Item 1      Financial Statements:
 
               Consolidated Balance Sheets as of March 31, 1998       2
               and September 30, 1997
 
               Consolidated Statements of Operations for the Three    3
               Months ended March 31, 1998, March 31, 1997,
               and December 31, 1997, and the Six Months
               ended March 31, 1998 and March 31, 1997.
 
               Consolidated Statements of Cash Flows for the Six      4
               Months ended March 31, 1998 and March 31, 1997
 
               Notes to Consolidated 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   13
 
   Item 6      Exhibits and Reports on Form 8-K                      13
</TABLE>

                                       1
<PAGE>
 
                                     PART I
                             FINANCIAL INFORMATION

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

<TABLE>
<CAPTION>
                                                         March 31, 1998         Sept. 30, 1997
                                                         --------------         --------------
                                                            (Unaudited)
<S>                                                           <C>                   <C>
                                             ASSETS

Current assets:
 Cash and cash equivalents                                    $ 92,243              $ 97,358
 Short-term investments                                         52,053                58,486
 Accounts receivable, net                                       28,779                21,072
 Inventories, net:
  Raw material                                                   2,654                 2,421
  Work in process                                                8,382                 6,762
  Finished goods                                                 2,454                 2,626
                                                              --------              --------
                                                                13,490                11,809
 Prepaid expenses                                                2,274                 1,121
 Deferred tax asset                                             14,800                14,800
                                                              --------              --------
  Total current assets                                         203,639               204,646
                                                              --------              --------
Property and equipment, net                                     55,366                41,684
Restricted long-term deposits                                   58,669                45,556
Other assets                                                       622                   394
                                                              --------              --------
                                                              $318,296              $292,280
                                                              ========              ========

                           LIABILITIES AND SHAREHOLDERS' EQUITY

Current liabilities:
 Current installments of capital lease obligations and
  term loans                                                  $    153              $    256
 Accounts payable                                               14,882                19,758
 Accrued expenses and other current liabilities                 12,988                 7,017
                                                              --------              --------
     Total current liabilities                                  28,023                27,031
                                                              --------              --------
Capital lease obligations and term loans, less
 current installments                                               71                   147
Shareholders' equity:
 Common stock, $.01 par value.  Authorized 100,000,000
  shares; issued and outstanding 36,313,319 shares on
  Mar. 31, 1998, and 35,913,738 shares on Sept. 30, 1997           363                   359
 Additional paid-in capital                                    279,830               277,169
 Retained earnings (accumulated deficit)                        10,009               (12,426)
                                                              --------              --------
     Net shareholders' equity                                  290,202               265,102
                                                              --------              --------
                                                              $318,296              $292,280
                                                              ========              ========
</TABLE>

                                       2
<PAGE>
 
                       VITESSE SEMICONDUCTOR CORPORATION
                     CONSOLIDATED STATEMENTS OF OPERATIONS
                                  (UNAUDITED)
                (in thousands, except share and per share data)
<TABLE>
<CAPTION>
 
 
                                                           Three Months Ended                         Six Months Ended
                                            ------------------------------------------------   -------------------------------
                                            Mar. 31, 1998    Mar. 31, 1997    Dec. 31, 1997    Mar. 31, 1998    Mar. 31, 1997
                                            --------------   --------------   --------------   --------------   --------------
<S>                                         <C>              <C>              <C>              <C>              <C>
 
Revenues, net                                 $    40,212      $    24,562      $    34,701      $    74,913      $    46,394
 
Costs and expenses:
 Cost of revenues                                  16,012           10,833           14,194           30,206           20,691
 Engineering, research and development              6,462            3,914            5,555           12,017            7,394
 Selling, general and administrative                4,849            3,273            4,262            9,111            6,205
                                              -----------      -----------      -----------      -----------      -----------
  Total costs and expenses                         27,323           18,020           24,011           51,334           34,290
                                              -----------      -----------      -----------      -----------      -----------
 
Income from operations                             12,889            6,542           10,690           23,579           12,104
 
Other income (expense):
 Interest income                                    2,189            2,222            2,293            4,482            3,421
 Interest and other expense                            (8)            (119)             (10)             (18)            (210)
                                              -----------      -----------      -----------      -----------      -----------
  Total other income                                2,181            2,103            2,283            4,464            3,211
                                              -----------      -----------      -----------      -----------      -----------
 
Income before income taxes                         15,070            8,645           12,973           28,043           15,315
Income taxes                                        3,014              863            2,594            5,608            1,530
                                              -----------      -----------      -----------      -----------      -----------
 
Net income                                    $    12,056      $     7,782      $    10,379      $    22,435      $    13,785
                                              ===========      ===========      ===========      ===========      ===========
 
Net income per share
 Basic                                              $0.33            $0.22            $0.29            $0.62            $0.42
                                              ===========      ===========      ===========      ===========      ===========
 Diluted                                            $0.31            $0.20            $0.27            $0.57            $0.37
                                              ===========      ===========      ===========      ===========      ===========
 
Basic weighted average
 common shares outstanding                     36,177,939       34,693,231       35,952,714       36,075,058       33,057,747
                                              ===========      ===========      ===========      ===========      ===========
 
Diluted weighted average
 common shares outstanding                     39,388,300       38,472,727       39,058,026       39,274,097       36,923,609
                                              ===========      ===========      ===========      ===========      ===========
</TABLE>

                                       3
<PAGE>
 
                       VITESSE SEMICONDUCTOR CORPORATION
                     CONSOLIDATED STATEMENTS OF CASH FLOWS
                                  (UNAUDITED)
                                 (in thousands)

<TABLE>
<CAPTION>
 
                                                                             Six Months Ended
                                                                      -------------------------------
                                                                      Mar. 31, 1998    Mar. 31, 1997
                                                                      --------------   --------------
<S>                                                                   <C>              <C>
 
Cash flows from operating activities:
Net income                                                                 $ 22,435         $ 13,785
Adjustments to reconcile net income to net cash
provided by operating activities:
 Depreciation and amortization                                                6,144            2,893
 Change in assets and liabilities:
  (Increase) decrease in:
   Receivables, net                                                          (7,707)            (154)
   Inventories                                                               (1,681)            (275)
   Prepaid expenses                                                          (1,153)            (235)
   Other assets                                                                (228)             (78)
  Increase (decrease) in:
   Accounts payable                                                          (4,876)             186
   Accrued expenses and other current liabilities                             5,971            3,718
                                                                           --------         --------
     Net cash provided by operating activities                               18,905           19,840
                                                                           --------         --------
 
Cash flows from investing activities:
 Short-term investments                                                       6,433          (65,371)
 Capital expenditures                                                       (19,826)          (8,458)
 Restricted long-term investment                                            (13,113)          (6,300)
                                                                           --------         --------
     Net cash used in investing activities                                  (26,506)         (80,129)
                                                                           --------         --------
 
Cash flows from financing activities:
 Principal payments under capital lease obligations & term loans               (179)            (511)
 Proceeds from issuance of common stock, net                                  2,665          120,596
                                                                           --------         --------
     Net cash provided by financing activities                                2,486          120,085
                                                                           --------         --------
 
     Net (decrease) increase in cash & cash equivalents                      (5,115)          59,796
Cash & cash equivalents at beginning of period                               97,358           52,436
                                                                           --------         --------
Cash & cash equivalents at end of period                                   $ 92,243         $112,232
                                                                           ========         ========
 
Supplemental disclosures of cash flow information:
 Cash paid during the period for:
  Interest                                                                 $     25         $     36
                                                                           ========         ========
  Income taxes                                                             $    248         $     56
                                                                           ========         ========
</TABLE>

                                       4
<PAGE>
 
                       VITESSE SEMICONDUCTOR CORPORATION
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                        
NOTE 1.  GENERAL

   The accompanying consolidated financial statements include the accounts of
Vitesse Semiconductor Corporation and its subsidiaries.  All intercompany
accounts and transactions have been eliminated.  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, 1997 balance sheet.  This report should be
read in conjunction with the audited financial statements presented in the 1997
Annual Report.   Footnotes and other disclosures which would substantially
duplicate the disclosures in the Company's audited financial statements for
fiscal year 1997 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.

   In February 1997, the Financial Accounting Standards Board issued SFAS No.
128, "Earnings Per Share."  SFAS No. 128 specifies new standards designed to
improve the earnings per share (EPS) information provided in financial
statements by simplifying the existing computational guidelines, revising the
disclosure requirements and increasing the comparability of EPS data on an
international basis.  Some of the changes made to simplify the EPS computations
include: (a) eliminating the presentation of primary EPS and replacing it with
basic EPS, for which common stock equivalents are not considered, (b)
eliminating the modified treasury stock method and 3% materiality provision and
(c) revising the contingent share provision and the supplemental EPS data
requirements.  SFAS No. 128 also makes a number of changes to existing
disclosure statements issued for periods ending after December 15, 1997,
including interim periods.  All earnings per share amounts for all periods have
been presented and, where necessary, restated to conform to SFAS No. 128
requirements.


NOTE 2.  YEAR 2000 PROBLEM

  The Company has developed a plan to address the Year 2000 problem.  The plan
provides for the Company's computer systems to be Year 2000 compliant by the end
of fiscal 1999.  The Year 2000 problem is the result of computer programs being
written using two digits rather than four to define the applicable year.  The
Company is expensing all costs related to this issue as the costs are incurred.
The Company does not believe that such costs will be material to the financial
statements.

                                       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 (the "Securities Act"), in particular, in "Results of Operations--
Revenues and Income Taxes," and in "Liquidity and Capital Resources--Investing
and Financing Activities," and is subject to the safe harbor created by that
section. 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 "Risk Factors."

RESULTS OF OPERATIONS

   Revenues

   Total revenues in the second quarter of fiscal 1998 were $40,212,000, a 64%
increase over the $24,562,000 recorded in the second quarter of fiscal 1997 and
a 16% increase over the $34,701,000 recorded in the prior quarter.  For the six
months ended March 31, 1998, total revenues were $74,913,000, a 61% increase
over the $46,394,000 recorded in the six months ended March 31, 1997.  The
increase in total revenues in the second quarter of 1998 and in the six months
ended March 31, 1998 was due to an increase in production revenues as a result
of increased shipments to customers in the communications and ATE markets.

   The Company has recently commenced initial shipments from its new Colorado
Springs, Colorado wafer fabrication facility and is currently conducting
extensive product and process qualification procedures.  Revenues in the second
quarter of fiscal 1998 from the new facility were approximately $1,000,000.
This facility is not expected to begin volume commercial production until the
third quarter of fiscal 1998.

   Cost of Revenues

   Cost of revenues as a percentage of total revenues in the second quarter of
fiscal 1998 was 39.8% compared to 44.1% in the second quarter of fiscal 1997 and
40.9% in the prior quarter.  For the six months ended March 31, 1998 and 1997,
cost of revenues as a percentage of total revenues was 40.3% and 44.6%,
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 increased manufacturing yields.

   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.

                                       6
<PAGE>
 
   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 $6,462,000 in the second
quarter of fiscal 1998 compared to $3,914,000 in the second quarter of fiscal
1997 and $5,555,000 in the prior quarter.  For the six months ended March 31,
1998, engineering, research and development costs were $12,017,000 compared to
$7,394,000 in the six months ended March 31, 1997.  The increase was 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 were 16% in each of the second
quarters of 1998 and 1997, in the prior quarter, and in the six months ended
March 31, 1998 and 1997.  The Company's engineering, research and development
costs are expensed as incurred.

   Selling, General and Administrative Expenses

   Selling, general and administrative expenses (SG&A) were $4,849,000 in the
second quarter of 1998, compared to $3,273,000 in the second quarter of 1997 and
$4,262,000 in the prior quarter.  For the six months ended March 31, 1998, SG&A
expenses were $9,111,000 compared to $6,205,000 in the same period in 1997.
This increase was primarily due to increased headcount.  As a percentage of
total revenues, however, SG&A expenses decreased to 12% in the second quarter of
1998 from 13% in the second quarter of 1997 and was unchanged from the prior
quarter.  For the six months ended March 31, 1998, SG&A expenses as a percentage
of total revenues decreased to 12% from 13% in the comparable period a year ago.
These decreases were the result of the Company's revenues growing faster than
SG&A expenses.

                                       7
<PAGE>
 
   Interest Income

   Interest income decreased to $2,189,000 in the second quarter of fiscal 1998
from $2,222,000 in the second quarter of 1997 and $2,293,000 in the prior
quarter.  This was due to a lower average cash balance in the second quarter of
fiscal 1998 as compared to the prior periods, primarily due to the financing of
the new wafer fabrication facility in Colorado Springs, Colorado.  For the six
months ended March 31, 1998, interest income increased to $4,482,000 from
$3,421,000 in the comparable period a year ago.  This was due to a higher
average cash balance in the first six months of fiscal 1998 as compared to the
same period of fiscal 1997.

   Interest Expense

   Interest expense decreased to $8,000 in the second quarter of fiscal 1998
from $119,000 in the second quarter of fiscal 1997 and $10,000 in the prior
quarter.  For the six months ended March 31, 1998, interest expense declined to
$18,000 from $210,000 in the comparable period a year ago.  These decreases were
caused by a decrease in the Company's average debt balance.

   Income Taxes

   The Company recorded a provision for income taxes in the amount of $3,014,000
in the second quarter of fiscal 1998 and $863,000 in the second quarter of
fiscal 1997 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.  The Company had a deferred tax asset
balance in the amount of $14,800,000 as of March 31, 1998, net of a valuation
allowance of $17,047,000.  The Company has net operating loss carryforwards of
$60,466,000 and $15,734,000 for federal and state income tax purposes.  In
determining the future realizability of deferred tax assets associated with net
operating loss carryforwards, the Company has considered all available evidence,
both positive and negative.  On the positive side, the Company has experienced a
recent trend of profitable operations and a growing backlog of sales.  The
negative evidence includes significant tax benefits derived from incentive stock
options during the past three years.  These tax benefits are expected to
continue into the foreseeable future to reduce taxable income and thus reduce
the Company's ability to utilize its NOLs.  In addition, considering the
significant uncertainty and business risks associated with the new wafer
fabrication facility, the Company has concluded that it is more likely than not
that the deferred tax asset associated with the NOL carryforward will not be
realized and has therefore established an appropriate valuation allowance.


LIQUIDITY AND CAPITAL RESOURCES

   Operating Activities

   The Company generated $18,905,000 and $19,840,000 from operating activities
in the six month periods ended March 31, 1998 and 1997, respectively.

                                       8
<PAGE>
 
   Investing Activities

   Capital expenditures, principally for manufacturing and test equipment, were
$19,826,000 in the six month period ended March 31, 1998 compared to $8,458,000
in the six month period ended March 31, 1997.  The Company intends to continue
investing in manufacturing, test and engineering equipment and currently expects
to spend an additional $10 to $15 million for capital expenditures in fiscal
1998, which the Company intends to finance with working capital.

   Financing Activities

   In the six month period ended March 31, 1998, the Company generated
$2,486,000 in financing activities.  Net  proceeds from the issuance of common
stock was $2,665,000, offset by $179,000 in payments on debt obligations.

   Management believes that the Company's cash flow from operations is adequate
to finance its planned growth and operating needs for the next 12 months


                   FACTORS AFFECTING FUTURE OPERATING RESULTS
                                        

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.

MANUFACTURING CAPACITY LIMITATIONS; NEW PRODUCTION FACILITY

   The Company has recently commenced initial shipments from its six-inch wafer
fabrication facility in Colorado Springs, Colorado.  The facility includes a
10,000 square foot Class 1 clean room with the capability for future expansion
to 15,000 square feet.  For the second quarter of fiscal 1998, approximately
$1,000,000 of revenue was generated from this facility.  The Company is
currently conducting extensive product and process qualification procedures at
this facility and does not believe it will begin volume commercial production
until the third quarter of fiscal 1998.

                                       9
<PAGE>
 
   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
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.

                                       10
<PAGE>
 
ASIAN ECONOMIC ISSUES

   The Company's international business is subject to risks customarily
encountered in foreign operations, including the recent financial turmoil in
Asia.  Although management believes that the financial turmoil in Asia will not
have a material impact on the financial statements, there can be no assurance
that the Company will not be affected by such economic issues in Asia.

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 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.  A majority of the Company's ICs are packaged in plastic by
third parties since the Company has no internal capability to perform such
plastic packaging.  The balance of the Company's ICs are packaged in its
Camarillo facility using customized ceramic packaging which is presently
available from only one source. 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 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 

                                       11
<PAGE>
 
may be mandated generally, and it is unclear how such reductions will be
allocated among California'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 operation of the Company's 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.

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.

                                       12
<PAGE>
 
                                    PART II
                               OTHER INFORMATION
                                        
ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

     On January 27, 1998, 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 50,000,000 to 100,000,000, and to ratify the
appointment of KPMG Peat Marwick LLP as independent auditors for the Company for
the 1998 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       68     General Partner of Sequoia Capital and Chairman
                               of the Board of Directors of the Company
 James A. Cole          55     General Partner of Spectra Enterprise Associates
 Alex Daly              36     Sr. Vice President, C-Cube Microsystems
 John C. Lewis          62     Chief Executive Officer and Chairman of Amdahl
                               Corporation
 Thurman J. Rodgers     49     President and Chief Executive Officer of Cypress
                               Semiconductor Corporation
 Louis R. Tomasetta     49     President, Chief Executive Officer and Director
                               of the Company
</TABLE>
 
Additionally, the following items were voted upon and approved by the 
shareholders:

<TABLE>
<CAPTION>
                                                          <S>                         <C>                     <C>

                                                                                      Against or                Votes
                                                           Votes for                   Withheld               Abstained
                                                           ---------                  ----------              ---------
Amendment of the Company's Restated
Certificate of Incorporation to increase
the number of authorized shares from
50,000,000 to 100,000,000                                 32,526,819                      980,669                 67,889

Ratification of appointment of KPMG
Peat Marwick LLP as independent auditors
for the fiscal year ending September 30, 1998             33,504,812                       25,463                 45,042
</TABLE>

ITEM 6.  EXHIBITS & REPORTS ON FORM 8-K

    (A)  EXHIBITS
    
         27 - FINANCIAL DATA SCHEDULE

    (B) REPORTS ON FORM 8-K

         None.

                                       13
<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


May 12, 1998               By:  /s/  Eugene F. Hovanec
                                --------------------------------
                                     Eugene F. Hovanec
                                     Vice President, Finance and
                                     Chief Financial Officer

                                       14