<PAGE>


                         SECURITIES AND EXCHANGE COMMISSION
                              Washington, D.C.  20549
                               ______________________
                                          
                                          
                                     FORM 10-Q
(Mark One)

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

     For the quarterly period ended 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:  0-27246
                                          
                                          
                                 ZORAN CORPORATION
               (Exact name of registrant as specified in its charter)
                                          
                                          
     DELAWARE                                              94-2794449
(State or other jurisdiction of                           (I.R.S. Employer
incorporation or organization)                               Identification No.)

                3112 SCOTT BOULEVARD, SANTA CLARA, CALIFORNIA 95054
    (Address of principal executive offices)                          (Zip Code)

   Registrant's telephone number, including area code:            (408) 919-4111
                                          
                                          
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.

                    Yes X                      No __  


The number of outstanding shares of the registrant's Common Stock, $.001 par
value, as of April 30, 1998 was 9,934,184.

<PAGE>


                                 ZORAN CORPORATION
                                          
                                       INDEX


<TABLE>
<CAPTION>
                                                                  PAGE NO.
                                                                  --------
<S>                                                               <C>
                          PART I.   FINANCIAL INFORMATION


Item 1.   Financial Statements

          Condensed Consolidated Balance Sheets
          March 31, 1998 and December 31, 1997                         3

          Condensed Consolidated Income Statements
          Three Months Ended March 31, 1998 and 1997                   4


          Condensed Consolidated Statements of Cash Flows
          Three Months Ended March 31, 1998 and 1997                   5
     
          Notes to Condensed Consolidated Financial Statements         6

Item 2.   Management's Discussion and Analysis of 
          Financial Condition and Results of Operations                7




                          PART II.  OTHER INFORMATION


Item 6.   Exhibits and Reports on Form 8-K                            14


SIGNATURES                                                            15
</TABLE>




                                      2



<PAGE>
                              ZORAN CORPORATION
                    CONDENSED CONSOLIDATED BALANCE SHEETS
                     (IN THOUSANDS, EXCEPT SHARE DATA)
                                 (UNAUDITED)
<TABLE>
<CAPTION>


                                                               March 31,     December 31,
                                                                 1998            1997
                                                                 ----            ----
<S>                                                           <C>           <C>
ASSETS
   Current assets:
       Cash & equivalents                                     $  8,442      $   9,903
       Short-term investments                                   10,839         12,473
       Accounts receivable                                      11,841         16,509
       Inventories                                               7,600          4,123
       Prepaid expenses & other current assets                   2,016          2,232
                                                              ---------     ----------
         Total current assets                                   40,738         45,240

   Property & equipment, net                                     5,765          5,704
                                                              ---------     ----------
   Total assets                                               $ 46,503      $  50,944
                                                              ---------     ----------
                                                              ---------     ----------

LIABILITIES & EQUITY
   Current liabilities:
       Accounts payable                                       $  4,955      $   5,656
       Accrued expenses and other liabilities                    6,608         11,002
                                                              ---------     ----------
         Total current liabilities                              11,563         16,658

   Stockholder's equity:
       Common Stock, $0.001 par value;
        20,000,000 shares authorized; 9,909,176
        and 9,800,679 shares issued and outstanding                 10             10
       Additional paid-in capital                               78,699         78,664
       Warrants                                                    717            717
       Accumulated deficit                                     (44,486)       (45,105)
                                                              ---------     ----------
         Total stockholders' equity                             34,940         34,286 
                                                              ---------     ----------

   Total liabilities & stockholders' equity                   $ 46,503      $  50,944
                                                              ---------     ----------
                                                              ---------     ----------
</TABLE>


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

                                      3


<PAGE>
                              ZORAN CORPORATION
               CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
                     (IN THOUSANDS, EXCEPT SHARE DATA)
                                 (UNAUDITED)

<TABLE>
<CAPTION>

                                                                Three Months Ended
                                                                     March 31,
                                                             ------------------------
                                                                 1998         1997
                                                             --------      -------- 
<S>                                                          <C>           <C>
Revenues:
  Product sales                                              $  8,634      $  6,316 
  Software, licensing and development                           2,534         3,751 
                                                             --------      -------- 
    Total revenues                                             11,168        10,067 

Costs and expenses:
  Cost of product sales                                         4,657         3,526 
  Research and development                                      3,234         3,312 
  Selling, general and administrative                           2,748         2,604 
                                                             --------      -------- 
    Total costs and expenses                                   10,639         9,442 

Operating income                                                  529           625 

Interest & other income (expense), net                            245           278 
                                                             --------      -------- 

Income before income taxes                                        774           903 

Provision for income taxes                                        155           226 
                                                             --------      -------- 

Net income                                                     $  619        $  677 
                                                             --------      -------- 
                                                             --------      -------- 

Basic net income per share                                    $  0.06       $  0.07 
                                                             --------      -------- 
                                                             --------      -------- 

Diluted net income per share                                  $  0.06       $  0.06 
                                                             --------      -------- 
                                                             --------      -------- 

Shares used to compute basic net income per share               9,856         9,103 
                                                             --------      -------- 
                                                             --------      -------- 

Shares used to compute diluted net income per share            10,952        11,070 
                                                             --------      -------- 
                                                             --------      -------- 


</TABLE>

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

                                      4

<PAGE>
                              ZORAN CORPORATION
               CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                     (IN THOUSANDS, EXCEPT SHARE DATA)
                                 (UNAUDITED)

<TABLE>
<CAPTION>
                                                              THREE MONTHS ENDED
                                                                   MARCH 31,
                                                            -----------------------
                                                               1998           1997 
                                                            --------       --------
<S>                                                         <C>            <C>
Cash flows from operating activities:
  Net income                                                $   619        $  677 
  Adjustments to reconcile net income to net cash used 
  by operations:
    Depreciation, amortization and other                        537           379 
    Changes in current assets and liabilities:
     Accounts receivable                                      4,668         1,813 
     Inventory                                               (3,477)          760 
     Prepaid expenses and other current assets                  171          (310) 
     Accounts payable                                          (701)       (3,159) 
     Accrued expenses and other liabilities                  (4,394)       (1,103) 
                                                            --------       ------- 
        Net cash used by operating activities                (2,577)         (943) 
                                                            --------       ------- 

Cash flows from investing activities:
  Capital expenditures for property and equipment              (553)         (892) 
  Sale of short-term investments, net                         1,634           378 
                                                            --------       ------- 
        Net cash provided (used) in investing activities      1,081          (514) 

Cash flows from financing activities:
  Proceeds from issuance of Common Stock, net                    35            22 
                                                            --------       ------- 
        Net cash provided by financing activities                35            22 

Net (decrease) in cash and cash equivalents                  (1,461)       (1,435) 

Cash and cash equivalents at beginning of period              9,903        11,176 
                                                            --------       ------- 

Cash and cash equivalents at end of period                  $ 8,442        $ 9,741 
                                                            --------       ------- 
                                                            --------       ------- 

</TABLE>



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

                                      5

<PAGE>

                              ZORAN CORPORATION
           NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                 (UNAUDITED)



1. BASIS OF PRESENTATION
     The accompanying unaudited condensed consolidated financial statements
contain all adjustments (consisting only of normal recurring adjustments) which,
in the opinion of management, are necessary to present fairly the financial
information included therein.  While the Company believes that the disclosures
are adequate to make the information not misleading, it is suggested that these
financial statements be read in conjunction with the audited consolidated
financial statements and accompanying notes included in the Company's Annual
Report on  Form 10-K for the year ended December 31, 1997.  Results for the
interim periods presented are not necessarily indicative of the results to be
expected for the full year.

2. BALANCE SHEET COMPONENTS
<TABLE>
<CAPTION>


                                    MARCH 31,  DECEMBER 31,
                                      1998         1997
                                    ---------  ------------
<S>                                 <C>           <C>
Inventory:
  Work-in-process                    $  2,343     $  1,860 
  Finished goods                        5,257        2,263 
                                     --------     -------- 
                                     $  7,600     $  4,123 
                                     --------     -------- 
                                     --------     -------- 

</TABLE>

3. INCOME TAXES
  The provision for income taxes reflects the estimated annualized effective
tax rate applied to earnings for the interim periods.  The effective tax rate
differs from the U.S. statutory rate due to utilization of net operating losses
and State of Israel tax benefits on foreign earnings.  The provision includes
primarily taxes on income in excess of net operating loss carryover limitations
and foreign withholding taxes.

4.   EARNINGS PER SHARE
  FAS 128 requires the reconciliation of the numerators and the denominators 
of the basic and diluted per share computation as follows:

<TABLE>
<CAPTION>
                                                                  MARCH 31,
                                                  1998                                   1997
                                 -------------------------------------  -------------------------------------
                                   INCOME        SHARES      PER SHARE    INCOME        SHARES      PER SHARE
                                 (NUMERATOR)  (DENOMINATOR)   AMOUNT    (NUMERATOR)  (DENOMINATOR)   AMOUNT
                                 -----------  -------------  ---------  -----------  -------------  ---------
<S>                              <C>          <C>            <C>        <C>           <C>           <C>

Basic EPS:
  Net income available
    to common stockholders        $     619           9,856   $   0.06    $     677          9,103   $   0.07
                                                             ---------                              ---------
                                                             ---------                              ---------

Effects of Dilutive Securities:
  Stock Options                           -           1,038                                  1,843
  Warrants                                -              58                                    124

Diuted EPS:
  Income available to
    common stockholder            $     619          10,952   $   0.06    $     677         11,070   $   0.06
                                                             ---------                              ---------
                                                             ---------                              ---------
</TABLE>


                                      6

<PAGE>



ITEM 2.   MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
          RESULTS OF OPERATIONS


THE FOLLOWING DISCUSSION INCLUDES FORWARD-LOOKING STATEMENTS WITH RESPECT TO THE
COMPANY'S FUTURE FINANCIAL PERFORMANCE.  ACTUAL RESULTS MAY DIFFER MATERIALLY
FROM THOSE CURRENTLY ANTICIPATED DEPENDING UPON A VARIETY OF FACTORS, INCLUDING
THOSE DESCRIBED BELOW UNDER THE SUB-HEADING, "FUTURE PERFORMANCE AND RISK
FACTORS" AND DISCUSSED MORE FULLY IN THE COMPANY'S ANNUAL REPORT ON FORM 10-K
FOR THE YEAR ENDED DECEMBER 31, 1997.


OVERVIEW

     From the Company's inception in 1981 through 1991, the Company derived the
substantial majority of its revenue from digital filter processors ("DFPs") and
vector signal processors ("VSPs") used principally in military, industrial and
medical applications.  In 1989, the Company repositioned its business to develop
and market data compression products for the evolving multimedia markets and
discontinued development of DFP and VSP products.  In 1994, the Company
discontinued production of these products which are not expected to contribute
significant revenues in future periods.  The Company's current lines of
multimedia compression products include JPEG-based products used in video
editing systems and filmless digital cameras, MPEG-based products used in video
playback and Dolby Digital-based audio products used in movie and home theater
systems and DVD players which have been recently introduced by several
manufacturers.

     Historically, average selling prices ("ASPs") in the semiconductor industry
in general, and for the Company's products in particular, have decreased over
the life of a particular product.  Although ASPs for the Company's hardware
products have fluctuated substantially from period to period, these fluctuations
have been driven principally by changes in customer mix (original equipment
manufacturer ("OEM") sales versus sales to distributors) and the transition from
low-volume to high-volume production sales rather than by factors related to
product life cycles.  During 1996 and 1997, the Company reduced its ASPs on
certain products in order to better penetrate the consumer market. The Company
believes that, as its product lines continue to mature and competitive markets
evolve, it is likely to experience further declines in the ASPs of its products,
although the timing and amount of such future changes cannot be predicted with
any certainty.  There can be no assurance that costs will decrease at the same
rate as such declines in ASPs, or at all.

     The Company sells its products, either directly or through distributors or
independent sales representatives, to OEMs worldwide. Sales prices to
distributors are generally lower than prices for direct sales, as distributors
are responsible for certain sales and marketing expenses, maintenance of
inventories and customer support and training.  Lower gross margins on sales to
distributors are partially offset by reduced selling and marketing expenses
related to such sales.  Product sales in Japan are primarily made through
Fujifilm Microdevices Co., Ltd. ("Fujifilm"), the Company's strategic partner
and distributor in Japan.  Fujifilm provides more sales and marketing support
than Zoran's other distributors.

     Zoran has historically generated a significant percentage of its total
revenues from development contracts, primarily with key customers.  These
development contracts have provided the Company with partial funding for the
development of certain of its products.  Payments received by the Company under
these development contracts are recorded as development revenue.  The Company
classifies all development costs, including costs related to these development
contracts, as research and development expenses.  The Company retains ownership
of the intellectual property developed by it under these development contracts. 
While the Company intends to continue to enter into development contracts with
certain strategic partners, it expects development revenue to decrease as a
percentage of total revenues.

                                      7

<PAGE>

     The Company conducts a substantial portion of its research and development
and certain sales and marketing and administrative operations in Israel through
its wholly-owned Israeli subsidiary.  As a result, certain expenses are incurred
in Israeli shekels.  Until May 1995, substantially all of the Company's product
sales were made from the Company's U.S. facility.  In May 1995,  the Company
restructured its manufacturing and sales organizations and began selling a
portion of its products directly from its facility in Israel.  To date,
substantially all of the Company's revenues have been denominated in U.S.
dollars and most costs of product sales have been incurred in U.S. dollars.  The
Company expects that most of its revenues and costs of  product sales will
continue to be denominated and incurred in U.S. dollars for the foreseeable
future.  The Company has not experienced material losses or gains as a result of
currency exchange rate fluctuations and has not engaged in hedging transactions
to reduce its exposure to such fluctuations.  The Company intends to actively
monitor its foreign exchange exposure and to take appropriate action to reduce
its foreign exchange risk, if such risk becomes material.

RESULTS OF OPERATIONS

REVENUES

     Total revenues for the quarter ended March 31, 1998 increased by 10.9% 
to $11.2 million from $10.1 million for the same period in 1997.  Product 
sales for the quarter increased by 36.7% to $8.6 million from $6.3 million 
for first quarter of 1997.  Unit sales increased across all product families 
compared to the same period in 1997, with the greatest percentage increase 
coming from the Company's audio-based product family.  Software, licensing 
and development revenues decreased by 32.4% to $2.5 million compared to $3.8 
million for the first quarter of 1997. This decrease was primarily due to the 
timing of significant new licensing contracts for software and hardware 
design and as well as the timing of revenue recognition of long-term 
development contracts 

     Product sales consist of revenues from sales of the Company's integrated
circuits.  Software, licensing and development revenue consists of revenue from
license and royalty agreements, primarily for audio and video decoder software,
that generally provide for the license of software for a specified period of
time for either a single fee or a fee based on the number of units distributed
by the licensee.  Development revenue is derived from hardware design contracts
that provide for license and milestone payments to be made at specified times.


PRODUCT GROSS MARGIN

     Product gross margin for the quarter ended March 31, 1998 increased by 3.8%
to 53.0% from 49.1% for the same period in 1997.  The increase was due to a
product sales mix that included an increased percentage of higher-margin
products, an increased percentage of products sold directly to OEM customers and
lower manufacturing costs compared to the same quarter in 1997.  

     The Company's product gross margin is dependent on product mix and on the
percentage of products sold directly to the Company's OEM customers versus
indirectly through its marketing partners who purchase the Company's products at
lower prices but absorb most of the associated marketing and sales support
expenses.  The Company expects product and customer mix to continue to fluctuate
in future periods, causing further fluctuations in margins.  


RESEARCH AND DEVELOPMENT

     Research and development ("R&D") expenses for the quarter ended March 
31, 1998 decreased by 3.9% to $3.2 million from $3.3 million for the same 
period in 1997.  R&D expenses decreased as a percentage of total revenues for 
the quarter from 32.9% for the first quarter of 1997 to 29.0% for the first 
quarter of 1998.

     The Company continues to believe that significant investments in R&D are 
required for it to remain competitive and expects to continue

                                      8

<PAGE>

to devote significant resources to product development, although such 
expenses as a percentage of total revenues may fluctuate. 

SELLING, GENERAL AND ADMINISTRATIVE

     Selling, general and administrative ("SG&A") expenses for the quarter ended
March 31, 1998 increased by 5.5% to $2.7 million from $2.6 million for the same
period in 1997.  The increase was primarily due to increased sales and marketing
expenses related to product market development and to support planned revenue
growth.  

     The Company expects that SG&A expenses will continue to increase to 
support the anticipated growth of the Company. 

INTEREST AND OTHER INCOME, NET

     Net interest and other income for the quarter ended March 31, 1998
decreased by 11.8% to $245,000 from $278,000 for the same period in 1997. The
decrease resulted primarily from decreased interest income due to slightly lower
cash balances during the quarter as compared to the same quarter in 1997.
     


PROVISION FOR INCOME TAXES

     The Company's estimated effective tax rate decreased to 20% for the current
quarter from 25% for the same quarter last year. The decrease was primarily due
the tax benefits derived from revenue and net income attributable the Company's
operations in Israel, which receives favorable tax treatment.

                                      9

<PAGE>

LIQUIDITY AND CAPITAL RESOURCES

     At March 31, 1998, the Company had $8.4 million of cash and cash 
equivalents, $10.8 million of short-term investments and $29.1 million of 
working capital.  Cash used in operations for the three month period was $2.5 
million, primarily reflecting changes in inventory, accounts receivable, 
accrued liabilities, and offset in part by net income, which includes 
non-cash charges for depreciation and amortization.  The Company's capital 
expenditures for the quarter ended March 31, 1998 totaled $553,000.  The 
Company had no bank debt at March 31, 1998 or at December 31, 1997.

     The Company believes that its current balances of cash, cash equivalents 
and short-term investments, together with existing sources of liquidity and 
anticipated cash flow from operations, will satisfy the Company's anticipated 
working capital and capital equipment requirements through at least the next 
12 months. 

FUTURE PERFORMANCE AND RISK FACTORS

     THE COMPANY'S FUTURE BUSINESS, OPERATING RESULTS AND FINANCIAL CONDITION
ARE SUBJECT TO VARIOUS RISKS AND UNCERTAINTIES, INCLUDING THOSE DESCRIBED BELOW.

     PRODUCT CONCENTRATION; EVOLVING MARKETS. Since the Company's markets are
still evolving, only a limited number of commercial and consumer products 
that incorporate the Company's integrated circuits are currently in volume 
production.  Current applications for the Company's products include 
professional and consumer video editing systems, PC-based and stand-alone 
video CD and DVD players, digital audio systems, filmless digital cameras and 
video conferencing systems.  During 1994 and 1995, the Company derived a 
majority of its product revenues from the sale of integrated circuits for 
video editing applications.  Video editing applications continued to account 
for the largest percentage of the Company's product sales in 1996 and 1997.  
Delays in the development of the DVD market resulted in decreased sales of 
the Company's audio products in 1997 compared to 1996.  The Company expects 
that sales of its devices for video capture and editing applications and 
digital audio applications will continue to account for a significant portion 
of its revenues for the near future. Over the longer term, the Company's 
ability to generate increased revenues will be dependent on the expansion of 
sales of its products for use in other existing applications, as well as the 
development and acceptance of new applications for the Company's technologies 
and products.  The potential size of the markets for new applications and the 
timing of their development and acceptance is uncertain.  The Company's 
future success will depend upon whether manufacturers select the Company's 
integrated circuits and software for incorporation into their products, and 
upon the successful marketing of these products by the manufacturers.  There 
can be no assurance that demand for existing applications will be sustained, 
that new markets will develop or that manufacturers developing products for 
any of these markets will design the Company's integrated circuits into their 
products or successfully market them.  The failure of existing and new 
markets to develop or to be receptive to the Company's products would have a 
material adverse effect on the Company's business, operating results and 
financial condition.

     The emergence of markets for the Company's integrated circuits will be
affected by a variety of factors beyond the Company's control.  In 
particular, the Company's products are designed to conform with certain 
current industry standards.  There can be no assurance that manufacturers 
will continue to follow these standards or that competing standards will not 
emerge which will be preferred by manufacturers.  The emergence of markets 
for the Company's products is also dependent in part upon third-party content 
providers developing and marketing content for end user systems, such as 
video and audio playback systems, in a format compatible with the Company's 
products.  There can be no assurance that these or other factors beyond the 
Company's control will not adversely affect the development of markets for 
the Company's products. 

     RELIANCE ON INDEPENDENT FOUNDRIES AND CONTRACTORS.  The Company does not
operate any manufacturing facilities, and from time to time shortages of 
foundry capacity develop for certain process technologies in the 
semiconductor industry. The Company currently relies on independent foundries 
to manufacture substantially all of its products.  The Company's independent 
foundries fabricate products for 

                                     10

<PAGE>

other companies and may also produce products of their own design.  The 
Company does not have a long-term supply contract with either TSMC or 
Motorola, its principal suppliers, and, therefore, neither TSMC nor Motorola 
is obligated to supply products to the Company for any specific period, in 
any specific quantity or at any specified price, except as may be provided in 
a particular purchase order. 

     The Company's reliance on independent foundries involves a number of 
risks, including the inability to obtain adequate capacity, the 
unavailability of or interruption in access to certain process technologies, 
reduced control over delivery schedules, quality assurance, manufacturing 
yields and cost, and potential misappropriation of the Company's intellectual 
property. The loss of any of the Company's foundries as a supplier, the 
inability of the Company in a period of increased demand for its products to 
expand supply or the Company's inability to obtain timely and adequate 
deliveries from its current or future suppliers could reduce or delay 
shipments of the Company's products.  Any of these developments could damage 
relationships with the Company's current and prospective customers and have a 
material adverse effect on the Company's business, operating results or 
financial condition.

     At present, all of the Company's semiconductor products are assembled by 
one of two independent contractors, ASAT and Anam, and tested by those 
contractors or other independent contractors. The Company's reliance on 
independent assembly and testing houses limits its control over delivery 
schedules, quality assurance and product cost. Disruptions in the provision 
of services by the Company's assembly or testing houses or other 
circumstances that would require the Company to seek alternative sources of 
assembly or testing could lead to supply constraints or delays in the 
delivery of the Company's products.  These constraints or delays could damage 
relationships with current and prospective customers and have a material 
adverse effect on the Company's business, operating results or financial 
condition.

     NEW PRODUCT DEVELOPMENT AND TIMELY INTRODUCTION OF NEW AND ENHANCED
PRODUCTS.  The markets for the Company's products are characterized by 
rapidly changing technologies, evolving industry standards, frequent new 
product introductions and short product life cycles.  The Company expects to 
increase its expenses relating to product development, and its future success 
will depend to a substantial degree upon its ability to develop and 
introduce, on a timely and cost-effective basis, new and enhanced products 
that meet changing customer requirements and industry standards. There can be 
no assurance that the Company will successfully develop, introduce or manage 
the transition to new products. Future delays in the introduction or shipment 
of new or enhanced products, the inability of such products to gain market 
acceptance or problems associated with new product transitions could 
adversely affect the Company's business, operating results and financial 
condition. 

     COMPETITION; PRICING PRESSURES.  The Company's existing and potential
competitors include many large domestic and international companies that have 
substantially greater financial, manufacturing, technical, marketing, 
distribution and other resources, broader product lines and longer standing 
relationships with customers than the Company.  The markets in which the 
Company competes are intensely competitive and are characterized by rapid 
technological change, declining ASPs and rapid product obsolescence. 

     CUSTOMER CONCENTRATION; CHANGES IN CUSTOMER MIX.  The Company's largest
customers have accounted for a substantial percentage of its revenues, and 
sales to these large customers have varied materially from year to year.  
There can be no assurance that the Company will be able to retain its key 
customers or that such customers will not cancel purchase orders or 
reschedule or decrease their level of purchases.  In addition, sales to these 
key customers may fluctuate significantly from quarter to quarter.  Any 
development that would result in a substantial decrease or delay in sales to 
one or more key customers, including actions by competitors or technological 
changes, could have a material adverse effect on the Company's business, 
operating results or financial condition.  In addition, any development that 
would adversely affect the collectability of account balances from one or 
more key customers could have a material adverse effect on the Company's 
business, operating results or financial condition.

     FLUCTUATIONS IN OPERATING RESULTS; NET OPERATING LOSS CARRYFORWARDS.  The
Company's quarterly operating results have varied significantly due to a 
number of factors, including the timing of new product introductions by the 
Company and its competitors, market acceptance of new and enhanced versions 
of the Company's products and products of its customers, the timing of large 
customer orders, the availability of development funding and the timing of 
development revenue, changes in the mix of products sold, and 

                                     11

<PAGE>

competitive pricing pressures.  The Company expects that its operating 
results will fluctuate in the future as a result of these factors and a 
variety of other factors, including the availability of adequate foundry 
capacity, fluctuations in manufacturing yields, the emergence of new industry 
standards, product obsolescence, changes in pricing policies by the Company, 
its competitors or its suppliers, the cyclical nature of the semiconductor 
industry, the evolving and unpredictable nature of the markets for products 
incorporating the Company's integrated circuits and software and the amount 
of research and development expenses associated with new product 
introductions.  The Company's operating results could also be adversely 
affected by economic conditions generally or in various geographic areas 
where the Company or its customers do business, other conditions affecting 
the timing of customer orders, a downturn in the markets for its customer's 
products, particularly the consumer electronics market, or order 
cancellations or reschedulings. These factors are difficult or impossible to 
forecast, and these or other factors could materially affect the Company's 
quarterly or annual operating results. The Company places orders to purchase 
its products from independent foundries several months in advance of the 
scheduled delivery date, often in advance of receiving non-cancelable orders 
from its customers.  If anticipated shipments or development revenue in any 
quarter are canceled or do not occur as quickly as expected, expense and 
inventory levels could be disproportionately high.  A significant portion of 
the Company's expenses is relatively fixed, and the timing of increases in 
expenses is based in large part on the Company's forecast of future revenues. 
 As a result, if revenues do not meet the Company's expectations it may be 
unable to quickly adjust expenses to levels appropriate to actual revenues, 
which could have a material  adverse effect on the Company's business, 
operating results or financial condition.  To date, the Company's operating 
results have not been materially affected by seasonal factors.  However, as 
markets for consumer products incorporating the Company's integrated circuits 
mature, the Company expects that sales will tend to be stronger during the 
last several months of the calendar year than at other times due to increased 
demand for consumer products during the holiday season. As a result of the 
foregoing, the Company's operating results and stock price may be subject to 
significant volatility, particularly on a quarterly basis. Any shortfall in 
revenues or net income from levels expected by securities analysts could have 
an immediate and significant adverse effect on the trading price of the 
Company's Common Stock.

     MANAGEMENT OF GROWTH.  The Company has recently experienced growth and
expansion which has placed, and will continue to place, a significant strain 
on its administrative, operational and financial resources and has resulted, 
and will continue to result, in a continuing increase in the level of 
responsibility for both existing and new management personnel.  The Company 
anticipates that future growth, if any, will require it to recruit and hire a 
substantial number of new engineering, managerial, sales and marketing 
personnel.  The Company's ability to manage its growth successfully will also 
require the Company to continue to expand and improve its  administrative, 
operational, management and financial systems and controls.  Many of the 
Company's key operations, including the major portion of its research and 
development operations and a significant portion of its sales and 
administrative operations, are located in Israel, while a majority of its 
sales and marketing and certain of its research and development and 
administrative personnel, including its President and Chief Executive Officer 
and other officers, are based in the United States.  The geographic 
separation of these operations is likely to place additional strain on the 
Company's resources and its ability to effectively manage its growth.  If the 
Company's management is unable to manage growth effectively,  the Company's 
business, operating results or financial condition could be materially and 
adversely affected.

     DEPENDENCE ON KEY PERSONNEL.  The Company's success depends to a
significant degree upon the continuing contributions of its senior 
management. The loss of key management personnel could delay product 
development cycles or otherwise have a material adverse effect on the 
Company's business, operating results or financial condition. There can be no 
assurance that the Company will be able to retain the services of any of its 
key employees.  The Company believes that its future success will also depend 
in large part on its ability to attract and retain highly-skilled 
engineering, managerial, sales and marketing personnel, both in the United 
States and in Israel.  Competition for such personnel is intense, and there 
can be no assurance that the Company will be successful in attracting, 
integrating and retaining such personnel.  Failure to attract and retain key 
personnel could have a material  adverse effect on the Company's business, 
operating results or financial condition.

     RELIANCE ON INTERNATIONAL SALES AND OPERATIONS; RELIANCE ON OPERATIONS IN
ISRAEL.  The Company anticipates that international sales will continue to 
represent a significant portion of total revenues.  In addition, 
substantially all of the Company's semiconductor products are manufactured, 
assembled and tested 

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<PAGE>

outside of the United States by independent foundries and subcontractors. The 
Company is subject to the risks of doing business internationally, including 
unexpected changes in regulatory requirements, fluctuations in exchange 
rates, imposition of tariffs and other barriers and restrictions and the 
burdens of complying with a variety of foreign laws. The Company is also 
subject to general geopolitical risks, such as political and economic 
instability and changes in diplomatic and trade relationships, in connection 
with its international operations.

     A substantial portion of the Company's research and development and sales
operations are located in the State of Israel.  Therefore, the Company is 
directly affected by the political, economic and military conditions to which 
that country is subject.  In addition, many of the Company's expenses in 
Israel are paid in Israeli shekels, thereby subjecting the Company to the 
risk of foreign currency fluctuations and to economic pressures resulting 
from Israel's generally high rate of inflation.  There can be no assurance 
that such factors will not have a material adverse effect of the Company's 
business, operating results or financial condition. 

     VOLATILITY OF STOCK PRICE.  The market price of the Company's Common Stock
has fluctuated significantly since the IPO and is subject to material 
fluctuations in the future in response to announcements concerning the 
Company or its competitors or customers, quarterly variations in operating 
results, announcements of technological innovations, the introduction of new 
products or changes in product pricing policies by the Company or its 
competitors, proprietary rights or other litigation, changes in analysts' 
earnings estimates, general conditions in the semiconductor industry, 
developments in the financial markets and other factors.  In addition, the 
stock market has, from time to time, experienced extreme price and volume 
fluctuations that have particularly affected the market prices for 
semiconductor companies or technology companies generally and which have been 
unrelated to the operating performance of the affected companies.  Broad 
market fluctuations of this type may adversely affect the future market price 
of the Common Stock.

     RISKS RELATED TO YEAR 2000 PROBLEM.  In the next two years, most companies
could face a potentially serious information systems problem because many 
software applications and operational programs written in the past were 
designed to handle date formats with two-digit years and thus may not 
properly recognize calendar dates beginning in the Year 2000. This problem 
could result in computers either outputting incorrect data or shutting down 
altogether when attempting to process a date such as "01/01/00."  The Company 
has examined all of its critical software and operational applications as 
well as the software products it has sold and found no potential problems 
related to the Year 2000 issue.  In addition, however, the Company could be 
exposed to a potential adverse impact resulting from the failure of financial 
institutions and other third parties to adequately address the Year 2000 
problem.  The Company intends to devote the necessary resources to identify 
and resolve Year 2000 issues that may exist with third parties.  However, the 
Company cannot estimate the cost of this effort at this time, nor can any 
assurance be given that the Year 2000 problem will not have a material 
adverse effect on the Company's business, operating results or financial 
condition.

     MARKET RISK DISCLOSURE.  The Company has an investment portfolio of
securities that are classified as "available-for-sale".  These securities are 
subject to interest rate risk and will fall in value if market interest rates 
increase.  The Company attempts to limit this exposure by investing primarily 
in short-term securities.  From time to time, the Company makes certain 
capital equipment or other purchases denominated in foreign currencies.  As a 
result, cash flows and earnings are exposed to fluctuations in interest rates 
and foreign currency exchange rates. The Company attempts to limit these 
exposures through operational strategies and generally has not hedged 
currency exposures.

                                     13

<PAGE>


                                          
                           PART II.     OTHER INFORMATION
                                          
                                          
                                          
                                          
Item 6.      Exhibits and Reports on Form 8-K

             (a)   Exhibits 
          
                   27  Financial Data Schedule

             (b)   Reports on Form 8-K
                                          
                   No reports on Form 8-K were filed during the three months 
                   ended March 31, 1998.

                                     14

<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.


                                              ZORAN CORPORATION





Date:  May 14, 1998                           /S/  LEVY GERZBERG
                                              ------------------------
                                              Levy Gerzberg
                                              President 
                                              Chief Executive Officer





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