<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 September 30, 1996

                                              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.)


            2041 MISSION COLLEGE BOULEVARD, SANTA CLARA, CALIFORNIA 95054
            (Address of principal executive offices)           (Zip Code)

      Registrant's telephone number, including area code:      (408) 986-1314


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 October 31, 1996 was 7,037,652.

<PAGE>

                                 ZORAN CORPORATION

                                      INDEX

                                                                       PAGE NO.
                                                                       -------
                           PART I. FINANCIAL INFORMATION

Item 1.  Financial Statements

           Condensed Consolidated Balance Sheets
              September 30, 1996 and December 31, 1995                     3

           Condensed Consolidated Income Statements
              Three and Nine Months Ended September 30, 1996 and 1995      4

           Condensed Consolidated Statements of Cash Flows
              Nine Months Ended September 30, 1996 and 1995                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                                 15


SIGNATURES                                                                15


                                       2

<PAGE>

                                ZORAN CORPORATION
                       CONDENSED CONSOLIDATED BALANCE SHEETS
                         (IN THOUSANDS, EXCEPT SHARE DATA)
                                  (UNAUDITED)

<TABLE>
<CAPTION>
                                                           SEPTEMBER 30,   DECEMBER 31,
                                                               1996            1995
                                                           -------------   ------------
<S>                                                        <C>             <C>
ASSETS

Current assets:
  Cash and cash equivalents                                    $ 7,534          $20,521
  Short-term investments                                        11,841                -
  Accounts receivable, net                                      11,600            4,479
  Inventory                                                      1,637            2,255
  Prepaid expenses and other current assets                        620              439
                                                              --------          -------
    Total current assets                                        33,232           27,694

Property and equipment, net                                      2,306            1,391
                                                              --------          -------

    Total assets                                               $35,538          $29,085
                                                              --------          -------
                                                              --------          -------

LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:
  Accounts payable                                              $2,107           $3,414
  Accrued expenses and other liabilities                         5,872            4,444
  Current portion of long-term debt                                343              372
                                                              --------          -------
    Total current liabilities                                    8,322            8,230
                                                              --------          -------

Long-term debt                                                     395              601
                                                              --------          -------

Stockholders' equity:
  Common Stock, $0.001 par value;
    20,000,000 shares authorized;
    7,007,444 and 6,538,530 shares
    issued and outstanding                                           7                7
  Additional paid-in capital                                    76,423           72,567
  Accumulated deficit                                          (49,609)         (52,320)
                                                              --------          -------
    Total stockholders' equity                                  26,821           20,254
                                                              --------          -------
    Total liabilities and stockholders' equity                 $35,538          $29,085
                                                              --------          -------
                                                              --------          -------
</TABLE>





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

                                       3

<PAGE>

                               ZORAN CORPORATION
                     CONDENSED CONSOLIDATED INCOME STATEMENTS
                      (IN THOUSANDS, EXCEPT PER SHARE DATA)
                                 (UNAUDITED)

<TABLE>
<CAPTION>
                                                   THREE MONTHS ENDED          NINE MONTHS ENDED
                                                      SEPTEMBER 30,               SEPTEMBER 30,
                                                   -------------------         ------------------
                                                    1996        1995             1996      1995
                                                  --------     -------         --------   -------
<S>                                               <C>          <C>             <C>        <C>
Revenues:
  Product sales                                    $10,067      $5,322          $25,169   $12,399
  Development and licensing                            379         400            1,184     1,310
                                                   -------     -------          -------   -------
    Total revenues                                  10,446       5,722           26,353    13,709
                                                   -------     -------          -------   -------

Costs and expenses:
  Cost of product sales                              5,563       2,610           14,278     6,268
  Research and development                           1,614       1,120            3,727     3,021
  Selling, general and administrative                2,190       1,613            6,033     3,829
                                                   -------     -------          -------   -------
    Total costs and expenses                         9,367       5,343           24,038    13,118
                                                   -------     -------          -------   -------

Operating income                                     1,079         379            2,315       591
Interest expense                                       (46)        (54)            (119)     (251)
Interest and other income, net                         258          21              850        48
                                                   -------     -------          -------   -------

Income before income taxes                           1,291         346            3,046       388
Provision for income taxes                             142         120              335       126
                                                   -------     -------          -------   -------

Net income                                          $1,149        $226           $2,711      $262
                                                   -------     -------          -------   -------
                                                   -------     -------          -------   -------


Net income per share                                 $0.14       $0.03            $0.33     $0.04
                                                   -------     -------          -------   -------
                                                   -------     -------          -------   -------

Weighted average common shares
  and equivalents                                    8,167       6,384            8,256     6,400
                                                   -------     -------          -------   -------
                                                   -------     -------          -------   -------
</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)
                                 (UNAUDITED)

<TABLE>
<CAPTION>
                                                                  NINE MONTHS ENDED
                                                                    SEPTEMBER 30,
                                                              -------------------------
                                                                1996             1995
                                                              ---------        --------
<S>                                                           <C>              <C>
Cash flows from operating activities:
  Net income                                                  $ 2,711           $   262
  Adjustments:
    Depreciation and amortization                                  636              599
    Changes in assets and liabilities:
       Accounts receivable                                      (7,121)          (2,494)
       Inventory                                                   618             (622)
       Prepaid expenses and other current assets                  (181)              12
       Accounts payable                                         (1,307)           1,138
       Accrued expenses and other liabilities                    1,428            1,072
                                                              ---------          -------
          Net cash used in operating activities                 (3,216)             (33)
                                                              ---------          -------

Cash flows from investing activities:
  Purchases of short-term investments, net                     (11,841)               -
  Expenditures for property and equipment                       (1,521)            (260)
                                                              ---------          -------
          Net cash used in investing activities                (13,362)            (260)
                                                              ---------          -------

Cash flows from financing activities:
  Proceeds (repayment) of debt, net                               (235)             208
  Proceeds from issuance of Preferred Stock, net                     -              656
  Proceeds from issuance of Common Stock, net                    3,826                5
                                                              ---------          -------
          Net cash provided by financing activities              3,591              869
                                                              ---------          -------

Net increase (decrease) in cash and cash equivalents           (12,987)             576

Cash and cash equivalents at beginning of period                20,521            1,054
                                                              ---------          -------

Cash and cash equivalents at end of period                    $  7,534           $ 1,630
                                                              ---------          -------
                                                              ---------          -------
</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, 1995.  Results for the
interim periods presented are not necessarily indicative of the results to be
expected for the full year.

2.   BALANCE SHEET COMPONENTS
                                            September 30,    December 31,
                                                1996             1995
                                            ------------     ------------
Inventories (in thousands):
        Work-in-process                       $    845         $     942
        Finished goods                             792             1,313
                                              --------         ---------
                                              $  1,637         $   2,255
                                              --------         ---------

3.   STOCKHOLDERS' EQUITY
         Stockholders' equity as of September 30, 
1996 reflects the exercise of the underwriters' over-allotment option in 
January 1996, which was related to the December 1995 initial public stock 
offering.  This exercise resulted in the sale of 307,500 additional shares of 
Common Stock for net proceeds of approximately $3.5 million.

4.  REVENUES
         Product sales for the current quarter include revenue 
from an advance payment deferred in prior periods and recognized in the third 
quarter upon the completion of a multi-year sales program with a strategic 
partner.  Without the benefit of this revenue, product gross margin for the 
third quarter of 1966 would have been approximately the same as the second 
quarter.

5.   INCOME TAXES
         The provision for income taxes reflects the 
estimated annualized effective tax rate applied to earnings for the interim 
period.  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 foreign withholding taxes 
and alternative minimum taxes.

6.   NET INCOME PER SHARE
         Net income per share is computed using the 
weighted average number of common and common equivalent shares outstanding 
during the period.  Common equivalent shares consist of shares issuable upon 
exercise of stock options and warrants (using the treasury stock method).  
Pursuant to the requirements of the Securities and Exchange Commission, 
Common Stock, Preferred Stock and common equivalent shares issued during the 
twelve months prior to the initial public offering are included in the 
computation for all periods presented.

7.  ACQUISITION AGREEMENT
         In October 1996, the Company entered into 
an agreement to acquire privately-held CompCore Multimedia, Inc., a provider 
of digital compression software and integrated circuit cores.  Under the 
terms of the agreement, CompCore stockholders will receive approximately 
1,957,000 shares of Zoran Common Stock and CompCore stock option holders will 
receive approximately 896,000 options for Zoran Common Stock.  The 
transaction will be accounted for as a pooling of interests and is intended 
to qualify as a tax-free reorganization.  The transaction is expected to be 
completed in the first quarter of 1997 and is subject to approval by the 
stockholders of both companies and other customary conditions.

                                       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, 1995.

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 integrated circuits designed 
to compress video and audio data for commercial and consumer applications in 
evolving multimedia markets.  At that time, the Company discontinued 
development of DFP and VSP products, and in mid-1994, the Company advised its 
customers that it was discontinuing production of these products.  
"End-of-life" sales of DFP and VSP products contributed substantially to 
revenues and operating income during the first quarter of 1995, while sales 
of these products declined during the balance of 1995 and have not been 
significant in 1996.  DFP and VSP products are not expected to contribute 
significant revenues in future periods.  The Company's current lines of 
multimedia compression products include JPEG products used in video editing 
and filmless digital cameras, MPEG products used in video playback and Dolby 
AC-3 audio products used in movie and home theater systems and DVD players 
which the Company believes will be introduced by manufacturers later this 
year.

        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.  To date, the Company has 
not experienced a recognizable pattern of declines in the ASPs of its 
multimedia products. Although ASPs 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 "test" sales to high-volume 
production sales rather than by factors related to product life cycles.  
During 1996, Zoran has experienced pricing pressure on certain of its first 
generation multimedia products which has adversely affected ASPs. The Company 
believes that, as its multimedia product lines continue to mature and 
competitive markets evolve, it is likely to experience further declines in 
the ASPs of its multimedia 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 selling prices for direct 
sales, as distributors are responsible for certain sales and marketing 
expenses, customer support and training.  Lower gross margins on sales to 
distributors are partially offset by reduced selling and marketing expenses 
related to such sales.  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. 

                                       7

<PAGE>

        The Company is a party to certain research and development agreements 
with the Office of the Chief Scientist in Israel's Ministry of Trade and 
Industry Department (the "Chief Scientist") and the Israel-United States 
Binational Industrial Research and Development Foundation ("BIRDF"), which 
fund up to 50% of incurred project costs for approved products up to 
specified contract maximums.  These agreements require the Company to use its 
best efforts to achieve specified results and require the Company to pay 
royalties at rates of 2 1/2% to 5% of resulting product sales, and up to 30% 
of resulting license revenues, up to a maximum of 100% to 150% of total 
funding received.  Reported research and development expenses are net of 
these grants, which fluctuate from period to period.

        The Company conducts 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 product sales 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 sales and costs of 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 is 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 and nine months ended September 30, 
1996 were $10.4 million and $26.4 million, respectively, increases of 83% and 
92%, respectively, compared to the same periods in 1995.  This growth was due 
to increases of 89% and 103% in product sales for the quarter and nine 
months, respectively, compared to last year. The increases in product sales 
resulted from continued growth in unit sales of the Company's Dolby AC-3 
digital audio decoders, which are used in home audio equipment and DVD 
players.  Although sales of these products were up substantially from the 
prior periods, there have been delays in the development of the DVD market 
and there is still uncertainty regarding the timing of volume production and 
shipping of DVD players. In addition, unit sales of the Company's JPEG 
devices were up slightly for the current quarter compared to the same quarter 
last year.  This modest increase reflected slower than anticipated 
development of the market for consumer-oriented video editing equipment.  
Despite the increase in unit sales, revenue for this product line declined 
from the comparable quarter last year due to a shift in product mix toward 
lower-priced devices.  Unit sales and revenue for the Company's JPEG products 
increased for the current nine months compared to last year.   Product sales 
for the current quarter also reflected revenue from an advance payment 
deferred in prior periods and recognized in the third quarter upon the 
completion of a multi-year sales program with a strategic partner. Sales to 
Fujifilm, the Company's strategic partner and distributor in Japan, as well 
as an OEM customer, accounted for 47% and 38% of the Company's product sales 
in the quarter and nine months ended September 30, 1996, respectively, 
compared to 1% and 2%, respectively, in the comparable 1995 periods.  The 
Company's next two largest customers in the quarter ended September 30, 1996 
accounted for an aggregate of 28% and 27% of the Company's product sales in 
the quarter and nine months ended September 30, 1996, respectively, compared 
to 2% and 8%, respectively, in the comparable 1995 periods.  Fast Multimedia, 
Inc. accounted for 0% and 8% of product sales during the third quarter and 
nine months ended September 30, 1996, respectively, compared to 73% and 45% 
for the comparable periods in 1995.  Sales of discontinued DFP and VSP 
military and industrial products were insignificant in the current nine 
months compared to sales of $1.5 million for these products during the first 
nine months of 1995, primarily in the first quarter.

                                       8

<PAGE>

        Development and licensing revenue for the quarter and nine months 
ended September 30, 1996 decreased slightly compared to the same periods last 
year due to the completion of several development projects in prior periods.  
While Zoran intends to continue to enter into development contracts with 
certain strategic partners, it expects development revenue to fluctuate in 
future periods and to continue to represent a relatively minor portion of 
total revenues.

PRODUCT GROSS PROFIT

        Product gross margin was 45% and 43% during the current quarter and 
nine months, respectively, compared to 39% in the second quarter of 1996 and 
51% and 49% for the quarter and nine months ended September 30, 1995, 
respectively.  The margin rate decreases from the prior year were primarily 
due to higher volume sales of relatively lower priced, lower margin Dolby 
AC-3 products sold to Fujifilm, the Company's strategic partner, customer and 
distributor in Japan. Without the benefit of revenues recognized from the 
completion of the multi-year sales program with a strategic partner, product 
gross margin for the third quarter of 1996 would have been approximately the 
same as the second quarter. Zoran's product gross margin is dependent on 
product mix and on the percentage of products sold directly to Zoran'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.  Product gross margin during the first 
nine months of last year was also positively impacted by sales of 
high-margin, "end-of-life" DFP and VSP products, primarily in the first 
quarter.  The Company expects product and customer mix to continue to 
fluctuate in future quarters.  In the near term, the Company believes that 
the proportion of its product sales represented by lower priced Dolby AC-3 
products sold indirectly to manufacturers through Fujifilm will continue to 
be high, placing pressure on margins.

RESEARCH AND DEVELOPMENT

        Research and development ("R&D") expenses of $1.6 million and $3.7 
million for the quarter and nine months ended September 30, 1996, 
respectively, were approximately 44% and 23% above the comparable periods of 
1995.  As a result of higher revenues, R&D expenses as a percentage of total 
revenues decreased substantially compared to the same periods last year.  The 
Company continues to believe that significant investments in R&D are required 
for it to remain competitive, and anticipates that such expenses in terms of 
absolute dollars will increase in future periods, although such expenses as a 
percentage of total revenues may fluctuate.

SELLING, GENERAL AND ADMINISTRATIVE

        Selling, general and administrative ("SG&A") expenses increased to $2.2
million for the current quarter from $1.6 million for the third quarter of 1995
and increased to $6.0 million for the nine months ended September 30, 1996 from
$3.8 million for the comparable nine-month period last year.  SG&A expenses,
however, decreased as a percentage of total revenues in each comparable period.
The increase in absolute dollars for the current periods was due primarily to
increased sales and marketing expenses to support increased sales levels,
increased royalties related to higher product sales and increased administrative
expenses associated Zoran's status as a publicly-traded company.  The Company
expects that SG&A expenses will continue to increase in order to support the
growth of the Company.

                                       9

<PAGE>

INTEREST AND OTHER INCOME (EXPENSE), NET

        Net interest and other income and expense resulted in net other 
income of $212,000 and $731,000 for the quarter and nine months ended 
September 30, 1996, respectively, compared to net other expenses in the 
comparable periods of 1995. Interest expense decreased due to the use of 
proceeds from the initial public stock offering of the Company's Common Stock 
(the "IPO") in December 1995 to repay short-term debt.  Interest income 
increased due to the investment of the IPO proceeds, including proceeds from 
the January 1996 exercise of the underwriters' over-allotment option.

PROVISION FOR INCOME TAXES

        The provision for income taxes increased to $142,000 and $335,000 for 
the current quarter and nine months, respectively, from $120,000 and $126,000 
for the comparable periods last year.  The Company's estimated effective tax 
rate of 11% for the current year reflects alternative minimum tax on its 
domestic earnings and foreign withholding taxes on intercompany royalties.

LIQUIDITY AND CAPITAL RESOURCES

        Net proceeds from the Company's December 1995 IPO and the exercise of 
certain warrants in connection with the IPO totaled $17.5 million.  The 
Company also received net proceeds of $3.5 million in January 1996 upon the 
exercise of the underwriters' over-allotment option.  At September 30, 1996, 
the Company had $19.4 million of cash, cash equivalents and short-term 
investments.

        The Company's operating activities used cash of $3.2 million in the 
nine months ended September 30, 1996.  Cash used in operating activities 
reflected changes in working capital, partially offset by net income and 
depreciation and amortization.  The principal change in working capital 
during the nine-month period was an increase in accounts receivable of $7.1 
million due primarily to a significant portion of quarterly sales being 
shipped late in the quarter and delayed payments from a significant customer. 
 Accounts receivable from this customer represented 14% of total accounts 
receivable at September 30, 1996. Subsequent to September 30, 1996, the 
Company received approximately half of the quarter-end balance due from this 
customer with most of the remainder supported by promissory notes due by year 
end.  There can be no assurance that this remaining balance will be received. 
 During the nine-month period, the Company's capital expenditures were $1.5 
million and it repaid long-term debt of $235,000.

        The Company believes that its current balances of cash, cash 
equivalents and short-term investments and anticipated cash flow from 
operations, will satisfy the Company's anticipated working capital and 
capital equipment requirements through 1997.

                                       10

<PAGE>

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.  To date, only a limited 
number of commercial and consumer products that incorporate the Company's 
integrated circuits are in volume production.  Current applications for the 
Company's products include professional and consumer video editing systems, 
PC-based video CD systems, stand-alone video CD systems, digital audio 
systems and filmless digital cameras.  During 1994 and 1995, the Company 
derived a majority of its product revenues from the sale of integrated 
circuits for video editing applications.  Sales of audio products have 
accounted for an increased percentage of product sales in 1996.  The Company 
expects that sales of its devices for digital audio and video editing 
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 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 other companies and may also produce 
products of their own design.  The Company does not have a long-term supply 
contract with two of its principal foundries and, therefore, neither of these 
suppliers 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.

                                       11

<PAGE>

        All of the Company's semiconductor products are currently being 
assembled by one of two independent contractors 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.

        PENDING ACQUISITION.  On October 20, 1996, the Company entered into 
an Agreement and Plan of Reorganization (the "Plan of Reorganization") 
pursuant to which the Company has agreed to acquire CompCore Multimedia, Inc. 
("CompCore") through a merger (the "Merger") of CompCore with a wholly-owned 
subsidiary of the Company.  The managements of the Company and CompCore have 
entered into the Plan of Reorganization with the expectation that the Merger 
will result in beneficial synergies for the Company and CompCore.  Achieving 
the anticipated benefits of the Merger will depend in part upon whether the 
integration of the two companies businesses is accomplished in an efficient 
and effective manner, and there can be no assurance that this will occur.  
The combination of the two companies will require, among other things, 
integration of the companies respective product offerings and technology and 
coordination of their research and development, sales and marketing, and 
financial reporting efforts.  There can be no assurance that such integration 
will be accomplished smoothly or successfully.  If significant difficulties 
are encountered in the integration of the existing product lines and 
technology, resources could be diverted from new product development, 
resulting in delays in new product introductions.  The difficulties of such 
integration may be increased by the necessity of coordinating geographically 
separated organizations with distinct cultures.  The integration of certain 
operations following the Merger will require the dedication of management and 
other personnel resources which may temporarily distract from the day-to-day 
business of the combined company.  Failure to successfully accomplish the 
integration of the two companies operations could have a material adverse 
effect on the combined company's business, financial condition or results of 
operations.

        There can be no assurance that the distributors, resellers and 
present and potential customers of the Company or CompCore will continue 
their current buying patterns without regard to the announced Merger.  In 
particular, the Company and CompCore believe that certain customers may defer 
purchasing decisions as they evaluate the Company's future product strategy.  
Any such deferrals could have a material adverse effect upon the combined 
company's business, financial condition or results of operations.

        The Company and CompCore expect that the combined company will incur 
Merger-related expenses of approximately $2 million for transaction fees and 
costs for financial advisors, legal counsel and accountants and to reflect 
costs associated with the combined operations of the two companies.  This is 
a preliminary estimate only and therefore subject to change.  There can be no 
assurance that the Company will not incur additional charges in subsequent 
periods to reflect costs associated with the Merger or that management will 
be successful in its efforts to integrate the operations of the two companies.

        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.

                                       12

<PAGE>

        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; CHANGE 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 to 
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 affect the collectibility 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.

        POTENTIAL FLUCTUATIONS IN OPERATING RESULTS.  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 the mix of distribution 
channels employed and 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 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. 

                                       13

<PAGE>
        MANAGEMENT OF GROWTH.  The Company has recently experienced rapid 
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 research and 
development 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 administrative personnel, including its 
President and Chief Executive Officer, 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, particularly Levy Gerzberg, a  co-founder of the Company and its 
President and Chief Executive Officer.  The loss of Dr. Gerzberg or other 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 Dr. Gerzberg or any of its other 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 products are manufactured, assembled and 
tested 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.

        The Company's principal research and development facilities and a 
substantial portion of its 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 technology 
companies 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. 

                                       14
<PAGE>

                         PART II.   OTHER INFORMATION


Item 6.    Exhibits and Reports on Form 8-K

           (a)  Exhibits

                11.1     Statement re:  Computation of Net Income Per Share

                27       Financial Data Schedule

           (b)  Reports on Form 8-K

                No reports on Form 8-K were filed during the three months ended
                September 30, 1996.










                                  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:  November 8, 1996                           /s/  Levy Gerzberg
                                                  -----------------------
                                                  Levy Gerzberg
                                                  President
                                                  Chief Executive Officer




Date:   November 8, 1996                          /s/  Ami Kraft
                                                  -----------------------
                                                  Ami Kraft
                                                  Vice President, Finance
                                                  Chief Financial Officer

                                       15