<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 June 30, 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 July 30, 1998 was 10,069,873.


                                      
<PAGE>

                                 ZORAN CORPORATION
                                          
                                       INDEX

<TABLE>
<CAPTION>
                                                                             PAGE NO.
                                                                             --------

                             PART I.  FINANCIAL INFORMATION
<S>                                                                           <C>
Item 1.        Financial Statements

                    Condensed Consolidated Balance Sheets             
                       June 30, 1998 and December 31, 1997                       3

                    Condensed Consolidated Statements of Operations
                       Three and Six Months Ended June 30, 1998 and 1997         4

                    Condensed Consolidated Statements of Cash Flows
                       Six Months Ended June 30, 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                8



                            PART II.   OTHER INFORMATION


Item 4.  Submission of Matters to a vote of Security Holders                    15

Item 6.  Exhibits and Reports on Form 8-K                                       16


SIGNATURES                                                                      17

</TABLE>

                                      2
<PAGE>

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

<TABLE>
<CAPTION>
                                                       June 30,     December 31,
                                                         1998           1997
                                                       --------     ------------
<S>                                                   <C>            <C>
ASSETS
    Current assets:
       Cash & equivalents                              $  6,552         $  9,903
       Short-term investments                             9,634           12,473
       Accounts receivable, net                          10,978           16,509
       Inventories                                        9,094            4,123
       Other current assets                               1,909            2,232
                                                       --------         --------
         Total current assets                            38,167           45,240


    Property & equipment, net                             5,794            5,704
                                                       --------         --------

                                                       $ 43,961         $ 50,944
                                                       --------         --------
                                                       --------         --------

LIABILITIES & STOCKHOLDERS' EQUITY              
    Current liabilities:                      
       Accounts payable                                $  3,523         $  5,656
       Accrued expenses and other liabilities             6,037           11,002
                                                       --------         --------
         Total current liabilities                        9,560           16,658

    Stockholder's equity:                     
       Common Stock, $0.001 par value;
         20,000,000 shares authorized; 10,033,870
         and 9,800,679 shares issued and outstanding         10               10
       Additional paid-in capital                        79,136           78,664
       Warrants outstanding                                 717              717
       Accumulated deficit                              (45,462)         (45,105)
                                                       --------         --------
         Total stockholders' equity                      34,401           34,286
                                                       --------         --------

                                                       $ 43,961         $ 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   Six Months Ended
                                                      June 30,           June 30,
                                                ------------------  ------------------
                                                   1998     1997      1998      1997
                                                --------  --------  --------  -------- 
<S>                                             <C>      <C>      <C>      <C>
  Revenues:
     Product sales                               $ 4,610   $ 6,216   $13,244   $12,532
     Software, licensing and development           2,465     3,036     4,999     6,787 
                                                --------  --------  --------  -------- 
     Total revenues                                7,075     9,252    18,243    19,319
                                          
  Costs and expenses:
     Cost of product sales                         2,940     2,478     7,597     6,004
     Research and development                      2,944     3,203     6,178     6,515
     Selling, general and administrative           2,686     2,567     5,434     5,171 
                                                --------  --------  --------  -------- 
     Total costs and expenses                      8,570     8,248    19,209    17,690
                                                                               
  Operating income (loss)                         (1,495)    1,004      (966)    1,629

  Interest & other income (expense), net             275       350       520       628
                                                --------  --------  --------  -------- 
                                                                               
  Income (loss) before income taxes               (1,220)    1,354      (446)    2,257
                                                                               
  Provision (benefit) for income taxes              (244)      338       (89)      564
                                                --------  --------  --------  -------- 

  Net income (loss)                              $  (976)  $ 1,016     $(357)  $ 1,693
                                                --------  --------  --------  -------- 
                                                --------  --------  --------  -------- 
                                                                               
  Basic net income (loss) per share              $ (0.10)  $  0.11   $ (0.04)  $  0.18
                                                --------  --------  --------  -------- 
                                                --------  --------  --------  -------- 
                                                                               
  Diluted net income (loss) per share            $ (0.10)  $  0.09   $ (0.04)  $  0.15
                                                --------  --------  --------  -------- 
                                                --------  --------  --------  -------- 
                                          
  Shares used to compute basic net income                                      
  (loss) per share                                 9,975     9,301     9,916     9,203
                                                --------  --------  --------  -------- 
                                                --------  --------  --------  -------- 
                                                                               
  Shares used to compute diluted net income                                    
  (loss) per share                                 9,975    11,036     9,916    11,053
                                                --------  --------  --------  -------- 
                                                --------  --------  --------  -------- 

</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>

                                                                     SIX MONTHS ENDED
                                                                          JUNE 30,
                                                                  ------------------------
                                                                    1998            1997
                                                                  --------        --------
<S>                                                            <C>              <C>
 Cash flows from operating activities:                         
     Net income (loss)                                            $  (357)         $ 1,693
     Adjustments to reconcile net income to net cash           
     used by operations:                                       
        Depreciation, amortization and other                        1,046              777
        Changes in current assets and liabilities:             
          Accounts receivable, net                                  5,531             (211)
          Inventory                                                (4,971)           1,063
          Other current assets                                        278             (116)
          Accounts payable                                         (2,133)          (3,110)
          Accrued expenses and other liabilities                   (4,965)            (498)
                                                                  --------        --------
             Net cash used by operating activities                 (5,571)            (402)
                                                                  --------        --------
                                                           
 Cash flows from investing activities:                     
     Property and equipment                                        (1,091)          (1,857)
     Sales/Purchases of short-term investments, net                 2,839             (665)
                                                                  --------        --------
             Net cash provided (used) in investing activities       1,748           (2,522)
                                                           
 Cash flows from financing activities:                     
     Proceeds from issuance of Common Stock, net                      472              239
                                                                  --------        --------
             Net cash provided by financing activities                472              239
                                                                  --------        --------
                                                           
  Net decrease in cash and cash equivalents                        (3,351)          (2,685)
                                                           
  Cash and cash equivalents at beginning of period                  9,903           11,176
                                                                  --------        --------

  Cash and cash equivalents at end of period                      $ 6,552          $ 8,491
                                                                  --------        --------
                                                                  --------        --------

</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>

                                           JUNE 30,     DECEMBER 31,
                                             1998           1997
                                           -------        -------
       <S>                               <C>            <C>
         Inventory:
               Work-in-process             $ 2,354        $ 1,860
               Finished goods                6,740          2,263
                                           -------        -------
                                           $ 9,094        $ 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

         A reconciliation of the numerators and the denominators of the basic 
and diluted per share computation is as follows:

<TABLE>
<CAPTION>

                                                               Three Months Ended June 30,
                                                     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           $  (976)          9,975     $  (0.10)      $  1,016          9,301        $ 0.11
                                                                 --------                                      ------
                                                                 --------                                      ------
Effects of Dilutive Securities:
  Stock Options                                                                                   1,618
  Warrants                                                                                          117

Diluted EPS:
  Income available to
    common stockholder               $  (976)          9,975     $  (0.10)       $ 1,016         11,036        $ 0.09
                                                                 --------                                      ------
                                                                 --------                                      ------

                                     ---------------------------------------------------------------------------------
<CAPTION>

                                                                 Six Months Ended June 30,
                                                     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           $  (357)          9,916      $ (0.04)        $ 1,693        9,202         $ 0.18
                                                                 --------                                      ------
                                                                 --------                                      ------
                               
Effects of Dilutive Securities:
  Stock Options                                                                                  1,731
  Warrants                                                                                         121
                               
Diluted EPS:                   
  Income available to            
    common stockholder               $  (357)          9,916      $ (0.04)        $ 1,693       11,054         $ 0.15
                                                                 --------                                      ------
                                                                 --------                                      ------

</TABLE>

                                       6
<PAGE>



5. RECENTLY ISSUED ACCOUNTING STANDARD

    In June 1998, the Financial Accounting Standards Board issued Statement 
of Financial Accounting Standards No. 133, "Accounting for Derivative 
Instruments and Hedging Activities" ("SFAS 133").  FAS 133 establishes a new 
model for accounting for derivatives and hedging activities and supercedes  
and amends a number of existing accounting standards.  SFAS 133 requires that 
all derivatives be recognized in the balance sheet at their fair market 
value, and the corresponding derivative gains or losses be either reported in 
the statement of operations or as a deferred item depending on the type of 
hedge relationship that exists with respect to such derivative.  Adopting the 
provisions of SFAS 133 are not expected to have a material effect on the 
Company's consolidated financial statements, which will be effective for the 
Company's fiscal 2000. 

                                      7
<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

    Zoran Corporation ("Zoran" or the "Company") develops and markets 
integrated circuits ("ICs"), integrated circuit cores and software for digital 
video and audio applications enabled by compression. The Company's product 
lines address the PC and consumer multimedia market and include JPEG-based 
codecs, MPEG-based video decoders including DVD, Dolby Digital and MPEG-based 
audio decoders and real-time video CD and DVD decoder software for PC 
applications. The Company's software is  bundled by PC and graphic systems 
manufactures for software-only or hardware-assisted video CD, DVD and JPEG 
compressed video playback on the PC. Current applications for the Company's 
IC products include professional and consumer video editing systems, filmless 
digital cameras, PC-based or stand-alone video CD and DVD players and digital 
audio systems.

    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 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 to OEMs worldwide, either directly or 
through distributors or independent sales representatives. 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.

    The Company conducts a substantial portion of its research and 
development and certain sales and marketing activities in Israel through its 
wholly-owned Israeli subsidiary.  As a result, certain expenses are incurred 
in Israeli shekels.  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 

                                      8
<PAGE>

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 were $7.1 million and $18.2 million for the three and six 
month periods ended June 30, 1998, compared to $9.3 million and $19.3 million 
for the same periods of the prior fiscal year, representing a decrease of 
23.5% and 5.6% for the respective periods.  For the three and six month 
periods ended June 30, 1998 the corresponding product revenues were $4.6 
million and $13.2 million compared to $6.2 million and $12.5 million for the 
same periods in 1997, a decrease of 25.8% and an increase of 5.6%, 
respectively.  For the current quarter decreased unit sales in the JPEG and 
MPEG product families were partially offset by increased unit sales in the 
audio product family.  Software, licensing and development revenues were $2.5 
million and $5.0 million for the three and six month periods ended June 30, 
1998, compared to $3.0 million and $6.8 million for the same periods of the 
prior fiscal year, representing a decrease of 18.8% and 26.3% for the 
respective periods. This decrease was primarily due to the timing of 
significant new contracts for software and hardware design and as well as the 
timing of revenue recognition on 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 margins were 36.2% and 42.6% of product revenues for the 
three and six month periods ended June 30, 1998, compared to 60.1% and 52.1% 
for the same periods of the prior fiscal year, a decrease of 39.8% and 18.2%, 
respectively. The decrease was due to a product sales mix that included a 
decreased percentage of higher-margin products, a reduced percentage of 
products sold directly to OEM customers and higher manufacturing costs 
compared to the same periods 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 were $2.9 million and $6.2 
million for the three and six month periods ended June 30, 1998 compared to 
$3.2 million and $6.5 million for the same periods of the prior fiscal year.  
As a percentage of revenues R&D expenses increased to 41.6% and 33.9% for the 
three and six month periods ended June 30, 1998, compared to 34.6% and 33.7% 
for the same periods of the prior fiscal year.  The increase in R&D expenses 
as a percentage of revenues for the current quarter compared to the same 
period in 1997 was primarily due to reduced revenues quarter to quarter

    The Company continues to believe that significant investments in R&D are 
required for it to remain competitive and expects to continue 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 were $2.7 million and 
$5.4 million for the three and six month periods ended June 30, 1998, 
compared to $2.6 million and $5.2 million for the same periods of the prior 
fiscal year.  As a percentage of revenues, SG&A expenses were 38.0% and 29.8% 
for the 

                                      9
<PAGE>

three and six month periods ended June 30, 1998, compared to 27.8% and 26.8% 
for the same periods of the prior fiscal year.  The increase as a percent of 
revenues was due to SG&A expenses remaining flat while revenues decreased 
from period to period.

INTEREST AND OTHER INCOME, NET

     Net interest and other income for the three and six month periods ended 
June 30, 1998 was $275,000 and $520,000, respectively, a decrease of 21.4% 
and 17.2% compared to the same periods in 1997. The decrease resulted 
primarily from decreased interest income due to lower cash balances during 
the current periods as compared to the same periods of the prior fiscal year.

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 to the tax benefits derived from revenue and net income 
attributable to the Company's operations in Israel, which receives favorable 
tax treatment.

LIQUIDITY AND CAPITAL RESOURCES

    At June 30, 1998, the Company had $6.6 million of cash and cash 
equivalents, $9.6 million of short-term investments and $28.6 million of 
working capital.  Cash used in operations for the first six months of 1998  
was $5.6 million contrasted with $.4 million for the comparable period in 
1997.  Cash used  primarily reflects changes in inventory, accounts 
receivable and accrued liabilities.  The Company's capital expenditures for 
six months ended June 30, 1998 totaled $1.1 million.  The Company had no bank 
debt at June 30, 1998 or at December 31, 1997.

    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 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 

                                      10
<PAGE>

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 either TSMC or Motorola Inc., 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, Inc. and Anam Industrial, 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. 

                                      11
<PAGE>

    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 and 
quarter to quarter.  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 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.  Over the past three years, the Company has 
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.  Some of the Company's key operations, including the major portion 
of its research and development operations and a 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 

                                      12
<PAGE>

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 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 Company's 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.  

                                      13
<PAGE>

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.

                                      14
<PAGE>


                          PART II.     OTHER INFORMATION

Item 4.  Submission of Matters to a vote of Security Holders

              The Company's 1998 Annual Meeting of Stockholders was held on June
         10, 1998. At the meeting the following six persons nominated by 
         management were elected to serve as directors of the Company:

<TABLE>
<CAPTION>
                                                 Shares 
                                      ----------------------------
            Nominee                   Voted For           Withheld
            -------------             ----------------------------
         <S>                        <C>                   <C>
            Levy Gerzberg             9,385,807             55,953
            Uzia Galil                9,385,820             55,940
            George T. Haber           9,386,020             55,740
            James D. Meindl           9,385,820             55,940
            Arthur B Stabenow         9,386,020             55,740
            Philip M. Young           9,386,020             55,740

</TABLE>

    The following additional items were voted upon at the meeting:

   1. A proposal to amend the Company's 1993 Stock Option Plan to increase 
      the number of shares of Common Stock reserved for issuance thereunder by
      450,000 shares was approved by a vote of  8,615,243 shares for; 709,204 
      shares against; 117,313 shares abstaining.

   2. A proposal to ratify the appointment of Price Waterhouse LLP as the
      independent accountants of the Company for the fiscal year ending 
      December 31, 1998 was approved by a vote of 9,311,785 for; 31,620 
      against; 98,355 abstaining.

                                      15
<PAGE>

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 six months 
               ended June 30, 1998. 

                                      16
<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:  August 13, 1998                        /s/  Levy Gerzberg
                                              ---------------------------
                                              Levy Gerzberg
                                              President 
                                              Chief Executive Officer

                                              /s/  Karl Schneider
                                              ---------------------------
                                              Karl Schneider
                                              Vice President of Finance
                                              Chief Financial Officer



                                      17