<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, 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 October 31, 1998 was 10,098,871.

<PAGE>

                               ZORAN CORPORATION

                                     INDEX

                                                                    PAGE NO.

                      PART I.      FINANCIAL INFORMATION

Item 1.   Financial Statements

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

          Condensed Consolidated Statements of Operations
           Three and Nine Months Ended September 30, 1998 and 1997      4

          Condensed Consolidated Statements of Cash Flows
           Nine Months Ended September 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 6.   Exhibits and Reports on Form 8-K                            15


SIGNATURES                                                            16

                                       2

<PAGE>

                                    ZORAN CORPORATION
                           CONDENSED CONSOLIDATED BALANCE SHEETS
                             (IN THOUSANDS, EXCEPT SHARE DATA)
                                         (UNAUDITED)
<TABLE>
<CAPTION>
                                                      September 30,   December 31,
                                                          1998            1997
                                                      -------------   ------------
<S>                                                   <C>             <C>
ASSETS
 Current assets:
  Cash & equivalents                                     $  5,560      $  9,903
  Short-term investments                                   10,857        12,473
  Accounts receivable, net                                 13,357        16,509
  Inventories                                               6,811         4,123
  Other current assets                                      1,793         2,232
                                                      -------------   ------------
  Total current assets                                     38,378        45,240

 Property & equipment, net                                  5,523         5,704
                                                      -------------   ------------
                                                        $  43,901     $  50,944
                                                      -------------   ------------
                                                      -------------   ------------

LIABILITIES & STOCKHOLDERS' EQUITY
 Current liabilities:
  Accounts payable                                       $  2,529      $  5,656
  Accrued expenses and other liabilities                    6,539        11,002
                                                      -------------   ------------
  Total current liabilities                                 9,068        16,658

 Stockholders' 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                               79,156        78,664
  Warrants outstanding                                        717           717
  Accumulated deficit                                    (45,050)       (45,105)
                                                      -------------   ------------
  Total stockholders' equity                               34,833        34,286
                                                      -------------   ------------
                                                        $  43,901     $  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           Nine Months Ended
                                                                 September 30,                September 30,
                                                           -----------------------      -----------------------
                                                             1998           1997           1998         1997
                                                           --------       --------      ---------     ---------
<S>                                                        <C>            <C>           <C>           <C>
Revenues:
  Product sales                                            $  8,986       $  8,486      $  22,230     $  21,018
  Software, licensing and development                         2,860          3,101          7,859         9,888
                                                           --------       --------      ---------     ---------
  Total revenues                                             11,846         11,587         30,089        30,906

Costs and expenses:
  Cost of product sales                                       5,153          4,044         12,750        10,048
  Research and development                                    3,476          3,722          9,654        10,237
  Selling, general and administrative                         2,877          2,986          8,311         8,157
                                                           --------       --------      ---------     ---------
  Total costs and expenses                                   11,506         10,752         30,715        28,442

Operating income (loss)                                         340            835          (626)         2,464

Interest & other income (expense), net                          176            316            696           944
                                                           --------       --------      ---------     ---------
Income before income taxes                                      516          1,151             70         3,408

Provision for income taxes                                      103            288             14           852
                                                           --------       --------      ---------     ---------
Net income                                                 $    413       $    863      $      56     $   2,556
                                                           --------       --------      ---------     ---------
Basic net income per share                                 $   0.04       $   0.09      $     .01     $    0.27
                                                           --------       --------      ---------     ---------
Diluted net income per share                               $   0.04       $   0.08      $     .01     $    0.23
                                                           --------       --------      ---------     ---------
Shares used to compute basic net income per share            10,064          9,504          9,988         9,332
                                                           --------       --------      ---------     ---------
Shares used to compute diluted net income per share          10,941         11,131         10,970        11,114
                                                           --------       --------      ---------     ---------
</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>

                                                            NINE MONTHS ENDED
                                                               SEPTEMBER 30,
                                                          ---------------------
                                                             1998       1997
                                                          ---------- ----------
<S>                                                       <C>        <C>
Cash flows from operating activities:
 Net income                                                 $    56   $  2,556
 Adjustments to reconcile net income to net cash used
 by operations:
  Depreciation, amortization and other                        1,564      1,243
  Changes in current assets and liabilities:
   Accounts receivable, net                                   3,152     (1,591)
   Inventory                                                 (2,688)       110
   Other current assets                                         394       (371)
   Accounts payable                                          (3,127)    (3,735)
   Accrued expenses and other liabilities                    (4,463)     1,777
                                                          ---------- ----------
    Net cash used by operating activities                    (5,112)       (11)
                                                          ---------- ----------

Cash flows from investing activities:
 Purchase of Property and equipment                          (1,339)    (1,109)
 Sales/Purchases of short-term investments, net               1,913     (2,615)
                                                          ---------- ----------
    Net cash provided (used) in investing activities            574     (3,724)

Cash flows from financing activities:
 Proceeds from issuance of Common Stock, net                    492        380
                                                          ---------- ----------
    Net cash provided by financing activities                   492        380
                                                          ---------- ----------

Net decrease in cash and cash equivalents                    (4,046)    (3,355)

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

Cash and cash equivalents at end of period                 $  5,857   $  7,821
                                                          ---------- ----------
                                                          ---------- ----------

</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>
                                                    SEPTEMBER 30,   DECEMBER 31,
                                                         1998           1997
                                                    -------------   ------------
<S>                                                 <C>             <C>
INVENTORY:

   Work-in-process                                  $    1,512      $    1,860
   Finished goods                                        5,299           2,263
                                                    -------------   ------------
                                                      $  6,811        $  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 September 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          $       413             10,064     $    0.04      $       863              9,504    $    0.09
                                                                       ---------                                        ---------
                                                                       ---------                                        ---------

Effects of Dilutive Securities:
  Convertible Preferred Stock                                    -                                                 -
  Stock Options                                                877                                             1,614
  Warrants                                                       -                                                13

Diluted EPS:
  Income available to
    common stockholders             $       413             10,941     $    0.04      $        863            11,131    $    0.08
                                                                       ---------                                        ---------
                                                                       ---------                                        ---------

</TABLE>











<TABLE>
<CAPTION>
                                                                    Nine Months Ended September 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          $         5              9,988     $    0.01     $     2,556              9,332     $    0.27
                                                                       ---------                                        ---------
                                                                       ---------                                        ---------

Effects of Dilutive Securities:
  Convertible Preferred Stock                                    -                                                -
  Stock Options                                              1,043                                            1,697
  Warrants                                                     (61)                                              85

Diluted EPS:
  Income available to
    common stockholders             $          5            10,970     $    0.01     $     2,556             11,114     $    0.23
                                                                       ---------                                        ---------
                                                                       ---------                                        ---------
</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, which will be effective for the Company's fiscal year
2000, is not expected to have a material effect on the Company's consolidated
financial statements.

                                      -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 
manufacturers 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.  Since 1996, the 
Company has periodically reduced its ASPs on certain products to better 
penetrate its target markets and remain competitive. 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 directly and 
through distributors and 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 $11.8 million and $30.1 million for the three and 
nine month periods ended September 30, 1998, compared to $11.6 million and 
$30.9 million for the same periods of the prior fiscal year, representing a 
increase of 1.7% and a decrease of 2.6% for the respective periods.  For the 
three and nine month periods ended September 30, 1998, the corresponding 
product revenues were $9.0 million and $22.2 million compared to $8.5 million 
and $21.0 million for the same periods in 1997, increases of 5.9% and 5.7%, 
respectively.  For the current quarter there were increased unit sales in 
each of the MPEG and Audio and product families offsetting decreased unit 
sales in the JPEG product family.  Software, licensing and development 
revenues were $2.9 million and $7.9 million for the three and nine month 
periods ended September 30, 1998, compared to $3.1 million and $9.9 million 
for the same periods of the prior fiscal year, representing a decrease of 
6.5% and 20.2% for the respective periods. This decrease was primarily due to 
a shift in the amount of fixed period license fees the Company is able to 
collect on significant new software contracts and 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 42.7% and 42.6% of product revenues for the 
three and nine month periods ended September 30, 1998, compared to 52.3% and 
52.2% for the same periods of the prior fiscal year, a decrease of 18.3% and 
18.4%, 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 associated with the introduction of new products as 
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 $3.5 million and $9.7 
million for the three and nine month periods ended September 30, 1998 
compared to $3.7 million and $10.2 million for the same periods of the prior 
fiscal year.  As a percentage of revenues, R&D expenses decreased to 29.3% 
and 32.1% for the three and nine month periods ended September 30, 1998, 
compared to 32.1% and 33.1% for the same periods of the prior fiscal year.  
The decrease in R&D expenses as a percentage of revenues for the current 
quarter compared to the same period in 1997 was due to both reduced expenses 
and increased revenue.

     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.

                                       9
<PAGE>

SELLING, GENERAL AND ADMINISTRATIVE

     Selling, general and administrative ("SG&A") expenses were $2.9 million 
and $8.3 million for the three and nine month periods ended September 30, 
1998, compared to $3.0 million and $8.2 million for the same periods of the 
prior fiscal year.  As a percentage of revenues, SG&A expenses were 24.3% and 
27.6% for the three and nine month periods ended September 30, 1998, compared 
to 25.8% and 26.4% for the same periods of the prior fiscal year.  The 
decrease as a percent of revenues, quarter to quarter, was due to SG&A 
expenses remaining flat while revenues increased.

INTEREST AND OTHER INCOME, NET

     Net interest and other income for the three and nine month periods ended 
September 30, 1998 was $176,000 and $696,000, respectively, a decrease of 
44.3% and 26.3% 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 September 30, 1998, the Company had $5.6 million of cash and cash 
equivalents, $10.9 million of short-term investments and $29.3 million of 
working capital.  Cash used in operations for the first nine months of 1998 
was $5.1 million contrasted with $11,000 for the comparable period in 1997. 
Cash used  primarily reflects changes in inventory, accounts receivable and 
accrued liabilities.  The Company's capital expenditures for the nine months 
ended September 30, 1998 totaled $1.3 million.  The Company had no bank debt 
at September 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 expenditure 
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

                                       10
<PAGE>

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 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 

                                       11
<PAGE>

customers than the Company.  The markets in which the Company competes are 
intensely competitive and are characterized by rapid technological change, 
declining ASPs and rapid product obsolescence.

     CUSTOMER CONCENTRATION; CHANGES IN CUSTOMER MIX.  The Company's largest 
customers have accounted for a substantial percentage of its revenues, and 
sales to these large customers have varied materially from year to year 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 are 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.  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 

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<PAGE>

its ability to effectively manage its growth.  If the Company's management is 
unable to manage growth effectively,  the Company's business, operating 
results or financial condition could be materially and adversely affected.

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

     RELIANCE ON INTERNATIONAL SALES AND OPERATIONS; RELIANCE ON OPERATIONS 
IN ISRAEL.  The Company anticipates that international sales will continue to 
represent a significant portion of total revenues.  In addition, 
substantially all of the Company's semiconductor products are manufactured, 
assembled and tested 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 may not properly recognize calendar dates beginning in the Year 2000.  
If systems do not correctly recognize date information when the year changes 
to 2000, there could be an adverse impact on the Company's operations.  The 
risk for Zoran exists in three areas:  systems used by the Company to run its 
business, embedded software and software products sold to its customers, and 
the Year 2000 readiness of the Company's key suppliers and customers.  The 
Company is currently evaluating its exposure in all of these areas based on a 
Year 2000 compliance plan it has developed.

The Company has begun conducting a comprehensive inventory and evaluation of 
the systems used in running its business.  This includes its IT systems, 
equipment, and facilities.  To date, the Company has not found any potential 
Year 2000 issues  that would have a material impact on its operations.  The 
company should complete this portion of the investigation in the second 
quarter of 1999.   Since the Company has not yet identified any significant 
non-compliance problems there are currently no contingency plans in place for 
Year 2000 issues.  As the Company continues through the investigation 
however, it may find it necessary to 

                                       13
<PAGE>

create contingency plans in order to address Year 2000 compliance problems.  
The Company expects to complete any necessary contingency planning by the 
second quarter of 1999.

The Company believes its current software products are Year 2000 compliant. 
This is based on extensive testing of the software in Year 2000 simulated 
conditions.  However, since all customer situations cannot be anticipated, 
particularly those involving third party products, the Company's software 
products could prove to be non-compliant in some circumstances.  The impact 
of these claims could have a material impact on the Company's results of 
operations or financial condition.

Zoran has begun the process of contacting each of its critical suppliers to 
determine that the suppliers' operations and the products and services they 
provide are Year 2000 compliant.  Where practicable, Zoran will attempt to 
mitigate its risks with respect to the failure of suppliers to be Year 2000 
ready.  Where suppliers will not be compliant the Company may seek 
alternative suppliers who are found to be in Year 2000 conformance.  To date, 
no supplier has been identified that will not be Year 2000 ready by the 
appropriate timeframe.  However, the Company has not yet completed contacting 
all of its key suppliers and does not anticipate completing this portion of 
the investigation until the second quarter of 1999.  The Company has just 
begun to contact its key customers in order to ascertain their Year 2000 
compliance status.  Failure of the Company's customers to be Year 2000 ready 
may result in lost sales and reduced revenue or diminish the ability of 
customers to pay on a timely basis.  The Company expects to complete 
contacting all of its key customers by the second quarter of 1999.

     Based on the investigation to date the Company has not incurred and does 
not anticipate incurring costs that would materially impact the Company's 
operating results or financial condition.  However, the investigation is 
ongoing and no assurances can be given that unidentified non-compliance 
issues will not have a material impact on the Company's operations or 
financial condition.  Failure to ensure that the Company has fully identified 
and addressed the Year 2000 problem could result in the Company or any of its 
key vendors being unable for a period of time to conduct critical business 
activities, which include but are not restricted to, shipping product to 
customers, invoicing customers and paying vendors.

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

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<PAGE>

Item 6.  Exhibits and Reports on Form 8-K

      (a)  Exhibits

           3.3 Amended and Restated Bylaws of the Company

           27  Financial Data Schedule

      (b)  Reports on Form 8-K

           No reports on Form 8-K were filed during the nine months ended
           September 30, 1998.

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

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

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