<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, 1997

                                      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, 1997 was 9,772,884.
<PAGE>


                               ZORAN CORPORATION

                                    INDEX

                                                                     PAGE NO.
                                                                     --------

                          PART I. FINANCIAL INFORMATION

Item 1.  Financial Statements

         Condensed Consolidated Balance Sheets
           September 30, 1997 and December 31, 1996                     3

         Condensed Consolidated Income Statements
           Three and Nine Months Ended September 30, 1997 and 1996      4

         Condensed Consolidated Statements of Cash Flows
           Nine Months Ended September 30, 1997 and 1996                5

         Notes to Condensed Consolidated Financial Statements           6

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



                          PART II. OTHER INFORMATION


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


SIGNATURES                                                             15


                                     2
<PAGE>

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


                                               SEPTEMBER 30,     DECEMBER 31,
                                                   1997              1996
                                               -------------     ------------
ASSETS

Current assets:
  Cash and cash equivalents                       $  7,821         $  11,176 
  Short-term investments                            13,352            12,243 
  Accounts receivable, net                          12,679            11,088
  Inventory                                          1,689             1,799
  Prepaid expenses and other current assets          2,292             1,219
                                                  --------         ---------
    Total current assets                            37,833            37,525


Property and equipment, net                          5,274             3,857
                                                  --------         ---------

    Total assets                                  $ 43,107         $  41,382 
                                                  --------         ---------
                                                  --------         ---------


LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:
  Accounts payable                                $  2,133         $   5,868 
  Accrued expenses and other liabilities             8,761             6,984
                                                  --------         ---------
    Total current liabilities                       10,894            12,852
                                                  --------         ---------


Stockholders' equity:
  Common Stock, $0.001 par value;
    20,000,000 shares authorized;
    9,552,496 and 9,029,365 shares
    issued and outstanding                              10                 9
  Additional paid-in capital                        78,264            77,855
  Warrants                                             717               -   
  Accumulated deficit                              (46,778)          (49,334)
                                                  --------         ---------
    Total stockholders' equity                      32,213            28,530
                                                  --------         ---------

    Total liabilities and stockholders' equity    $ 43,107         $  41,382 
                                                  --------         ---------
                                                  --------         ---------


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


                                     3
<PAGE>

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

<TABLE>
<CAPTION>
                                                    THREE MONTHS ENDED             NINE MONTHS ENDED
                                                       SEPTEMBER 30,                  SEPTEMBER 30,
                                                  -----------------------       ------------------------
                                                     1997         1996             1997          1996
                                                  -----------------------       ------------------------
<S>                                                <C>         <C>              <C>           <C>
Revenues:
  Product sales                                    $  8,486    $  10,067        $  21,018     $   25,169
  Software, licensing and development                 3,101        2,302            9,888          5,795
                                                  -----------------------       ------------------------
      Total revenues                                 11,587       12,369           30,906         30,964
                                                  -----------------------       ------------------------
                                                                            
Costs and expenses:                                                         
  Cost of product sales                               4,044        5,563           10,048         14,278
  Research and development                            3,722        2,785           10,237          6,085
  Selling, general and administrative                 2,986        2,961            8,157          8,176
                                                  -----------------------       ------------------------
      Total costs and expenses                       10,752       11,309           28,442         28,539
                                                  -----------------------       ------------------------
                                                                            
Operating income                                        835        1,060            2,464          2,425
Interest and other income, net                          316          208              944            749
                                                  -----------------------       ------------------------

Income before income taxes                            1,151        1,268            3,408          3,174
Provision for income taxes                              288          136              852            368
                                                  -----------------------       ------------------------

Net income                                         $    863    $   1,132        $   2,556     $    2,806 
                                                  -----------------------       ------------------------
                                                  -----------------------       ------------------------
                                                                            
                                                                            
Net income per share                               $   0.08    $    0.10        $    0.23     $     0.27 
                                                  -----------------------       ------------------------
                                                  -----------------------       ------------------------
                                                                            
Weighted average common shares                                              
  and equivalents                                    11,131       10,851           11,079         10,542
                                                  -----------------------       ------------------------
                                                  -----------------------       ------------------------
</TABLE>

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


                                     4
<PAGE>

                             ZORAN CORPORATION
              CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                              (IN THOUSANDS)
                               (UNAUDITED)


                                                       NINE MONTHS ENDED
                                                         SEPTEMBER 30,
                                                    ----------------------
                                                      1997          1996
                                                    --------      --------
Cash flows from operating activities:
  Net income                                       $  2,556      $  2,806
  Adjustments:
    Depreciation and amortization                     1,243           903
    Changes in assets and liabilities:
      Accounts receivable                            (1,591)       (7,027)
      Inventory                                         110           618
      Prepaid expenses and other current assets        (371)         (297)
      Accounts payable                               (3,735)       (1,287)
      Accrued expenses and other liabilities          1,777         1,845
                                                   --------      --------
        Net cash used in operating activities           (11)       (2,439)
                                                   --------      --------

Cash flows from investing activities:
  Purchases of short-term investments, net           (1,109)      (11,841)
  Expenditures for property and equipment            (2,615)       (2,077)
                                                   --------      --------
    Net cash used in investing activities            (3,724)      (13,918)
                                                   --------      --------

Cash flows from financing activities:
  Proceeds of debt, net                                 -             765
  Proceeds from issuance of Common Stock, net           380         3,822
                                                   --------      --------
    Net cash provided by financing activities           380         4,587
                                                   --------      --------
Net decrease in cash and cash equivalents            (3,355)      (11,770)


Cash and cash equivalents at beginning of period     11,176        21,438
                                                   --------      --------

Cash and cash equivalents at end of period         $  7,821      $  9,668 
                                                   --------      --------
                                                   --------      --------


         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, 
1996.  Financial statements for the three and nine months ended September 30, 
1996 have been restated to reflect the acquisition of CompCore Multimedia, 
Inc. ("CompCore") in December 1996 which was accounted for as a pooling of 
interests.  Results for the interim periods presented are not necessarily 
indicative of the results to be expected for the full year.

2.  BALANCE SHEET COMPONENTS
                                          September 30,    December 31,
                                              1997            1996
                                          -------------    ------------
Inventories (in thousands):
    Work-in-process                         $     719        $     382
    Finished goods                                970            1,417
                                            ---------        ---------
                                            $   1,689        $   1,799
                                            ---------        ---------
                                            ---------        ---------

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.  NET INCOME PER SHARE
    Net income per share is computed using the weighted average number of 
common and common equivalent shares outstanding during the period. Common 
equivalent shares consist of shares issuable upon exercise of stock options 
and warrants (using the treasury stock method).

5.  FAS 128 SAB 74 REQUIREMENTS 
    In February 1997, the Financial Accounting Standards Board issued 
Statement of Financial Accounting Standards No. 128, "Earnings Per Share."  
This Statement is effective for periods ending after December 15, 1997 and 
redefines earnings per share under generally accepted accounting principles.  
Under the new standard, primary earnings per share is replaced by basic 
earnings per share and fully diluted earnings per share is replaced by 
diluted earnings per share.  If the Company had adopted this Statement for 
the periods ended September 30, 1997, the Company's earnings per share would 
have been as follows:

<TABLE>
<CAPTION>
                                   Three Months Ended September 30,         Nine Months Ended September 30,
                                   --------------------------------         -------------------------------
                                         1997            1996                     1997           1996
                                         ----            ----                     ----           ----
<S>                                     <C>             <C>                      <C>            <C>
Basic earnings per share                $0.09           $0.13                    $0.27          $0.32
Diluted earnings per share               0.08            0.10                     0.23           0.27
</TABLE>

6.  WARRANT
    In September 1997, in connection with a software license agreement, the 
Company issued a warrant to purchase 75,000 shares of its Common Stock at an 
exercise price of $24.31 per share.  The warrant is exercisable for a period 
of four years from the date beginning one year after the issuance date of the 
warrant.  The estimated value of the warrant, included in prepaid expenses 
and other current assets, is approximately $717,000, which will be amortized 
over the four-year period of the license agreement.      


                                     6
<PAGE>

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


   THE FOLLOWING DISCUSSION INCLUDES FORWARD-LOOKING STATEMENTS WITH RESPECT 
TO THE COMPANY'S FUTURE FINANCIAL PERFORMANCE.  ACTUAL RESULTS MAY DIFFER 
MATERIALLY FROM THOSE CURRENTLY ANTICIPATED DEPENDING UPON A VARIETY OF 
FACTORS, INCLUDING THOSE DESCRIBED BELOW UNDER THE SUB-HEADING, "FUTURE 
PERFORMANCE AND RISK FACTORS" AND DISCUSSED MORE FULLY IN THE COMPANY'S 
ANNUAL REPORT ON FORM 10-K FOR THE YEAR ENDED DECEMBER 31, 1996.

OVERVIEW

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

    In December 1996, the Company acquired CompCore, a provider of 
software-based compression products and a designer of cores for video and 
audio decoder integrated circuits.  The Company issued approximately 2.0 
million shares of Zoran Common Stock in exchange for all of the outstanding 
Common Stock of CompCore.  The Company also assumed all outstanding options 
to purchase CompCore Common Stock which were exchanged for options to 
purchase approximately 900,000 shares of Zoran Common Stock.  The acquisition 
was accounted for as a pooling of interests, and the financial statements of 
the Company and the information herein have been restated to include the 
results of CompCore for all periods.

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

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


                                     7
<PAGE>

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

RESULTS OF OPERATIONS

REVENUES

    Total revenues for the quarter and nine months ended September 30, 1997 
were $11.6 million and $30.9  million, respectively, decreases of 6% and less 
than 1% compared to the same periods in 1996.  Product sales of $8.5 million 
and $21.0 million for the current quarter and nine months, respectively, each 
decreased by 16% compared to the same periods last year.  The decreases in 
product sales resulted primarily from unit sales and revenue decreases for 
the Company's Dolby Digital audio compression ICs sold through Fujifilm due 
to early delays in the development of the DVD market and uncertainty 
regarding the timing of volume production and shipment of DVD players.  These 
decreases were partially offset by unit sales and revenue increases for the 
Company's JPEG-based products used in desktop video editing and digital 
filmless cameras.  Product sales for the current quarter were negatively 
impacted by a delay in shipping a large order of JPEG-based devices while 
product sales for the quarter ended September 30, 1996 reflected revenue from 
an advance payment deferred in prior periods and recognized in the third 
quarter of 1996 upon completion of a multi-year sales program with a 
strategic partner. Software, licensing and development revenues of $3.1 
million and $9.9 million for the quarter and nine months ended September 30, 
1997, respectively, increased by 35% and 71% compared to the same periods 
last year due primarily to significant new licensing contracts and progress 
on long-term development contracts. 

    Customers comprising a significant portion of the Company's total 
revenues for the respective periods were as follows:

<TABLE>
<CAPTION>
                 Three Months Ended September 30,          Nine Months Ended September 30,
                 --------------------------------          -------------------------------
                         1997        1996                         1997        1996
                         ----        ----                         ----        ----
<S>                       <C>        <C>                          <C>          <C>
    A                     19%        16%                          16%          19%
    B                     13%        41%                          12%          34%
    C                     11%         --                           5%           --
    D                     10%         1%                          15%           2%
</TABLE>


                                     8
<PAGE>

PRODUCT GROSS PROFIT

    Product gross margin was 52% for the quarter and nine months ended 
September 30, 1997, compared to 60% for the prior quarter ended June 30, 1997 
and 45% and 43% for the quarter and nine months ended September 30, 1996, 
respectively.  The decrease from the second quarter of 1997 reflects 
proportionally higher sales of lower margin products and a greater percentage 
of sales through distributors and to higher volume customers.  The increases 
for the current quarter and nine months compared to last year were due to a 
product sales mix that included an increased percentage of higher margin 
product, an increased percentage of products sold directly to OEM customers 
and lower manufacturing costs during the current periods.  Product margins 
for the quarter and nine months ended September 30, 1996 were positively 
impacted by revenues recognized from the completion of the multi-year sales 
program with a strategic partner.  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 quarters, causing further 
fluctuations in margins. 

RESEARCH AND DEVELOPMENT

    Research and development ("R&D") expenses of $3.7 million and $10.2 
million for the quarter and nine months ended September 30, 1997, 
respectively, were 34% and 68% above the comparable periods in 1996.  The 
increases  were a result of the planned enhancement of the Company's 
technology and development capabilities in conjunction with the Company's 
growth in general and its increased software, licensing and development 
revenue.  R&D expenses during the current quarter and nine month periods 
increased as a percentage of total revenues compared to the same periods last 
year due to the above factors and the decrease in product sales. 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 of $3.0 million and 
$8.2 million for the quarter and nine months ended September 30, 1997, 
respectively, were basically equal to the comparable periods in 1996.  SG&A 
expenses for the quarter ended September 30, 1997 increased slightly compared 
to last year as a percentage of total revenues due to decreased product 
sales.  Increased sales related expenses for the periods to support planned 
revenue growth were offset by decreased administrative expenses due primarily 
to certain expenses at non-recurring levels in the prior year.  The Company 
expects that future SG&A expenses will increase in order to support the 
anticipated growth of the Company.

INTEREST AND OTHER INCOME, NET

    Net interest and other income of $316,000 and $944,000 for the quarter 
and nine months ended September 30, 1997, respectively, represented increases 
of 52% and 26%, respectively, compared to the same periods last year.  The 
increases resulted primarily from decreased interest expense as a result of 
the repayment of the Company's remaining debt during 1996.

PROVISION FOR INCOME TAXES

    The Company's estimated effective tax rate increased to 25% for the 
current year from 11% last year.  The increase was primarily due to taxes on 
income in excess of the net operating loss carryover limitation and foreign 
withholding taxes.


                                     9
<PAGE>

LIQUIDITY AND CAPITAL RESOURCES

    Net proceeds from the initial public offering of the Company's Common 
Stock (the "IPO") in December 1995, the exercise of certain warrants in 
connection with the IPO and net proceeds from the exercise of the 
underwriters' over-allotment option in January 1996 totaled $21.0 million.  
At September 30, 1997, the Company had $21.2 million of cash, cash 
equivalents and short-term investments.

    The Company's operating activities used cash of $11,000 in the nine 
months ended September 30, 1997.  Cash used in operating activities reflected 
changes in working capital, partially offset by net income and depreciation 
and amortization.  The principal change in working capital during the nine 
months was a net decrease in accounts payable and accrued expenses of $2.0 
million due partially to payments of expenses related to the acquisition of 
CompCore in December 1996.  In addition, accounts receivable increased by 
$1.6 million due primarily to the high level of product shipments and 
execution of licensing and development agreements during the last month of 
the period and additional progress on development contracts.  During the nine 
months ended September 30, 1997, the Company's capital expenditures were $2.6 
million.  The Company had no bank debt at December 31, 1996 or at September 
30, 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 twelve 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.  While sales of audio products accounted for an 
increased percentage of product revenues in 1996, video editing applications 
continued to account for the largest percentage of the Company's product 
sales.  Delays in the development of the DVD market have resulted in 
decreased sales of the Company's audio products in 1997 compared to 1996.  
The Company expects that sales of its devices for video capture and editing 
applications and digital audio applications will continue to account for a 
significant portion of its revenues for the near future. Over the longer 
term, the Company's ability to generate increased revenues will be dependent 
on the expansion of sales of its products for use in other existing 
applications, as well as the development and acceptance of new applications 
for the Company's technologies and products.  The potential size of the 
markets for new applications and the timing of their development and 
acceptance is uncertain.  The Company's future success will depend upon 
whether manufacturers select the Company's integrated circuits and software 
for incorporation into their products, and upon the successful marketing of 
these products by the manufacturers.  There can be no assurance that demand 
for existing applications will be sustained, that new markets will develop or 
that manufacturers developing products for any of these markets will design 
the Company's integrated circuits into their products or successfully market 
them.  The failure of existing and new markets to develop or to be receptive 
to the Company's products would have a material adverse effect on the 
Company's business, operating results and financial condition.

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


                                     10
<PAGE>


    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.  Although the Company has supply 
understandings and arrangements with two of its principal foundries, it does 
not have formal long-term supply contracts and, therefore, neither of these 
suppliers is obligated to supply products to the Company for any specific 
period, in any specific quantity or at any specified price, except as may be 
provided in a particular purchase order.

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

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

    RECENTLY COMPLETED ACQUISITION.  On December 27, 1996, the Company 
acquired CompCore.  The managements of the Company and CompCore have 
completed the merger with the expectation that the merger will result in 
beneficial synergies for the companies.  Achieving the anticipated benefits 
of the merger will depend in part upon whether the integration of the two 
companies' businesses is accomplished in an efficient and effective manner.  
The combination of the two companies has required, among other things, 
integration of the companies' respective product offerings and technology and 
coordination of their research and development, sales and marketing, and 
financial reporting efforts. Certain aspects of the integration are still in 
process, and there can be no assurance that it will be completed smoothly or 
successfully.  If significant difficulties are encountered in the integration 
of the existing product lines and technology, resources could be diverted 
from new product development, resulting in delays in new product 
introductions.  The difficulties of such integration have been increased by 
the necessity of coordinating geographically separated organizations with 
distinct cultures.  The integration of certain operations require the 
dedication of management and other personnel resources which may temporarily 
distract from the day-to-day business of the combined company.  In addition, 
certain former key employees of CompCore are no longer with the Company.  
There can be no assurance that other former CompCore employees will remain 
employed by the Company.  Failure to successfully complete the integration of 
the two companies' operations could have a material adverse effect on the 
combined company's business, financial condition or results of operations.

    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 
continue to devote significant resources 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.


                                     11
<PAGE>

    COMPETITION; PRICING PRESSURES.  The Company's existing and potential 
competitors include 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.  There 
can be no assurance that the Company's products will continue to compete 
favorably or that the Company will be successful in the face of increasing 
competition from new products and enhancements introduced by existing or new 
competitors.  In addition, increased competition may result in price 
reductions, reduced margins and loss of market share, any of which could have 
a material adverse effect on the Company's business, operating results and 
financial condition.

    CUSTOMER CONCENTRATION; CHANGE IN CUSTOMER MIX.  The Company's largest 
customers have accounted for a substantial percentage of its revenues, and 
sales to these large customers have varied materially from year to year. 
There can be no assurance that the Company will be able to retain its key 
customers or that such customers will not cancel purchase orders 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 affect the collectibility of account balances from one or more key 
customers could have a material adverse effect on the Company's business, 
operating results or financial condition.

    FLUCTUATIONS IN OPERATING RESULTS.  The Company's quarterly operating 
results have varied significantly due to a number of factors, including the 
timing of new product introductions by the Company and its competitors, 
market acceptance of new and enhanced versions of the Company's products and 
products of its customers, the timing of large customer orders and shipments, 
the availability of development funding and the timing of licensing and 
development revenue, changes in the mix of products sold and the mix of 
distribution channels employed, and competitive pricing pressures.  The 
Company expects that its operating results will fluctuate in the future as a 
result of these factors and a variety of other factors, including the 
availability of adequate foundry capacity, fluctuations in manufacturing 
yields, the emergence of new industry standards, product obsolescence, 
changes in pricing policies by the Company, its competitors or its suppliers, 
the cyclical nature of the semiconductor industry, the evolving and 
unpredictable nature of the markets for products incorporating the Company's 
integrated circuits and 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 customers' 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 
licensing 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.  The Company believes that its operating results have 
been somewhat affected by seasonal factors reflecting stronger demand for 
consumer products during the last several months of the calendar year.  As 
markets for consumer products incorporating the Company's integrated circuits 
and software mature, the Company expects that these seasonal trends may 
become more significant.  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.


                                     12
<PAGE>

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

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

    RELIANCE ON INTERNATIONAL SALES AND OPERATIONS; RELIANCE ON OPERATIONS IN 
ISRAEL.  The Company anticipates that international sales will continue to 
represent a significant portion of total revenues.  In addition, 
substantially all of the Company's 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 on the Company's 
business, operating results or financial condition.

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


                                     13
<PAGE>

                        PART II. OTHER INFORMATION



Item 6.  Exhibits and Reports on Form 8-K

    (a)  Exhibits 

           11.1  Statement re:  Computation of Net Income Per Share

           27    Financial Data Schedule

    (b)  Reports on Form 8-K

         No reports on Form 8-K were filed during the three months ended 
         September 30, 1997.  


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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 10, 1997             /s/  LEVY GERZBERG
                                     --------------------------------
                                     Levy Gerzberg
                                     President 
                                     Chief Executive Officer



Date:  November 10, 1997             /s/  AMI KRAFT
                                     --------------------------------
                                     Ami Kraft
                                     Vice President, Finance
                                     Chief Financial Officer


                                     15