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                                    UNITED STATES
                          SECURITIES AND EXCHANGE COMMISSION
                                WASHINGTON, DC  20549
                                           
                                      FORM  10-Q
                                           

[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
    ACT OF 1934
    FOR THE QUARTERLY PERIOD ENDED..............NOVEMBER 2, 1996...............

                                          OR
                                           
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
    ACT OF 1934
    FOR THE TRANSITION PERIOD ENDED................TO...........................

    COMMISSION FILE NUMBER.....................0-4187...........................
                                           
                           AMATI COMMUNICATIONS CORPORATION
                             (FORMERLY ICOT CORPORATION)
                (Exact name of registrant as specified in its charter)
                                           
                                           
                       DELAWARE                            94-1675494
         (State or other jurisdiction of                  (IRS Employer
          incorporation or organization)                Identification No.)

    2043 SAMARITAN DRIVE, SAN JOSE, CA                         95124
    (Address of Principal Executive Offices)                 (Zip Code)

    REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE:    (408) 879-2000

    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 AT LEAST THE PAST 90 DAYS.

         YES  X                        NO   
             ----                         ----

    AS OF DECEMBER 13, 1996, 18,586,980 SHARES OF REGISTRANT'S COMMON STOCK
    WERE OUTSTANDING.

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                                      FORM 10-Q
                                       CONTENTS
                                           
PART I.  FINANCIAL INFORMATION


         Item 1.     FINANCIAL STATEMENTS

                     Consolidated Condensed Statements of Operations

                     Consolidated Condensed Balance Sheets

                     Consolidated Condensed Statements of Cash Flows

                     Notes to Consolidated Condensed Financial Statements


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


PART II. OTHER INFORMATION


         Item 2.     CHANGES IN SECURITIES

         Item 6.     EXHIBITS AND REPORTS ON FORM 8-K


                     SIGNATURES

<PAGE>

 PART I.  FINANCIAL INFORMATION

 ITEM 1.      FINANCIAL STATEMENTS

                           AMATI COMMUNICATIONS CORPORATION
                   CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
                        (In thousands, except per share data)
                                           
                                                     Three Months Ended
                                                ----------------------------
                                                November 2,      October 28,
                                                   1996              1995   
                                                -----------      -----------
       Net sales                                 $  4,513         $  3,354  
       Cost of sales                                2,087            1,840  
                                                ---------        ---------
          Gross margin                              2,426            1,514  
               
       Operating expenses:
          Research and development                  1,751              360  
          Marketing and sales                         557               60  
          General and administrative                  720              321  
          Other                                       128               --  
                                               ----------        ---------
                Total operating expenses            3,156              741  
               
                Income (loss) from operations        (730)             773  
               
       Other income (expense):
          Interest income                               1               86  
          Interest expense                            (17)               0  
                                               ----------        ---------
                Total other income (expense)          (16)              86  
               
                Income (loss) before income taxes    (746)             859  
               
       Provision for income taxes                      --               43  
                                               ----------        ---------
                NET INCOME (LOSS)                $   (746)         $   816  
                                               ----------        ---------
                                               ----------        ---------
                NET INCOME (LOSS) PER SHARE      $  (0.04)         $  0.07  
                                               ----------        ---------
                                               ----------        ---------
       Weighted Average Number of
       Common Shares and Common 
       Share Equivalents                           17,719           12,264  
                                               ----------        ---------
                                               ----------        ---------

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

                                      1
<PAGE>
                           AMATI COMMUNICATIONS CORPORATION
                        CONSOLIDATED CONDENSED BALANCE SHEETS
                                    (In thousands)


                                                     November 2,   July 27,
                                                       1996          1996  
                                                     ----------   ----------
    ASSETS
    
    Current assets:
       Cash and cash equivalents                      $  3,107    $    886  
       Accounts receivable, less allowance of 
           $30 in 1997 and 1996                          4,207       1,524  
       Inventories                                       1,849       1,616  
       Other current assets                              1,146       1,156  
                                                      --------    --------
           Total current assets                         10,309       5,182  
    
    Equipment and leasehold improvements-net             4,574       1,059  
                                                      --------    --------
       TOTAL ASSETS                                  $  14,883    $  6,241  
                                                      --------    --------
                                                      --------    --------
    LIABILITIES AND STOCKHOLDERS' EQUITY
    
    Current liabilities:
       Current maturities of capitalized lease 
         obligations                                 $     545    $     --  
       Accounts payable and accrued expenses             5,130       3,079  
       Employee compensation                             1,041         793  
       Notes payable                                       395         395  
                                                     ---------    --------
            Total current liabilities                    7,111       4,267  
                                                     ---------    --------
    Long-term liabilities:
       Capitalized lease obligations, less current 
         maturities                                      1,708          --  
       Obligations under lease commitments                 294         294  
                                                     ---------    --------
        Total long-term liabilities                      2,002         294  
                                                     ---------    --------
    Stockholders' equity                                 5,770       1,680  
                                                     ---------    --------
       TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY    $  14,883    $  6,241  
                                                     ---------    --------
                                                     ---------    --------

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

                                      2
<PAGE>

                           AMATI COMMUNICATIONS CORPORATION
                   CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
                                    (In thousands)

                                                          Three Months Ended
                                                       ------------------------
                                                       November 2,   Ocober 28,
                                                          1996         1995
                                                       -----------   ----------
Cash flows from operating activities:
    Net income (loss)                                       $   (746) $   816 
    Adjustments to reconcile net income (loss) to net
     cash provided by (used for) operating activities:
         Depreciation and amortization                           164      136 
         Loss on retirement of capital equipment                  51        3 
         Increase in accounts receivable                      (2,683)     (77)
         Decrease (increase) in inventories                     (233)     180 
         Decrease (increase) in other assets                     (52)     226 
         Increase (decrease) in accounts payable, accrued
             expenses and employee compensation                2,063     (274)
                                                             -------    -----
        NET CASH PROVIDED BY (USED FOR) OPERATING ACTIVITIES  (1,436)   1,010 
                                                             -------    -----
Cash flows from investing activities:
     Advances to Amati and acquisition costs incurred             --   (2,417)
     Purchases of held-to-maturity investments                    --   (1,992)
     Proceeds from maturities of held-to-maturity investments     --    2,425 
     Purchase of equipment and leasehold improvements         (1,415)      (2)
                                                             -------    -----
        NET CASH USED FOR INVESTING ACTIVITIES                (1,415)  (1,986)
                                                             -------    -----
Cash flows from financing activities:
     Payment of lease obligations                                 --       (4)
     Proceeds from equity financing                            5,000       -- 
     Proceeds from exercise of stock options/warrants             72      605
                                                             -------    -----
        NET CASH PROVIDED BY FINANCING ACTIVITIES              5,072      601
                                                             -------    -----

NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS           2,221     (375)
BEGINNING BALANCE - CASH AND CASH EQUIVALENTS                    886    1,066 
                                                             -------    -----
ENDING BALANCE - CASH AND CASH EQUIVALENTS                  $  3,107   $  691 
                                                             -------    -----
                                                             -------    -----
Supplemental disclosures of cash flow information:
    Cash paid during the period for interest                $     55   $   --
                                                             -------    -----
                                                             -------    -----

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

                                      3
<PAGE>

                           AMATI COMMUNICATIONS CORPORATION
                 NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
                                   November 2, 1996

NOTE A - BASIS OF PRESENTATION

The accompanying unaudited consolidated condensed financial statements have 
been prepared in accordance with the rules and regulations of the Securities 
and Exchange Commission and do not include all of the information and 
footnotes required by generally accepted accounting principles for complete 
financial statements.  In the opinion of management, all adjustments 
(consisting of normal recurring entries) considered necessary for a fair 
presentation have been included.  For further information, refer to the 
financial statements and footnotes included in the Company's Annual Report on 
Form 10-K for the year ended July 27, 1996.  The results for the period are 
not necessarily indicative of results for the full fiscal year.  

NOTE B - NET INCOME (LOSS) PER SHARE

Net income (loss) per share is based on the weighted average number of shares 
outstanding of common stock and common stock equivalents (when dilutive) 
using the treasury stock method.  No common stock equivalents have been 
included in fiscal 1997 because the effect would decrease the loss per share.

NOTE C - INVENTORIES

Inventories are stated at the lower of cost (first-in, first-out) or market 
and are comprised of the following:

                                  NOVEMBER 2, 1996          JULY 27, 1996
                                  ----------------          -------------
        Finished goods                $     47                $     1  
        Work in process                    631                    890  
        Purchased and service parts      1,171                    725  
                                     ---------               --------
                                      $  1,849                $ 1,616 
                                     ---------               --------
                                     ---------               --------

                                       4
<PAGE>

                           AMATI COMMUNICATIONS CORPORATION
           NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (CONTINUED)
                                   November 2, 1996
                                           

NOTE D - LITIGATION

In November 1993, an action was brought against the Company for damages 
related to the use of the Company's products.  The plaintiff filed a suit 
claiming repetitive stress injuries resulting from the use of the Company's 
product in the course of employment with American Airlines from the period 
May 1981 through July 1991.  The plaintiff alleges damages in the amount of 
$1 million and seeks punitive damages of $10 million.  The Company believes 
that the claim is without merit and has tendered defense of this action to 
its insurance carriers.  In the opinion of management, the outcome of this 
litigation will not have a material adverse effect on the Company's financial 
position or its results of operations. The Company is not involved in any 
other substantial litigation.

NOTE E - ACQUISITION OF OLD AMATI

On November 28, 1995, the Company acquired all of the outstanding shares of 
Amati Communications Corporation ("Old Amati") for approximately $29.5 
million.  The purchase price consisted of the issuance of 2.6 million shares 
of Company common stock in exchange for all shares of Old Amati common stock, 
1.5 million shares of Company common stock in exchange for all shares of Old 
Amati Series A preferred stock, warrants for the purchase of up to 1.1 
million shares of Company common stock in exchange for all Old Amati 
warrants, and options to purchase up to 1.6 million shares of Company common 
stock in exchange for all options to purchase Old Amati common stock.  The 
purchase price also includes registration and other acquisition costs of $0.8 
million, total cash advances to Old Amati prior to the merger of $5.6 million 
and is net of the estimated proceeds from the assumed exercise of Old Amati 
options and warrants of $3.3 million.

The transaction was accounted for using the purchase method of accounting.  
The Company allocated the purchase price to the net assets based upon their 
estimated fair values.  The fair values of tangible assets acquired and 
liabilities assumed were $1.2 million and $3.2 million, respectively. The 
balance of the purchase price, $31.6 million, was charged to earnings to 
write off in-process research and development that had not reached 
technological feasibility and had no alternative future uses.

The following table reflects unaudited pro-forma combined results of 
operations of the Company and Old Amati on the basis that the acquisition had 
taken place and the related charge, noted above, was recorded at the 
beginning of the fiscal year for the period presented:

                                       5
<PAGE>

                          AMATI COMMUNICATIONS CORPORATION
           NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (CONTINUED)
                                   November 2, 1996
                                           

                               Three Months Ended October 28, 1995
                               -----------------------------------
                               (in thousands except per share data)

                                Revenues                  $    3,728  
                                Net loss                  $  (32,579)
                                Net loss per share        $    (1.93)
                                Shares used in computation    16,919  

In management's opinion, the unaudited pro-forma combined results of 
operations are not necessarily indicative of the actual results that would 
have occurred had the acquisition been consummated at the beginning of 1996 
or of future operations of the combined companies under the ownership and 
management of the Company.

NOTE F - CHANGE IN SECURITIES

In October 1996, the Company entered into an Investment Agreement (the 
"Investment Agreement") with Quantum Industrial Partners LDC, S-C Phoenix 
Holdings, L.L.C., Winston Partners, L.P., Winston Partners II LDC and Winston 
Partners II L.L.C. (collectively, the "Investors") which will provide to the 
Company up to $15 million in equity financing in exchange for the issuance of 
Company Common Stock and warrants (the "Warrants") to purchase up to 600,000 
shares of Company Common Stock.  The Warrants were issued on October 3, 1996 
and are exercisable at any time between December 17, 1996 and October 2, 
2001.  Warrants to purchase up to 300,000 shares of Common Stock are 
exercisable at $17.45 per share; Warrants to purchase the other 300,000 
shares are exercisable at $25 per share.  The Company has delivered a Put 
Notice to the Investors for $10,000,000 pursuant to the Investment Agreement. 
In exchange for the $10,000,000 investment in the Company, the Investors 
will receive an aggregate of 741,913 shares of the Company's Common Stock.  
The Company has received $5,000,000 pursuant to this first Put Notice.  The 
Warrants and Common Stock issued in connection with the Investment Agreement 
were exempt from the registration requirements of the Securities Act of 1933, 
as amended (the "Securities Act"), pursuant to the exemption therefrom 
found at Section 4(2) of the Securities Act.

                                       6
<PAGE>

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

INTRODUCTION  

To the extent that Management's Discussion and Analysis of Financial 
Condition and Results of Operations discusses financial projections, 
information or expectations about the Company's products or markets, or 
otherwise makes statements about future events, such statements are 
forward-looking and are subject to a number of risks and uncertainties that 
could cause actual results to differ materially from the statements made.  
These include, among others, successful and timely development and acceptance 
of new products, the availability of sufficient funding to complete 
development of new products and other factors described below.  In addition, 
such risks and uncertainties also include the matters identified under the 
heading "Risk Factors" below.

OVERVIEW

On November 28, 1995, ICOT Corporation, based in San Jose, California, and 
Amati Communications Corporation ("Old Amati"), a privately held Mountain 
View, California based company, completed a merger by which Old Amati became 
a wholly-owned subsidiary of ICOT Corporation.  Effective as of the merger, 
the name of the surviving company was changed to Amati Communications 
Corporation (the "Company") and its common stock began trading on the Nasdaq 
National Market under the symbol "AMTX" on November 29, 1995.

The Company is a leading developer of advanced transmission equipment 
utilizing Discrete Multi-tone "DMT" technology for the Asymmetric Digital 
Subscriber Line "ADSL", Very high-speed Digital Subscriber Line "VDSL" and 
cable modem markets.  Its DMT technology has been selected as the American 
National Standards Institute "ANSI" and European Telecommunications Standards 
Institute "ETSI" standard for ADSL products.  The Company is the holder of 
ADSL/DMT patents and has licensed the technology to companies such as Nortel, 
Motorola and NEC. The Company is also a provider of network connectivity 
systems for the internetworking and Original Equipment Manufacturers "OEM" 
marketplaces.

RESULTS OF OPERATIONS

Total net sales in the first quarter of fiscal 1997 increased 35% to 
$4,513,000 from sales of $3,354,000 in the first quarter of fiscal 1996.  
Sales to IBM accounted for 44% of the Company's revenue in the first quarter 
of fiscal 1997, compared with 80% for the comparable period of fiscal 1996. 
Royalty revenues derived from a product developed by the Company for IBM were 
$181,000 in the current fiscal quarter compared with $233,000 for the first 
quarter of the prior fiscal year. The Company expects that IBM will continue 
to account for a substantial portion of the Company's revenues until it 
completes development and commercialization of its ADSL products.  IBM is not 
obligated to purchase any specified amounts of products or to provide

                                       7
<PAGE>

binding forecasts of product purchases for any period.  Since IBM considers 
product sales and market data confidential, the Company has very little 
ability to forecast future demand. Furthermore, since IBM has the exclusive 
responsibility for marketing and selling of the products that the Company 
develops, results of operations can be significantly affected by IBM's 
success in the market place.

During fiscal 1996, the Company began shipping its Overture series of 
transceivers.  The Overture 4 is a prototype that does not have a low enough 
cost or power consumption for mass deployment and its components are entirely 
discrete (off the shelf).  This product is to be phased out in favor of the 
next series of transceiver, called Overture 8.  In the third quarter of 
fiscal 1996, the Company delivered the Overture 8, which is characterized by 
a high bandwidth as defined by the ANSI standards.  This product is currently 
installed in its first field trial of broadcast video in Australia.  Sales of 
the Overture series field trials in the first quarter of fiscal 1997 were 
$240,000. In addition, contract revenues realized during the current quarter 
include an initial consideration under a joint development agreement entered 
into by the Company and NEC Corporation-Japan on October 30, 1996.  The 
Company anticipates that the Overture series of products will continue to be 
represented at international field trials.

PC to Mainframe Connectivity sales of $297,000 for the first quarter of 
fiscal 1997 represents a decline of 54% when compared with the same period of 
the prior fiscal year due to a general decline in the Company's connectivity 
market share.  The PC to Mainframe Connectivity market is highly competitive 
and is characterized by rapid advances in technology which frequently result 
in the introduction of new products with improved performance 
characteristics, thereby subjecting the Company's products to risk of 
technological obsolescence.  The Company competes directly or indirectly with 
a broad range of companies, many of whom have significantly greater 
resources. In addition, the Company is competing for a limited segment of a 
declining market.

Gross margin as a percent of sales was 54% for the first quarter of fiscal 
1997 compared with 45% for the same period of fiscal 1996.  The increase in 
margin was primarily attributable to higher margins on contract revenues.  
Amortization of capitalized software costs charged to cost of sales was 
$61,000 in the first quarters of fiscal 1997 and fiscal 1996.

Net research and development expenses increased 386% to $1,751,000 in the 
first quarter of fiscal 1997 when compared to the same period of fiscal 1996 
largely because of the addition of 15 Old Amati engineers and the hiring of 
16 new employees as a result of the merger.  Higher costs in fiscal 1997 are 
primarily due to the introduction of the Company's new family of Overture 8 
ADSL/DMT modems and Overture 8 Access System shelf products. From the 
technology acquired in the merger, the Company believes it has a 
technological leadership position in DMT technology. Maintaining this 
position is largely dependent on the Company's ability to develop new 
products that meet a wide range of customer needs.  Research and development 
efforts for the DMT technology are grouped into three areas: the 
microelectronics group which is primarily focused on ADSL and VDSL markets; 
the software group, which is primarily focused on the development of firmware 
for the Overture series; and the hardware group, which is primarily focused 
on analog and digital design activities. All research and development 
expenses related to

                                       8
<PAGE>

this technology are charged to operations as incurred.  Total engineering 
expenses are net of funded development costs from IBM. There were no funded 
development costs for the first quarter of fiscal 1997 compared with $5,000 
in the first quarter of fiscal 1996.  There was no capitalization of software 
development costs in either fiscal year.  The Company considers research and 
development a key element in its ability to compete and will continue to make 
investments in product development and support.

Marketing and sales expenses increased by $497,000 or 828% for the first 
quarter of fiscal 1997 when compared with the same period of the prior fiscal 
year due to an increase in staffing and overseas travel in conjunction with 
the Overture series participation in field trials internationally.  Sales, 
marketing and customer support operations of the acquired business, which 
cover both domestic and international markets, is handled by five 
individuals.  The Company's strategy is to sell to telephone companies 
worldwide through large telecommunication suppliers who will integrate the 
Company's products into larger systems for their customers.  This type of OEM 
selling does not require a large sales force.

General and administrative expenses increased by $399,000 or 124% in the 
first quarter of fiscal 1997 when compared with the same period of the prior 
fiscal year.  This is primarily due to patent and legal expenses, additional 
corporate staffing and occupancy costs.

Interest income decreased to $1,000 in the first quarter of fiscal 1997 
compared to $86,000 in the same period of fiscal 1996 due to lower cash 
balances for investment purposes.

There was no provision for income taxes for the first quarter of fiscal 1997 
compared to $43,000 for the comparable period of fiscal 1996.  Tax provisions 
were required for Federal alternative minimum tax and California state taxes 
due to limitations on the use of California's loss carryforwards.  The 
Company had provided a valuation allowance against the deferred tax asset 
attributable to the net operating losses due to uncertainties regarding the 
realization of these assets.

LIQUIDITY AND CAPITAL RESOURCES

The Company had cash and short term investments of $3,107,000 as of November 
2, 1996, compared to $886,000 as of July 27, 1996.  Cash used for operating 
activities of $1,436,000 related primarily to the net loss incurred during 
the period.  Cash used for investing activities of $1,415,000 was primarily 
for leasehold improvements associated with the move to a larger facility to 
consolidate its operations and accommodate the Company's recent growth.  Cash 
provided by financing activities of $5,072,000 resulted primarily from the 
completion of an equity financing transaction with an investors group, as 
further discussed.

In October 1996, the Company entered into an Investment Agreement (the 
"Investment Agreement") with Quantum Industrial Partners LDC, S-C Phoenix 
Holdings, L.L.C., Winston Partners, L.P., Winston Partners II LDC and Winston 
Partners II L.L.C. (collectively, the 

                                       9
<PAGE>

"Investors") which will provide to the Company up to $15 million in equity 
financing in exchange for the issuance of Company Common Stock and warrants 
(the "Warrants") to purchase up to 600,000 shares of Company Common Stock.  
As of November 2, 1996, proceeds of $5,000,000 has been received as an 
initial draw down pursuant to this agreement.

In the prior fiscal year, the Company secured a capital lease line of 
$1,500,000, of which $880,000 has been utilized.  In addition, an existing 
bank line of credit for $1,250,000 was increased to $2,000,000.

The Company's ability to meet its future capital requirements will depend on 
many factors, including sales levels, progress in research and development 
programs, the establishment of collaborative agreements, and costs of 
manufacturing facilities and commercialization activities. While the Company 
anticipates that the funding available under the line of credit, capital 
lease line and Investment Agreement will be sufficient to meet its capital 
requirements for the foreseeable future, the Company may require funding in 
addition to that available under these agreements, and may seek additional 
funding through collaborative agreements or through public or private sale of 
securities prior to the commercialization of Old Amati products.

RISK FACTORS

The information about the Company included or incorporated by reference 
herein contains forward looking statements that involve risks and 
uncertainties, including the risks detailed below.

HISTORY OF LOSSES.  The Company had a net loss in the fiscal year ended July 
27, 1996 of approximately $34,078,000 (including a charge related to the 
Merger of approximately $31,554,000). Due in part to the Merger, the Company 
is not expected to operate profitably in the foreseeable future as the 
Company continues research, development, production and marketing activities. 
There can be no assurance that the Company will ever attain profitability. 
Any long-term viability, profitability and growth from the Company's 
technology will depend upon successful commercialization of products 
resulting from its research and product development activities. Extensive 
additional research and development will be required prior to 
commercialization of certain products.  There can be no assurance that the 
Company will be able to develop commercially viable products from its 
technology, generate significant revenues and/or achieve profitability.

NEED FOR ADDITIONAL CAPITAL.  During fiscal 1996, the Company secured a line 
of credit for $1,250,000 subsequently increased to $2,000,000, a capital 
lease line of $1,500,000 and entered into an Investment Agreement with the 
Investors, which provides to the Company up to $15 million in equity 
financing.  As of November 2, 1996, proceeds of $5,000,000 were received as 
an initial draw down pursuant to this financing agreement.  The Company's 
future capital requirements will depend on many factors, including sales 
levels, progress in research and development programs, the establishment of 
collaborative agreements, and costs of manufacturing facilities and 
commercialization activities.  The Company may require funding in addition to 
that

                                       10
<PAGE>

available under its line of credit, capital lease line and the Investment 
Agreement. There can be no assurance that such additional funding will be 
available on acceptable terms, if at all.  If additional funds are required 
and not available, the Company could be required to curtail significantly or 
defer, temporarily or permanently, one or more of its research and 
development programs or to obtain funds through arrangements that may require 
the Company to relinquish certain technology or product rights.

MARKET FOR ADSL PRODUCTS STILL UNDER DEVELOPMENT; PRINCIPAL ADSL MARKET 
OUTSIDE OF THE UNITED STATES.  ADSL was developed to transmit digital video 
over copper wire and also has application in providing access to the Internet 
over copper wire.  Although the current infrastructure in the local 
distribution networks of telephone companies is based on copper wire, there 
can be no assurance that telephone companies will pursue the deployment of 
ADSL systems or, if deployment occurs, as to the volume and timing of such 
deployment.  Significant deployment may be prevented or delayed by a number 
of factors, including cost, regulatory barriers, lack of programming content, 
lack of consumer demand and the availability of alternative technologies.  
Access systems with high performance broadband capability, such as the ADSL 
system, may be attractive to telephone companies only to the extent that the 
telephone companies plan to offer broadcast video, video-on-demand or 
Internet access services which utilize the full features of a high 
performance local distribution network.  Substantial amounts of time, effort 
and money will be required to develop such high performance services.  There 
can be no assurance that sufficient programming content for video services 
will be developed to justify deploying digital video transmission systems, or 
that programming content will be both attractive to consumers and offered at 
prices that will create a mass market.  If such high performances services 
are offered, and there is demand for them, there can be no assurance that 
telephone companies will select ADSL over competing technologies, such as 
fiber-to-the-curb, hybrid fiber-coaxial ("HFC"), and wireless communications. 
Fiber-to-the curb, HFC and wireless systems have greater bandwidth than the 
ADSL products being developed by the Company.  Although Internet access 
services may provide a market for ADSL in the United States, because foreign 
telephone companies currently face less competition from cable companies than 
telephone companies face in the United States, the Company believes that its 
principal markets for ADSL video applications will be outside the United 
States.

PRICE COMPETITIVENESS OF ADSL PRODUCTS.  The Company believes that in order 
to design and manufacture commercially acceptable ADSL products, cost 
improvements beyond those available with current technology will be 
necessary.  The future success of the Company will depend, in part, on its 
ability to develop ADSL products that compete effectively on the basis of 
price and performance.  Current prices are significantly higher than those 
that the Company believes would be necessary for mass deployment of ADSL 
products.  There can be no assurance that the Company will be successful in 
developing ADSL products that can be sold at prices which are viable in the 
market.

RAPID TECHNOLOGICAL CHANGE; COMPETITION IN THE TELECOMMUNICATION TRANSMISSION 
BUSINESS. Competition from existing companies, including major communications 
companies, is expected to increase.  Most of the Company's competitors in the 
communications industry are more

                                       11
<PAGE>

established, benefit from greater market recognition and have greater 
financial, technical, production and marketing resources than the Company.  
Some competitors are developing alternate access technologies, such as HFC, 
fiber-to-curb and wireless systems, that may prove technologically superior 
or more cost effective than the Company's technology.  There can be no 
assurance that developments by others will not render the Company's products 
or technologies obsolete or noncompetitive or that the Company will be able 
to keep pace with new technological developments.

COMPETITION IN THE PC TO MAINFRAME CONNECTIVITY BUSINESS.  The PC to 
Mainframe Connectivity market is highly competitive and is characterized by 
rapid advances in technology which frequently result in the introduction of 
new products with improved performance characteristics, thereby subjecting 
the Company's products to the risk of technological obsolescence.  The 
Company's ability to compete is dependent on several factors, including 
reliability, product performance, quality, features, distribution channels, 
name awareness, customer support, product development capabilities, and the 
ability to meet delivery schedules.  The Company competes, directly or 
indirectly, with a broad range of companies in the PC-Connectivity business, 
many of whom have significantly greater financial and other resources.  In 
addition, the Company is only competing for a limited and declining segment 
of the PC-Connectivity market, which is itself declining and expected to 
continue to decline.  The Company expects revenues from its PC-Connectivity 
business to continue to decline.

COMPETITION FOR VDSL STANDARDS.  The Company expects to apply its DMT 
technology to the development of VDSL products for the transmission of 
digital video service in connection with a fiber-optic backbone to cover the 
distance from this platform or node to subscribers' homes over copper wire or 
coaxial cable.  ANSI has not yet awarded the standard for VDSL technology, 
and the competition for the ANSI standard for VDSL is expected to be intense. 
AT&T, as well as other companies with greater resources than the Company, 
are expected to compete for these standards. There is no assurance that the 
Company's DMT technology will be successful in obtaining the ANSI VDSL 
standard.

DEPENDENCE ON COMPLEMENTARY PRODUCTS.  Widespread use of ADSL and VDSL 
products for digital video service will depend on the commercial availability 
of other products and components, including the video content, digital 
switches, video servers, encode/decode equipment, and set-top boxes in 
subscribers' homes.  There can be no assurance that other suppliers will 
develop and market these complementary components effectively or that these 
components, when combined with the Company's ADSL and VDSL products, will be 
a cost-effective means of transmitting video-on-demand or video dialtone.

DEPENDENCE ON LARGE CUSTOMERS AND SYSTEM INTEGRATORS.  The Company expects to 
sell many of its telecommunication transmission products to large 
telecommunications service companies which serve as integrators for the 
various component systems that make up a video-on-demand or multimedia 
system.  These systems integrators in turn sell the systems to telephone 
companies for distribution to their subscribers.  The Company is largely 
dependent on these systems integrators for the introduction of its products 
to field trials.  There can be no assurance that systems

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<PAGE>

integrators will select the Company's products for field trials or, if they 
do initially select the Company's products, that they will continue to use 
them.  In addition, telephone companies are generally reluctant to deploy new 
technologies available only from a single source, especially when the 
supplier is as relatively small as the Company, and often require the 
availability of alternative sources before deploying a new technology.  This 
reluctance may put the Company at a competitive disadvantage relative to some 
of its competitors.  Further, acceptance of the Company's products by these 
customers may require the Company to relinquish rights to its technology or 
products.  There can be no assurance, however, that even if the Company were 
to relinquish such rights to its technology or products, telephone companies 
would deploy the Company's ADSL or VDSL products.

CUSTOMER CONCENTRATION; RELIANCE ON SALES TO IBM.  Sales to IBM for PC to 
Mainframe Connectivity and related products accounted for approximately 65%, 
83% and 69% of the Company's net sales in fiscal 1994, 1995 and 1996, 
respectively, and 44% for the three months ended November 2, 1996. Since IBM 
considers product sales and market data confidential, the Company has very 
little ability to anticipate future demands and IBM is not obligated to 
purchase any specified amount of products.  For its PC-Connectivity products, 
the Company is highly dependent on sales to IBM and expects that quarterly 
and annual results could be volatile due to its dependence on this dominant 
customer.  In addition, there can be no assurance that IBM will continue to 
distribute and support the Company's products.  The Company's principal 
contract with IBM expires in December 1996. Further, IBM may terminate its 
agreements with the Company upon 30 days' notice without a significant 
penalty.

INTERNATIONAL BUSINESS.  The Company expects that sales outside of the United 
States will represent a significant portion of its future sales, especially 
of the Company's ADSL products. Operations outside of the United States are 
subject to various risks, including exposure to currency fluctuations, the 
imposition of governmental controls, the need to comply with a wide variety 
of foreign and United States export laws, political and economic instability, 
trade restrictions, changes in tariffs and taxes, and longer payment cycles 
typically associated with international sales.  The inability of the Company 
to design products to comply with foreign standards or any significant or 
prolonged delay in the Company's international sales could have a material 
adverse effect on the Company's future business and results of operations.

REGULATORY MATTERS.  Telephone companies, which constitute the initial 
primary market for the Company's telecommunication transmission products, and 
cable television companies, which may become a future market for such 
products, are subject to extensive regulation by both the federal and state 
governments in the United States and by foreign governments.  Many of these 
regulations have the effect of limiting the economic incentive of telephone 
companies to deploy new technologies.  Restrictions on telephone companies 
and cable television companies may materially and adversely affect demand for 
the products of the Company.  Recent legislation passed by Congress will 
significantly alter the regulations on telephone companies and cable 
companies in the United States, and there can be no assurance that such 
legislation will not adversely affect the commercialization of the Company's 
products.  In addition, both in the United States and abroad, rates for 
telecommunications services are governed by tariffs or licensed

                                       13
<PAGE>

carriers that are subject to regulatory approval.  These tariffs also could 
have a material adverse affect on the demand for the Company's products.

DEPENDENCE ON SUPPLIERS AND THIRD-PARTY MANUFACTURERS.  Certain key 
components in the Company's products, such as integrated circuits, are 
currently available only from single sources.  The Company does not have any 
long-term supply contracts with its sole source vendors and purchases these 
components on a purchase order basis. In addition, certain components and 
subassemblies for the Company's products have long lead times.  While the 
Company seeks to accurately forecast its requirements, inaccuracies in its 
forecast could result in shortages or oversupplies of these components.  The 
inability to obtain sufficient quantities of sole source components or 
subassemblies as required, or to develop alternative sources as required in 
the future, or inaccuracies in forecasts for long lead time components or 
subassemblies could result in delays or reductions in product shipments or 
product redesigns which would materially and adversely affect the Company's 
business, operating results and financial condition.  In addition, increases 
in the prices of components for which the Company does not have alternate 
sources could materially and adversely affect the Company's operating results.

The Company may outsource a portion of its manufacturing operations to 
independent third party manufacturers.  There are risks associated with the 
use of independent manufacturers, including unavailability of or delays in 
obtaining adequate supplies of products and reduced control of manufacturing 
quality and production costs.  There can be no assurance that the Company's 
third party manufacturers will provide adequate supplies of quality products 
on a timely basis.  The inability to obtain such products on a timely basis 
would have a material adverse effect on the Company's business, operating 
results and financial condition.

PATENTS AND TRADE SECRETS.  There can be no assurance that any patents owned 
or controlled by the Company will provide commercially significant protection 
of the Company's technology or ensure that the Company may not be determined 
to infringe valid patents of others.  The Company's patents have not been 
tested in court, and the validity and scope of the Company's proprietary 
rights could be challenged.  The Company has also received foreign patents, 
but since the patent laws of foreign countries differ from those of the 
United States, the degree of protection afforded by any foreign patents may 
be different from that available under U.S. patent laws.

The Company also relies on trade secrets and proprietary know-how which it 
seeks to protect by confidentiality agreements with its collaborators, 
employees and consultants.  There can be no assurance that these agreements 
will not be breached, that the Company will have adequate remedies for any 
breach or that the Company's trade secrets and proprietary know-how will not 
otherwise become known or be discovered by competitors.

THE COMPANY'S RSI LAWSUIT.  The Company is a defendant in a suit brought in 
November 1993 alleging repetitive stress injuries ("RSI") resulting from the 
use of the Company's products claiming $1 million in compensatory and $10 
million in punitive damages.  The Company has tendered defense of the suit to 
its insurance carriers, but there can be no assurance that the suit

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<PAGE>

will not have a material adverse effect on the financial position or results 
of operations of the Company.

POSSIBLE VOLATILITY OF STOCK PRICE; SHARES ELIGIBLE FOR FUTURE SALE.  The 
market price of the Company's Common Stock has been and may continue to be 
highly volatile.  Future events, many of which will be beyond the control of 
the Company, as well as announcements related to technology and product 
development and collaborative arrangements and expected quarterly 
fluctuations in revenues and financial results, may have a significant impact 
on the market price of the Company's Common Stock.  Future sales of the 
Company's Common Stock by the Investors which is a party for the Investment 
Agreement or by other current stockholders and by option holders and warrant 
holders who exercise the Company stock options or warrants could have a 
depressive effect on the market price of the Company's Common Stock.



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<PAGE>

PART II.  OTHER INFORMATION

ITEM 2.      CHANGES IN SECURITIES

In October 1996, the Company entered into an Investment Agreement (the 
"Investment Agreement") with Quantum Industrial Partners LDC, S-C Phoenix 
Holdings, L.L.C., Winston Partners, L.P., Winston Partners II LDC and Winston 
Partners II L.L.C. (collectively, the "Investors") which will provide to the 
Company up to $15 million in equity financing in exchange for the issuance of 
Company Common Stock and warrants (the "Warrants") to purchase up to 600,000 
shares of Company Common Stock.  The Warrants were issued on October 3, 1996 
and are exercisable at any time between December 17, 1996 and October 2, 
2001.  Warrants to purchase up to 300,000 shares of Common Stock are 
exercisable at $17.45 per share; Warrants to purchase the other 300,000 
shares are exercisable at $25 per share.  The Company has delivered a Put 
Notice to the Investors for $10,000,000 pursuant to the Investment Agreement. 
In exchange for the $10,000,000 investment in the Company, the Investors 
will receive an aggregate of 741,913 shares of the Company's Common Stock.  
The Company has received $5,000,000 pursuant to this first Put Notice.  The 
Warrants and Common Stock issued in connection with the Investment Agreement 
were exempt from the registration requirements of the Securities Act of 1933, 
as amended (the "Securities Act"), pursuant to the exemption therefrom 
found at Section 4(2) of the Securities Act.

ITEM 6.      EXHIBITS AND REPORTS ON FORM 8-K

EXHIBITS

None.

REPORTS ON FORM 8-K

None.


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                                      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.

                                        AMATI COMMUNICATIONS CORPORATION
                                                (Registrant)



Dated:  December 13, 1996               /S/   JAMES STEENBERGEN     
                                        -------------------------------
                                        James Steenbergen   
                                        Director, President,
                                        Chief Executive Officer and
                                        Chief Financial Officer


Dated:  December 13, 1996               /S/      TERRY MEDEL   
                                        -------------------------------
                                        Terry Medel
                                        Controller, Treasurer and Secretary


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