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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..........MAY 3, 1997.....................

                                      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 JUNE 11, 1997, 19,151,250 SHARES OF REGISTRANT'S COMMON STOCK WERE 
OUTSTANDING.

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<PAGE>

                                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)

<TABLE>
<CAPTION>
                                                        Three Months Ended                    Nine Months Ended
                                                   ----------------------------         -----------------------------
                                                     May 3,          April 27,            May 3,          April 27,
                                                      1997             1996                1997             1996
                                                   ----------       ----------          ---------        ----------
 <S>                                               <C>              <C>                 <C>              <C>
 Net sales                                         $    3,663       $    3,756          $  11,188        $    9,634  
 Cost of sales                                          2,042            2,180              6,242             5,566  
                                                   ----------       ----------          ---------        ----------
    Gross margin                                        1,621            1,576              4,946             4,068  

 Operating expenses:
    Research and development                            2,050            1,105              5,680             2,489  
    Marketing and sales                                   783              276              1,938               480  
    General and administrative                          1,035              696              3,041             1,527  
    Write-off of acquired in-process
        research and development                          ---              ---                ---            31,554  
                                                   ----------       ----------          ---------        ----------
          Total operating expenses                      3,868            2,077             10,659            36,050  

          Loss from operations                        (2,247)            (501)            (5,713)          (31,982)

 Other income (expense):
    Interest income                                        35               11                 68               155  
    Interest expense                                      (81)              (8)              (180)              (11)
                                                   ----------       ----------          ---------        ----------
          Total other income (expense)                    (46)               3               (112)              144
                                                   ----------       ----------          ---------        ----------
          Loss before taxes                           (2,293)            (498)            (5,825)          (31,838)

 Provision for income taxes                               ---              ---                ---                43  
                                                   ----------       ----------          ---------        ----------
          NET LOSS                                 $   (2,293)      $     (498)         $  (5,825)       $  (31,881)
                                                   ----------       ----------          ---------        ----------
                                                   ----------       ----------          ---------        ----------
          NET LOSS PER SHARE                       $    (0.12)      $    (0.03)         $   (0.32)       $    (2.16)
                                                   ----------       ----------          ---------        ----------
                                                   ----------       ----------          ---------        ----------

 Number of shares used in computation
     of net loss per share                             18,958           17,138             18,436            14,747 
                                                   ----------       ----------          ---------        ----------
                                                   ----------       ----------          ---------        ----------
</TABLE>

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


                                       1
<PAGE>

                        AMATI COMMUNICATIONS CORPORATION
                      CONSOLIDATED CONDENSED BALANCE SHEETS
                                 (In thousands)


                                                          May 3,       July 27,
                                                           1997         1996
                                                         --------     --------
 ASSETS

 Current assets:
    Cash and cash equivalents                            $    515     $    886
    Short term investments                                  1,000          ---
    Accounts receivable, less allowance of 
        $30 in 1997 and 1996                                2,964        1,524
    Inventories                                             3,847        1,616
    Other current assets                                      750        1,156
                                                         --------     --------
        Total current assets                                9,076        5,182
 Equipment and leasehold improvements-net                   5,569        1,059
 Other non-current assets                                     300          ---
                                                         --------     --------
    TOTAL ASSETS                                         $ 14,945     $  6,241
                                                         --------     --------
                                                         --------     --------

 LIABILITIES AND STOCKHOLDERS' EQUITY

 Current liabilities:
    Accounts payable and accrued expenses                $  4,336     $  3,079
    Accrued employee compensation                           1,094          793
    Current maturities of capitalized lease obligations       773          ---
    Notes payable                                             ---          395
                                                         --------     --------
         Total current liabilities                          6,203        4,267
                                                         --------     --------
 Long-term liabilities:
    Capitalized lease obligations, net of 
      current maturities                                    2,053          ---
    Obligations under lease commitments                       294          294
                                                         --------     --------
        Total long-term liabilities                         2,347          294
                                                         --------     --------
 Stockholders' equity                                       6,395        1,680
                                                         --------     --------

    TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY           $ 14,945     $  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)

<TABLE>
<CAPTION>
                                                                                     Nine Months Ended
                                                                            ----------------------------------
                                                                               May 3,                April 27,
                                                                               1997                    1996
                                                                            ----------             -----------
 <S>                                                                        <C>                    <C>
 Cash flows from operating activities:
     NET LOSS                                                               $   (5,825)            $   (31,881)
     Adjustments to reconcile net loss to net
      cash used for operating activities:
          Depreciation and amortization                                            946                     418  
          Write-off of acquired in-process research and development                ---                  31,554  
          Provision for bad debts                                                  ---                      20  
          Loss on retirement of capital equipment                                   25                       3  
          Increase in accounts receivable                                       (1,440)                   (333) 
          Decrease (increase) in inventories                                    (2,231)                    138  
          Increase in other assets                                                 (69)                     (7) 
          Increase (decrease) in accounts payable, accrued
              expenses and employee compensation                                 1,558                    (917)
          Increase (decrease) in other liabilities                                (395)                    395  
                                                                            ----------             -----------
         NET CASH USED FOR OPERATING ACTIVITIES                                 (7,431)                   (610) 
                                                                            ----------             -----------

 Cash flows from investing activities:
      Proceeds from sale of equipment                                               38                     ---  
      Advances to Amati and acquisition costs                                      ---                  (2,266)
      Purchases of held-to-maturity investments                                 (2,482)                    ---  
      Proceeds from maturities of held-to-maturity investments                   1,482                   2,425  
      Purchase of equipment and leasehold improvements                          (2,143)                   (161)
                                                                            ----------             -----------
         NET CASH USED FOR INVESTING ACTIVITIES                                 (3,105)                     (2) 
                                                                            ----------             -----------
 Cash flows from financing activities:
      Payment of debt/lease obligations                                           (375)                    ---  
      Proceeds from equity financing, net of issuance costs                      9,724  
      Proceeds from exercise of stock options/warrants                             816                   1,024  
                                                                            ----------             -----------
         NET CASH PROVIDED BY FINANCING ACTIVITIES                              10,165                   1,024  
                                                                            ----------             -----------
 NET INCREASE IN CASH AND CASH EQUIVALENTS                                        (371)                    412  
 BEGINNING BALANCE - CASH AND CASH EQUIVALENTS                                     886                   1,066  
                                                                            ----------             -----------
 ENDING BALANCE - CASH AND CASH EQUIVALENTS                                 $      515             $     1,478  
                                                                            ----------             -----------
                                                                            ----------             -----------

 Supplemental disclosures of cash flow information:
     Cash paid during the period for interest                               $       81             $         3
                                                                            ----------             -----------
                                                                            ----------             -----------
</TABLE>

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


                                       3
<PAGE>

                        AMATI COMMUNICATIONS CORPORATION
             NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
                                MAY 3, 1997


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 LOSS PER SHARE

Net loss per share is based on the weighted average number of shares 
outstanding of common stock. No common stock equivalents have been included 
in fiscal 1997 because the effect would decrease the loss per share.

In February 1997, the FASB issued SFAS No. 128, Earnings Per Share, which 
simplifies the standards for computing earnings per share previously found in 
Accounting Principles Board Opinion ("APBO") No. 15.  SFAS No. 128 replaces 
the presentation of primary earnings per share with a presentation of basic 
earnings per share, which excludes dilution.  SFAS No. 128 also requires dual 
presentation of basic and diluted earnings per share on the face of the 
income statement for all entities with complex capital structures and 
requires a reconciliation.  Diluted earnings per share is computed similarly 
to fully diluted earnings per share pursuant to APBO No. 15.  SFAS No. 128 
must be adopted for financial statements issued for periods ending after 
December 15, 1997, including interim period; earlier application is not 
permitted.  SFAS No. 128 requires restatement of all prior period earnings 
per share presented.  The Company does not anticipate that SFAS No. 128 will 
have a material impact on its earnings per share calculation.


                                      4
<PAGE>

                        AMATI COMMUNICATIONS CORPORATION
             NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
                                MAY 3, 1997


NOTE C - INVENTORIES

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

                                           May 3, 1997          July 27, 1996
                                           -----------          -------------
 Finished goods                              $  426                $    1  
 Work in process                              1,725                   890  
 Purchased and service parts                  1,696                   725  
                                          -------------         --------------
                                             $3,847                $1,616  
                                          -------------         --------------
                                          -------------         --------------

NOTE D - 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
                                MAY 3, 1997

                                                    Nine Months Ended
                                                    -----------------
                                                     April 27, 1996
                                                     --------------
                                           (in thousands except per share data)

                   Revenues                              $ 11,061  
                   Net loss                              $(34,330)  
                   Net loss per share                    $  (2.04) 
                   Shares used in computation              16,827   

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 E - 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 December 17, 
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 received 
$10,000,000 pursuant to this Investment Agreement.  In exchange for the 
$10,000,000 investment in the Company, the Investors received an aggregate of 
741,913 shares of the Company's Common Stock. 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 under Section 4(2) of the 
Securities Act.  The resale of the shares of Common Stock issued to the 
Investors, and the 600,000 shares of Common Stock issuable  on exercise of 
the Warrants, has been registered by the Company on behalf of the Investors.  
On June 3, 1997, the Company exercised its put right to take down the final 
$5,000,000 in equity financing.


                                      6
<PAGE>

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


INTRODUCTION  

Other  than  for  statements of  historical fact, statements  made in this  
Quarterly Report on Form 10-Q, including in Management's Discussion and 
Analysis of Financial Condition and Results of Operations regarding financial 
projections, information or expectations about the Company's products or 
markets, 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.  In September 
1996, the combined company moved to a new 40,000 square foot building in San 
Jose, California to accommodate its growth and consolidate engineering and 
manufacturing in a single facility.

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.  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 its 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") such as International Business Machines ("IBM").  The 
Company and IBM have had a long-standing relationship. Since 1989, the 
Company has undertaken several projects in which it has designed, developed 
and manufactured custom products for IBM, including the completion of the 
current generation of local area network ("LAN") products which IBM launched 
into the market in 1994.


                                      7
<PAGE>

RESULTS OF OPERATIONS

Total net sales in the third quarter of fiscal 1997 decreased 2% to 
$3,663,000 from sales of $3,756,000 in the third quarter of the prior fiscal 
year. Revenues recognized during the current fiscal quarter relate primarily 
to contract revenues recorded under the Company's previously announced joint 
development agreement with NEC Japan.  For the nine months of fiscal 1997, 
net sales of $11,188,000 represents an increase of 16% over sales for the 
comparable prior fiscal period.  Sales to IBM accounted for 39% and 49% of 
the Company's revenue in the third quarter and nine months of fiscal 1997, 
respectively, compared with 56% and 64% for the comparable periods of fiscal 
1996. Royalty revenues derived from a product developed by the Company for 
IBM were $144,000 in the third quarter and $545,000 for the first nine months 
of fiscal 1997 compared with $172,000 and $633,000 for the third quarter and 
nine months of the prior fiscal year, respectively. In February 1997, the 
Company signed an extended contract with IBM for the development and 
manufacture of its next generation internetworking products.  The Company 
expects that IBM will continue to account for a substantial portion of the 
Company's revenues until development and commercialization of its ADSL 
products are completed. 

In the third quarter of fiscal 1996, the Company first delivered the Overture 8,
which is characterized by a high bandwidth as defined by the ANSI standards.  
The Company's ADSL products continue to participate successfully in labs and 
field trials in both international and domestic markets.  The international 
trials include services being offered by Post Telephone and Telegraph 
("PTT")'s in Europe and Asia-Pacific, with companies such as Italtel, Tadiran 
and Samsung.  Other trials include broadcast video installed in Australia and 
data/video applications in France.  In the US, the Company has provided 
equipment in GTE's Internet access trials in Washington and Texas.  Sales of 
the Overture series in the third quarter and the first nine months of fiscal 
1997 were $320,000 and $1,271,000, respectively.

In January 1997, the first in a line of products developed by the Company 
called the Allegro Access Concentrator, a platform for high density 
installation of the Overture 8 DMT modem technology, was shipped to France.  
This shelf version uses the Overture 8 modem and offers high-speed 
concentration of packet based information or video data streams and 
multiplexing of multiple data channels per ADSL modem connection.  During the 
third quarter of fiscal 1997, the Company introduced its next generation of 
Overture 8 products, the Model 810, which delivers speeds up to 8 Mbps 
downstream and 640 Kbps upstream.  Its advanced, low power design consumes 
less than 7W and adjusts power consumption to line lengths and traffic 
conditions.  This model is designed to be used as a plug-in for the Allegro 
Access Concentrator or as a stand-alone unit for the subscriber.  In the VDSL 
technology, development efforts in conjunction with NEC Japan are ongoing.  

PC to Mainframe Connectivity sales of $212,000 and $709,000 in the third 
quarter and first nine months of fiscal 1997 represent a decline of 60% and 
54% when compared with the same periods 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 


                                      8
<PAGE>

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 44% for the third quarter and first 
nine months of fiscal 1997 compared with 42% for the same periods of fiscal 
1996.  The increase in margin was primarily attributable to product mix.  
Amortization of capitalized software costs charged to cost of sales were 
$61,000 and $183,000 in the third quarter and nine- month period of fiscal 
1997, respectively.

Net research and development expenses increased 86% to $2,050,000 in the 
third quarter of fiscal 1997 and 128% to $5,680,000 for the first nine months 
when compared to the same periods of fiscal 1996 largely because of the 
addition of engineers and other new employees as a result of the merger, and 
the introduction of the Company's new family of Overture 8 ADSL/DMT modems, 
access system shelf products and access concentrators.  Maintaining the 
Company's technology 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 the DMT 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 third quarter and nine-month 
period of fiscal 1997 compared with $150,000 and $288,000 in the same periods 
of fiscal 1996.  There was no capitalization of software development costs 
charged to research and development 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 to provide 
high-speed solutions for the future.

Marketing and sales expenses increased by $507,000 or 184% in the third 
quarter and $1,458,000 or 304% for the first nine months of fiscal 1997 when 
compared with the same periods of the prior fiscal year.  This is primarily 
due to an increase in staffing and overseas travel in conjunction with the 
Overture series representation in field trials internationally and 
participation in domestic trade shows and product promotion.  Sales, 
marketing and customer support operations of the Company's ADSL products, 
which cover both domestic and international markets, is handled by fourteen 
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 $339,000 or 49% in the third 
quarter and $1,514,000 or 99% for the nine months of fiscal 1997 when 
compared with the same periods of the prior fiscal year.  This is primarily 
due to patent and legal expenses, additional corporate staffing and occupancy 
costs.


                                      9
<PAGE>

Interest income decreased to $68,000 in the nine-month period of fiscal 1997 
compared to $155,000 in the same period of fiscal 1996 due to lower cash 
balances for investment purposes.

There were no provisions for income taxes for the third quarter of both 
fiscal years and first nine months of fiscal 1997 compared to $43,000 for the 
comparable nine-month period of fiscal 1996. Tax provisions for fiscal 1996 
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 $1,515,000 as of May 3, 
1997, compared to $886,000 as of July 27, 1996.  During the fiscal period, 
cash used for operating activities of $7,431,000 related primarily to the net 
loss incurred during the period.  Cash used for investing activities of 
$3,105,000 was primarily for leasehold improvements associated with the move 
to a larger facility to consolidate the Company's operations, and the 
purchase of short-term investments. Cash provided by financing activities of 
$10,165,000 resulted primarily from the completion of an equity financing 
transaction with an investors group, discussed below, and proceeds from the 
exercise of stock options and warrants.

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.  As of February 1, 1997, proceeds of 
$10,000,000 has been received pursuant to this agreement in exchange for 
741,913 shares of the Company's common stock.  On June 3, 1997, the Company 
has exercised its put right to take down the final $5,000,000 in equity 
financing.  

In the prior fiscal year, the Company secured a capital lease line of 
$1,500,000, subsequently increased to $1,700,000.  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 through the fiscal year, 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 its ADSL products.


                                      10
<PAGE>

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 net losses 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) and for the nine months ended May 3, 
1997 of $5,825,000.  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 subsequently increased to $1,700,000 and entered 
into an Investment Agreement with the Investors, which provides to the 
Company up to $15 million in equity financing.  As of May 3, 1997, proceeds 
of $10,000,000 have been received pursuant to this financing agreement.  On 
June 3, 1997, the Company exercised its put right to take down the final 
$5,000,000 in financing.  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 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 


                                      11
<PAGE>

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 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.


                                      12
<PAGE>

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 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 49% for the nine months ended May 3, 1997.  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 

                                      13
<PAGE>


with IBM expiring in December 1996 had been extended.  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 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 


                                      14
<PAGE>

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 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.


                                      15
<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 December 17, 
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 received $10,000,000 
pursuant to this Investment Agreement.  In exchange for the $10,000,000 
investment in the Company, the Investors received an aggregate of 741,913 
shares of the Company's Common Stock. 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 under Section 4(2) of the Securities Act.  
The resale of the 741,913 shares of Common Stock issued to the Investors, and 
the 600,000 shares of Common Stock issuable on exercise of the Warrants, has 
been registered by the Company on behalf of the Investors.  On June 3, 1997, 
the Company has exercised its put option to take down the final $5,000,000 in 
equity financing.

ITEM 6.      EXHIBITS AND REPORTS ON FORM 8-K

EXHIBITS

None.

REPORTS ON FORM 8-K

None.


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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.

                                       AMATI COMMUNICATIONS CORPORATION
                                       --------------------------------
                                                 (Registrant)



Dated:  June 13, 1997                  /S/   JAMES STEENBERGEN           
                                       --------------------------------------
                                       James Steenbergen   
                                       Director, President,
                                       Chief Executive Officer and
                                       Chief Financial Officer


Dated:  June 13, 1997                  /S/   TERRY MEDEL              
                                       --------------------------------------
                                       Terry Medel
                                       Controller, Treasurer and Secretary



                                      17