<PAGE>

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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.........FEBRUARY 1, 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 MARCH 13, 1997, 18,904,649 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                Six Months Ended
                                        ----------------------------      -----------------------------
                                        February 1,      January 27,       February 1,       January 27,
                                           1997             1996              1997              1996
                                        ----------------------------      -----------------------------
<S>                                        <C>           <C>                <C>              <C>
Net sales                                  $  3,012      $   2,524          $  7,525        $   5,878  
Cost of sales                                 2,113          1,546             4,200            3,387  
                                           --------      ---------         ---------        ---------
   Gross margin                                 899            978             3,325            2,491  
                                  
Operating expenses:               
   Research and development                   1,879          1,023             3,630           1,383  
   Marketing and sales                          598            145             1,154             204  
   General and administrative                 1,158            510             2,006             831  
   Write-off of in-process
       research and development                 ---         31,554               ---          31,554  
                                           --------      ---------         ---------        --------
         Total operating expenses             3,635         33,232             6,790          33,972  
                                      
         Loss from operations                (2,736)       (32,254)           (3,465)        (31,481)
                                      
Other income (expense):               
   Interest income                               32             58               33              144
   Interest expense                             (82)            (3)            (100)              (3)
                                           --------      ---------         --------         --------
         Total other income (expense)           (50)            55              (67)             141 
                                           --------      ---------         --------         --------

         Loss before taxes                   (2,786)       (32,199)          (3,532)         (31,340)

Provision for income taxes                      ---            ---              ---               43 
                                           --------      ---------         --------        ---------
         NET LOSS                          $ (2,786)     $ (32,199)        $ (3,532)       $ (31,383)
                                           --------      ---------         --------        ---------
                                           --------      ---------         --------        ---------

         NET LOSS PER SHARE                $  (0.15)     $  (2.12)         $ (0.19)        $   (2.32)
                                           --------      --------          -------         ---------
                                           --------      --------          -------         ---------

Weighted Average Number of
    Shares Outstanding                       18,685        15,223          18,208            13,551  
                                           --------     ---------        --------        ---------
                                           --------     ---------        --------        ---------
</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)
<TABLE>
<CAPTION>
                                                          February 1,         July 27,
                                                             1997               1997
                                                          -----------         --------
<S>                                                        <C>                <C>
ASSETS

Current assets:
   Cash and cash equivalents                              $    2,900          $    886
   Short term investments                                      2,148               ---
   Accounts receivable, less allowance of
     $29 in 1997 and $30 in 1996                               2,232             1,524
   Inventories                                                 2,640             1,616
   Other current assets                                          972             1,156
                                                          ----------          --------
     Total current assets                                     10,892             5,182


Equipment and leasehold improvements-net                       4,941             1,059 
Other non-current assets                                         100               --- 
                                                          ----------          --------
   TOTAL ASSETS                                           $   15,933          $  6,241  
                                                          ----------          --------
                                                          ----------          --------


LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:
   Accounts payable and accrued expenses                  $    3,589          $  3,079 
   Employee compensation                                       1,105               793  
   Current maturities of capitalized 
     lease obligations                                           652               ---  
   Notes payable                                                 ---               395  
                                                          ----------          --------
        Total current liabilities                              5,346             4,267
                                                          ----------          --------
Long-term liabilities:
   Capitalized lease obligations, net of 
     current maturities                                        1,862               ---  
   Obligations under lease commitments                           294               294  
                                                          ----------          --------
       Total long-term liabilities                             2,156               294  
                                                          ----------          --------
Stockholders' equity                                           8,431             1,680       
                                                          ----------          --------
   TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY             $   15,933          $  6,241  
                                                          ----------          --------
                                                          ----------          --------
</TABLE>


                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>
                                                                 Six Months Ended
                                                             --------------------------
                                                             February 1,    January 27,
                                                                1997           1996       
                                                             -----------    -----------
<S>                                                          <C>            <C>
Cash flows from operating activities:
   NET LOSS                                                  $   (3,532)    $   (31,383)
   Adjustments to reconcile net loss to net
   cash provided by operating activities:
     Depreciation and amortization                                  478             277  
     Write-off of in-process research and development               ---          31,554  
     Provision for bad debts                                        ---              20  
     Loss on retirement of capital equipment                         25               3  
     Decrease (increase) in accounts receivable                    (708)            790  
     Decrease (increase) in inventories                          (1,024)            112  
     Decrease in other assets                                        22             158  
     Increase (decrease) in accounts payable, accrued
       expenses and employee compensation                           822          (1,909)
     Increase (decrease) in other liabilities                      (395)            395  
                                                             ----------     -----------
     NET CASH PROVIDED BY (USED FOR) OPERATING ACTIVITIES        (4,312)             17  
                                                             ----------     -----------

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                     (2,148)            ---  
   Proceeds from maturities of held-to-maturity investments         ---           2,425 
   Purchase of equipment and leasehold improvements              (1,635)            (14)
                                                             ----------     -----------
     NET CASH PROVIDED BY (USED FOR) INVESTING ACTIVITIES        (3,745)            145  
                                                             ----------     -----------

Cash flows from financing activities:
   Payment of lease obligations                                    (212)             (7)
   Proceeds from equity financing, net of issuance costs          9,718             ---  
   Proceeds from exercise of stock options/warrants                 565             786  
                                                             ----------     -----------
     NET CASH PROVIDED BY FINANCING ACTIVITIES                   10,071             779  
                                                             ----------     -----------

NET INCREASE IN CASH AND CASH EQUIVALENTS                         2,014             941  
BEGINNING BALANCE - CASH AND CASH EQUIVALENTS                       886           1,066  
                                                             ----------     -----------
ENDING BALANCE - CASH AND CASH EQUIVALENTS                   $    2,900     $     2,007  
                                                             ----------     -----------
                                                             ----------     -----------

Supplemental disclosures of cash flow information:
  Cash paid during the period for interest                   $      185     $         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
                                 February 1, 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.


NOTE C - INVENTORIES

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

<TABLE>
<CAPTION>
                                         February 1, 1997            July 27, 1996
                                         ----------------            -------------
<S>                                          <C>                       <C>
Finished goods                               $     183                 $       1 
Work in process                                  1,302                       890  
Purchased and service parts                      1,155                       725  
                                             ---------                 ---------
                                             $   2,640                 $   1,616  
                                             ---------                 ---------
                                             ---------                 ---------
</TABLE>

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


                                      4
<PAGE>

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:

<TABLE>
<CAPTION>
                                                     Six Months Ended
                                                     ----------------
                                                     January 27, 1996
                                                     ----------------
                                         (in thousands except per share data)
<S>                                              <C>
         Revenues                                $      7,305
         Net loss                                $    (33,832)
         Net loss per share                      $      (2.03)
         Shares used in computation                    16,672
</TABLE>

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 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 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


                                      5
<PAGE>

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.  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.


                                      6
<PAGE>

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


INTRODUCTION  

Other than for statement of historical fact, statements made in this 
Quarterly Report on Form 10-Q including those 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.  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") 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 second quarter of fiscal 1997 increased 19% to 
$3,012,000 from sales of $2,524,000 in the second quarter of the prior fiscal 
year.  For the first six months of fiscal 1997, net sales increased 28% over 
sales for the comparable prior fiscal period of $5,878,000.  The decline in 
revenues in the second quarter of fiscal 1997 from the first quarter relates 
primarily to contract revenues recorded in the first quarter under a joint 
development agreement with NEC Japan.  Sales to IBM accounted for 70% and 54% 
of the Company's revenue in the second quarter and first half of fiscal 1997, 
respectively, compared with 55% and 70% for the comparable periods of fiscal 
1996. Royalty revenues derived from a product developed by the Company for 
IBM were $242,000 in the second quarter and $423,000 for the first six months 
of fiscal 1997 compared with $248,000 and $480,000 for the second quarter and 
six months of the prior fiscal year, respectively.  Subsequent to the end of 
the second quarter of fiscal 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 it 
completes development and commercialization of its ADSL products. 

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. This product is currently installed in its first field trial of 
broadcast video in Australia.  The Company's ADSL products continue to 
participate successfully in labs and field trials in both domestic and 
international markets.  In the VDSL technology, development efforts in 
conjunction with NEC Japan are ongoing and products are expected in calendar 
year 1998. Sales of the Overture series in the second quarter and six months 
of fiscal 1997 were $711,000 and $951,000, respectively.  During the second 
quarter of fiscal 1997, the first in line of the 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.

PC to Mainframe Connectivity sales of $199,000 and $497,000 in the second 
quarter and first six months of fiscal 1997 represent a decline of 47% and 
51% 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 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 were 30% in the second quarter and 44% for 
the first six months of fiscal 1997 compared with 39% and 42% for the same 
periods of fiscal 1996.  The decrease in margin was primarily attributable to 
product mix.  Amortization of capitalized 


                                       8

<PAGE>

software costs charged to cost of sales were $61,000 and $122,000 in the 
second quarter and six-month period of fiscal 1997, respectively.

Net research and development expenses increased 84% to $1,879,000 in the 
second quarter of fiscal 1997 and 162% to $3,630,000 for the first six months 
when compared to the same periods of fiscal 1996 largely because of the 
addition of 15 Old Amati engineers, the hiring of 24 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.  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 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 second quarter and first half 
of fiscal 1997 compared with $138,000 and $143,000 in the same periods 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 to provide high-speed solutions for the future.

Marketing and sales expenses increased by $453,000 or 312% in the second 
quarter and $950,000 or 466% for the first six 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 acquired business, which 
cover both domestic and international markets, is handled by nine 
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 $648,000 or 127% in the 
second quarter and $1,175,000 or 141% for the six 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.

Interest income decreased to $32,000 in the second quarter and $33,000 for 
the first half of fiscal 1997 compared to $58,000 and $144,000 in the same 
periods of fiscal 1996 due to lower cash balances for investment purposes.

There were no provisions for income taxes for the second quarter of both fiscal
years and first six months of fiscal 1997 compared to $43,000 for the comparable
period of fiscal 1996.  Tax provisions for fiscal 1996 were required for Federal
alternative minimum tax and California state 

                                       9

<PAGE>

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 $5,048,000 as of February 
1, 1997, compared to $886,000 as of July 27, 1996.  During the fiscal period, 
cash used for operating activities of $4,312,000 related primarily to the net 
loss incurred during the period.  Cash used for investing activities of 
$3,745,000 was primarily for leasehold improvements associated with the move 
to a larger facility to consolidate its operations and the purchase of 
short-term investments. Cash provided by financing activities of $10,071,000 
resulted primarily from the completion of an equity financing transaction 
with an investors group, as further discussed, 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.

In the prior fiscal year, the Company secured a capital lease line of 
$1,500,000, of which $1,000,000 had 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.

                                       10

<PAGE>


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) and during the six months ended February 
1, 1997 of $3,532,000.  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), and 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 February 1, 1997, proceeds of $10,000,000 have been received 
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 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-

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<PAGE>

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.

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 

                                       12

<PAGE>

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 54% for the six months ended February 1, 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 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 


                                       13

<PAGE>


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 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 


                                       14

<PAGE>

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 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 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 therefrom found at 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.

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


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


                                       17