<PAGE>

--------------------------------------------------------------------------------
                UNITED STATES SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D. C. 20549

                                    FORM 10-Q

(Mark One)

X        QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (D) OF THE SECURITIES
         EXCHANGE ACT OF 1934

For the quarter ended July 31, 1999 OR

_        TRANSACTION REPORT PURSUANT TO SECTION 13 OR 15 (D) OF THE SECURITIES
         EXCHANGE ACT OF 1934

For the transition period from ________ to __________

                        Commission file number 000-22009


                              NEOMAGIC CORPORATION
             (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)

           DELAWARE                                   77-0344424
 [State or other jurisdiction             [I.R.S. Employer Identification No.]
of incorporation or organization]


           3260 JAY STREET
       SANTA CLARA, CALIFORNIA                           95054
[Address of principal executive offices]               [Zip Code]


                                 (408) 988- 7020
               Registrant's telephone number, including area code



Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934
during the preceding 12 months ( or for such shorter period that the registrant
was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.

                                 Yes  X    No

    The number of shares of the Registrant's Common Stock, $.001 par value,
                  outstanding at August 1, 1999 was 25,235,959

--------------------------------------------------------------------------------

                                       Page 1 of 26
<PAGE>

                              NEOMAGIC CORPORATION
                                   FORM 10-Q

                                     INDEX
<TABLE>
<CAPTION>
<S>                                                                                    <C>
                                                                                       PAGE
PART I.  CONSOLIDATED CONDENSED FINANCIAL INFORMATION

Item 1.  Unaudited Consolidated Condensed Financial Statements:


         Consolidated Condensed Statements of Income
                  Three and six months ended July 31, 1999 and 1998                      3

         Consolidated Condensed Balance Sheets
                  July 31, 1999 and January 31, 1999                                     4

         Consolidated Condensed Statements of Cash Flows
                  Six months ended July 31, 1999 and 1998                                5

         Notes to Unaudited Consolidated Condensed Financial Statements                  6-8

Item 2.  Management's Discussion and Analysis of
         Financial Condition and Results of Operations                                   9-23


PART II.  OTHER INFORMATION

Item 1.  Legal Proceedings                                                               24

Item 2.  Changes in Securities                                                           24

Item 3.  Defaults Upon Senior Securities                                                 24

Item 4.  Submission of Matters to a Vote of Security Holders                             24

Item 5.  Other Information                                                               25

Item 6.  Exhibits and Reports on Form 8-K                                                25

Signatures                                                                               26
</TABLE>


                                       Page 2 of 26
<PAGE>

Part I.  Financial Information
Item I.  Financial Statements


                              NEOMAGIC CORPORATION
                   CONSOLIDATED CONDENSED STATEMENTS OF INCOME
                      (In thousands, except per share data)
                                   (Unaudited)

<TABLE>
<CAPTION>
                                                      Three Months Ended                  Six Months Ended
                                                ------------------------------     -----------------------------
                                                  July 31,          July 31,         July 31,         July 31,
                                                    1999              1998             1999             1998
                                                ------------      ------------     -----------       -----------
<S>                                             <C>               <C>              <C>               <C>
Net sales                                        $  60,320         $  53,396        $132,717          $ 101,134

Cost of sales                                       42,232            31,058          87,841             58,568
                                                ------------      ------------     -----------       -----------
Gross margin                                        18,088            22,338          44,876             42,566

Operating expenses:
  Research and development                          10,905             7,314          20,678             13,566
  Sales, general and administrative                  4,311             4,848           9,557              9,204
  In-process research and development                    -                 -           5,348                  -
                                                ------------      -----------      -----------       -----------
               Total operating expenses             15,216            12,162          35,583             22,770

Income from operations                               2,872            10,176           9,293             19,796
  Interest income and other                            932               919           1,716              1,894
  Interest expense                                    (218)             (372)           (470)              (696)
                                                ------------      -----------      -----------       -----------

Income before income taxes                           3,586            10,723          10,539             20,994

Provision for income taxes                           1,076             3,753           4,768              7,348
                                                ------------      -----------      -----------       -----------
Net income                                       $   2,510         $   6,970       $   5,771          $  13,646
                                                ------------      -----------      -----------       -----------
                                                ------------      -----------      -----------       -----------

Basic net income per share                       $     .10         $     .30       $     .24          $     .58
Diluted net income per share                     $     .10         $     .27       $     .22          $     .52

Weighted common shares outstanding                  24,460            23,595          24,468             23,445
Weighted common shares outstanding                  26,073            26,033          25,854             26,066
assuming dilution
</TABLE>


             See accompanying notes to unaudited consolidated condensed
                             financial statements.

                                       Page 3 of 26
<PAGE>

                              NEOMAGIC CORPORATION
                      CONSOLIDATED CONDENSED BALANCE SHEETS
                                 (In thousands)
                                   (Unaudited)

<TABLE>
<CAPTION>
                                                             July 31,        January 31,
                                                               1999              1999
                                                        -----------------  ---------------
<S>                                                     <C>                <C>
ASSETS

Current assets:
  Cash and cash equivalents                                $  39,178         $  36,631
  Short-term investments                                      44,762            56,097
  Accounts receivable, net                                    18,742            19,363
  Inventory                                                   23,075            19,046
  Other current assets                                         3,815             2,681
                                                        -----------------  ---------------
            Total current assets                             129,572           133,818

Property, plant and equipment, net                            11,720             8,335
Deferred tax asset                                             1,034             1,034
Other assets                                                   7,317             1,187
                                                        -----------------  ---------------

             Total assets                                  $ 149,643         $ 144,374
                                                        -----------------  ---------------
                                                        -----------------  ---------------

LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:
  Accounts payable                                         $  26,286         $  31,296
  Compensation and related benefits                            3,436             4,046
  Income taxes payable                                         5,309             3,059
  Other accruals                                               3,359             1,876
  Obligations under capital leases                               471               702
                                                        -----------------  ---------------
             Total current liabilities                        38,861            40,979

Commitments and contingencies

Stockholders' equity:
  Common stock                                                    25                25
  Additional paid-in-capital                                  68,549            67,286
  Notes receivable from stockholders                            (554)             (554)
  Deferred compensation                                       (1,411)           (1,764)
  Retained earnings                                           44,173            38,402
                                                        -----------------  ---------------
           Total stockholders' equity                        110,782           103,395

           Total liabilities and stockholders' equity      $ 149,643         $ 144,374
                                                        -----------------  ---------------
                                                        -----------------  ---------------
</TABLE>


              See accompanying notes to unaudited consolidated condensed
                             financial statements.

                                       Page 4 of 26
<PAGE>

                              NEOMAGIC CORPORATION
                 CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
                                 (In thousands)
                                   (Unaudited)
<TABLE>
<CAPTION>
                                                                                       Six Months Ended
                                                                              ---------------------------------
                                                                                  July 31,          July 31,
                                                                                    1999              1998
                                                                              ---------------     -------------
<S>                                                                           <C>                 <C>
OPERATING ACTIVITIES:
Net income                                                                        $  5,771           $ 13,646
Adjustments to reconcile net income to net cash provided by
  operating activities:
     Depreciation and amortization                                                   2,336              1,437
     Amortization of deferred compensation                                             297                443
     Purchased in-process research and development                                   5,348                  -
     Changes in operating assets and liabilities:
           Accounts receivable                                                         621                137
           Inventory                                                                (4,029)            (4,443)
           Other current assets                                                     (1,134)              (519)
           Other assets                                                             (1,054)              (243)
           Accounts payable                                                         (5,010)            11,509
           Compensation and related benefits                                          (610)              (647)
           Income taxes                                                              2,250                845
           Other accruals                                                            1,483             (1,215)
                                                                              ---------------     -------------
Net cash provided by operating activities                                            6,269             20,950
                                                                              ---------------     -------------
                                                                              ---------------     -------------

INVESTING ACTIVITIES:
     Purchases of property, plant and equipment                                     (5,721)            (2,518)
     Purchases of short-term investments                                           (73,120)           (24,859)
     Maturities of short-term investments                                           84,455             29,630
     Purchase of the Optical Drive Development Group                                (3,901)                 -
     Purchase of ACL                                                                (6,523)                 -
                                                                              ---------------     -------------
Net cash provided by (used for) investing activities                                (4,810)             2,253
                                                                              ---------------     -------------
                                                                              ---------------     -------------

FINANCING ACTIVITIES:
     Payments on lease obligation                                                     (231)              (311)
     Payments on working capital line of credit                                          -            (21,041)
     Net proceeds from issuance of common stock                                      1,319              1,734
                                                                              ---------------     -------------
Net cash provided by (used for) financing activities                                 1,088            (19,618)
                                                                              ---------------     -------------
                                                                              ---------------     -------------

Net increase in cash and cash equivalents                                            2,547              3,585
Cash and cash equivalents at beginning of period                                    36,631             35,004
                                                                              ---------------     -------------
Cash and cash equivalents at end of period                                        $ 39,178           $ 38,589
                                                                              ---------------     -------------
                                                                              ---------------     -------------
Supplemental schedules of cash flow information
Cash paid for:
     Interest                                                                     $    470           $    696
     Taxes                                                                        $  2,506           $  6,501
Supplemental schedules of non-cash investing and financing activities:
     Deferred compensation                                                        $    (56)          $   (185)
</TABLE>


           See accompanying notes to unaudited consolidated condensed
                             financial statements.

                                       Page 5 of 26
<PAGE>

NEOMAGIC CORPORATION
NOTES TO UNAUDITED CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

1.   Basis of Presentation:

         The second quarters of fiscal 2000 and fiscal 1999 ended on August 1,
1999 and July 26, 1998, respectively. For ease of presentation, the accompanying
financial statements have been shown as ending on the last day of calendar July.

         The unaudited consolidated condensed financial statements have been
prepared pursuant to the rules and regulations of the Securities and Exchange
Commission and include the accounts of NeoMagic Corporation and its wholly owned
subsidiaries, collectively ("NeoMagic" or the "Company"). All significant
intercompany balances and transactions have been eliminated. Certain information
and footnote disclosures, normally included in financial statements prepared in
accordance with generally accepted accounting principles, have been condensed or
omitted pursuant to such rules and regulations. In the opinion of the Company,
the financial statements reflect all adjustments, consisting only of normal
recurring adjustments, necessary for a fair presentation of the financial
position at July 31, 1999 and January 31, 1999, the operating results for the
three and six months ending July 31, 1999 and 1998, and cash flows for the six
months ended July 31, 1999 and 1998. These financial statements and notes should
be read in conjunction with the Company's audited financial statements and notes
thereto for the year ended January 31, 1999, included in the Company's Annual
Report on Form 10-K filed with the Securities and Exchange Commission.

         The results of operations for the six months ended July 31, 1999 are
not necessarily indicative of the results that may be expected for the year
ending January 31, 2000.

         Certain amounts for prior years have been reclassified to conform to
current year presentation.

2.   Inventory:

         Inventory is stated at the lower of cost or market value. Cost is
determined by the first-in, first-out method.

<TABLE>
<CAPTION>
                                                  July 31,     January 31,
Inventory consists of:                              1999          1999
                                                ---------------------------
                                                       (in thousands)
<S>                                             <C>            <C>
Raw materials                                     $ 13,255       $  6,396
Work in process                                      1,235          4,717
Finished goods                                       8,585          7,933
                                                ---------------------------
    Total                                         $ 23,075       $ 19,046
                                                ---------------------------
                                                ---------------------------
</TABLE>

3.   Acquisitions:

         The Company completed two acquisitions in February 1999. The Company
acquired the operations of ACL of Tel Aviv, Israel from Robomatix Technology
Ltd. for $6.0 million in cash and warrants to purchase up to 100,000 shares of
NeoMagic common stock over a period of five years, at an exercise price of $20
per share. The Company also acquired the operations of the Optical Drive
Development Group of Mitel Corporation for $4.0 million in cash. Both
acquisitions were accounted for as purchases.

         For the ACL transaction, the excess purchase price over the estimated
fair value of net tangible assets has been allocated to intangible assets,
primarily consisting of patents ($1.5 million), assembled workforce ($1.2
million), and goodwill ($0.2 million). In addition to the intangible assets
acquired, the Company recorded a $3.3 million charge, representing the write-off
of acquired in-process research and development ("IPRD"). The risk adjusted
discount rate applied to after-tax cash flows to calculate the IPRD and patent
valuation was 50%.


                                       Page 6 of 26
<PAGE>

         For the Mitel transaction, the excess purchase price over the estimated
fair value of net tangible assets acquired has been allocated to intangible
assets, primarily consisting of patents ($1.2 million), assembled workforce
($0.2 million), and goodwill ($0.4 million). In addition to the intangible
assets acquired, the Company recorded a $2.0 million charge, representing the
write-off of acquired IPRD. The risk adjusted discount rate applied to after-tax
cash flows to calculate the IPRD and patent valuation was between 40-45%.

         The allocation of $3.3 million and $2.0 million of the purchase price
to IPRD in the case of the ACL and the Mitel acquisitions, respectively,
represents the estimated fair value based on risk adjusted cash flows related to
each incomplete in process research and development project. The Company
believes that such fair values do not exceed the amount a third party would pay
for each such in-process technology. At the date of each of the acquisitions,
the projects associated with the IPRD efforts had not yet reached technological
feasibility and the in-progress technology had no alternative future use.
Accordingly, these costs were expensed. In making its purchase price allocations
for the ACL and Mitel acquisitions, the Company used the income approach which
considered present value calculations of income, an analysis of project
accomplishments and completion costs, an assessment of overall contribution, as
well as project risks. The values assigned to IPRD for each acquisition were
determined by estimating the costs and efforts to develop the purchased
in-process technology into commercially viable products, estimating the
resulting future net cash flows from each project, excluding the cash flows
related to the portion of each project that was complete at the acquisition
date, and discounting the resulting net cash flows to their present value.
Projected future net cash flows attributable to the in-process technology,
assuming successful development of such technologies, were discounted to their
present value using a discount rate which was derived based on the Company's
estimated weighted average cost of capital plus a risk premium to account for
the inherent uncertainty surrounding the successful completion of each project
and the associated estimated cash flows. The value of the assembled workforces
was based upon the cost to replace that workforce. Intangible assets, including
goodwill, are being amortized over their estimated useful lives of four years.
Such amortization was $322,000 and $639,000 for the three months and six months
ended July 31, 1999, respectively.

         Subsequent to the acquisitions, there have been no significant changes
in the assumptions used in the IPRD analysis relating to the timing of expected
future revenues or the amount of development expenses and efforts expected to be
required to bring the in process research and development technologies to
completion and to achieve such revenues.


4.   Earnings Per Share:

         In 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 128, "Earnings per Share" ("SFAS 128"). SFAS
128 replaces the calculation of primary and fully diluted earnings per share
with basic and diluted earnings per share. Unlike primary earnings per share,
basic earnings per share exclude any dilutive effect of options, warrants, and
convertible securities. Diluted earnings per share is very similar to fully
diluted earnings per share.


                                       Page 7 of 26
<PAGE>

Per share information calculated on this basis is as follows (in thousands,
except per share amounts):
<TABLE>
<CAPTION>
                                                            Three Months Ended             Six Months Ended
                                                                 July 31                        July 31
                                                        ---------------------------   -------------------------
                                                            1999          1998            1999           1998
                                                        ---------------------------   -------------------------
<S>                                                     <C>            <C>            <C>             <C>
Numerator:
     Net income                                          $ 2,510       $ 6,970         $ 5,771        $13,646
                                                        ---------------------------   -------------------------
Denominator:
      Denominator for basic earnings per share -          24,460        23,595          24,468         23,445
      weighted average shares outstanding
      Effect of dilutive securities:
            Employee stock options                         1,613         2,349           1,386          2,531
            Warrants                                           -            89               -             90
                                                        ---------------------------   -------------------------
      Dilutive potential common shares                     1,613         2,438           1,386          2,621
                                                        ---------------------------   -------------------------
       Denominator for diluted earnings per share -
       adjusted weighted-average shares                   26,073        26,033          25,854         26,066
Basic earnings per share                                 $   .10       $   .30         $   .24        $   .58
Diluted earnings per share                               $   .10       $   .27         $   .22        $   .52
</TABLE>

5.   Recently Issued Accounting Pronouncements

         The Company adopted Statement of Financial Accounting Standards No.
130, "Reporting Comprehensive Income," ("SFAS 130") during the quarter ended
July 31, 1998. SFAS 130 establishes new rules for the reporting and displaying
of comprehensive income and its components; however, the adoption of this
Statement had no impact on the Company's net income or stockholders' equity.
SFAS 130 requires unrealized gains or losses on the Company's available-for-sale
securities and foreign currency translation adjustments to be included in
comprehensive income. Gross unrealized gains and losses on available-for-sales
securities and foreign currency translation adjustments at July 31, 1999 and
1998 were immaterial.

         In June 1997, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 131, ("SFAS 131") "Disclosures about
Segments of an Enterprise and Related Information." The statement changes
standards for the way that public business enterprises identify and report
operating segments in annual and interim financial statements. This statement
requires selected information about an enterprise's operating segments.
Currently, the Company has one operating segment by which management evaluates
performance. All of the Company's net sales to date have been derived from the
sale of multimedia accelerators, and the Company expects this to continue
through fiscal 2000.

         In June 1998, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 133, ("SFAS 133") "Accounting for
Derivative Instruments and Hedging Activities." The Standard will require
companies to record all derivatives held on the balance sheet at fair value.
Derivatives that are not hedges must be adjusted to fair value through income.
If the derivative is a hedge, changes in the fair value of the derivative is
either offset against the change in fair value of the hedged assets,
liabilities, or firm commitments through earnings, or recognized in other
comprehensive income until the value related to the ineffective portion of a
hedge, if any, is recognized in earnings. The Company expects to adopt SFAS 133
as of the beginning of its fiscal year 2001. The effect of adoption of the
Standard is currently being evaluated, but is not expected to have a material
effect on the Company's financial position or results of operations.


                                       Page 8 of 26
<PAGE>

PART I.  FINANCIAL INFORMATION

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

         When used in this discussion, the words "expects," "anticipates" and
similar expressions are intended to identify forward-looking statements. Such
statements, which include statements concerning the timing of availability and
functionality of products under development, the availability and cost of
products from the Company's suppliers, insufficient, excess or obsolete
inventory, foreign exchange rate fluctuations, product mix, trends in average
selling prices, general seasonal business conditions, the growth rate of the
market for notebook PCs, competition, and the adoption or retention of industry
standards are subject to risks and uncertainties, including those set forth
below under "Factors that May Affect Results," that could cause actual results
to differ materially from those projected. These forward-looking statements
speak only as of the date hereof. The Company expressly disclaims any obligation
or undertaking to release publicly any updates or revisions to any
forward-looking statements contained herein, to reflect any changes in the
Company's expectations with regard thereto or any changes in events, conditions
or circumstances on which any such statement is based.

OVERVIEW

         The Company designs, develops and markets high-performance
semiconductor solutions for sale to original equipment manufacturers ("OEM") of
mobile computing products including notebook PCs, and more recently digital
cameras and DVD drives. The Company pioneered the first commercially available
high-performance silicon technology that integrates DRAM, complex logic and
analog circuits into a single chip. The Company's proprietary MagicWare-TM-
technology eliminates the need to drive signals off-chip to discrete memory,
achieving its performance advantage while actually lowering the power
consumption and extending the battery life for smaller, lighter weight portable
devices. The first commercial application for the Company's technology is in the
design, development and marketing of multimedia accelerators for sale to
notebook computer manufacturers. To date, all of the Company's net sales have
been derived from the sale of the Company's MagicGraph128 and MagicMedia256
families of pin-compatible multimedia accelerators and companion audio chips for
notebook PCs.

         The Company's products require semiconductor wafers manufactured with
state-of-the-art fabrication equipment and technology. NeoMagic has established
strategic relationships with Mitsubishi Electric Corporation ("Mitsubishi
Electric"), Toshiba Corporation ("Toshiba") and Infineon Technologies
("Infineon"), formerly Siemens Aktiengesellschaft Semiconductor Group, to
produce its semiconductor wafers and uses other independent contractors to
perform assembly, packaging and testing. The Company's foundry relationships are
formalized in separate five-year wafer supply agreements. These relationships
enable the Company to concentrate its resources on product design and
development, where NeoMagic believes it has greater competitive advantages, and
to eliminate the high cost of owning and operating a semiconductor wafer
fabrication facility. The Company depends on these suppliers to allocate to the
Company a portion of their manufacturing capacity sufficient to meet the
Company's needs, to produce products of acceptable quality and at acceptable
manufacturing yields and to deliver those products to the Company on a timely
basis. The Company is currently operating in a supply-constrained environment on
some of its principle products, which has had, and is expected to continue to
have, an adverse effect on the Company's fiscal 2000 net sales. Further, the
Company has paid, and expects to continue to have to pay, premium prices in
order to obtain any incremental wafer capacity from its suppliers, which has
had, and will continue to have, an adverse effect on gross margins for fiscal
2000. The Company is also dependent on its suppliers to advance, on a timely
basis, the process design technologies on which the manufacturing of the
Company's products are based. The Company is currently experiencing difficulty
in bringing to production its advanced 3D multimedia accelerators, which has
had, and will continue to have, an adverse effect on the Company's net sales in
fiscal 2000.

         The Company purchases wafers and pays an agreed price for wafers
meeting certain acceptance criteria. To date, a substantial majority of the
Company's wafer purchases, which constitute a significant part of its cost of
sales, have been priced in Japanese yen. Recently, the value of the yen has
strengthened relative to the U.S. dollar, making the wafers purchased by the
Company relatively more expensive. Further appreciation in the value of the yen
would make the wafers relatively more expensive to the Company, which could have
a material adverse effect on


                                       Page 9 of 26
<PAGE>

the Company's business, financial condition and results of operations. The
Company has in the past hedged its exposure to fluctuations in the exchange
rate between the Japanese yen and the United States dollar by purchasing
forward contracts and options and may continue to do so in the future. Any
gains or losses associated with the Company's hedging activities have been
immaterial.

         The following information should be read in conjunction with the
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" on pages 8-20 of the Company's Fiscal 1999 Annual Report.

RESULTS OF OPERATIONS

The following table sets forth for the periods indicated certain financial data
as a percentage of net sales:
<TABLE>
<CAPTION>
                                               Three Months Ended          Six Months Ended
                                                    July 31,                   July 31
                                            ------------------------   ------------------------
                                                1999         1998          1999         1998
                                            -----------   ----------   ----------   -----------
<S>                                         <C>           <C>          <C>          <C>
Net sales                                      100.0%       100.0%        100.0%       100.0%
Cost of sales                                   70.0         58.2          66.2         57.9
                                            -----------   ----------   ----------   -----------
Gross margin                                    30.0         41.8          33.8         42.1
Operating expenses
  Research and development                      18.1         13.7          15.6         13.4
  Selling, general and administrative            7.1          9.1           7.2          9.1
  In-process research and development              -            -           4.0            -
                                            -----------   ----------   ----------   -----------
      Total operating expenses                  25.2         22.8          26.8         22.5
                                            -----------   ----------   ----------   -----------
Income from operations                           4.8         19.0           7.0         19.6
      Interest income and other                  1.5          1.7           1.3          1.9
      Interest expense                           (.4)         (.7)          (.4)         (.7)
                                            -----------   ----------   ----------   -----------
Income before income taxes                       5.9         20.0           7.9         20.8
Provision for income taxes                       1.8          7.0           3.6          7.3
                                            -----------   ----------   ----------   -----------
Net income                                       4.1%        13.0%          4.3%        13.5%
                                            -----------   ----------   ----------   -----------
                                            -----------   ----------   ----------   -----------
</TABLE>

NET SALES

         The Company's net sales to date have been generated from the sale of
its multimedia accelerators. The Company's products are used in, and its
business is dependent on, the personal computer industry with sales primarily in
Asia, Japan, and the United States. Net sales were $60.3 million for the three
months ended July 31, 1999, compared to $53.4 million for the three months ended
July 31, 1998. Net sales were $132.7 million for the six months ended July 31,
1999, compared to $101.1 million for the six months ended July 31, 1998. Net
sales increased primarily as a result of increased shipments of the Company's
products and introduction by the Company of additional products in its
MagicGraph128 and MagicMedia256 product families expanding the portion of the
market addressed by NeoMagic products, offset in part by lower average selling
prices. The Company expects that the percentage of its net sales represented by
any one product or type of product may change significantly from period to
period as new products are introduced and existing products reach the end of
their product life cycles. Due to competition, a decrease in DRAM pricing and
the trend in the market toward lower cost notebook computers, the Company's
products often experience declining unit average selling prices over time, which
at times can be substantial. In addition, the Company is currently operating in
a supply-constrained environment on some of its principle products. This supply
shortage has had and will continue to have an adverse effect on net sales for
fiscal 2000.

         Export sales accounted for 81.0% and 89.2% of net sales in the three
months ended July 31, 1999 and 1998, respectively. Export sales accounted for
81.1% and 87.8% of net sales in the six months ended July 31, 1999 and 1998,
respectively. The Company expects that export sales will continue to represent a
substantial majority of net sales, although there can be no assurance that
export sales as a percentage of net sales will remain at current levels. All
sale transactions were denominated in U.S. dollars.


                                       Page 10 of 26
<PAGE>

         Five customers accounted for 20.3%, 13.7%, 12.9%, 12.1%, and 10.3% of
net sales for the three months ended July 31, 1999. Four customers accounted for
23.0%, 18.0%, 11.0% and 10.2% of net sales for the three months ended July 31,
1998. Four customers accounted for 20.6%, 14.1%, 13.6% and 10.3% of net sales
for the six months ended July 31, 1999. Four customers accounted for 19.3%,
18.7%, 10.6% and 10.3% of net sales for the six months ended July 31, 1998. The
Company expects a significant portion of its future sales to remain concentrated
within a limited number of strategic customers. There can be no assurance that
the Company will be able to retain its strategic customers or that such
customers will not cancel or reschedule orders or, in the event orders are
canceled, that such orders will be replaced by other sales. In addition, sales
to any particular customer may fluctuate significantly from quarter to quarter.
The occurrence of any such events or the loss of a strategic customer could have
a material adverse effect on the Company's operating results.

GROSS MARGIN

         Gross margin was $18.1 million and $22.3 million for the three months
ended July 31, 1999 and 1998, respectively. Gross margin percentages decreased
to 30.0% for the three months ended July 31, 1999 from 41.8% in the three months
ended July 31, 1998. Gross margin was $44.9 million and $42.6 million for the
six months ended July 31, 1999 and 1998, respectively. Gross margin percentages
decreased to 33.8% for the six months ended July 31, 1999 from 42.1% in the six
months ended July 31, 1998. The decrease in gross margin percentage was due
primarily to higher unit costs, including premiums paid to certain of the
Company's foundries to obtain incremental production capacity. Also affecting
gross margin was a decrease in the dollar/yen exchange rate and declines in unit
average selling prices stemming from the market trend toward lower priced
notebooks and increased competition. These factors were mitigated in part by
other product cost decreases stemming from the Company's ongoing cost reduction
efforts.

         In the future, the Company's gross margin percentages may be affected
by the availability and cost of products from the Company's suppliers,
insufficient, excess or obsolete inventory levels, manufacturing yields
(particularly on new products), foreign currency exchange rate fluctuations, the
continued trend in the market toward lower priced notebooks, increased
competition and related decreases in unit average selling prices (particularly
with respect to older generation products), changes in the mix of products sold
and timing of volume shipments of new products. Further, as the Company is
currently operating in a supply-constrained environment, the Company has paid,
and expects it will pay, premium prices in order to obtain any incremental wafer
capacity from its suppliers, which has and will continue to have an adverse
effect on gross margins for fiscal 2000.

RESEARCH AND DEVELOPMENT EXPENSES

         Research and development expenses include compensation and associated
costs relating to development personnel, operating system software costs and
prototyping costs, which include photomask costs and pre-production wafer costs.
Research and development expenses were $10.9 million and $7.3 million for the
three months ended July 31, 1999 and 1998, respectively. Research and
development expenses were $20.7 million and $13.6 million for the six months
ended July 31, 1999 and 1998, respectively. The Company has made and intends to
continue to make significant investments in research and development to remain
competitive by developing new and enhanced products to serve its identified
markets. Research and development expenses increased primarily as a result of
increased employee related expenses on higher headcount, increased prototyping
costs associated with new product development, and amortization of intangibles
associated with the acquisitions of ACL and the Optical Drive Development Group.
Research and development spending is expected to increase in absolute dollars in
fiscal 2000.

SALES, GENERAL AND ADMINISTRATIVE EXPENSES

         Sales, general and administrative expenses were $4.3 million and $4.8
million in the three months ended July 31, 1999 and 1998, respectively. Sales,
general and administrative expenses were $9.6 million and $9.2 million in the
six months ended July 31, 1999 and 1998, respectively. Sales, general and
administrative expenses decreased in the three months ended July 31, 1999
compared to the three months ended July 31, 1998 due primarily to lower
commissions paid to outside sales representatives. Sales, general and
administrative expenses increased in


                                       Page 11 of 26
<PAGE>

the six months ended July 31, 1999 compared to the six months ended July 31,
1998 due primarily to higher personnel costs and legal costs, offset in part
by lower outside commissions. The Company anticipates that sales, general and
administrative expenses will increase in absolute dollars in fiscal 2000.

IN-PROCESS RESEARCH AND DEVELOPMENT

         In-process research and development expenses were $5.3 million in the
six months ended July 31, 1999. The Company completed two acquisitions in
February 1999. The Company acquired the operations of ACL of Tel Aviv, Israel
from Robomatix Technology Ltd. for $6.0 million in cash and warrants to purchase
up to 100,000 shares of NeoMagic common stock over a period of five years, at an
exercise price of $20 per share. The Company also acquired the operations of the
Optical Drive Development Group of Mitel Corporation for $4.0 million in cash.
Both acquisitions were accounted for as purchases in the first quarter of fiscal
2000.

         For the ACL transaction, the excess purchase price over the estimated
fair value of net tangible assets acquired was allocated to intangible assets,
primarily consisting of patents ($1.5 million), assembled workforce ($1.2
million), and goodwill ($0.2 million). In addition to the intangible assets
acquired, the Company recorded a $3.3 million charge, representing the write-off
of acquired in-process research and development ("IPRD"). The risk adjusted
discount rate applied to after-tax cash flows to calculate the IPRD and patent
valuation was 50%.

         For the Mitel transaction, the excess purchase price over the estimated
fair value of acquired net tangible assets was allocated to intangible assets,
primarily consisting of patents ($1.2 million), assembled workforce ($0.2
million), and goodwill ($0.4 million). In addition to the intangible assets
acquired, the Company recorded a $2.0 million charge, representing the write-off
of acquired IPRD. The risk adjusted discount rate applied to after-tax cash
flows to calculate the IPRD and patent valuation was between 40-45%.

         The allocation of $3.3 million and $2.0 million of the purchase price
to IPRD in the case of the ACL and the Mitel acquisitions, respectively,
represents the estimated fair value based on risk adjusted cash flows related to
each incomplete in process research and development project. The Company
believes that such fair values do not exceed the amount a third party would pay
for each such in-process technology. At the date of each of the acquisitions,
the projects associated with the IPRD efforts had not yet reached technological
feasibility and the in-progress technology had no alternative future use.
Accordingly, these costs were expensed. In making its purchase price allocations
for the ACL and Mitel acquisitions, the Company used the income approach which
considered present value calculations of income, an analysis of project
accomplishments and completion costs, an assessment of overall contribution, as
well as project risks. The values assigned to IPRD for each acquisition were
determined by estimating the costs and efforts to develop the purchased
in-process technology into commercially viable products, estimating the
resulting future net cash flows from each project, excluding the cash flows
related to the portion of each project that was complete at the acquisition
date, and discounting the resulting net cash flows to their present value.
Projected future net cash flows attributable to the in-process technology,
assuming successful development of such technologies, were discounted to their
present value using a discount rate which was derived based on the Company's
estimated weighted average cost of capital plus a risk premium to account for
the inherent uncertainty surrounding the successful completion of each project
and the associated estimated cash flows. The value of the assembled workforces
was based upon the cost to replace that workforce. Intangible assets, including
goodwill, are being amortized over their estimated useful lives of four years.
Such amortization was $322,000 and $639,000 for the three months and six months
ended July 31, 1999, respectively.

         Subsequent to the acquisitions, there have been no significant changes
in the assumptions used in the IPRD analysis relating to the timing of expected
future revenues or the amount of development expenses and efforts expected to be
required to bring the in process research and development technologies to
completion and to achieve such revenues.



                                       Page 12 of 26
<PAGE>

INTEREST INCOME AND OTHER

         The Company earns interest on its cash and short-term investments.
Interest income and other was $932,000 and $919,000 for the three months ended
July 31, 1999 and 1998, respectively. Interest income and other was $1.7 million
and $1.9 million for the six months ended July 31, 1999 and 1998, respectively.
The decrease in interest income and other in the first six months of fiscal 2000
stemmed from an increase in tax-exempt securities investments, which carry lower
pre-tax yields.

INTEREST EXPENSE

         The Company pays interest and commissions on wafer purchases and
interest on its capital leases. Interest expense was $218,000 and $372,000, for
the three months ended July 31, 1999 and 1998, respectively. Interest expense
was $470,000 and $696,000, for the six months ended July 31, 1999 and 1998,
respectively. The decrease in interest expense from fiscal 1999 reflects lower
interest and commissions on wafer purchases and lower capital lease balances.

INCOME TAXES

         The Company's effective tax rate for the three and six months ended
July 31, 1999 was 30%, excluding the effect of the in-process research and
development charge of $5.3 million, compared to an effective tax rate for the
three and six months ended July 31, 1998 of 35%. The lower effective tax rate
for the three months ended July 31, 1999 is due primarily to changes in the
geographical mix of revenue and operating profits.

LIQUIDITY AND CAPITAL RESOURCES

         The Company's cash, cash equivalents and short-term investments
decreased $8.8 million in the six months ended July 31, 1999 to $83.9 million
from $92.7 million at January 31, 1999. The decrease was due primarily to the
two acquisitions completed in February 1999 for $10.4 million and purchases of
property, plant and equipment of $5.7 million. The decrease in cash, cash
equivalents and short-term investments was also attributable to an increase in
inventory, other current assets, other assets, and a decrease in accounts
payable, offset by income from operations, other accruals and proceeds from
issuance of common stock. Working capital decreased $2.1 million to $90.7
million at July 31, 1999 from $92.8 million at January 31, 1999.

         Net cash provided by operating activities for the six months ended July
31, 1999 was $6.3 million compared to $20.9 million for the six months ended
July 31, 1998. The cash provided by operating activities during the first six
months of fiscal 2000 stemmed primarily from income from operations and
increases in income taxes payable and other accruals, offset in part by a
decrease in accounts payable, and increases in inventory, other current assets
and other assets.

         Net cash used for investing activities for the six months ended July
31, 1999 was $4.8 million, compared to net cash provided by investing activities
of $2.3 million for the six months ended July 31, 1998. Cash used for investing
activities during the first six months of fiscal 2000 stemmed from the $10.4
million acquisitions of the Optical Drive Development Group and ACL and the
purchases of $5.7 million of property, plant and equipment, partially offset by
net maturities of short-term investments of $11.3 million. Continued expansion
of the Company's business may require higher levels of capital equipment
purchases, technology investments, foundry investments and other payments to
secure manufacturing capacity. The timing and amount of future investments will
depend primarily on the growth of the Company's future revenues.

         Net cash provided by financing activities was $1.1 million for the six
months ended July 31, 1999 compared to net cash used in financing activities of
$19.6 million for the six months ended July 31, 1998. Net cash provided by
financing activities for the first six months of fiscal 2000 related primarily
to net proceeds from


                                       Page 13 of 26
<PAGE>

issuance of common stock. Net cash used in financing activities for the first
six months of fiscal 1999 related primarily to repayments against the working
capital line of $21.0 million.

         At July 31, 1999 the Company's principal sources of liquidity included
cash and cash equivalents and short-term investments of $83.9 million. The
Company believes these available funds and anticipated funds from operations
will satisfy the Company's projected working capital and capital expenditure
requirements through the next 12 months. Investments will continue in product
development in new and existing areas of technology. Cash may also be used to
acquire technology through purchases and strategic acquisitions. The Company's
future cash requirements will depend on many factors including the rate of net
sales growth, the timing and extent of spending to support research and
development programs, expansion of sales and marketing, the timing of
introductions of new products and enhancements to existing products, and market
acceptance of the Company's products. The Company expects that it may need to
raise additional equity or debt financing in the future. There can be no
assurance that additional equity or debt financing, if required, will be
available on acceptable terms or at all.

IMPACT OF CURRENCY EXCHANGE RATES

         The Company currently purchases most of its wafers under purchase
contracts denominated in Japanese yen. Recently, the value of the yen has
strengthened relative to the U.S. dollar, making the wafers purchased by the
Company relatively more expensive. Further appreciation in the value of the yen
would make the wafers relatively more expensive to the Company, which could have
a material adverse effect on the Company's business, financial condition and
results of operations. The Company generally enters into foreign currency
forward contracts and foreign currency options to minimize short-term foreign
currency fluctuation exposures related to these firm purchase commitments. The
Company does not use derivative financial instruments for speculative or trading
purposes. The Company's accounting policies for these instruments are based on
the Company's designation of such instruments as hedging transactions. The
criteria the Company uses for designating an instrument as a hedge include its
effectiveness in risk reduction and one-to-one matching of derivative
instruments to underlying transactions. Notwithstanding the measures the Company
has adopted, due to the unpredictability and volatility of currency exchange
rates and currency controls, there can be no assurance that the Company will not
experience currency losses in the future, nor can the Company predict the effect
of exchange rate fluctuations upon future operating results.

IMPACT OF YEAR 2000

         Like many other companies, the year 2000 computer issue creates risks
for the Company. If computer systems do not correctly recognize and process date
information beyond calendar year 1999, there could be an adverse impact on the
Company's operations. Computer programs that have time-sensitive software may
recognize a date using "00" as the year 1900 rather than the year 2000.

         The Company has completed an initial assessment of its internal
computer systems, and does not believe that it will be required to modify or
replace significant portions of its internal systems so that they will function
properly with respect to dates in the year 2000 and thereafter. The Company's
internal computer systems consist primarily of third party software tools for
engineering, sales, finance and human resources functions. The Company has
reviewed its internal business software, including system software for order
management, finance, purchasing and human resources. All major business software
appears to be year 2000 compliant, and the Company is in the process of
performing testing of such software to ensure such compliance. The Company is
also working closely with the suppliers of its engineering software tools on the
year 2000 issue, and plans to have all such tools updated and tested for year
2000 compliance by the end of the third quarter of fiscal 2000. The Company is
also reviewing its networks, telephones, PCs and workstations, and expects all
to be in compliance by the end of the third quarter of fiscal 2000. For all new
software purchases, the Company requires year 2000 compliance.

         NeoMagic does not operate its own manufacturing facilities. Rather, the
Company's products are manufactured and tested by independent third party
suppliers, primarily located in Asia and Japan. The Company believes that its
most reasonably likely worst case year 2000 scenario would relate to problems
with its third party suppliers rather than with the Company's internal systems
or its products. The Company has contacted critical


                                       Page 14 of 26
<PAGE>

suppliers of products and services to determine whether or not the suppliers'
operations and the products and services they provide are year 2000 capable.
Highest priority is being placed on working with suppliers that are critical
to the delivery of the Company's products to customers. A worst case scenario
involving a critical supplier would be the partial or complete shutdown of
the supplier and its resulting inability to provide its products or services
to the Company on a timely basis. The Company continues to monitor its
suppliers and is currently developing contingency plans to address issues
related to suppliers that are not considered to be taking all steps necessary
to ensure year 2000 capability. Where efforts to work with critical suppliers
to ensure year 2000 capability have not been successful, contingency planning
generally emphasizes the identification of substitute and second-source
suppliers, where available, or planned increases in inventory levels of
specific products in advance of the end of calendar year 1999. This
contingency planning is expected to be ongoing through calendar 1999.

         The Company's year 2000 efforts to date have largely been carried out
with existing personnel, and the incremental costs incurred to date have been
less than $350,000. Management believes that incremental costs to be incurred
going forward to assure that its internal systems and products are year 2000
capable will be less than $200,000. However, the Company is not in a position to
identify or to avoid all possible adverse year 2000 scenarios, particularly as
it relates to its third party suppliers. Due to the large number of variables
involved, the Company cannot provide an estimate of the damage it might suffer
if any of these adverse scenarios were to occur. As such, there can be no
assurance that the failure to ensure year 2000 capability by a supplier or
another third party would not have a material adverse effect on the Company's
financial condition or overall results of operations.


FACTORS THAT MAY AFFECT RESULTS

FLUCTUATIONS IN QUARTERLY OPERATING RESULTS

         NeoMagic's quarterly and annual results of operations are affected by a
variety of factors that could materially adversely affect net sales, gross
margin and income from operations. These factors include, among others, demand
for the Company's products, unanticipated delays or problems in the introduction
or performance of the Company's next generation of products, availability and
cost of manufacturing capacity, the Company's ability to introduce new products
in accordance with OEM design requirements and design cycles, market acceptance
of the end-products of the Company's customers, changes in the timing of product
orders due to unexpected delays in the introduction of products of the Company's
customers or due to the life cycles of such customers' products ending earlier
than anticipated, supply constraints for the other components incorporated into
its customers' notebook PC products, new product announcements or product
introductions by NeoMagic's competitors, competitive pressures resulting in
lower average selling prices, the volume of orders that are received and can be
fulfilled in a quarter, the rescheduling or cancellation of orders by customers
which cannot be replaced with orders from other customers, the unanticipated
loss of any strategic relationship, changes in product or customer mix (i.e. the
portion of the Company's revenues represented by the Company's various products
and customers), incorrect forecasting of future revenues, fluctuations in
manufacturing yields, insufficient, excess or obsolete inventory levels, foreign
exchange rate fluctuations, the level of expenditures for research and
development and sales, general and administrative functions of the Company, the
Company's ability to leverage its technology across new markets, the affect on
the Company's business due to internal systems or systems of suppliers,
infrastructure providers and other third parties adversely affected by year 2000
problems, and litigation involving antitrust, intellectual property, and other
issues. Any one or more of these factors could result in the Company failing to
achieve its expectations as to future revenues and profits. The Company may be
unable to adjust spending sufficiently in a timely manner to compensate for any
unexpected sales shortfall, which could materially adversely affect quarterly
operating results. Accordingly, the Company believes that period-to-period
comparisons of its operating results should not be relied upon as an indication
of future performance. In addition, the results of any quarterly period are not
indicative of results to be expected for a full fiscal year. In future quarters,
the Company's operating results may be below the expectations of public market
analysts or investors. In such event, the market price of the common stock would
be materially adversely affected.

RISKS ASSOCIATED WITH DEPENDENCE ON THE NOTEBOOK PC MARKET


                                       Page 15 of 26
<PAGE>

         The Company's products are currently used only in notebook PCs. The
notebook PC market is characterized by rapidly changing technology, evolving
industry standards, frequent new product introductions, significant price
competition, and the trend toward lower priced notebooks, which is resulting in
short product life cycles and regular reductions of average selling prices over
the life of a specific product. Although the notebook PC market has grown
substantially in recent years, there is no assurance that such growth will
continue. A reduction in sales of notebook PCs, or a reduction in the growth
rate of such sales, would likely reduce demand for the Company's products.
Moreover, such changes in demand could be large and sudden. Since PC
manufacturers often build inventories during periods of anticipated growth, they
may be left with excess inventories if growth slows or if they have incorrectly
forecasted product transitions. In such cases, the PC manufacturers may abruptly
suspend substantially all purchases of additional inventory from suppliers such
as the Company until the excess inventory has been absorbed. Any reduction in
the demand for notebook PCs in general, or for a particular product that
incorporates the Company's multimedia accelerators, could have a material
adverse impact on the Company's business, financial condition and results of
operations.

         The Company's ability to compete in the future will depend on its
ability to identify and ensure compliance with evolving industry standards.
Unanticipated changes in industry standards could render the Company's products
incompatible with products developed by major hardware manufacturers and
software developers, including Intel Corporation and Microsoft Corporation. The
Company also will continue to need licenses from Intel, Microsoft and perhaps,
other companies in order to manufacture products that are compatible with
industry standards, including particularly the industry standards set by those
companies. There is no assurance that such licenses will always be available, or
will be available on reasonable terms. The Company could be required, as a
result, to invest significant time and effort to redesign its products to ensure
compliance with relevant standards. If the Company's products are not in
compliance with prevailing industry standards for a significant period of time,
or the Company is unable to obtain necessary licenses from industry standard
setters, the Company could miss crucial OEM design cycles, which could result in
a material adverse effect on the Company's business, financial condition and
results of operations. In addition, the Company's products are designed to
afford the notebook PC manufacturer significant advantages with respect to
product performance, power consumption and size. To the extent that other future
developments in notebook PC components or subassemblies incorporate one or more
of the advantages offered by the Company's products, the market demand for the
Company's products may be negatively impacted, which could result in a material
adverse effect on the Company's business, financial condition and results of
operations.

PRODUCT CONCENTRATION, RISKS ASSOCIATED WITH MULTIMEDIA PRODUCTS

         The Company's revenues currently are entirely dependent on the market
for multimedia accelerators for notebook PCs, and on the Company's ability to
compete in that market. Since the Company has no other revenue generating
product line, the Company's revenues and results of operations would be
materially adversely affected if for any reason it were unsuccessful in selling
multimedia accelerators. The notebook PC market frequently undergoes transitions
in which products rapidly incorporate new features and performance standards on
an industry-wide basis. If the Company's products were unable to support the new
feature sets or performance levels stemming from such a transition, the Company
would likely not have the opportunity to compete for new design wins until it
was able to incorporate the new feature sets or performance requirements into
its products. The Company is currently experiencing difficulty in bringing to
production its advanced 3D multimedia accelerators, which will have an adverse
effect on the Company's annual net sales and market share in fiscal 2000.
Failure by the Company to develop and market, on a timely basis, products with
the required feature sets or performance standards could have a material adverse
effect on the Company's business, financial condition and results of operations.

         The notebook PC multimedia market is characterized by extreme price
competition. Leading-edge products may command higher average selling prices,
but prices decline throughout the product life cycle as comparable and more
advanced products are introduced into the market. As a result, the Company's
ability to maintain average selling prices and gross margins depends
substantially on its ability to continue introducing new products. Its
ability to maintain gross margins is also dependent upon its ability to
reduce product costs throughout a product life cycle by instituting cost
reduction design changes and yield improvements, persuading customers to
adopt cost-reduced versions of its products, and successfully managing its
manufacturing and subcontractor relationships. Failure by the Company to
design and market advanced products in a timely manner, and to reduce product
costs on products, would have a material adverse effect on the Company's net
sales, gross margins and results of operations.


                                       Page 16 of 26
<PAGE>

CONSUMER PRODUCT EXECUTION

         The Company announced the formation of the Consumer Products division
in June 1998. The division is exploring consumer semiconductor product
opportunities in emerging markets such as digital video disks (DVD), digital
cameras, and other consumer products that can benefit from the advantages of
embedded DRAM MagicWare-TM- technology pioneered by NeoMagic. In February 1999,
the Company completed two acquisitions to further the development efforts of the
Consumer Products division. The Company acquired the operations of the Optical
Drive Development Group from Mitel Semiconductor in Manchester, England and the
operations of ACL of Tel Aviv, Israel from Robomatix Technologies Ltd. The DVD
and digital camera markets are new and evolving. The Company's ability to
compete in these new markets will depend on its ability to identify and ensure
compliance with evolving industry standards, develop and market compelling
semiconductor solutions, and deliver those solutions to the market in a timely
and cost effective manner. Any such new product development program faces
substantial risks and uncertainties, including risks as to the costs, timing and
results of engineering efforts, competitive risks and market development risks.
There can be no assurance that the products the Company expects to introduce
will incorporate the features, functionality and pricing demanded by the market,
or will be introduced within the appropriate window of market demand. The
failure of the Company to successfully introduce new products and achieve market
acceptance for such products would have a material adverse effect on the
Company's business, financial condition and results of operations.

CUSTOMER CONCENTRATION

         The Company's sales are concentrated within a limited customer base in
the notebook PC market. The Company expects that a small number of customers
will continue to account for a substantial portion of its net sales for the
foreseeable future. Furthermore, the majority of the Company's sales are made on
the basis of purchase orders rather than pursuant to long-term purchase
agreements. As a result, the Company's business, financial condition and results
of operations could be materially adversely affected by the decision of a single
customer to cease using the Company's products, or by a decline in the number of
notebook PCs sold by a single customer.

EFFECTS OF CHANGES IN DRAM PRICING

         The Company's products feature large DRAM memory integrated with analog
and logic circuitry on a single chip, while its competitors often provide
discrete analog and logic circuitry to be used in conjunction with DRAM supplied
by others. The selling prices of the Company's products reflect many factors,
including the prices of DRAM chips. As the Company places firm purchase
commitments for wafers some 3 to 4 months in advance, significant reductions in
the market price of DRAM could cause the Company's products to become less
competitively priced relative to competing discrete solutions with
non-integrated DRAM. In this circumstance, the Company could be forced to
respond to pricing pressures precipitated by changes in the DRAM market by
reducing the average selling prices of its products to current and prospective
customers. Recently, the DRAM market has experienced significant price erosion,
which has been a factor in the overall decline in the average selling price of
the Company's products. Because the Company's product costs cannot be adjusted
as rapidly as changes in the market price of DRAM, the Company's business,
financial condition and results of operations may be materially and adversely
affected by unanticipated changes in the price of DRAM.

COMPETITION

         The market for multimedia accelerators for notebook PCs in which the
Company competes is intensely competitive and is characterized by rapid
technological change, evolving industry standards and declining average selling
prices. NeoMagic believes that the principal factors of competition in this
market are performance, price, features, power consumption, size and software
support. The ability of the Company to compete successfully in the rapidly
evolving notebook PC market depends on a number of factors, including success in
designing and subcontracting the manufacture of new products that implement new
technologies in a timely manner, product quality, reliability, price, the
efficiency of production, design wins for NeoMagic's integrated circuits, ramp
up of production of the Company's products for particular system manufacturers,
end-user acceptance of the system


                                       Page 17 of 26
<PAGE>

manufacturers' products, market acceptance of competitors' products and
general economic conditions. There can be no assurance that the Company will
be able to compete successfully in the future.

         NeoMagic competes with major domestic and international companies, some
of which have substantially greater financial and other resources than the
Company with which to pursue engineering, manufacturing, marketing and
distribution of their products. The Company's principal competitors currently
include ATI Technologies (ATI), Chips & Technologies, Inc. ("Chips &
Technologies"- in January 1998, Intel Corporation acquired Chips and
Technologies), S3 Inc., and Trident Microsystems, Inc. ("Trident"). NeoMagic may
also face increased competition from new entrants into the notebook PC
multimedia accelerator market including companies currently selling products
designed for desktop PCs. Certain of the Company's competitors may offer
products with more functionality and / or higher processor speeds at the expense
of battery life and power consumption than the Company's product offerings.
These feature sets may be more competitive for certain applications than the
Company's products. Some of the Company's competitors, including Chips &
Technologies and Trident have announced or introduced multimedia accelerator
products that integrate large DRAM with analog and logic circuitry on a single
chip. Potential competition also could come from manufacturers that integrate
the multimedia accelerator with other systems components. For example, several
of the Company's competitors have announced plans to develop products that
integrate the multimedia accelerator with the core logic chip set. The
successful commercial introduction by competitors of products that integrate
large DRAM with analog and logic circuitry on a single chip or that eliminate
the need for a separate multimedia accelerator in notebook PCs could have a
material adverse effect on the Company's business, financial condition and
results of operations.

         Some of the Company's current and potential competitors operate their
own manufacturing facilities. Since the Company does not operate its own
manufacturing facility and must make binding commitments to purchase products,
it may not be able to reduce its costs and cycle time or adjust its production
to meet changing demand as rapidly as companies that operate their own
facilities, which could have a material adverse effect on the Company's results
of operations.

DEPENDENCE ON MANUFACTURING RELATIONSHIPS

         The Company's products require wafers manufactured with
state-of-the-art fabrication equipment and techniques. The Company's wafers
currently are manufactured by Mitsubishi Electric and Toshiba in Japan. In
February 1999, the Company entered into a wafer supply agreement with Infineon
(formerly Siemens) of Germany. Each of these manufacturing relationships is
covered under the terms of a five-year wafer supply agreement. The Company
expects that, for the foreseeable future, some of its products will be
manufactured by a single source. Since, in the Company's experience, the lead
time needed to establish a strategic relationship with a new DRAM partner is at
least 12 months and the estimated time for a foundry to switch to a new product
line ranges from four to nine months, there may be no readily available
alternative source of supply for specific products. A manufacturing disruption
experienced by any of the Company's manufacturing partners or the failure of one
of the Company's manufacturing partners to dedicate adequate resources to the
production of the Company's products would have a material adverse effect on the
Company's business, financial condition and results of operations. Furthermore,
in the event that the transition to the next generation of manufacturing
technologies by the Company's manufacturing partners is unsuccessful, the
Company's business, financial condition and results of operations would be
materially and adversely affected.

         There are many other risks associated with the Company's dependence
upon third party manufacturers, including the potential lack of adequate
capacity during periods of excess demand, reduced control over delivery
schedules, quality, manufacturing yields and cost, limited warranties on wafers
supplied to the Company, and potential misappropriation of NeoMagic intellectual
property. The Company is dependent on its manufacturing partners to migrate the
process technology in a timely manner, produce wafers with acceptable quality
and manufacturing yields, deliver those wafers on a timely basis to the
Company's third party assembly subcontractors and to allocate to the Company a
portion of their manufacturing capacity sufficient to meet the Company's needs.
Although the Company's products are designed using the process design rules of
the particular manufacturer, there can be no assurance that the Company's
manufacturing partners will be able to achieve or maintain acceptable yields or
deliver sufficient quantities of wafers on a timely basis or at an acceptable
cost. Additionally, there can be


                                      Page 18 of 26
<PAGE>

no assurance that the Company's manufacturing partners will continue to
devote adequate resources to the production of the Company's products or
continue to advance, on a timely basis, the process design technologies on
which the manufacturing of the Company's products are based. The Company is
currently experiencing difficulties in some of these areas, and is operating
in a supply-constrained environment on some of its principle products. This
supply issue has had, and is expected to continue to have, an adverse effect
on the Company's business, financial position and results of operations
through at least the remainder of fiscal 2000.

         The Company's products are assembled and tested by third party
subcontractors. The Company does not have long-term agreements with any of these
subcontractors. Such assembly and testing is conducted on a purchase order
basis. As a result of its reliance on third party subcontractors to assemble and
test its products, the Company cannot directly control product delivery
schedules, which could lead to product shortages or quality assurance problems
that could increase the costs of manufacturing or assembly of the Company's
products. Due to the amount of time normally required to qualify assembly and
test subcontractors, product shipments could be delayed significantly if the
Company were required to find alternative subcontractors. Any problems
associated with the delivery, quality or cost of the assembly and test of the
Company's products could have a material adverse effect on the Company's
business, financial condition and results of operations.

INVENTORY RISK

         Under its wafer supply agreements with Mitsubishi Electric, Toshiba and
Infineon, the Company is obligated to provide rolling 12-month forecasts of
anticipated purchases and to place binding purchase orders three to four months
prior to shipment from the suppliers. If the Company cancels a purchase order,
it must pay cancellation penalties based on the status of work in process or the
proximity of the cancellation to the delivery date. Forecasts of monthly
purchases may not increase or decrease by more than a certain percentage from
the previous month's forecast without the manufacturer's consent. Thus, the
Company must make forecasts and place purchase orders for wafers long before it
receives purchase orders from its own customers. This limits the Company's
ability to react to fluctuations in demand for its products, which can be
unexpected and dramatic, and from time-to-time will cause the Company to have an
excess or shortage of wafers for a particular product. Also, many of the
Company's customers are moving to "just in time" relationships with their
vendors, which can shift the risk of carrying inventory back to the supplier. As
a result of the long lead-time for manufacturing wafers and the increase in
"just in time" ordering by PC manufacturers, semiconductor companies such as the
Company from time-to-time must take charges for excess inventory. Significant
write-offs of excess inventory could have a material adverse effect on the
Company's financial condition and results of operations. Conversely, failure to
obtain sufficient wafers can cause the Company to miss revenue opportunities
and, if significant, could impact sales by the Company's customers. The Company
is currently experiencing such a wafer shortage on some of its principle
products, which is expected to have an adverse effect on the Company's business,
financial condition and results of operations through at least the remainder of
fiscal 2000.

MANUFACTURING YIELDS

         The fabrication of semiconductors is a complex and precise process.
Because NeoMagic's products feature the integration of large DRAM memory with
analog and logic circuitry on a single chip, a manufacturer must obtain
acceptable yields of both the memory and logic portions of such products,
compounding the complexity of the manufacturing process. As a result, the
Company may face greater manufacturing challenges than its competitors. Minute
levels of contaminants in the manufacturing environment, defects in masks used
to print circuits on a wafer, difficulties in the fabrication process or other
factors can cause a substantial percentage of wafers to be rejected or a
significant number of die on each wafer to be nonfunctional. Many of these
problems are difficult to diagnose and time consuming or expensive to remedy. As
a result, semiconductor companies often experience problems in achieving
acceptable wafer manufacturing yields, which are represented by the number of
good die as a proportion of the total number of die on any particular wafer. The
Company purchases wafers, not die, and pays an agreed upon price for wafers
meeting certain acceptance criteria. Accordingly, the Company bears the risk of
the yield of good die from wafers purchased meeting the acceptance criteria.
Poor yields would materially adversely affect the Company's net sales, gross
margins and results of operations.


                                       Page 19 of 26
<PAGE>

         Semiconductor manufacturing yields are a function of both product
design, which is developed largely by the Company, and process technology, which
is typically proprietary to the manufacturer. Historically, the Company has
experienced lower yields on new products. Since low yields may result from
either design or process technology failures, yield problems may not be
effectively determined or resolved until an actual product exists that can be
analyzed and tested to identify process sensitivities relating to the design
rules that are used. As a result, yield problems may not be identified until
well into the production process, and resolution of yield problems would require
cooperation by and communication between the Company and the manufacturer. This
risk is compounded by the offshore location of the Company's manufacturers,
increasing the effort and time required identifying, communicating and resolving
manufacturing yield problems. As the Company's relationships with additional
manufacturing partners develop, yields could be adversely affected due to
difficulties associated with adopting the Company's technology and product
design to the proprietary process technology and design rules of each
manufacturer. Any significant decrease in manufacturing yields could result in
an increase in the Company's per unit product cost and a decrease in total units
available for sale, which could require the Company to allocate its available
product supply among its customers, potentially adversely impacting customer
relationships as well as revenues, market share and gross margins. There can be
no assurance that the Company's manufacturers will achieve or maintain
acceptable manufacturing yields in the future. The inability of the Company to
achieve planned yields from its manufacturers could have a material adverse
effect on the Company's business, financial condition and results of operations.
Furthermore, the Company also faces the risk of product recalls resulting from
design or manufacturing defects which are not discovered during the
manufacturing and testing process. In the event of a significant number of
product returns, the Company's net sales and gross margin could be materially
adversely affected.

DEPENDENCE ON NEW PRODUCT DEVELOPMENT, RAPID TECHNOLOGICAL CHANGE

         The Company's business, financial condition and results of operations
will depend to a significant extent on its ability to maintain its position in
the market for multimedia accelerator products that integrate large DRAM with
analog and logic circuitry on a single chip. As a result, the Company believes
that significant expenditures for research and development will continue to be
required in the future. The notebook PC market for which the Company's products
are designed is intensely competitive and is characterized by rapidly changing
technology, evolving industry standards and declining average selling prices.
Notebook PC manufacturers demand products incorporating rich features and
functionality in order to achieve product differentiation. The Company must
anticipate the features and functionality that the consumer and/or OEMs of
notebook PCs will demand, incorporate those features and functionality into
products that meet the exacting design requirements of the notebook PC
manufacturers, price its products competitively, and introduce the products to
the market on a timely basis. For example, 3-D, digital audio and DVD
functionality have become increasingly important for notebook PCs. The Company's
ability to compete may depend on its ability to incorporate these features in
its products. The success of new product introductions is dependent on several
factors, including proper new product definition, timely completion and
introduction of new product designs, the ability of strategic manufacturing
partners to effectively design and implement the manufacture of new products,
quality of new products, differentiation of new products from those of the
Company's competitors and market acceptance of NeoMagic's and its customers'
products. There can be no assurance that the products the Company expects to
introduce will incorporate the features and functionality demanded by system
manufacturers and consumers of notebook PCs, will be successfully developed, or
will be introduced within the appropriate window of market demand. The Company
is currently experiencing delays in bringing to production new products that
incorporate hardware 3D functionality. The failure of the Company to
successfully introduce new products and achieve market acceptance for such
products would have a material adverse effect on the Company's business,
financial condition and results of operations.

         The integration of large DRAM memory with analog and logic circuitry on
a single chip is highly complex and is critical to the Company's success.
Because of the complexity of its products, however, NeoMagic has experienced,
and is currently experiencing, delays in completing development and introduction
of new products. Such delays in the completion of development of future
products, including the products currently expected to be announced over the
next year, are anticipated to adversely affect the Company's business, financial
condition, and results of operations. In addition, there can be no assurance
that fundamental advances in either the memory or


                                       Page 20 of 26
<PAGE>

logic components of the Company's products will not significantly increase
the complexity inherent in the design and manufacture of the Company's
products, rendering the Company's product technologically infeasible or
uncompetitive. The multiple chip solutions offered by some of the Company's
competitors are less complex to design and manufacture than the Company's
integrated products. As a result, these competitive solutions may be less
expensive, particularly during periods of depressed DRAM prices. The time
required for competitors to develop and introduce competing products may be
shorter and manufacturing yields may be better than those experienced by the
Company.

         As the markets for the Company's products continue to develop and
competition increases, NeoMagic anticipates that product life cycles will
shorten and average selling prices will decline. In particular, average selling
prices and, in some cases, gross margin for each of the Company's products will
decline as the products mature. Thus, the Company will need to continue
introducing compelling new products at relatively higher average selling prices
in order to maintain overall average selling prices. There can be no assurance
that the Company will successfully identify new product opportunities or develop
and bring to market new products in a timely manner. Further, there can be no
assurance that products or technologies developed by others will not render
NeoMagic's products or technologies obsolete or uncompetitive, or that the
Company's products will be selected for new designs by its customers. The
failure of the Company's new product development efforts and its ability to
bring new products to market on a timely basis would have a material adverse
effect on NeoMagic's business, financial condition and results of operations.

UNCERTAINTY REGARDING PATENTS AND PROTECTION OF PROPRIETARY RIGHTS

         As a general matter, the semiconductor industry is characterized by
substantial litigation regarding patent and other intellectual property rights.
The Company relies in part on patents to protect its intellectual property. The
Company currently holds 31 patents, of which 24 are issued in the United States.
These patents cover certain aspects of the design and architecture of the
Company's technology. Additionally, the Company and its newly acquired
businesses have patent applications pending in several countries including the
United States. The Company also relies on a combination of mask work protection,
trademarks, copyrights, trade secret laws, employee and third-party
nondisclosure agreements and licensing arrangements to protect its intellectual
property.

         In December 1998, the Company filed a lawsuit in the United States
District Court for the District of Delaware against Trident Microsystems, Inc.
The suit alleges that Trident's embedded DRAM graphics accelerators infringe
certain patents held by NeoMagic Corporation. In January 1999, Trident filed a
counter claim against the Company alleging an attempted monopolization in
violation of antitrust laws, arising from NeoMagic's filing of the patent
infringement action against Trident in December. The Company has filed for a
summary motion to dismiss the antitrust claim, and does not expect resolution of
the suits until at least calendar year 2000. There can be no assurance as to the
result of the request for summary motion, the patent infringement suit and the
counter-suit for antitrust filed by Trident.

         There can be no assurance that any issued or pending patents will
provide the Company with significant intellectual property protection,
competitive advantages, or will not be challenged by third parties, or that the
patents of others will not have an adverse effect on the Company's ability to do
business. In addition, there can be no assurance that others will not
independently develop similar products, duplicate the Company's products or
design around any patents that may be issued to the Company. Further, there can
be no assurance that others will not gain access to the Company's trade secrets
or intellectual property, or disclose such intellectual property or trade
secrets, or that the Company can meaningfully protect its intellectual property.

         The Company in the past has been, and in the future may be, notified
that it may be infringing the intellectual property rights of third parties. For
example, in February 1999, the Company was informed by two of its customers that
they have been notified of potential infringement by a holder of three United
States patents and are requesting indemnification from NeoMagic. At this time,
the Company has conducted both an internal and external infringement review, and
does not believe that its products infringe any claims of the patents. However,
the Company may have certain indemnification obligations to customers with
respect to the infringement of third-party intellectual property rights by its
products, and there can be no assurance that such potential obligations to


                                       Page 21 of 26
<PAGE>

indemnify its customers will not have a material adverse effect on the Company's
business, financial condition and results of operations. Further, there can be
no assurances that the Company or such customers would prevail in any patent
litigation, or that such customers will continue to purchase the Company's
products while the Company is under the threat of litigation.

         Any patent litigation, whether or not determined in the Company's favor
or settled by the Company, would at a minimum be costly and could divert the
efforts and attention of the Company's management and technical personnel from
productive tasks. There can be no assurance that current or future infringement
claims by third parties or claims for indemnification by other customers or end
users of the Company's products resulting from infringement claims will not be
asserted in the future or that such assertions, if proven to be true, will not
materially adversely affect the Company's business, financial condition and
results of operations. In the event of any adverse ruling in any such matter,
the Company could be required to pay substantial damages, which could include
treble damages, cease the manufacturing, use and sale of infringing products,
discontinue the use of certain processes, or to obtain a license under the
intellectual property rights of the third party claiming infringement. There can
be no assurance, however, that a license would be available on reasonable terms
or at all. Any limitations on the Company's ability to market its products, or
delays and costs associated with redesigning its products or payments of license
fees to third parties, or any failure by the Company to develop or license a
substitute technology on commercially reasonable terms could have a material
adverse effect on the Company's business, financial condition and results of
operations.

DEPENDENCE ON INTERNATIONAL SALES AND SUPPLIERS

         Export sales are a critical part of the Company's business. Export
sales accounted for 81.0% and 89.2% of net sales in the three months ended July
31, 1999 and 1998, respectively. Export sales accounted for 81.1% and 87.8% of
net sales in the six months ended July 31, 1999 and 1998, respectively. The
Company expects that net sales derived from international sales will continue to
represent a significant portion of its total net sales. Letters of credit issued
by customers support a portion of the Company's international sales. To date,
the Company's international sales have been denominated in United States
dollars. Increases in the value of the U.S. dollar relative to the local
currency of the Company's customers could make the Company's products relatively
more expensive than competitors' products sold in the customer's local currency.

         International manufacturers produce all of the Company's wafers. In
addition, many of the assembly and test services used by the Company are
procured from international sources. Under the Company's wafer supply agreements
with Mitsubishi Electric and Toshiba, wafers are priced in Japanese yen. As a
result, the Company's costs of goods sold are subject to fluctuations in the
yen-dollar exchange rates. The Company has in the past hedged its exposure to
fluctuations in foreign currency exchange rates by purchasing foreign exchange
contracts and will continue to do so in the future. However, there can be no
assurance that such hedging will be adequate. Significant wafer or assembly and
test service price increases, fluctuations in currency exchange rates or the
Company's inability to fully hedge against currency exchange rate fluctuations
could have a material and sudden adverse effect on the Company's business,
financial condition and results of operations.

         International sales and manufacturing operations are subject to a
variety of risks, including fluctuations in currency exchange rates, tariffs,
import restrictions and other trade barriers, unexpected changes in regulatory
requirements, longer accounts receivable payment cycles, potentially adverse tax
consequences and export license requirements. In addition, the Company is
subject to the risks inherent in conducting business internationally including
foreign government regulation, political and economic instability, and
unexpected changes in diplomatic and trade relationships. Moreover, the laws of
certain foreign countries in which the Company's products may be developed,
manufactured or sold, including various countries in Asia, may not protect the
Company's intellectual property rights to the same extent as do the laws of the
United States, thus increasing the possibility of piracy of the Company's
products. There can be no assurance that one or more of these risks will not
have a material adverse effect on the Company's business, financial condition
and results of operations.

NEED FOR ADDITIONAL CAPITAL


                                       Page 22 of 26
<PAGE>

         The Company requires substantial working capital to fund its business,
particularly to finance inventories and accounts receivable and for capital
expenditures. The Company believes that its existing capital resources will be
sufficient to meet the Company's cash requirements through the next 12 months,
although the Company could be required, or could elect, to seek to raise
additional capital during such period. The Company's future cash requirements
will depend on many factors, including the rate of net sales growth, timing and
extent of spending to support research and development programs in new and
existing areas of technology, expansion of sales and marketing support
activities, and timing and customer acceptance for new products and enhancements
to existing products. The Company may raise additional equity or debt financing
in the future. There can be no assurance that additional equity or debt
financing, if required, will be available on acceptable terms or at all.

MANAGEMENT OF EXPANDED OPERATIONS

         The Company has experienced periods of rapid growth and expansion both
domestically and internationally, which have placed and may continue to place a
significant strain on the Company's limited personnel and other resources. To
manage these expanded operations effectively, including the operations of
recently acquired entities in the U.K. and Israel, the Company will be required
to continue to improve its operational, financial and management systems. The
Company is dependent upon its ability to successfully hire, train, motivate and
manage its employees, especially its management and development personnel. If
the Company's management is unable to manage its expanded operations
effectively, the Company's business, financial condition and results of
operations could be materially adversely affected.

DEPENDENCE ON QUALIFIED PERSONNEL

         The Company's future success depends in part on the continued service
of its key engineering, sales, marketing, manufacturing, finance and executive
personnel, and its ability to identify, hire and retain additional personnel.
There is intense competition for qualified personnel in the semiconductor
industry, and there can be no assurance that the Company will be able to
continue to attract and train qualified personnel necessary for the development
of its business. Further, increased demands on the Company's management
resources will likely require the addition of new management personnel and the
development of additional expertise by current management personnel. Failure to
recruit key personnel in a timely manner, or the loss of existing key technical
and management personnel could be significantly detrimental to the Company's
product development programs or otherwise have a material adverse effect on the
Company's business, financial condition and results of operations.

VOLATILITY OF STOCK PRICE

         The market price of the Company's common stock, like that of other
semiconductor companies, has been and is likely to continue to be, highly
volatile. The market has from time to time experienced significant price and
volume fluctuations that may be unrelated to the operating performance of
particular companies. The market price of the Company's Common Stock could be
subject to significant fluctuations in response to various factors, including
quarter-to-quarter variations in the Company's anticipated or actual operating
results, announcements of new products, technological innovations or setbacks by
the Company or its competitors, general conditions in the semiconductor and PC
industries, unanticipated shifts in the notebook PC market or industry
standards, loss of key customers, changes in DRAM pricing, litigation
commencement or developments, changes in or the failure by the Company to meet
estimates of the Company's performance by securities analysts, market conditions
for high technology stocks in general, and other events or factors.


                                       Page 23 of 26
<PAGE>

         PART II.  OTHER INFORMATION

ITEM 1.  Legal Proceedings

                  In December 1998, the Company filed a lawsuit in the United
         States District Court for the District of Delaware against Trident
         Microsystems, Inc. ("Trident"). The suit alleges that Trident's
         embedded DRAM graphics accelerators infringe certain patents held by
         NeoMagic Corporation. In January 1999, Trident filed a counter claim
         against the Company alleging an attempted monopolization in violation
         of antitrust laws, arising from NeoMagic's filing of the patent
         infringement action against Trident in December. The Company has filed
         for a summary motion to dismiss the antitrust claim, and does not
         expect resolution of the suits until at least calendar year 2000. There
         can be no assurance as to the result of the request for summary motion,
         the patent infringement suit and the counter-suit for antitrust filed
         by Trident.

                  In February 1999, the Company was informed by two of its
         customers that they have been notified of potential infringement by a
         holder of three United States patents and are requesting
         indemnification from NeoMagic. At this time, the Company has conducted
         both an internal and external infringement review, and does not believe
         that its products infringe any claims of the patents. However, the
         Company may have certain indemnification obligations to customers with
         respect to the infringement of third-party intellectual property rights
         by its products, and there can be no assurance that such potential
         obligations to indemnify its customers will not have a material adverse
         effect on the Company's business, financial condition and results of
         operations. Further, there can be no assurances that the Company or
         such customers would prevail in any patent litigation, or that such
         customers will continue to purchase the Company's products while the
         Company is under the threat of litigation.

ITEM 2.  Changes in Securities
         None.

ITEM 3.  Defaults Upon Senior Securities
         None.

ITEM 4.  Submission of Matters to a Vote of Security Holders

         The Annual Meeting of Stockholders was held on June 10, 1999. The
         matters voted upon at the meeting and results of the voting with
         respect to those matters were as follows:
<TABLE>
<CAPTION>

         1)    Election of Directors
                                            VOTES FOR                WITHHELD
                                            ---------                --------
              <S>                           <C>                      <C>
              Kamran Elahian                21,332,958                383,834
              Prakash C. Agarwal            21,352,117                364,675
              Brian P. Dougherty            21,365,741                351,051
              James Lally                   21,364,741                352,051
              Klaus Wiemer                  21,370,622                346,170
</TABLE>
         2)   Proposal to amend the 1993 Stock Option Plan
<TABLE>
<CAPTION>
                               VOTES FOR        AGAINST        ABSTAIN
                               ---------        -------        -------
                               <S>             <C>             <C>
                               13,726,909      6,334,384        73,623
</TABLE>
         3)   Proposal to ratify the appointment of Ernst &
              Young LLP as the company's independent auditors
<TABLE>
                               VOTES FOR        AGAINST        ABSTAIN
                               ---------        -------        -------
                               <S>              <C>            <C>
                               21,584,398        95,613         36,781
</TABLE>


                                       Page 24 of 26
<PAGE>

ITEM 5.  Other Information
         Not applicable.

ITEM 6.  Exhibits and Reports on Form 8-K
         (a)  Exhibits
<TABLE>
<CAPTION>
         EXHIBIT
         NUMBER            DESCRIPTION
         -------           -----------
         <S>               <C>
         27.1              Financial Data Schedule
</TABLE>
         (b)  Reports on Form 8-K

         The Company did not file any reports on FORM 8-K during the three
months ended July 31, 1999.


                                       Page 25 of 26
<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.


                              NEOMAGIC CORPORATION
                                  (Registrant)




                                Merle McClendon
                                ---------------
                                MERLE MC CLENDON
                            Vice President, Finance
                          and Chief Financial Officer
                  (Principal Financial and Accounting Officer)

                               September 14, 1999


                                      Page 26 of 26