===============================================================================

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

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

                                   FORM 10-K

[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
    ACT OF 1934

                   For The Fiscal Year Ended June 30, 2002

                                      or

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

      For the transition period from                to
                                     --------------    --------------

                        COMMISSION FILE NO. 0-25298

                            OAK TECHNOLOGY, INC.

          (Exact name of Registrant as specified in its charter)

               Delaware                               77-0161486
  (State or other jurisdiction of                  (I.R.S. Employer
   incorporation or organization)                 Identification No.)



  1390 Kifer Road, Sunnyvale, California                 94086
(Address of principal executive offices)              (Zip Code)


     Registrant's telephone number, including area code: (408) 523-6500
      Securities registered pursuant to Section 12(b) of the Act: None
         Securities registered pursuant to Section 12(g) of the Act:

                        Common Stock, $.001 Par Value
                       Preferred Stock Purchase Rights

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

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 past 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 [ ]

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of the Registrant's knowledge, in definitive proxy or information
statements incorporated by reference to Part III of this Form 10-K or any
amendment to this Form 10-K.  [X]

The aggregate market value of voting stock held by non-affiliates of the
Registrant was approximately $301,085,969 as of August 26, 2002, based upon the
closing price of the Registrant's Common Stock on the Nasdaq National Market
reported for August 26, 2002.  Shares of Common Stock held by each executive
officer and Director and by each person who beneficially owns more than 5% of
the outstanding Common Stock have been excluded in that such persons may under
certain circumstances be deemed to be affiliates.  This determination of
affiliate status is not necessarily a conclusive determination of affiliate
status for any other purpose.

55,896,764 shares of the Registrant's $.001 par value Common Stock were
outstanding at August 26, 2002.

                     DOCUMENTS INCORPORATED BY REFERENCE

The Registrant has incorporated by reference into Part III of this Annual
Report on Form 10-K portions of its Proxy Statement for the 2002 Annual Meeting
of Stockholders.

===============================================================================

<PAGE>


                             OAK TECHNOLOGY, INC.

                                   INDEX TO

                          ANNUAL REPORT ON FORM 10-K

                         FOR YEAR ENDED JUNE 30, 2002


<TABLE>
<CAPTION>

                                                                           Page
                                                                           ----
<S>     <C>                                                                <C>

                                    PART I

Item 1.  Business..........................................................   3
Item 2.  Properties........................................................  18
Item 3.  Legal Proceedings.................................................  18
Item 4.  Submission of Matters to a Vote of Security Holders...............  20


                                    PART II


Item 5.  Market for the Registrant's Common Equity and Related Stockholder
         Matters...........................................................  21
Item 6.  Selected Financial Data...........................................  22
Item 7.  Management's Discussion and Analysis of Financial Condition and
         Results of Operations.............................................  23
Item 7A. Quantitative and Qualitative Disclosures About Market Risk........  41
Item 8.  Financial Statements and Supplementary Data.......................  41
Item 9.  Changes in and Disagreements with Accountants on Accounting and
         Financial Disclosure..............................................  41


                                   PART III

Item 10. Directors and Executive Officers of the Registrant................  42
Item 11. Executive Compensation............................................  42
Item 12. Security Ownership of Certain Beneficial Owners and Management....  42
Item 13. Certain Relationships and Related Transactions....................  42


                                    PART IV

Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K..  43

Signatures.................................................................  83

</TABLE>

                                       2


<PAGE>

                                    PART I


ITEM 1.  BUSINESS

Except for the historical financial information contained herein, the matters
discussed in this Annual Report on Form 10-K may be considered "forward-
looking" statements within the meaning of Section 27a of the Securities Act of
1933, as amended, and Section 21e of the Securities Exchange Act of 1934, as
amended.  Such statements include declarations regarding the intent, belief or
current expectations of Oak Technology, Inc. and its management.  Such forward-
looking statements are not guarantees of future performance and involve a
number of risks and uncertainties.  Actual results could differ materially from
those indicated by such forward-looking statements.  The important factors that
could cause actual results to differ materially from those indicated include,
but are not limited to, those are discussed in the section titled "Factors That
May Affect Future Results" in Item 7, "Management's Discussion and Analysis of
Financial Condition and Results of Operations".  Other risks may also be
identified from time to time in our reports and registration statements filed
with the Securities and Exchange Commission.


General
-------

     Oak Technology, Inc. and its subsidiaries ("Oak" or the "Company")
designs, develops and markets high performance integrated semiconductors,
software and platform solutions to original equipment manufacturers ("OEMs")
worldwide that serve the optical storage and digital imaging equipment markets.
Our digital imaging products consist of semiconductor hardware and software
that enables users to print, scan, process and transmit documents to computer
peripherals that perform printing functions. Our Optical Storage products
consist primarily of integrated circuits and supporting software and firmware,
all designed to store and distribute digital content, thereby enabling our
customers to deliver cost-effective, powerful systems to the end user for the
home and enterprise.  We are a "fabless" semiconductor company, in that we
contract with independent foundries to manufacture all of our integrated
circuit products, enabling us to focus on our design strengths, minimize fixed
costs and capital expenditures, and gain access to advanced manufacturing
facilities.  Oak's mission is to be a leading solution provider for the storage
and distribution of digital content.

     Oak's operations are organized along its two market-focused groups: the
Optical Storage Group and the Imaging Group.  The Imaging Group is comprised of
the combination of our Xionics Document Technologies, Inc. and Pixel Magic
subsidiaries, serving the digital imaging equipment market.

     Oak was originally incorporated in California in 1987 and was
reincorporated in Delaware in 1994.  Our executive offices and principal
marketing, sales and product development operations are located at 1390 Kifer
Road, Sunnyvale, California 94086, telephone number (408) 523-6500.  In
addition, we have facilities in: Woburn, Massachusetts; San Diego, California;
Tucson, Arizona; Austin, Texas; Taipei, Taiwan; Yokohama City, Kanagawa and
Osaka, Japan; Seoul, Korea; Manchester, England; and Dortmund, Germany.


Corporate History
-----------------

     Oak provides high-performance, integrated semiconductors to original
equipment manufacturers (OEMs) worldwide who serve the optical storage, and
digital imaging equipment markets. The Company's products, consisting primarily
of integrated circuits and supporting software and firmware, enable its OEM
customers to deliver cost-effective, powerful systems to the end-user for
storage, home entertainment and imaging (copy, fax, print) applications.

     The Company pioneered the IDE/ATAPI CD-ROM controller chip in 1993, and
was recognized as one of the industry's largest merchant suppliers of CD-ROM
controllers.  The Company established customer relationships



                                      3


<PAGE>


with many of the leading CD-ROM drive manufacturers and, through these
relationships, sought input directly from its customers regarding the optimal
features for next generation of optical storage controllers having advanced
features and higher levels of integration.  In 1997, the Company began to
investigate expanding into additional optical storage market segments,
conducting research and development targeting optical storage semiconductors
for use in CD-Recordable (CD-R) and CD-ReWritable (CD-RW) drives.  The Company
also engaged in research and development that leveraged its CD-ROM and CD-R/RW
development efforts, by pursuing the development of additional optical storage
semiconductors, including MPEG-1 and MPEG-2 audio/video decoders for VideoCD
(VCD) and DVD players, and integrated circuits for digital broadcast systems
such as cable, satellite and terrestrial set-top boxes for use in such emerging
markets as DVD-ROM drives and DVD players.

     In the second half of fiscal 1998, the Company began a period of
redirection and restructuring in an effort to redefine its strategic direction
and focus on its key strengths and core competencies.  A key decision was made
to exit markets where the Company saw limited potential for profitability and a
significant dependency on the PC market and redirect resources to market
opportunities where the Company could utilize its core technical competencies.
The Company initiated several changes in the fiscal year to support this
redirection.

     As part of this redirection, in July 1998, Oak acquired ViewPoint
Technology, Inc., a privately held company that was developing solutions for
the CD-RW ("Read-Writable") drive market.  ViewPoint had developed a controller
that supports high encoding speeds for CD-RW drives.  The ViewPoint acquisition
provided Oak with a controller to complement its expertise in the block decoder
area, and provided a springboard for Oak's next generation CD-RW drives.

     In August 1998, Oak acquired Xerographic Laser Images Corporation ("XLI"),
a provider of print quality enhancement technology for the digital imaging
equipment markets.  XLI was operated as a division of Pixel Magic, a wholly-
owned subsidiary of Oak, and served to leverage Pixel Magic's position in the
digital equipment market by broadening its expertise in resolution enhancement
technology ("iRET").

     In July 1999, Oak acquired Xionics Document Technologies, Inc., which
became a wholly owned subsidiary of Oak following the merger.  Xionics was
engaged in the design, development and marketing of innovative software and
silicon solutions for printing, scanning, copying, processing and transmitting
digital documents to computer peripheral devices that perform document imaging
functions.  These devices include printers, copiers, scanners, fax machines and
multifunction peripherals (MFPs) that perform a combination of these imaging
functions.  Oak consolidated its Pixel Magic subsidiary with Xionics to form
the Imaging Group and moved the combined entity to Woburn, Massachusetts in
August 2000.

     In July 2000, Oak acquired TCD Labs, Inc.  This acquisition enabled us to
offer complete, integrated, retail-ready hardware/software solutions to PC and
CD-RW drive makers, and to leverage TCD's enabling software for compact disk
recording technology, allowing consumers to take full advantage of the data
capturing, sharing and archiving capabilities of the CD-RW format.  As a result
of the TCD acquisition, Oak has formed an Optical Media Software Group within
our Optical Group.

     In July 2001, Oak purchased all of the outstanding shares of Accel
Technology Ltd., a design engineering firm based in Osaka, Japan, pursuant to
the terms of a share purchase agreement.  Accel focuses on turnkey CD-RW and
DVD Recordable drives for PC and consumer use.  Accel has been organized as a
division within the Optical Storage Group.

Target Markets and Products
---------------------------

     Currently, our target markets include optical storage and digital imaging
hardware and software, which correspond to our Optical Storage Group and
Imaging Group, respectively.  Our business strategy and product offerings
(current and planned for fiscal 2003) for each of the target market segments
are described below.


                                       4

<PAGE>


                               OPTICAL STORAGE

Business Overview and Strategy
------------------------------

     Multimedia computer applications have continued to drive the demand for
low-cost, high-density storage mechanisms.  Initially, the adoption of CD-ROM
technology as the mainstream optical storage medium on the desktop was fueled
in large measure by data-intensive, graphics/audio/video-rich applications that
required a universal, high-density storage medium.  Today, this adoption has
shifted from CD-ROM technology to CD-RW and DVD based technologies for the
storing, displaying and distribution of digital content. Oak's Optical Storage
Group is a leading provider of controllers to the optical storage market, and a
pioneer in this field with the first IDE/ATAPI CD-ROM controller. Today our
Optical Group's product deployments are targeted on CD-RW drives, CD-RW drives
with DVD read capability, commonly known as Combo drives, and DVD-RW.  Our
Optical Storage Group currently has solutions for CD-RW and Combo drives, and a
three-chip solution for DVD Recordable.  Our core competencies include IDE and
alternative interfaces, error correction code ("ECC"), DSP/servo control, disc
write encoding, wobble servo, write strategy, system design, analog, RF and
system software and firmware.  OEM customers for our Optical Storage products
in fiscal 2002 included LG Electronics, Philips, Samsung and Mitsumi.

     The optical storage market is witnessing an increasing adoption of Optical
Storage drives, driven by the popularity of customized audio CD recordings and
the widespread availability of MP3 audio titles on the Internet.  The adoption
of Combo drives specifically is likewise experiencing an accelerated adoption
due principally to the increased demand for combined functionality in slim
drives for notebook computers.  We have prepared for these market transitions
by focusing our development efforts on the CD-RW Combo and DVD-RW technologies,
which provide us with the opportunity to offer valuable innovation to our
customers in a growing market faced with technological challenges.  Our
strategy for increasing the market penetration of our CD-RW, Combo and DVD RW
products and technologies includes technological innovation, protection of
intellectual property, and aggressive marketing programs.  We may also enter
into strategic alliances with drive manufacturers and technology partners.

     The Optical Storage market has picked up considerable momentum as more
consumers discover the advantages of this writable and removable medium.  Re-
writable Optical Storage drives are quickly emerging as the preferred removable
media storage device, particularly for the home PC market.  Major applications
include audio, still pictures and Video storage, archival and data interchange.
Increased consumer demand and the widespread adoption of CD-RW, Combo and DVD-
RW drives by the PC OEM manufacturers over the next year are expected to
contribute to significant ongoing growth in the Optical Storage market.  The
anticipated industry adoption of Microsoft's Mount Rainier standard, which will
enable native operating systems to support data on Optical Storage media, and
in effect replace the floppy drive, is expected to further accelerate the
growth of the Optical Storage market.

     We expect that ongoing functional integration and continuing improvements
in performance, particularly for the writing speeds, will play an important
role in cost reduction and consumer acceptance of the CD-RW drives, thereby
fueling its mass adoption by PC OEMs.  To this end, we recently announced the
OTI-9797T CD-RW controller which has 48X CD-RW write speeds as well as 48X CD-
ROM read speeds. We are also focusing our efforts on the OTI-9897, a fully
integrated controller chip for use in Combo drives.  The Combo drive offers
wide functionality to the end user and is becoming a mainstream product for the
notebook PC markets.  We believe the Combo drive will facilitate the recently
observed evolution from CD formats to DVD and DVD recordable formats. In
anticipation of this evolution we recently announced our three-chip solution
for DVD Recordable.  The OTI-9832, OTI 9831 and the OTI 9838 combine to create
a highly integrated recordable DVD solution offering 32X CD-R, 24X CD-RW, 16X
DVD Read and 4X DVD Write speeds, supporting all DVD formats: DVD-R, DVD-RW,
DVD+R and DVD+RW.  Additionally, as a result of our recent acquisition of Accel
Technology, we are able to provide our customers with a faster time-to-market
capability, through the availability of comprehensive reference designs based
on the OTI-9797T, including the full firmware needed to build a CD-RW drive.
We believe that this capability to offer a complete solution places Oak in a
unique competitive position and offers a valuable time-to-market advantage to
its customers.


                                      5


<PAGE>


     The following table shows our current mix of Optical Storage products for
fiscal 2002.  All products in the table are in production. In addition, we are
currently developing several next-generation products, which are generally not
disclosed until the products have been developed.


Optical Storage Products
------------------------

<TABLE>
<CAPTION>

                                        CD     CD      DVD     DVD
                                      Write   Read    Read    Write
 Name          Description            Speed   Speed   Speed   Speed    Status
 ----          -----------            -----   -----   -----   -----    ------
<S>           <C>                    <C>      <C>     <C>     <C>    <C>
OTI-9796  Integrated controller with  16X      40X                       In
          enhanced audio and SDRAM                                   Production
          support, ExactLink buffer
          underrun protection.

OTI-9797S Similar to 9796 but with    32X      40X                       In
          higher speeds                                              Production

OTI-9897  Oak's "Combo" controller    24X      40X       8X              In
                                                                     Production
OTI-9797T Similar to 9797S but with   48X      48X                       In
          higher speeds                                              Production

OTI-9831/ Oak's 3 chip solution for   24X      48X      16X    4X     Sampling
OTI-9832/ recordable DVD                                                with
OTI-9838                                                             Customers


</TABLE>


     Our Optical Media Software Group, formed in July 2000 as a result of the
acquisition of TCD Labs, licenses its SimpliCD(r) optical storage recording
software and Recorder SDK (Software developer Kits) to PC OEMs and drive
manufacturers.  SimpliCD is designed to simplify the burning of CDs from a
Windows desktop utilizing a media player.  The Recorder SDK allows OEMs to
enable the recording of compressed audio files on a CD in accordance with the
Optical Storage Trade Association's (OSTA) MultiAudio format. The Optical Media
Software Group is Oak's first entry into CD-RW software as a product offering,
and represents one component of our CD-RW strategy.  The addition of SimpliCD
to the Optical Storage product line allows Oak to provide an integrated,
retail-ready software solution to both drive makers and PC OEMs.  SimpliCD uses
a CD-RW drive to create or copy consumer audio, video or computer-data CDs,
allowing Oak to leverage the software in compact disk recording technology, and
allowing our consumers to take full advantage of the data capturing, sharing
and archiving capabilities of the CD-RW format.  SimpliCD's drag-and-drop user
interface is designed to provide ease of recording capability in all Microsoft
Windows-based environments, and is universally compatible with all CD-RW drives
and controllers.


                                       6


<PAGE>

                                 IMAGING GROUP

Business Overview and Strategy
------------------------------

     The Imaging Group is a merchant supplier of application-specific
integrated circuits, IC-based controller technology, and digital page
processing software and technology for the digital imaging, production and
printing market, enabling users to print, scan, copy, process and transmit
documents in computer peripherals, such as printers, copiers, and multi-
function peripherals (MFPs), that perform document imaging functions.  The
Imaging Group is located in Woburn, Massachusetts.

     For hardware solutions, the Imaging Group designs high-performance, full-
featured compression ASICs, imaging DSPs, resolution enhancement ASICs and
system-on-a-chip ("SOC") solutions for digital copiers, printers, scanners, fax
machines and multifunction peripherals ("MFPs").  For software solutions, Oak's
Imaging Group offers integrated, modular embedded software products, intended
to provide the performance, output quality and network connectivity required
for today's printing peripheral market.  In addition, we provide complementary
personal computer software products, in particular printer drivers, and
standards-based technology to enable original equipment manufacturers ("OEMs")
of peripherals to design and develop differentiated products.

     Core competencies include strong expertise in color/monochrome image
processing pipelines, dot modulation and resolution enhancement technology, and
high-speed compression/decompression technology and systems applications, high-
speed imaging DSP technology, SOC design, control of scanner and printer
mechanisms, reference design platforms and software and hardware architecture
for processing and control of document imaging peripherals that incorporate
page description language interpreters.  We offer a broad suite of products to
major OEMs in the digital imaging and printing market. Our OEM customers for
these products during fiscal 2002 included Canon, Hewlett-Packard, Lexmark,
Xerox, Ricoh, Sharp, Minolta-QMS, Fujitsu, Fuji-Xerox, Kyocera, Heidelberg,
IBM, Kodak, Matsushita, Olivetti, Samsung, Sanyo, Seiko Epson, and Toshiba.

     Fundamental shifts are presently occurring in the digital imaging market.
These changes include increasing share of color printing technology, growth in
distributed printing, the shift towards MFPs, growth in network connectivity
and the emergence of PC-independent printing, including wireless printing due
to rapid growth of digital hand held devices.  Imaging equipment manufacturers
are also continuing to shift toward the use of outsourced design and
manufacturing suppliers, in particular for the high volume low cost segment of
the market.

     Although historically targeting the mid-range of the digital imaging
market, we are now also targeting high-volume opportunities, such as the low-
end to mid-range laser and inkjet products.  In fiscal 2002, Oak introduced its
new Quatro architecture, a SOC platform that combines the power of a RISC CPU
core with Oak's advanced DSP core to provide highly flexible SOC solutions for
imaging and printing devices.   In fiscal 2002, Oak also introduced its XP
family of printing solutions compliant with the XHTML-PRINT standard to help
OEMs build printers and MFPs that meet the requirements of print from non-PC
devices.  For fiscal 2003, the Imaging Group will continue its efforts to
develop new generations of products combining its software and silicon
expertise to offer solutions for OEMs in the digital imaging market.


                                       7

<PAGE>


Digital Imaging Equipment Products
----------------------------------

     ASICS
     -----

<TABLE>
<CAPTION>


Product                        Description                           Status
-------                        -----------                           ------
<S>      <C>                                                     <C>
PM-1V     High-speed bitonal image processor providing single-    In production
          pass compression or decompression of image data

PM-2m     40 MHz bitonal JBIG codec with multitasking capability. In production
          Provides single pass compression or decompression, as
          well as scaling and rotation of bitonal image data

PM-22     75 MHz bitonal JBIG codec with a 32-bit I/O.  Provides  In production
          single pass compression or decompression, as well as
          scaling and rotation of bi-tonal image data

PM-36     A fixed function JPEG compression and decompression     In production
          processor with a sustained data rate of up to 75 MHz

PM-44+    A programmable 85 MHz image DSP with four data paths    In production


PM-44i    A programmable 125 MHz image DSP with four data paths   In production
          and integrated memory

PM-44ix   A programmable 225 MHz image DSP with four data paths   Sampling
          and integrated memory

PM-48     A programmable 125 MHz image processor with eight data  In production
          paths

PM-2050,  Family of image enhancement processors and pulse width  In production
PM-2060i, and pulse position modulators for laser copiers,
PM- 1075  printers and MFPs
and
PM-1100


</TABLE>


Software
--------

<TABLE>
<S>              <C>
IPS.............. A software architecture that contains page description
                  language emulation components and supporting embedded system
                  service components needed to build printer and MFP
                  controllers.  The package includes: IPS/5E, IPS/5C,
                  IPS/XL, IPS/XLC, IPS/PS3 and IPS/PDF.


Printer Drivers.. Printer drivers for the PCLXL, PCL5E and PostScript Levels 2
                  and 3 page printing environments for the Microsoft NT and
                  Windows operating systems.


Soft Print
Server........... Software which provides embedded networking capabilities for
                  printers, copiers, scanners and MFPs.

XP1.............. XHTML-Print compatible software which allows the printers and
                  MFPs to print from non-PC devices.  The configurations
                  Include IPS/XP1, APS/XP1 and XP1 PS front-end

</TABLE>


                                      8

<PAGE>


Services
--------

     The Imaging Group assists OEMs in deploying Oak products and technology in
their devices by providing engineering services.  This may include complete
controller design as well as custom engineering for vendor-specific features
that complement our standard technology.  We also offer driver development and
customization.  In addition, we maintain a network of third-party development
partners to give the Imaging Group and OEM customers the option of using an
independent development partner closely allied with the Imaging Group for
development and integration services.

     Manufacturing Services.  For OEMs wishing to procure a total turnkey
     ----------------------
controller solution, the Imaging Group from time to time provides manufacturing
management services.  This includes complete project management of the design,
development, and manufacturing start-up, as well as management of the ongoing
product of the OEM's controller board by a third-party manufacturing
contractor.

     OEM Services.  The Imaging Group's OEM Services group provides customer
     ------------
support in every aspect of development, training, and maintenance.  Software
maintenance service is provided on a contract basis, and includes updates of
the licensed software, if any, along with support in the form of telephonic and
electronic mail response to customer questions.  Engineering support services,
in which the Imaging Group's engineers perform or assist with specific
engineering task for OEMs, are available for a fee either on a project specific
or general as needed basis.


                  OAK'S MANUFACTURING AND DESIGN METHODOLOGY


Manufacturing
-------------

     We contract with independent foundries to manufacture all of our products,
enabling us to focus on our design strengths, minimize fixed costs and capital
expenditures and gain access to advanced manufacturing facilities.   We depend
on our foundries to allocate to us a portion of their foundry capacity
sufficient to meet our needs to produce products of acceptable quality and with
acceptable manufacturing yields and to deliver products to us in a timely
manner.  These foundries fabricate products for other companies and some
manufacture products of their own design.  Shipments of our products could be
delayed if:

     o we lose any of these foundries as a supplier,

     o we are unable, in a period of increased demand for our products, to
       expand the foundry capacity of our current suppliers or qualify other
       wafer manufacturers for additional foundry capacity,

     o we are unable to obtain timely and adequate deliveries from our current
       or future suppliers; or

     o any other circumstances arise that would require us to seek alternative
       sources of supply.

     Delays in shipments could damage relationships with our current and
prospective customers, provide an advantage to our competitors and have a
material adverse effect on our business, financial condition and results of
operations.  Most of our devices are currently fabricated using complementary
metal oxide semiconductor ("CMOS") process technology from 0.5 micron, 0.35
micron and 0.25 micron feature sizes.  In addition, we are sampling products
for 0.18 micron feature sizes.  All of our semiconductor products are assembled
and tested by independent subcontractors.

     Our primary supplier of wafers during fiscal year 2002 was TSMC.  The
foundries generally are not obligated to supply products to us for any specific
period, in any specific quantity or at a specific price, except as may be
provided in a particular purchase order.  However, in order to obtain an
adequate supply of wafers, especially wafers manufactured using advanced
process techniques, we have entered into and will continue to consider various
possible transactions, including various "take or pay" contracts, that commit
us to purchase specified quantities of wafers over extended periods.


                                       9


<PAGE>

     Our reliance on independent manufacturers and third party assembly and
testing vendors involves a number of additional risks, including the
unavailability of, or interruption in access to, certain process technologies
and reduced control over delivery schedules, quality assurance and costs.  In
addition, as a result of our dependence on foreign subcontractors, we are
subject to the risks of conducting business internationally, including foreign
government regulation and general political risks, such as political and
economic instability, potential hostilities, changes in diplomatic and trade
relationships, currency fluctuations, unexpected changes in, or imposition of,
regulatory requirements, tariffs, import and export restrictions, and other
barriers and restrictions, potentially adverse tax consequences, the burdens of
complying with a variety of foreign laws and other factors beyond our control.
Substantially all of our agreements with offshore wafer fabrication and
assembly facilities provide for pricing and payment in U.S. dollars.

     The design and development of semiconductors is a highly complex and
precise process.  Additionally, our products are particularly complex and
difficult to manufacture.  Minute levels of contaminants in the manufacturing
environment, defects in the 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, time consuming and expensive to remedy, all of which can affect our
time to market with a particular product.  Our foundries may experience
irregularities or adverse yield fluctuations in their manufacturing processes.
If we or our foundries experience any yield or other production problems or
shortages of supply, our business could suffer.


Design Methodology
------------------

     Our products compete in markets that are characterized by rapidly
developing technology and evolving industry standards.  As a fabless
semiconductor company, we address these issues with a design environment based
on workstations, dedicated product simulators, system simulation with hardware
and software modeling, and use of a high level design description language in
order to define, develop and deliver new and enhanced products more rapidly.
Our engineering and design capabilities are critical to our future performance.
We have invested regularly in new advanced equipment and software tools in an
effort to keep these tools updated with the latest technology.  In addition to
the Imaging Group design facilities in Woburn, Massachusetts and the Optical
Storage Group design facilities in our corporate headquarters in Sunnyvale,
California, we have established Design Centers in Austin, Texas; San Diego,
California; Tucson, Arizona; Dortmund, Germany; Manchester, England; Taipei,
Taiwan R.O.C. and Osaka, Japan.

     Oak's library of core cells is key to its ability to reduce the time
needed to design new products.  Examples of core cells include a CD-ROM decoder
core, CD-R/W encoder/decoder core, CD-DSP & CD-Servo core, a parallel, multi-
pipelined microprocessor core, MPEG2 core, DVD-DSP core, 0.5, 0.35, 0.25 and
0.18 micron memory compilers, 0.5, 0.35, 0.25, and 0.18 micron I/O libraries,
SIMD DSP core, JBIG core and JPEG core.  Design methodology, including
equipment and software tools, is a critical factor in our ability to
successfully develop technology and products.  However, we may not be able to
obtain the equipment, software tools and other resources needed to develop
technically advanced products in a timely manner.


Marketing and Customers
-----------------------

     From its inception, Oak has been committed to a worldwide marketing
strategy.  We utilize a direct sales force in the United States, Japan, Taiwan
and Korea and a worldwide network of manufacturers' representatives and
distributors in North America, Europe and Asia.  While customers around the
world have many needs in common, each region has its own requirements.  In
order to support customers in key geographic markets, we have established sales
and support offices in Woburn, Massachusetts; Yokohama City, Kanagawa, Japan;
Taipei, Taiwan; and Seoul, Korea, in addition to our corporate headquarters in
Sunnyvale, California.  We believe that sales and technical


                                      10


<PAGE>


support personnel based in our regional offices understand the technical needs,
business philosophy and culture of their respective customers.  On-site
personnel are trained to respond to customer needs efficiently and effectively.

     We believe that customer service and technical support are important
competitive factors in the optical storage and digital imaging markets.  With a
global presence, we are able to provide prompt technical support to our
customers worldwide.  In addition, the Company's representatives travel
frequently to customer sites as part of the product development cycle.  We
provide several other types of technical support, including software
distribution through an electronic bulletin board, evaluation boards, product
demonstration software, engineering design kits and application notes.  We work
closely with customers in qualification of our products and providing needed
quality and reliability data.  In addition, we make the latest revision of our
software available to our customers under maintenance agreements and can
customize our software to a customer's specific requirements.

     Sales of our products are made pursuant to purchase orders and long-term
agreements covering licensing, maintenance, engineering services, royalties and
other fees.  Purchase orders are subject to price renegotiations and to changes
in quantities of products and delivery schedules in order to reflect changes in
the customers' requirements.  In addition, in certain circumstances, orders may
be canceled at the discretion of the buyer without penalty, resulting in
potential inventory reserves for Oak.  Our business, consistent with that of
others in the semiconductor industry, is generally characterized by long supply
lead times limited by foundry capacity and at times significantly shorter order
lead-times from customers.  This can put Oak in the position of taking
inventory risk in order to ensure that it will have product available for its
customers.  Actual shipments of our products depend on the manufacturing
capacity of Oak's foundries.  Therefore, as foundry capacity tightens, we may
not be able to meet the customer's requested delivery date or we may have to
allocate the quantity of available products among our customers.  Due to our
dependence on third party manufacturing capacity, we believe that backlog at
any particular date may not be indicative of actual net revenues for any future
period.

     Sales of CD-RW and "Combo" controller products comprised 67%, 66%, and 42%
of Oak's total revenues in fiscal 2002, 2001, and 2000, respectively.  Sales of
CD-RW and Combo controller products are expected to continue to account for a
majority of our total revenues for the foreseeable future.  Sales of our
Imaging Group products accounted for 33% of our net revenue in fiscal 2002.
Although we have recently introduced several new products in an attempt to
diversify our product and market base, we cannot predict whether these products
will be successfully designed, accepted by our customers, and brought to
production or whether our customers' products will be accepted in the
marketplace.

     A substantial majority of our revenues in fiscal 2002, 2001, and 2000 were
derived outside of the United States, primarily in Asia.  Including the results
of the Xionics acquisition beginning in fiscal 2000, the geographical areas
accounting for our net revenues in fiscal 2002, 2001, and 2000 are as follows:


<TABLE>
<CAPTION>

                                                             June 30,
                                                   ---------------------------
                                                      2002    2001     2000
                                                      ----    ----     ----
<S>                                                   <C>     <C>      <C>
Japan.............................................     39%     40%      32%
Korea.............................................     22%     37%      34%
Taiwan............................................     14%      5%       1%
North America.....................................     11%     16%      25%
Philippines.......................................     11%     --       --
Europe............................................      2%      1%       4%
Other.............................................      1%      1%       4%
                                                      ---     ---      ---
                                                      100%    100%     100%
                                                      ===     ===      ===

</TABLE>


     Accordingly, we are subject to the risks of conducting business outside of
the United States.  These risks include unexpected changes in, or impositions
of, legislative or regulatory requirements, delays resulting from difficulty in
obtaining export licenses for certain technology, tariffs, quotas and other
trade barriers and restrictions, longer payment cycles, greater difficulty in
accounts receivable collection, potentially adverse taxes, the burdens of


                                      11


<PAGE>


complying with a variety of foreign laws and other factors beyond our control.
We are also subject to general geopolitical risks in connection with our
international operations, such as political, social and economic instability,
potential hostilities and changes in diplomatic and trade relationships.  In
addition, the laws of certain foreign countries in which our products are or
may be developed, manufactured or sold, including various countries in Asia,
may not protect our products or intellectual property rights to the same extent
as do the laws of the United States.  This increases the likelihood of piracy
of our technology and products.  Although most of our foreign sales are
negotiated in U.S. dollars, invoicing is occasionally done in local currency.
As a result, unless we hedge the position we may be subject to the risks of
currency fluctuations.  One or more of the above factors may adversely affect
our operations in the future or require us to modify our current business
practices.

     A limited number of customers historically have accounted for a
substantial portion of Oak's net revenues.  In fiscal 2002, 2001, and 2000,
sales to our top ten customers accounted for approximately 69%, 82%, and 78%,
respectively, of our total net revenues.  In fiscal 2002, LG Electronics
accounted for 20% of total net revenues while Mitsumi and Ionics (Philips) each
accounted for 11% of total net revenues.  In fiscal 2001, LG Electronics
accounted for 31% of total net revenues.  In fiscal 2000, LG Electronics
accounted for 26% of total net revenues and Hewlett-Packard Company accounted
for 16%.

     We expect that sales to a limited number of customers will continue to
account for a substantial portion of our net revenues for the foreseeable
future.  We do not have long-term purchase agreements with any of our
customers.  Customers generally purchase our products subject to cancelable
short-term purchase orders.  We cannot predict whether our current customers
will continue to place orders or whether existing orders will be canceled.  We
have experienced significant changes from year to year in the composition of
our major customer base and believe this pattern will continue.  Our revenues
from the Optical Storage Group will also depend on whether our OEM customers
are successful in selling their optical drives both in aftermarket and to PC
OEM customers.  In part, to address this risk, we are continuing our efforts to
increase penetration in existing large customers as well as engage new large
OEM customers.  The current weakness in demand being experienced in
semiconductor and PC markets, coupled with the overall poor macroeconomic
environment, however, makes it difficult to forecast future financial
performance.  In addition, some of our customers have chosen, and may continue
to choose, to award their design wins and business on a project-by-project
basis to different vendors.  The current economic recession notwithstanding,
the loss of, or a significant reduction in, purchases or commitments from
current major customers which is not offset by corresponding increases from
other current or future customers would have a material adverse effect on our
financial performance, our business, overall financial condition and results of
operations.  If sales to current customers cease or are reduced, we may be
unable to obtain the orders from new customers necessary to offset any such
losses or reductions.  Moreover, we may not be able to qualify our independent
foundries for potential new customers or do so in a timely manner.

     We currently place non-cancelable orders to purchase our products from
independent foundries on an approximately three month rolling basis.  Our
customers generally place purchase orders with the Optical Storage Group with
less than four weeks lead time, and with the Imaging Group with between six to
ten weeks lead time.  These purchase orders may be rescheduled or under certain
circumstances may be canceled without penalty.  Consequently, if anticipated
sales and shipments in any quarter are rescheduled, canceled or do not occur as
quickly as expected, expense and inventory levels could be disproportionately
high and our business, financial condition and results of operations for that
quarter or for the year would suffer.


Competition
-----------

     The optical storage and imaging markets in which we compete are intensely
competitive and are characterized by rapid technological change, declining unit
average selling price ("ASPs") and rapid product obsolescence.   We are
currently experiencing intense competition in both the optical storage and
imaging markets, and expect competition to increase in the future from existing
competitors and from other companies that may enter our existing or future
markets with solutions that may be less costly or provide higher performance or
additional features.  Our existing and potential competitors include many large
domestic and international companies that have


                                      12


<PAGE>


substantially greater financial, manufacturing, technical, marketing,
distribution and other resources, broader product lines and longer standing
relationships with customers than we have.  Our competitors also include a
number of emerging companies, such as Via Technologies, Inc. and Ali
Corporation, both of whom recently announced their entry into the CD-RW
controller market.  Some of our principal competitors in the optical storage
market maintain their own semiconductor foundries and may benefit from certain
capacity, cost, quality control and technological advantages.  In general, we
believe that our ability to compete successfully depends on a number of
factors, both within and outside of our control, including:

     o the price, quality and performance of our products and our customers'
       products,

     o the timing and success of new product introductions by us, our customers
       and our competitors,

     o the emergence of new industry standards,

     o the development of technical innovations,

     o the ability to obtain adequate foundry capacity and sources of raw
       materials,

     o the efficiency of production,

     o the rate at which our customers design our products into their products,

     o the market acceptance of the products of our customers,

     o the assertion of intellectual property rights and

     o general market and economic conditions.

     We cannot predict whether we will be able to compete successfully in the
future based on these, or other, factors.

     The willingness of prospective customers to design Oak products into their
products depends, to a significant extent, upon our ability to have product
available at the appropriate market window, and to price our products at a
level that is cost effective for such customers.  The markets for most of the
applications for our products, particularly the optical market, are
characterized by intense price competition.  As the markets for our products
mature and competition increases, we anticipate that ASPs on our products will
decline.  If we are unable to reduce our costs sufficiently to offset declines
in ASPs or are unable to successfully introduce new higher-performance products
with higher ASPs, our business, financial condition and result of operations
will be adversely affected.  If we experience yield or other production
problems, or shortages of supply that increase our manufacturing costs, or fail
to reduce our manufacturing costs, the result could seriously harm our
business.

     Our current Optical Storage business is focused in the fast growing CD-RW
segment, where we currently participate with our high integration controllers
and analog front-end devices.  Major competitors in the high integration
controller area include Sanyo, MediaTek and Ricoh, all established suppliers in
this market. Emerging competitors that will be offering integrated controllers
for CD-RW include Via Technologies, Inc., Ali Corporation and Cheertek Inc.
Another competitor in this market is NEC, which offers an integrated Combo
solution.  In the analog front-end market, the established competitors include
MediaTek, AKM, Sony Semiconductor and Rohm.

     In the digital imaging market, our primary product offerings target the
niche, mid-range market and our merchant competition does not offer directly
competitive products.  In some cases, the merchant competition offers a subset
of our product features.  In other cases, the merchant competition offers a
software alternative to our hardware solution.  Our competitors in the merchant
market are major semiconductor suppliers such as Conexant, Motorola and Texas
Instruments.  However, we expect direct merchant competition in the niche,
high-end digital imaging equipment market to emerge in the near future.
Despite this lack of direct competition in the merchant market, we do
experience competition with our DSP, compression and resolution enhancement
products from internal design groups within our targeted customers, such as
Xerox, HP, and Canon.  As with the merchant market, one of our strengths in
competing with these internal design teams comes from the breadth of the
solutions we are


                                      13

<PAGE>


able to provide.  We must continue to enhance and strengthen our software
capabilities in order to compete successfully in this market.  As to the new
lower-end of products we are developing for the digital imaging equipment
market, we expect greater direct competition than we currently experience in
the niche, mid-range market.

     In the market for embedded printer systems, we, through our Imaging
Group's IPS product line, have one primary competitor, Adobe Systems
Incorporated, which has significantly greater resources than we do.  Adobe was
the developer of the PostScript page description language, which has a
significant brand name image.  Adobe's change in its licensing practices to
make PostScript source code available to certain of its development partners
may enable Adobe to compete more effectively against us.  A few other
companies, including Peerless Systems Corporation and Electronics for Imaging,
Inc., offer products and services that compete with our systems software and
integrated controller offerings.  Our most significant competitor in the area
of controller design remains OEMs' in-house development organizations.  In
addition, there are a few other merchant suppliers including Global Graphics
and some large OEMs develop their own proprietary PDL components as well.

     In the market for printer driver software, we compete primarily with a
small number of companies, including Adobe and Software 2000 Limited, who also
offer such software.  In addition, a few OEMs have their own internal driver
development capacity. With the advent of a "Uni-driver" architecture from
Microsoft the need for separate unique driver development is going away.
Therefore this is an area the Company has sought to de-emphasize as a
standalone product offering.

     In the market for engineering services and manufacturing services, we
compete primarily with OEM's internal development and manufacturing groups, as
well as with third-party design houses, contract manufacturers and our
competitors in other markets.


Research and Development
------------------------

     We currently invest substantial resources in our product development
efforts.  During fiscal 2002, 2001, and 2000, we spent approximately $53.2
million, $50.6 million and $49.2 million, respectively, on research and
development activities.  We intend to continue to invest in the development of
products in each of our core technologies and in products that integrate our
core technologies.

     Our performance strongly depends upon the successful development and
timely introduction of new products at competitive price and performance
levels.  We cannot predict whether products currently under development or any
other new products will be successfully developed or will achieve market
acceptance.  If we fail to introduce new products successfully or if our new
products fail to achieve market acceptance, our business, financial condition
and results of operations would be adversely affected.  The success of new
product introductions is dependent on several factors, including recognition of
market requirements, product cost, timely completion and introduction of new
product designs, quality of new products and achievement of acceptable
manufacturing yields from our contract manufacturers.  Due in part to the
design complexity of our products, we have in the past experienced delays in
completing development and introduction of new products.  We may encounter
similar delays in the development and introduction of future products.

     We may not be successful in identifying new product opportunities and
developing and bringing new products to market in a timely manner.  In
addition, our products may not be selected for design into the products of our
targeted customers.  Products or technologies developed by others may also
render our products or technologies obsolete or noncompetitive.  The failure of
our new product development efforts or our failure to achieve market acceptance
of our new products would have a material adverse affect on our business,
financial condition and results of operations.


                                      14

<PAGE>

Proprietary Rights and Licenses
-------------------------------

     Our ability to compete is affected by our ability to protect our
proprietary information.  We consider our technology to be proprietary and rely
on a combination of patents, trademarks, copyrights, trade secret laws,
confidentiality procedures and licensing arrangements to protect our
intellectual property rights.  We currently have patents granted, patents
pending, patents in preparation in the United States, and international patents
pending.  Oak's first patent was issued in 1996.  Currently our patent position
is 105 patents issued, 97 of which are issued in the United States, and 151
patent applications on file, 135 of which are pending in the United States
Patent and Trademark Office.  Accordingly, the duration of Oak's material
patents are no less than 11 years.  We intend to seek additional international
and United States patents on our strategic technology.  However, additional
patents might not be issued from our applications that are currently pending or
being prepared.  In addition, we may not be issued additional patents in all
countries where our products can be sold.  Any claims allowed from pending
applications or applications in preparation may not be of sufficient scope or
strength to provide meaningful protection or any commercial advantage to us.
Our competitors may also be able to design around our patents.  There can be no
assurance that any patents we hold will not be challenged, invalidated or
circumvented, or that the rights granted thereunder will provide competitive
advantages to us.  An action is currently pending in the Northern District of
California seeking to invalidate one of our patents relating to our Optical
Storage products (See Legal Proceedings).

     Moreover, while we hold or have applied for patents relating to the design
of our products, our products are based in part on industry standards, and we
do not hold patents on such standards.  The laws of certain foreign countries
in which our products are or may be manufactured or sold, including various
countries in Asia, may not protect our products or intellectual property rights
to the same extent as do the laws of the United States and thus make the
possibility of piracy of our technology and products more likely.  The steps
taken by Oak to protect its proprietary information may be inadequate to
prevent misappropriation of its technology.  Our competitors may also
independently develop technologies that are substantially equivalent or
superior to our technology.

     The semiconductor industry is characterized by vigorous protection and
pursuit of intellectual property rights, which has resulted in significant,
often protracted and expensive litigation.  Oak or its foundries may, from time
to time, be notified of claims that we may be infringing patents or other
intellectual property rights owned by third parties.  We may, if it is
necessary or desirable, seek licenses under such patents or other intellectual
property rights.  However, licenses that we seek may not be offered or the
terms of any offered licenses may not be acceptable to us.   The failure to
obtain a license from a third party for technology used by us could cause us to
incur substantial liabilities and to suspend the manufacture of products or the
use by our foundries of processes requiring the technology.

     Furthermore, Oak may initiate claims or litigation against third parties
for infringement of our proprietary rights or to establish the validity of our
proprietary rights.  We may also be required under a contractual obligation to
defend our customers against claims by third parties that the use of our
products infringe a third party's proprietary rights.  Oak has historically
indemnified its customers for certain costs and damages of patent infringement
in circumstances where an Oak product is the factor creating the customer's
infringement exposure. This practice generally excludes coverage in
circumstances where infringement arises out of the combination of Oak products
with products of others or where infringement arises based on modifications
made by the customer to Oak's products.  In January 2001, Samsung was notified
by Pitney Bowes that its use of Oak's resolution enhancement technology
("iRET") infringed Pitney Bowes U.S. Patent No. 4,386,272.  Oak is defending
Samsung against this allegation of infringement pursuant to its indemnification
obligation under an earlier license agreement between Samsung and XLI, a
subsidiary of Oak.

     Litigation by or against Oak could result in significant expense to Oak
and divert the efforts of our technical and management personnel, whether or
not such litigation results in a favorable determination for us.  In the event
of an adverse result in any such litigation, we could be required to pay
substantial damages, cease the manufacture, use and sale of infringing
products, expend significant resources to develop non-infringing technology,
discontinue the use of certain processes or obtain licenses to the infringing
technology.  There can be no assurance that we would be successful in such
development or that such licenses would be available on reasonable terms, or at



                                      15


<PAGE>

all, and any such development or license could require expenditures by Oak of
substantial time and other resources.  Patent disputes in the semiconductor
industry have often been settled through cross-licensing arrangements.  Even
though we have grown and continue to grow our patent portfolio, we may not be
able to settle an alleged patent infringement claim through a cross-licensing
arrangement.  If a successful claim is made against Oak or its customers and a
license is not made available to Oak on commercially reasonable terms or we are
required to pay substantial damages or awards, our business, financial
condition and results of operations would be materially adversely affected.

     We generally enter into confidentiality agreements with our employees and
confidentiality and license agreements with our customers and potential
customers.  We also limit access to and distribution of the source and object
code of our software and other proprietary information.  Under some
circumstances, however, we grant licenses that give our customers limited
access to the source code of our software which increases the likelihood of
misappropriation or misuse of our technology.  Accordingly, despite precautions
taken by Oak, it may be possible for unauthorized third parties to copy certain
portions of our technology or to obtain and use information that we regard as
proprietary.   The steps taken by Oak may not be adequate to prevent
misappropriation of its technology or to provide an adequate remedy in the
event of a breach or misappropriation by others.

     We have licensed technology from third parties for use in our optical
storage and digital imaging equipment business.  Under these licenses, we are
required to fulfill confidentiality obligations and in certain cases pay
royalties.  Some of our products require that certain copy protection software
or other software be obtained if the products are to be marketable and
exportable.  Should we lose our rights to or be unable to obtain the necessary
copy protection software, we would be unable to sell and market certain of our
Optical Storage products geared for the DVD market.

     We have also entered into a number of joint development and supply
arrangements under which we jointly develop a product with another company or
contract with another company to develop a product or component and then
purchase the product or component from that company for resale with our other
products. The terms of these arrangements may require us to defend and
indemnify another company using our technology in the event claims are asserted
that the technology infringes the rights of a third party.  In addition, we
have on occasion purchased off the shelf products to resell bundled with our
own product.  At times it is necessary or desirable for us to seek additional
licenses to intellectual property rights held by third parties or purchase
products manufactured or sold by third parties with respect to some or all of
our product offerings. These licenses or purchases may not be available on
terms acceptable to us, if at all.  If we are unable to enter such license
arrangements on acceptable terms or to maintain our current licenses on
acceptable terms, our business, financial condition and results of operations
could be materially adversely affected.  See "Management's Discussion and
Analysis of Financial Condition and Results of Operations-Factors That May
Affect Future Results-Oak May Be Unable to Protect Its Intellectual Property
and Proprietary Rights" and "-Oak May Be Unable to Obtain Third Party
Intellectual Property Rights and/or May Be Liable for Significant Damages"
below.


                                      16


<PAGE>

Management
----------

     The executive officers of Oak are elected by and serve at the discretion
of the Board of Directors.  As of August 1, 2002, Oak's executive officers were
as follows:

<TABLE>
<CAPTION>

             Name                   Age                 Position
             ----                   ---                 --------
<S>                                <C>   <C>
Young K. Sohn ....................  46    Chairman of the Board of Directors,
                                          President and Chief Executive Officer


John S. Edmunds...................  45    Senior Vice President of Finance, and
                                          Chief Financial Officer


Simon P. Dolan....................  43    Senior Vice President and General
                                          Manager of Imaging Group

David J. Power....................  45    Vice President, General Counsel and
                                          Secretary

</TABLE>

     Mr. Sohn joined Oak as President and Chief Executive Officer in February
     --------
1999.  He has also been a Director of Oak since January 1998. In March of 2002
Mr. Sohn assumed the responsibilities of acting General Manager for the Optical
Storage Group.  Prior to joining us, and since January 1993, Mr. Sohn was
employed by Quantum Corporation, most recently as President of its Hard Disk
Drive Business.  From August 1983 to January 1993, he acted as Director of
Marketing at Intel Corporation.  Mr. Sohn currently serves on the Board of
Directors of PLX Corporation, Inc.  He holds a B.S. in electrical engineering
from the University of Pennsylvania and a M.S. (M.B.A) from the Massachusetts
Institute of Technology.

     Mr. Edmunds joined Oak as Vice President of Finance and Chief Financial
     -----------
Officer in January 2000.  In March of 2001 he was promoted to Senior Vice
President.  For a two year period prior to joining Oak, he served as Corporate
Controller and Director of Internal Audit at Electronics for Imaging ("EFI") in
Foster City, California.  In addition, he spent 11 years with Tandem Computers
where his last position was VP of Tandem Computers Credit Corporation.
Previously, Mr. Edmunds was a C.P.A. for seven years with Coopers & Lybrand in
both San Francisco and San Jose.  Mr. Edmunds holds a B.S. degree in Business
Administration from the University of California.

     Mr. Dolan became Vice President and General Manager of Oak's Imaging Group
     ---------
in April 2000.  In March of 2001 he was promoted to Senior Vice President.  He
joined Oak as Vice President of Corporate Marketing and Strategy in October
1999.  Before joining Oak, Mr. Dolan was VP of Marketing at LSI Logic's
Consumer Division.  Mr. Dolan spent 11 years at LSI Logic in the U.S., Europe,
and Asia.  Before that he was VP of Strategic Marketing for LSI's products
group, and VP of Marketing for LSI Logic Europe PLC. Mr. Dolan held roles in
product marketing, field applications, and engineering at Inmos Corporation
before joining LSI in 1988.  A native of the UK, Mr. Dolan has degrees from the
Universities of London and Oxford.

     Mr. Power joined Oak as Vice President, General Counsel and Secretary in
     ---------
July of 2000.  Prior to joining us, he was Vice President, General Counsel and
Secretary for inSilicon Corporation, a semiconductor IP company that was formed
as a subsidiary of Phoenix Technologies Ltd. and spun off in an IPO in March of
2000.  From October 1997 to September of 2000, he was Associate General Counsel
of Phoenix Technologies.  Mr. Power holds a B.S. in Engineering from Arizona
State University and a J.D. from The John Marshall Law School in Chicago,
Illinois.  He is licensed to practice law in California and before the United
States Patent and Trademark Office.


                                      17


<PAGE>


Employees
---------
     As of June 30, 2002, Oak had 453 full-time employees.  We believe that our
future performance will depend, in part, on our ability to continue to attract
and retain qualified technical and management personnel, particularly highly
skilled design engineers and software programmers involved in new product
development.  Our employees are not represented by any collective bargaining
unit and we have never experienced a work stoppage.  We believe that our
employee relations are good.


ITEM 2.  PROPERTIES

     Our executive offices and principal marketing, sales and product
development operations are located in approximately 89,000 square feet of
leased space in Sunnyvale, California, under a non-cancelable operating lease
that expires in November 2006.

     We also own a portion of a building in Taipei, Taiwan.  We lease
facilities, primarily for sales, product development, and technical support, in
Woburn, Massachusetts; Osaka and Yokohama City, Kanagawa Japan; Manchester,
England; Dortmund, Germany; and Seoul, Korea.  In July of 2000, we moved our
two existing workforces in the Boston area into one 82,000 square feet leased
facility in Woburn, Massachusetts primarily for sales, product development,
technical support and administrative functions.  Approximately 8,900 square
feet of that lease has been sublet to a third party until September 2003.  As a
result of the new Woburn facility, we had subleased 33,000 square feet in
Andover, Massachusetts, and intend to continue to sublease out this facility
and a portion of our facilities in Austin, Texas and Woburn, Massachusetts.  We
believe our existing facilities will be adequate to meet our requirements for
at least the next fiscal year.


ITEM 3.  LEGAL PROCEEDINGS

     Oak and various of its directors and former officers are parties to a
consolidated class action lawsuit filed on behalf of all persons who purchased
or acquired Oak common stock (excluding the defendants and parties related to
them) for the period July 27, 1995 through May 22, 1996.  This state court
proceeding, designated IN RE OAK TECHNOLOGY SECURITIES LITIGATION, Master File
No. CV758510 was filed in Santa Clara County Superior Court in Santa Clara,
California.  The plaintiffs alleged violations of California securities laws
and statutory deceit provisions as well as breaches of fiduciary duty and abuse
of control.  The plaintiffs sought unspecified monetary damages.  The court
dismissed all claims except the California Corporations Code Sections
25400/25500 cause of action against Oak, four officers and Oak's investment
bankers and securities analysts.

     On July 16, 1998, the court provisionally certified a national class of
all persons who purchased Oak stock during the class period.  On August 5, 2000
the court granted Company's motion for summary judgment and entered judgment in
favor of Oak.  The plaintiffs have appealed the court's decision which is
currently under review by the Sixth District Court of Appeal.  Based on its
current information, Oak believes this suit to be without merit and will
continue to defend its position vigorously.  Although it is a remote
possibility, the court's ruling may be overturned on appeal and Oak may incur a
loss upon an adverse conclusion of these claims, an estimate of any such loss
cannot be made.

     Additionally, various Oak's directors and former officers are defendants
in three consolidated derivative actions pending in Santa Clara County Superior
Court in Santa Clara, California, entitled IN RE OAK TECHNOLOGY DERIVATIVE
ACTION, Master File No. CV758510.  This lawsuit, which asserts a claim for
breach of fiduciary duty and a claim under California securities law based upon
the officers' and directors' trading in securities of Oak during the period
July 27, 1995 through May 22, 1996, has been stayed pending resolution of the
above described class actions.  The plaintiffs are seeking monetary damages,
equitable relief and an accounting for the defendants' sales of shares of Oak
common stock.  Based on its current information, Oak believes the suits to be


                                      18


<PAGE>


without merit and will defend its position vigorously.  Although it is
reasonably possible Oak may incur a loss upon conclusion of these claims, an
estimate of any such loss cannot be made.

     If any of the above pending actions are decided adversely to Oak, it would
likely have a material adverse affect on Oak's financial condition, cash flows
and results of operations.

     On October 27, 1997, Oak filed a complaint in the United States District
Court, Northern District of California against UMC for breach of contract,
breach of the covenant of good faith and fair dealing and fraud based on UMC's
breach of a settlement agreement entered into by Oak and UMC as a means to
resolve an ITC action filed by Oak based on Oak's belief that UMC was violating
U.S. trade laws by the unlicensed importing or selling of certain CD-ROM
controllers that infringed one or more of Oak's United States patents. Under
the terms of the settlement agreement, effective July 31, 1997, UMC agreed to
cease and desist the manufacture and/or importation into the United States of
its specified CD-ROM controllers, except under certain limited conditions which
expired on January 31, 1998.  The settlement agreement additionally provided
for the withdrawal of Oak's ITC complaint against UMC.

     On December 24, 1997, UMC answered Oak's complaint and counterclaimed by
asserting causes of action for rescission, restitution, fraudulent concealment,
mistake, lack of mutuality, interference and declaratory judgment of non-
infringement, invalidity and unenforceability of the Oak patent that was the
subject of the ITC action filed against UMC.

     In a related action to the lawsuit that was commenced by Oak against UMC,
on December 19, 1997, MediaTek, a UMC affiliated, Taiwanese entity, filed a
complaint in the United States District Court, Northern District of California,
against Oak for declaratory judgment of non-infringement, invalidity and
unenforceability of the Oak patent that was the subject of the original ITC
action against UMC, and intentional interference with prospective economic
advantage.   Oak filed its answer on January 8, 1998, denying all the
allegations.  Oak believes UMC's counterclaims and Mediatek's claims to be
without merit.

     On June 11, 1998, the cases were consolidated for all purposes and stayed
under 28 U.S.C. Section 1659, based on the judge's conclusion that the civil
action involves the same issues before the International Trade Commission,
initiated by Oak a second time as a result of the alleged breach of the
settlement agreement.  The stay was lifted due to the final resolution of the
second ITC investigation and the decision of the Federal Circuit Court of
Appeals on May 2, 2001 affirming the Commission's determination that there was
no infringement of Oak's U.S. Patent No. 5,581, 715. The Federal Circuit Court
of Appeals did not review the Commission's determination that Oak's U.S. Patent
No. 5,581,715 was valid and enforceable.  As a result of the decision rendered
by the Federal Circuit Court of Appeals, and the lifting of the stay on the
consolidated action pending in the United States District Court, Northern
District of California, the parties are proceeding with the litigation.  The
trial is scheduled to commence in January 2003.

     If any of the above pending actions with respect to UMC and MediaTek are
decided adversely to Oak, it would likely have a material adverse affect on
Oak's financial condition, cash flows and results of operations.

     On January 4, 2001 Samsung Electronics, a customer of Oak's Imaging Group,
received a notification from Pitney Bowes alleging that the resolution
enhancement technology (iRET) Samsung acquired from Xerographic Laser Images
Corporation, Inc. ("XLI") in 1996 infringes Pitney Bowes U.S. Patent No.
4,386,272 ("272 patent").  XLI is a subsidiary of Oak as a result of an
acquisition in the first quarter of fiscal year 1999.  The terms of the
agreement for the licensing of the iRET technology to Samsung require Oak, as
successor in interest to XLI's assets and liabilities, to defend and indemnify
Samsung from claims alleging the iRET technology supplied to Samsung infringes
the intellectual property rights of a third party.  On June 18, 2001 Pitney
Bowes filed a complaint in the District Court of Connecticut, naming Samsung
and others, claiming infringement of the '272 patent.  On June 28, 2001 Samsung
formally requested Oak to defend Samsung and Oak agreed to do so.  Other XLI
customers are also subject to Pitney Bowes allegation of infringement of the
'272 patent.  On September 7, 2001, Oak filed a motion to intervene on behalf
of ourselves and for the benefit of any of our customers who may be subject to
the Pitney Bowes allegations, in the District Court of Connecticut.  The motion
to intervene was granted on December 12, 2001.  On


                                      19


<PAGE>


February 5, 2002, this action was transferred to the United States District
Court, District of Kentucky.  The parties are proceeding with this litigation.

     If the above pending action, with respect to Oak's indemnification
obligation in such action, is decided adversely, it would likely have a
material adverse affect on Oak's financial condition, cash flows and results of
operations.

     In January of 2002, Oak received a notice letter of infringement from
Syndia Corporation, an assignee of U.S. Patent No. 4,702, 808 (" '808 patent")
and U.S. Patent No. 5,131,941(" '941 patent") issued to Mr. Jerome Lemelson.
The '808 and '941 patents claim certain plasma enhanced chemical vapor
deposition etch processes that are used in the manufacture of semiconductor
chips.  The notice letter asserts that Oak's use and sale of semiconductor
chips manufactured using processes claimed by the '808 and '941 patents
constitutes an infringement.  Oak uses TSMC to manufacture its semiconductor
products, and has notified TSMC of the claims made by Syndia.  The terms of an
indemnification agreement between Oak and TSMC require TSMC to indemnify Oak
from claims alleging the manufacturing processes used by TSMC infringes the
intellectual property rights of a third party.  Pursuant to the terms of the
indemnification agreement between the parties, TSMC has agreed to indemnify and
hold Oak harmless against the claims made by Syndia.

     If TSMC fails to indemnify and hold Oak harmless, and Syndia is successful
in its claim for infringement, it would likely have a material adverse affect
on Oak's financial condition, cash flows and results of operations.


ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

     None.


                                      20


<PAGE>



                                    PART II


ITEM 5.  MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDER
         MATTERS

     Our Common Stock trades on the Nasdaq National Market under the symbol
OAKT.  The following table indicates the range of the high and low closing
prices as reported by Nasdaq for the past eight fiscal quarters up to June 30,
2002.


<TABLE>

                                                  High             Low
                                                  ----             ---
<S>                                             <C>            <C>
Fiscal 2001
-----------
            First Quarter.....................   $30.500         $20.375
            Second Quarter....................   $28.313         $ 6.313
            Third Quarter.....................   $10.250         $ 4.531
            Fourth Quarter....................   $11.940         $ 4.344


Fiscal 2002
-----------

            First Quarter......................  $10.360         $ 6.570
            Second Quarter.....................  $14.970         $ 7.310
            Third Quarter......................  $16.250         $12.100
            Fourth Quarter.....................  $16.650         $ 3.859

</TABLE>


     The reported last sale price of our Common Stock on the Nasdaq National
Market on August 26, 2002 was $5.40.  The approximate number of holders of
record of the shares of our Common Stock was 250 as of August 26, 2002.  This
number does not include stockholders whose shares are held in trust by other
entities.  The actual number of shareholders is greater than this number of
holders of record.  We estimate that the number of beneficial shareholders of
the shares of Oak Common Stock as of August 26, 2002 was approximately 12,200.



                                      21


<PAGE>


ITEM 6.  SELECTED FINANCIAL DATA


                    Oak Technology, Inc. and Subsidiaries

                     Selected Consolidated Financial Data
                     (in thousands, except per share data)


<TABLE>
<CAPTION>


                                                  Year Ended June 30,
                                  --------------------------------------------
                                    2002     2001     2000     1999     1998
                                    ----     ----     ----     ----     ----
<S>                              <C>      <C>      <C>      <C>      <C>
STATEMENT OF OPERATIONS DATA:
Net revenues..................... $146,633 $176,183 $ 86,455 $ 71,051 $157,106
Gross profit.....................   70,671   84,076   45,535   31,432   74,548
Operating loss...................  (29,858) (19,640) (61,109) (61,946)  (9,104)
Net (loss) income................  (26,950) (30,632) (32,862) (50,669)   5,947
Diluted net (loss) income per
  share (1)...................... $  (0.49)$  (0.56)$  (0.71)$  (1.24)$   0.14
Shares used in diluted per share
  calculations (1)...............   55,254   54,274   46,057   40,819   42,493

</TABLE>

<TABLE>
<CAPTION>

                                                  As of June 30,
                                  --------------------------------------------
                                    2002     2001     2000     1999     1998
                                    ----     ----     ----     ----     ----
<S>                              <C>      <C>      <C>      <C>      <C>
BALANCE SHEET DATA:
Cash, cash equivalents and short-
  term investments............... $142,666 $124,028 $120,804 $133,203 $117,225
Working capital..................  129,240  129,707  136,610  150,936  144,314
Total assets.....................  202,876  204,239  236,400  203,841  261,411
Long-term debt, excluding current
  portion........................       --       --       --        5       27
Total stockholders' equity....... $167,991 $177,743 $201,310 $189,422 $241,208

-----------------------
<FN>
(1) Computed on the basis described in Note 2 of Notes to Consolidated
    Financial Statements.
</FN>
</TABLE>

                                      22


<PAGE>


ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
        OF OPERATIONS

Except for the historical information contained herein, the matters discussed
in this Report on Form 10-K may be considered "forward-looking" statements
within the meaning of Section 27a of the Securities Act of 1933, as amended,
and Section 21e of the Securities Act of 1934, as amended.  Such statements
include declarations regarding the intent, belief or current expectations of
Oak and its management.  Such forward-looking statements are not guarantees of
future performance and involve a number of risks and uncertainties.  Actual
results could differ materially from those indicated by such forward-looking
statements.  Oak undertakes no obligation to publicly release the results of
any revision to these forward-looking statements which may be made to reflect
events or circumstances after the dates hereof or to reflect the occurrence of
unanticipated events.  Among the important factors that could cause actual
results to differ materially from those indicated by such forward-looking
statements are: (i) that the information is of a preliminary nature and may be
subject to further adjustment, (ii) variability in Oak's quarterly operating
results, (iii) general conditions in the semiconductor industry and overall
economic market, (iv) risks related to pending legal proceedings, (v)
development by competitors of new or superior products or the entry of new
competitors into Oak's markets, (vi) Oak's ability to diversify its product and
market base by developing and introducing new products within designated market
windows at competitive price and performance levels, (vii) willingness of
prospective customers to design Oak's products into their products, (viii)
availability of adequate foundry capacity and access to process technologies,
(ix) Oak's ability to protect its proprietary information and obtain adequate
access to third party technology on acceptable terms, (x) risks related to use
of independent manufacturers and third party assembly and test vendors, (xi)
dependence on key personnel, (xii) reliance on a limited number of large
customers, (xiii) dependence on sales of CD-RW and Combo controller products
and the PC market, (xiv) risks related to international business operations,
(xv)  Oak's ability to maintain adequate price levels and margins with respect
to its products, (xvi) risks related to acquisitions, (xvii) the ability to
attract and retain qualified management and technical personnel and (xviii)
other risks identified from time to time in Oak's reports and registration
statements filed with the Securities and Exchange Commission.


General
-------

     Oak designs, develops and markets high performance integrated
semiconductors, software and platform solutions to original equipment
manufacturers ("OEMs") worldwide that serve the optical storage and digital
imaging equipment markets.  Our digital imaging products consist of
semiconductor hardware and software that enables users to print, scan, process
and transmit documents to computer peripherals that perform printing functions.
Our Optical Storage products consist primarily of integrated circuits and
supporting software and firmware, all designed to store and distribute digital
content, thereby enabling our customers to deliver cost-effective, powerful
systems to the end user for the home and enterprise.  Our mission is to be a
leading solutions provider for the storage and distribution of digital content.

     Oak's operations are organized along its two market-focused groups: the
Optical Storage Group and the Imaging Group.  The Imaging Group is comprised of
the combination of our Xionics Document Technologies, Inc. and Pixel Magic
subsidiaries, serving the digital imaging equipment market.

     During the fiscal year ended June 30, 2002, Oak reported a net loss of
$27.0 million after accounting for $12.6 million of amortization for intangible
assets, $3.2 million of restructuring costs, $1.6 million impairment loss from
certain equity securities received by Oak from the sale of its Consumer
business group to Conexant in fiscal 2000 and $0.5 million of non-recurring
legal expenses related to the investigation of a potential one time acquisition
project.  During fiscal 2002, Oak's revenues continued to be negatively
impacted by inventory corrections occurring in the semiconductor industry and
the generally weak global economic market which particularly impacted the
Company's Optical Storage business, which historically has accounted for
approximately 67% of the Company's revenues.  The Company cannot predict when
the economic recovery, particularly in the semiconductor market, will begin, or
if during any recovery, what will be the Company's product's ultimate level of
customer acceptance, shipment volumes, product life or the impact of that
acceptance or product life on future operating results.

     Oak's quarterly and annual operating results have been, and will continue
to be, affected by a wide variety of factors that could have a material adverse
effect on revenues and profitability during any particular period, including
competitive pressures on selling prices, availability and cost of foundry
capacity and raw materials, fluctuations in yield, loss of any strategic
relationships, its ability to introduce new products in accordance with



                                      23


<PAGE>


ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
        OF OPERATIONS - (Continued)

OEM design requirements and design cycles, rate of adoption of new technology,
rate of growth of the DVD Recordable, CD-RW and Combo market, changes in
product mix or distribution channels, demand for semiconductors and end-user
products incorporating semiconductors, technological difficulties and resource
constraints encountered in developing and/or using new products, new product
introductions by its competitors, and market acceptance of product sold by both
Oak and its customers.

     In addition, our operating results are subject to fluctuations in the
markets for our customers' products, particularly the consumer electronics and
personal computer markets, which have been extremely volatile in the past.  Oak
has devoted a substantial portion of its research and development efforts in
recent quarters to developing chips used in DVD systems, CD-RW controllers and
inkjet multi-function peripherals.  Our DVD, CD-RW, and digital Imaging
products are subject to the new product risks described in the preceding
paragraph, including in particular our ability to timely introduce these
products and the market's acceptance of them, which could have a materially
adverse effect on our operating results.


Results of Operations
---------------------

     The following table sets forth, as a percentage of net revenues, certain
consolidated statement of operations data for the periods indicated:


<TABLE>
<CAPTION>


                                                           June 30,
                                              ---------------------------------
                                                2002        2001        2000
                                                ----        ----        ----
<S>                                           <C>         <C>         <C>
Revenues:
  Product revenues..........................     78.9%       80.2%       75.6%
  Software and other revenues...............     21.1        19.8        24.4
                                               ------      ------      ------
    Total revenues..........................    100.0       100.0       100.0
                                               ------      ------      ------
Cost of revenues and operating expenses:
  Cost of product revenues (*)..............     61.6        60.7        52.9
  Cost of software and other revenues (*)...     15.2        18.3        30.0
  Research and development expenses.........     36.3        28.6        56.8
  Selling, general and administrative
    expenses................................     21.5        20.8        38.4
  Amortization of intangibles...............      8.6         8.4        12.2
  Restructuring charges.....................      2.2         1.0         3.8
  Acquired in-process research and
    development.............................       --          --        12.2
                                               ------      ------      ------
    Operating loss..........................    (20.4)      (11.1)      (70.7)
Gain on sale of business unit...............       --          --        25.6
Non-operating income (loss), net............      3.4        (5.1)        7.1
                                               ------      ------      ------
Loss before income taxes....................    (16.9)      (16.2)      (38.0)
Income tax expense..........................      1.5         1.2          --
                                               ------      ------      ------
Net loss....................................    (18.4)%     (17.4)%     (38.0)%
                                               ======      ======      ======
------------------------------
<FN>
(*)  "Cost of product revenues" and "Cost of software and other revenues" are
      expressed as a percentage of "Product revenues" or "Software and other
      revenues", respectively.  All other line items are expressed as a
      percentage of total revenues.
</FN>
</TABLE>


Fiscal 2002 As Compared To Fiscal 2001
--------------------------------------

     Revenues.  Total revenues decreased 17% to $146.6 million for fiscal 2002
     --------
compared to $176.2 million for fiscal year 2001.  The $29.6 million decrease in
revenues is comprised of the decrease in Optical Storage revenues of $18.2
million from $116.9 million in fiscal 2001 to $98.7 million in fiscal 2002 and
the decrease in Imaging revenues by $11.4 million from $59.3 million in fiscal
2001 to $47.9 million in fiscal 2002 (see Segment Information footnote 17 to
the financial statements for financial information by business segment).  This
decrease


                                      24


<PAGE>


ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
        OF OPERATIONS - (Continued)


was directly attributable to the overall global economic slowdown encountered
in the high technology sector which began to impact Oak during the second half
of fiscal 2001.  In addition pressure on average selling prices is constant and
also serves to significantly reduce revenue in any given quarter by as much as
2%-10%.  The decrease in Imaging revenues is primarily a result of a decline in
the Hewlett Packard business due to final bookings in paid up license fees in
December 2000, a decline in driver development business and the overall
economic slowdown experienced in the high technology sector.

     For fiscal years 2002, 2001 and 2000, sales to Oak's top ten customers
accounted for approximately 69%, 82% and 77%, respectively, of Oak's net
revenues.  In fiscal 2002, LG Electronics accounted for 20% of total net
revenues while Mitsumi and Ionics (Philips) each accounted for 11% of total net
revenues.  In fiscal 2001, LG Electronics accounted for 31% of total net
revenues.  In fiscal 2000, LG Electronics accounted for 26% of total net
revenues and Hewlett-Packard Company accounted for 16% of total net revenues.

     From a geographic point of view (see Marketing and Customers in Part I)
the Company is doing more business in Taiwan and the Philippines and less
business in Korea as a result of a shift in customers.  In general more of the
consumer electronics manufacturing business for Optical Storage and Imaging in
the far east is moving toward lower labor cost markets like Taiwan and China.

     We expect that sales to a limited number of customers will continue to
account for a substantial portion of our net revenues for the foreseeable
future.  We do not have long-term purchase agreements with any of our
customers.  Customers generally purchase our products subject to cancelable
short-term purchase orders.  We cannot predict whether our current customers
will continue to place orders or whether existing orders will be canceled.  We
have experienced significant changes from year to year in the composition of
our major customer base and believe this pattern will continue. Our revenues
from the Optical Storage Group will also depend on whether our OEM customers
are successful in selling their optical drives both in aftermarket and to PC
OEM customers.  In part, to address this risk, we are continuing our efforts to
increase penetration in existing large customers as well as engage new large
OEM customers.  The current weakness in demand being experienced in
semiconductor and PC markets, coupled with the overall poor macroeconomic
environment, however, makes it difficult to forecast future financial
performance. In addition, some of our customers have chosen, and may continue
to choose, to award their design wins and business on a project-by-project
basis to different vendors.  The current economic recession notwithstanding,
the loss of, or a significant reduction in, purchases or commitments by current
major customers which is not offset by corresponding increases from other
current or future customers would have a material adverse effect on our
financial performance, our business, overall financial condition and results of
operations.  If sales to current customers cease or are reduced, we may be
unable to obtain the orders from new customers necessary to offset any such
losses or reductions.  Moreover, we may not be able to qualify our independent
foundries for potential new customers or do so in a timely manner.

     Cost of Revenues.  Product cost of revenues includes the cost of wafer
     ----------------
fabrication, assembly and testing performed by third-party vendors and direct
and indirect costs associated with the procurement, scheduling and quality
assurance functions performed by Oak.

     Software and other cost of revenues consist of labor associated with other
smaller streams of revenue associated with nonrecurring engineering services
and OEM maintenance and support, the costs of software documentation as well as
royalties that may be due to third parties.

     Gross margins remained constant at 48% in fiscal 2002 and fiscal 2001.
This was primarily a result of the consistent product mix between Optical
Storage and Imaging products between fiscal 2001 and 2002.  In fiscal 2002, the
Company recorded inventory write-down charges of $4.1 million primarily related
to Optical Storage products compared to the $5.6 million taken in fiscal 2001.
These charges were recorded as a result of the continued reduction in demand of
the Oak's products due to the worldwide PC and semiconductor slowdown beginning
in the December quarter of 2000.


                                      25


<PAGE>


ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
        OF OPERATIONS - (Continued)


     Gross margins for the Optical Storage segment, including the effects of
inventory charges, was 34% for fiscal 2002 as compared to 35% in fiscal 2001.
This decrease is primarily due to the decline in average selling prices due to
increased competition and faster speed transitions.

     Gross margin for the Imaging business segment was 78% for fiscal 2002,
compared to 74% for fiscal 2001. This was mostly due to the change in product
mix comprised of a larger percentage of licensing and maintenance revenues
which have maintained higher margins compared to other Imaging products.

     Oak's overall gross margin is subject to change due to various factors,
including, among others, competitive product pricing, yields, wafer costs,
assembly and test costs and product mix.  We expect that average selling prices
("ASPs") for our existing products will decline over time and ASPs for each new
product will decline significantly over the life of the product.  In addition,
given the extremely competitive nature of the optical storage market, we
believe that gross margins for new products in the optical storage market may
be lower than historical levels and that, as a result, gross margins in general
may decline in the future.

     Research and Development Expenses.  Research and development costs are
     ---------------------------------
expensed as incurred.  Research and development expenses were $53.2 million and
$50.6 million for fiscal 2002 and 2001, respectively, and expressed as a
percentage of net revenues were 36% and 29%, respectively.  Research and
development expenses increased as a percentage of net revenues primarily
attributable to the decrease in the Company's net revenues.  Approximately 65%
of the Company's current investment in research and development is made in
Optical Storage.  In general, management recognizes that as the result of
recent market conditions and revenue levels, research and development spending
at the rate of 36% of revenues on an ongoing basis is higher than we would
prefer and if revenue levels do not improve, we are continuing to look at the
requirements and expected return for our current research and development
programs as well as ways that it could be improved, or potentially leveraged by
working with other companies.  This may or may not result in future adjustments
to the absolute level of research and development spending.  Nevertheless, the
Company will continue to invest substantial resources in research and
development of new products in the Company's target markets: optical storage
and digital imaging.

     Selling, General and Administrative Expenses.  Selling, general and
     --------------------------------------------
administrative ("SG&A") expenses decreased 14% to $31.5 million in fiscal 2002
from $36.6 million in fiscal 2001 respectively, and expressed as a percentage
of net revenues were 22% and 21%, respectively.  The decrease was primarily
attributable to headcount related expenses that were recorded during fiscal
2001 that were not recorded during fiscal 2002, and to a lesser extent,
decreases in consulting expenses.  The decrease was also attributable to a
decrease in sales expenses as a result of lower revenues during fiscal 2002 as
compared to fiscal 2001.  SG&A expenses increased as a percentage of net
revenues for the current fiscal periods over the comparable periods in the
prior year due to a decrease in the Company's net revenues.

     Amortization of Intangibles.  Amortization of intangible assets decreased
     ---------------------------
to $12.6 million for fiscal 2002 compared to $14.7 million in fiscal 2001.  The
year over year decrease is a result of the completion of amortization of
certain intangible assets as they became fully amortized.  In July 2001, the
FASB issued SFAS No. 142, "Goodwill and Other Intangible Assets", which is
effective for fiscal years beginning after December 15, 2001.  SFAS No. 142
requires, among other things, the discontinuance of goodwill amortization.  In
addition, the standard includes provisions upon adoption for the
reclassification of certain existing recognized intangibles as goodwill,
reassessment of the useful lives of existing recognized intangibles,
reclassification of certain intangibles out of previously reported goodwill and
the testing for impairment of existing goodwill and other intangibles.  Oak
will adopt SFAS No. 142 for its fiscal year beginning July 1, 2002.  Upon
adoption of SFAS No. 142, the Company will no longer amortize goodwill, and
assembled workforce with a net carrying value of approximately $13.3 million at
June 30, 2002.  There are approximately $7 million of intangible assets
remaining on the balance sheet at June 30, 2002 that will continue to amortize,
approximately $5 million of which will amortize in fiscal 2003.

     Restructuring Charge.  During fiscal 2002, the Company recorded
     --------------------
restructuring charges of $3.2 million related to the reduction in force of
approximately 70 employees due to the restructuring of the overall business as
well as additional probable losses on a sublease where the tenant experienced
financial difficulty and abandoned the facility with approximately five years
remaining on the sublease.  The Company expects that the remaining amounts
payable under the terms of the sublease will be paid in cash prior to the end
of fiscal 2003.  All severance related amounts are expected to be paid in cash
prior to December 31, 2002.  During fiscal 2001, Oak recorded restructuring


                                      26

<PAGE>


ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
        OF OPERATIONS - (Continued)


charges of $2.6 million related to the reduction in force due to the
restructuring of the overall business and the planned sublease of the resulting
excess office space offset by a recovery of $0.8 million related to fiscal 2000
restructuring.  This represents the reduction in force of approximately 30
employees.

     Non-Operating Income.  Non-operating income increased 156% to $5.0 million
     --------------------
for fiscal 2002 compared to an expense of $8.9 million in fiscal 2001.  The
increase is primarily due to a charge of $17.4 million recorded in fiscal 2001
as a result of an other than temporary impairment resulting from a decline in
value of an equity investment.  During fiscal 2002, the Company recorded an
additional charge of $1.6 million related to further other than temporary
impairment losses resulting from a decline in value of this equity investment.
Excluding these charges, non-operating income decreased 21% to $6.6 million for
fiscal 2002 compared to $8.4 million in fiscal 2001 resulting from interest
income recorded during fiscal 2002 of $5.8 million compared to $8.0 million of
interest income during fiscal 2001.  Despite higher average cash balances in
fiscal 2002, interest income declined due to normal investment portfolio
turnover and lower interest rate yield instruments available in the market in
fiscal 2002.

     Income Taxes.  The tax provision for fiscal 2002 and 2001 remained
     ------------
constant at approximately $2.1 million which was primarily due to foreign
jurisdiction and withholding taxes.



Fiscal 2001 As Compared To Fiscal 2000
--------------------------------------

     Revenues.  Total revenues increased 104% to $176.2 million for fiscal 2001
     --------
compared to $86.5 million for fiscal year 2000.  The $89.7 million absolute
increase in revenues is comprised principally by the increase in Optical
Storage revenues of $80.9 million from $36.0 million in fiscal 2000 to $116.9
million in fiscal 2001.  This increase was directly attributable to the
Company's continued success in the OTI 9790 8X CD-RW controller introduced
during fiscal 2000.  Units of Optical products shipped increased from 3.78
million units in fiscal 2000 to 17.5 million units in fiscal 2001.  Imaging
revenues increased $13.1 million or 28% for fiscal 2001 from $46.2 million in
fiscal 2000 to $59.3 million in fiscal 2001.  This increase is primarily a
result of the inclusion of the Xionics software revenues for the entire fiscal
2001 as a result of the acquisition of Xionics which took place during January
of the prior fiscal year.  There were no revenues of Consumer products during
fiscal 2001, compared to $4.3 million in fiscal 2000, as a result of the
divestiture of the broadband business during January 2000 of the prior fiscal
year.

     Cost of Revenues.  Gross margins declined slightly to 48% in fiscal 2001
     ----------------
from 53% in fiscal 2000.  The decrease was primarily attributable to the
increase in Optical Storage revenues which has a lower average gross margin
compared to Imaging products, and to inventory allowances, in the amount of
$5.6 million, taken for excess inventory in the Optical Storage segment.  These
allowances were recorded as a result of the reduction in demand of the Oak's
products due to the worldwide PC and semiconductor slowdown beginning in the
December quarter of 2000.

     Gross margins for the Optical Storage segment was 35% for fiscal 2001 as
compared to 37% in fiscal 2000.  This decrease is primarily due to allowances
taken for excess inventory, partially offset by higher gross margins on new
products.

     Gross margin for the Imaging business segment was 74% for fiscal 2001,
compared to 66% for fiscal 2000 This was mostly due to the addition of the
higher margin Imaging Group software as a result of the acquisition of Xionics
which took place halfway through fiscal 2000 and was present for the entire
fiscal 2001.

     Research and Development Expenses.  Research and development costs are
     ---------------------------------
expensed as incurred.  Research and development expenses were $50.6 million and
$49.2 million for fiscal 2001 and 2000, respectively, and expressed as a
percentage of net revenues were 29% and 57%, respectively.

     Selling, General and Administrative Expenses.  Selling, general and
     --------------------------------------------
administrative ("S,G&A") expenses increased 10% to $36.6 million in fiscal 2001
from $33.2 million in fiscal 2000 respectively.  The increase was largely due
to charges recorded to bad debt expense of approximately $2.7 million during
fiscal 2001 as a result of an increase in the allowance for doubtful accounts.
The inclusion of the Xionics operations for the entire fiscal 2001 also
contributed to the increase in the expenses as the acquisition took place
during January of fiscal 2000.


                                      27

<PAGE>


ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
        OF OPERATIONS - (Continued)


     Amortization of Intangibles.  Amortization of intangible assets increased
     ---------------------------
to $14.7 million for fiscal 2001 compared to $10.5 million in fiscal 2000.  The
increase was a result of certain intangible assets which were amortized for the
entire fiscal 2001 as they were a result of the acquisition of Xionics which
took place during January of fiscal 2000.

     Restructuring Charge.  During the third quarter of fiscal 2001, Oak
     --------------------
recorded restructuring charges of $2.6 million related to the reduction in
force due to the restructuring of the overall business and the planned sublease
of the resulting excess office space offset by a recovery of $0.8 million
related to fiscal 2000 restructuring.  This represented the reduction in force
of approximately 30 employees.  During fiscal 2000, the Company had accrued
$3.3 million as restructuring charges, primarily related to the abandonment of
its leased facility in Andover, Massachusetts.  The Company was able to
negotiate a new sublease of the previously abandoned facility.  This recovery
resulted in a net restructuring charge of $1.8 million to the fiscal 2001
income statement.

     Non-Operating Income.  Non-operating income decreased 245% to an expense
     --------------------
of $8.9 million for fiscal 2001 compared to income of $6.2 million in fiscal
2000.  The decrease was primarily due to a charge of $17.4 million recorded in
fiscal 2001 as a result of an other than temporary impairment resulting from a
decline in value of an equity investment.   Excluding this charge, non-
operating income increased 37% to $8.4 million for fiscal 2001 compared to $6.2
million in fiscal 2000 resulting from approximately $8.0 million of interest
income recorded during fiscal 2001 compared to $6.6 million of interest income
during fiscal 2000.

     Income Taxes.  The tax provision for fiscal 2001 was primarily due to
     ------------
foreign jurisdiction and withholding taxes.  No provision for income taxes was
recorded for fiscal 2000 due to net operating losses.


Recently Issued Accounting Standards
------------------------------------

     In July 2001, the FASB issued SFAS No. 142, "Goodwill and Other Intangible
Assets", which is effective for fiscal years beginning after December 15, 2001.
SFAS No. 142 requires, among other things, the discontinuance of goodwill
amortization.  In addition, the standard includes provisions upon adoption for
the reclassification of certain existing recognized intangibles as goodwill,
reassessment of the useful lives of existing recognized intangibles,
reclassification of certain intangibles out of previously reported goodwill and
the testing for impairment of existing goodwill and other intangibles.  Oak
will adopt SFAS No. 142 for its fiscal year beginning July 1, 2002.  Upon
adoption of SFAS No. 142, the Company will no longer amortize goodwill, and
assembled workforce with a net carrying value of approximately $13.3 million at
June 30, 2002.  In lieu of amortization the Company will be required to
periodically perform an impairment review of its goodwill balance beginning
with the initial adoption.  The Company does not currently expect to record any
material impairment charges upon completion of the initial review nor does it
expect to change the useful lives of the amortizable intangible assets.

     On October 3, 2001, the FASB issued SFAS 144, "Accounting for the
Impairment or Disposal of Long-Lived Assets." SFAS 144 supersedes SFAS 121,
"Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets
to be disposed of." The primary objectives of SFAS 144 are to develop one
accounting model based on the framework established in SFAS 121 for long-lived
assets to be disposed of by sale, and to address significant implementation
issues.  The Company will adopt SFAS 144 for its fiscal year beginning July 1,
2002.  At this time, management does not expect the adoption of SFAS 144 to
have a material effect on the Company's financial position or results of
operations.

     In June 2002, the FASB issued SFAS No. 146, "Accounting for Exit or
Disposal Activities'" ("SFAS 146"). SFAS 146 addresses significant issues
regarding the recognition, measurement, and reporting of costs that are
associated with exit and disposal activities, including restructuring
activities that are currently accounted for under EITF No. 94-3, "Liability
Recognition for Certain Employee Termination Benefits and Other Costs to Exit
an Activity (including Certain Costs Incurred in a Restructuring)." The scope
of SFAS 146 also includes costs related to terminating a contract that is not a
capital lease and termination benefits that employees who are involuntarily
terminated receive under the terms of a one-time benefit arrangement that is
not an ongoing benefit arrangement or an individual deferred-compensation
contract.  SFAS 146 will be effective for exit or disposal activities that are
initiated after December 31, 2002 and early application is encouraged.  We will
adopt


                                      28

<PAGE>


ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
        OF OPERATIONS - (Continued)


SFAS 146 for our third fiscal quarter beginning January 1, 2003 and do not
expect that the adoption will have a material impact on our financial position,
results of operations, or cash flows.


Liquidity and Capital Resources
-------------------------------

     Since its inception, Oak has financed its cash requirements from cash
generated from operations, the sale of equity securities, bank lines of credit
and long-term and short-term debt.  Oak's principal sources of liquidity as of
June 30, 2002 consisted of approximately $142.7 million in cash, cash
equivalents and short-term investments.  Oak also has approximately $7.7
million in lines of letters of credit with Taiwanese financial institutions,
all of which were available at June 30, 2002.

     Oak's working capital remained fairly constant at $129.2 million as of
June 30, 2002 compared to $129.7 million as of June 30, 2001.  Decreases in
accounts receivable and inventory during fiscal 2002 and increases in accounts
payable and accrued expenses were offset by an increase in cash, cash
equivalents and short-term investments of approximately $18.6 million,
primarily attributable to an income tax refund received during fiscal 2002 of
approximately $14.7 million.

     Oak's working capital decreased by $6.9 million to $129.7 million as of
June 30, 2001 from $136.6 million as of June 30, 2000. The decrease was
primarily attributable to a decrease in inventory of approximately $13.5
million and prepaid and other current assets of $4.8 million offset by a
decrease in accounts payable of $11.9 million.  Oak's short-term investments
were principally invested in investment grade, interest-bearing securities.

     Oak's cash provided by operating activities increased to $23.6 million for
fiscal 2002 compared to $20.1 million for fiscal 2001.  The loss for fiscal
2002 of $27.0 million was primarily offset by decreases in accounts receivable
of $8.5 million, non-cash amortization and depreciation expense of $19.7
million and an income tax refund received for approximately $14.7 million.

     Oak's cash provided by operating activities increased to $20.1 million for
fiscal 2001 compared to an outflow of $18.6 million for fiscal 2000.  Fiscal
2001 cash provided in operating activities is primarily a result of a decrease
in the inventory balance of $13.5 million, decrease in prepaid expenses, other
current assets and other assets of $6.3 million, depreciation and amortization
expense of $22.6 million and an impairment loss on equity securities of $17.4
million recorded during fiscal 2001 offset by a net loss of $30.6 million and a
decrease in accounts payable and accrued expenses of $9.6 million.

     Oak's investing activities during fiscal 2002 used cash of $18.0 million
compared to $14.0 million during fiscal 2001.  Cash used in investing
activities during fiscal 2002 resulted primarily from a net outflow from
purchase and sales of short-term investments of $7.2 million, purchases of
property and equipment of $7.6 million and the acquisition of Accel, net of
cash acquired of $3.2 million.

     Oak's investing activities during fiscal 2001 used cash of $14.0 million
compared to proceeds of $12.6 million during fiscal 2000.  Cash used in
investing activities during fiscal 2001 resulted primarily from a net outflow
from purchase and sales of short-term investments of $7.4 million and purchases
of property and equipment of $6.6 million.

     Oak's cash provided by financing activities during fiscal 2002 was $7.6
million as compared to a minimal amount recorded during fiscal 2001.  The
proceeds in 2002 were a result of the issuance of common stock through the
exercise of employee stock options and employee stock purchase plan activity
during the year.

     Oak's financing activities during fiscal 2001 were minimal as compared to
proceeds of $5.6 million recorded during fiscal 2000.  Cash provided by
issuance of common stock through the exercise of employee stock options and
employee stock purchase plan activity of approximately $11.9 million was offset
by the acquisition of treasury stock of $12.0 million during the year.



                                      29


<PAGE>


ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
        OF OPERATIONS - (Continued)


     The following table summarizes our contractual payment obligations and
commitments as of June 30, 2002:


                 Payment Obligations by Year (in thousands)

<TABLE>
<CAPTION>



                           2003    2004    2005   2006   2007   Beyond   Total
                           ----    ----    ----   ----   ----   ------   -----
<S>                     <C>      <C>     <C>    <C>    <C>      <C>    <C>
Operating leases.........$ 6,536  $6,308  $6,316 $6,602 $4,149   $ 295  $30,206
Inventory purchase
  commitments............  5,292      --      --     --     --      --    5,292
                         -------  ------  ------ ------ ------   -----  -------
  Total..................$11,828  $6,308  $6,316 $6,602 $4,149   $ 295  $35,498
                         =======  ======  ====== ====== ======   =====  =======

</TABLE>


     We believe that our existing cash, cash equivalents, short-term
investments and credit facilities will be sufficient to provide adequate
working capital and to fund operations over the next twelve months.  If,
however, during the next twelve to eighteen month period we fail to increase
our revenue or are unable to reduce our expenses below our revenues, then we
may be in a position where we will need to seek additional financing.  However,
there can be no assurance that we will not be required to seek other financing
sooner or that such financing, if required, will be available on terms
satisfactory to us.  We may also utilize cash to acquire or invest in
complementary businesses or products or to obtain the right to use
complementary technologies.  From time to time, in the ordinary course of
business, we evaluate potential acquisitions of such businesses, products or
technologies.  However, Oak has no present understandings, commitments or
agreements with respect to any material acquisition of other businesses,
products or technologies, other than those disclosed above or elsewhere in this
Annual Report on Form 10-K.

     For the fiscal years ended June 30, 2002, 2001 and 2000, the Company did
not engage in any material related party transactions.


Critical Accounting Policies
----------------------------

     The discussion and analysis of our financial condition and results of
operations are based on the consolidated financial statements, which have been
prepared in accordance with accounting principles generally accepted in the
United States.  Note 2 of the Notes to Consolidated Financial Statements
describes the significant accounting policies essential to the consolidated
financial statements.  The preparation of these financial statements requires
estimates and assumptions that affect the reported amounts and disclosures.

     We believe the following to be critical accounting policies as they
require more significant judgments and estimates used in the preparation of our
consolidated financial statements.  Although we believe that our judgments and
estimates are appropriate and correct, actual future results may differ from
our estimates.

     In general the critical accounting policies that may require judgments or
estimates relate specifically to Distributor Revenue Recognition, the Allowance
for Doubtful Accounts, Inventory Reserves for Obsolescence and Declines in
Market Value, Loss on Engineering Service Contracts, Restructuring Charges for
Severance or Facilities and Income Tax Accruals.


                                      30

<PAGE>


ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
        OF OPERATIONS - (Continued)

     We recognize product revenues when an arrangement exists, delivery has
occurred, the price is determinable and collection is reasonably assured.
Approximately 6% of the Company's total revenues are sold through certain
distributors that are subject to agreements allowing for limited rights of
exchange of up to 5% of the total amounts sold in the previous six-month
period.  Accordingly, we do not recognize revenue for estimated returns from
all amounts sold to these distributors until the right of exchange has expired.

    The Allowance for Doubtful Accounts is established for estimated losses
resulting from the inability of our customers to make required payments.  The
assessment of specific receivable balances and required reserves is performed
by management and discussed with the audit committee.  We have identified
specific customers where collection is probable and have established specific
reserves, but to the extent collection is made, the allowance will be released.
Additionally, if the financial condition of our customers were to deteriorate,
resulting in an impairment of their ability to make payments, additional
allowances may be required.

     Reserves are provided for excess and obsolete inventory, which are
estimated based on a comparison of the quantity and cost of inventory on hand
to management's forecast of customer demand.  Customer demand is dependent on
many factors and requires us to use significant judgment in our forecasting
process.  We must also make assumptions regarding the rate at which new
products will be accepted in the marketplace and at which customers will
transition from older products to newer products. Generally, inventories in
excess of six months demand are reserved and the related charge is recorded as
a cost of revenue.  Once a reserve is established, it is maintained until the
product to which it relates is sold or otherwise disposed of, even if in
subsequent periods we forecast demand for the product.  This treatment is in
accordance with Accounting Research Bulletin 43 and Staff Accounting Bulletin
100 "Restructuring and Impairment Charges."

     We enter into engineering service agreements from time to time and use
either percentage of completion or completed contract methods in recognizing
the project based revenues.  Estimates of remaining costs are prepared every
quarter and compared to the estimated revenues to determine if any reserve for
loss on contracts may be required.  Estimated losses on engineering contracts
are not material to our financial position at this time.

     Restructuring Charges for Severance and Facility Abandonment have been
accrued based on specific plans for cost reduction that are established by
management prior to the end of the quarter.  The severance accrual is tied to a
plan that is generally specific by person or position that will be eliminated.
The facility abandonment reserve is established by estimating how long a
facility may be vacant and under what market based terms might it be released.
Estimates for each given facility generally range from $200,000 to $800,000. We
have three facilities we are attempting to sublease at this time with a
resulting reserve of $1.7 million as of June 30, 2002.  Some portion of these
reserves may prove to be too little, or in excess, which could result in an
adjustment to restructuring reserves in a future quarter.  In general, we
expect that these reserves will be used as payments are made for rent on these
abandoned facilities.  At this time we do not expect any additional adjustments
to be material to the Company's operating results.

     In general, we are in a loss position for tax purposes, and have
established a valuation allowance against deferred tax assets, as we do not
believe it is likely that we will generate sufficient taxable income in future
periods to realize the benefit of our deferred tax assets.  Predicting future
taxable income is difficult, and requires the use of significant judgment.  At
June 30, 2002, all of our deferred tax assets were reserved.  Accruals are made
for specific tax exposures and are generally not material to our operating
results or financial position, nor do we anticipate material changes to these
reserves in the near future.


                                      31

<PAGE>


ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
        OF OPERATIONS - (Continued)


Factors That May Affect Future Results
--------------------------------------

     You should read the following factors in conjunction with the factors
discussed elsewhere in this and our other filings with the SEC and in materials
incorporated by reference in these filings.  The following is intended to
highlight certain factors that may affect the financial condition and results
of operations of Oak and are not meant to be an exhaustive discussion of risks
that apply to companies with broad international operations, such as Oak.  Like
other businesses, Oak is susceptible to macroeconomic downturns in the United
States or abroad, as were experienced in fiscal year 2002, and continues into
fiscal year 2003, that may affect the general economic climate and performance
of Oak or its customers.

     Oak Has Experienced and Expects to Continue to Experience Significant
     ---------------------------------------------------------------------
Period-To-Period Fluctuations in Its Revenues and Operating Results, Which May
------------------------------------------------------------------------------
Result In Volatility In The Price Of Its Stock.  Oak's quarterly revenues and
----------------------------------------------
operating results have varied significantly in the past and are likely to vary
substantially from quarter to quarter in the future.  Accordingly, you should
not rely on period-to-period comparisons as an indication of future
performance.  In addition, these variations may cause our stock price to
fluctuate.  If quarterly results fail to meet public expectations, the price of
our stock may decline.

     Oak's revenues and operating results are affected by a wide variety of
factors, including factors that generally affect everyone in its industry and
factors that are more specific to its business and product lines.  The
principal risk we face in our business is our dependence on the optical storage
and digital imaging markets.  Other factors specific to our business and
product lines include the following:

     o Our ability to diversify our product offerings and the markets for our
       products;

     o Fluctuations in manufacturing costs;

     o The loss or gain of important customers;

     o The timing of significant orders and order cancellations or
       re-scheduling;

     o Pricing policy changes by Oak and its competitors and suppliers;

     o The potential for cancellation of customer orders and the resulting
       significant inventory exposure;

     o The timing of the development and introduction of new products or
       enhanced versions of existing products;

     o Market acceptance of new products;

     o Increased competition in product lines, and competitive pricing
       pressure;

     o Failure to anticipate changing customer product requirements;

     o The competitiveness of our customers;

     o Cyclical semiconductor industry conditions; and

     o The inability to obtain foundry capacity.

     The above factors have affected our business in the past and may affect us
in the future.  In addition, our quarterly operating results could be
materially adversely affected by legal expenses incurred in connection with, or
any judgment or settlement in, our current or future legal proceedings.  See
"Oak is a Defendant in Several Lawsuits."

     We operate in the highly cyclical semiconductor industry, which is subject
     --------------------------------------------------------------------------
to significant downturns.  We have diversified our business so that our
------------------------
product offerings include not only integrated circuits, but also embedded
software and platform solutions.  However, a significant portion of our revenue
will continue to come from our semiconductor product offerings.  The
semiconductor industry historically has been characterized by rapid
technological change and product obsolescence, cyclical market patterns and
seasonal customer demand, significant price erosion, periods of over-capacity
and under-capacity, periods of production shortages, variations in


                                      32

<PAGE>


ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
        OF OPERATIONS - (Continued)


manufacturing costs, including raw materials, and yields, and significant
expenditures for capital equipment and product development.

     The industry is currently experiencing a significant economic downturn, as
it previously has at various times.  These downturns, including the current
recession impacting the semiconductor industry, often occur in connection with,
or in anticipation of, maturing product cycles (of both the semiconductor
companies and their customers) and declines in general economic conditions,
such as those experienced in the second half of fiscal 2001 and which continues
today.  Downturns in the semiconductor industry, including the current
downturn, have been characterized by and resulted in diminished product demand,
production over-capacity, high inventory levels and accelerated erosion of
product prices.  Even if customers' aggregate demand were not to decline, the
availability of additional capacity can adversely impact pricing levels, which
can also depress revenue levels.

     Should the current recession impacting the semiconductor industry continue
for a significant period of time, our business, financial condition and results
of operations will continue to suffer.

     Oak Has a Recent History of Operating Losses and May Not Become or Remain
     -------------------------------------------------------------------------
Profitable. Oak has sustained significant losses in recent years and may not
----------
become profitable in the future.  While Oak had net income of $5.9 million in
fiscal 1998, its current loss trend began in calendar year 1998, resulting in
an operating loss of $9.1 million for fiscal 1998, an operating loss of $61.9
million for fiscal 1999, an operating loss of $61.1 million for fiscal 2000, an
operating loss of $19.6 million for fiscal 2001 and an operating loss of $29.9
million for fiscal 2002 (in each case before adjustments for non-operating
income or loss, or income tax expense or benefit).  Oak's operating losses
generally have been due to its dependence on its Optical Storage business,
which historically has accounted for approximately 67% of its business.  Given
certain evolving dynamics in the optical storage market, including the rate of
adoption of optical technology, (including CD-RW controllers) competition and
selling prices, we cannot accurately predict the impact of our CD-RW controller
product on operating results nor whether revenue from Optical Storage products
will enable Oak to return to profitability.  We expect that the average selling
prices, or ASP's, for our Optical Storage products and certain of our imaging
hardware products, will continue to decline over time and that ASPs for each
new Optical Storage product and imaging hardware product, will decline
significantly over the life of the product.  In addition, given the extremely
competitive nature of the optical storage market, we believe that gross margins
for new products in our optical storage market will be lower than historical
levels.  However, price declines in hardware products may be offset by cost
reductions, higher volumes of hardware products and higher volumes of higher
margin Imaging products being sold in the future.  If Oak incurs additional
losses or fails to achieve profitability in the future, this will significantly
harm our business and may affect the trading price of our common stock.

     Oak's Financial Performance Is Highly Dependent On The Timely And
     -----------------------------------------------------------------
Successful Introduction Of New Products.  Our financial performance depends in
---------------------------------------
large part on our ability to successfully develop and market next generation
and new products in a rapidly changing technological environment.  If we fail
to successfully identify new product opportunities and timely develop and
introduce new products that achieve market acceptance, we may lose our market
share and our future revenue and earnings may suffer.

     In the optical storage market, our performance is highly dependent upon
the successful development and timely introduction of our next generation CD-RW
controller, Combo (combination DVD and CD-RW) and DVD RW controller products. A
variety of standards and formats are being proposed in this market, making it
difficult to develop products to market requirements, and making it even more
difficult for the market to develop.  In the digital office market, our
performance depends on our ability to successfully develop embedded imaging
processing SOC solutions for the digital office market, in particular, embedded
digital color copier technology and image processing chips for multifunction
peripherals. Among other technological changes, embedded PDF and color
capability are rapidly emerging as market requirements for printers and other
imaging devices.  Some of our competitors have the capacity to supply these
solutions, and some of their solutions are well-received in the marketplace. We
face the challenges of developing products that will require greater color and
image complexity capability including web-based documents, and to work with
higher performing devices in networked environments.  If we are unable to meet
these challenges with the development of products that can effectively compete
in the OEM software and solutions market, our future results of operations
could differ materially from current expectations.


                                      33


<PAGE>


ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
        OF OPERATIONS - (Continued)


     In the past, product delays in the Optical Storage Group have resulted
primarily from difficulties in allocating engineering personnel among competing
projects, engineering resource limitations, and unanticipated engineering
complexity.  Product delays in the Imaging Group, including our recently
acquired business, have resulted from these same factors, as well as changing
OEM customer product specifications, difficulties with independent contractors,
and changing markets or competitive requirements.  These or other factors may
also contribute to future delays.  The design complexity of our products,
especially with the increased levels of integration that are required, have
previously contributed to delays in completing development and introduction of
new products in both of our markets.  If we fail in our new product development
efforts or our products fail to achieve market acceptance, our revenues will
decline and our business, financial condition and results of operations will
suffer.

     Oak's Future Revenues Are Highly Dependent On Sales of Its CD-RW
     ----------------------------------------------------------------
Controller Product.  Our future revenue will largely depend on the success of
------------------
our recently introduced and next generation CD-RW product as well as our Combo
(combination DVD and CD-RW) and DVD RW products.  We cannot predict whether
these products or their successors will be competitive in the marketplace or
carried into production by targeted customers.  The current trend toward
integrating increased speed and functionality on the CD-RW, Combo or DVD RW
controller products potentially adds to the development and manufacturing costs
of producing the product.  Our revenues and gross margins from our optical
storage controller products will depend on our ability to introduce integrated
Optical Storage products for the markets in a commercially competitive manner.
Even if our Optical Storage products prove to be competitive and are accepted
by targeted customers, our customers and their products may not be successful.
If our Optical Storage products fail to achieve market acceptance, we will need
other sources of revenue to offset the loss.  In fiscal 2002 Optical Storage
Revenues decreased by 16%.  A decrease in the overall level of sales of, and
prices for, Oak's older generation Optical Storage Products due to
introductions of newer products by competitors, product obsolescence and delays
in Oak's next generation CD-RW product, could also adversely affect our
business, financial condition and results of operation.

     Oak's Future Imaging Revenues Will Depend on Future Royalties from
     ------------------------------------------------------------------
Shipment of OEM Devices.  We anticipate that the royalty streams derived from
-----------------------
OEMs' shipments of office equipment containing Oak products, and the sale of
related products and services to manufacturers of office equipment will account
for a significant portion of our Imaging Group revenue for the foreseeable
future.  In order to assure that Oak will derive future royalty streams from
the shipment of OEM devices, Oak and its OEMs are required to develop and
release in a regular and timely manner new office products with increased
speed, enhanced output resolutions, reduced memory requirements, multiple
functions, and network connectivity.  OEMs are under tremendous pressure to
continually shorten the development cycles of these products, leading to
increased complexity and development costs to Oak and its OEMs.  Our success
will depend on, among other things, the rate at which OEMs serving the digital
office market outsource their technology needs, market acceptance of our
technology and products and the office devices of our OEMs; the ability of Oak
and its OEMs to meet industry changes and market demands in a timely manner;
achievement of new design wins by Oak; successful implementation of Oak's
technology and products in new office devices being developed by its OEMs; and
successful marketing of those devices by the OEMs.

     Oak's Markets Are Intensely Competitive and Experience Rapid Technological
     --------------------------------------------------------------------------
Change.   We face intense competition in the markets in which we compete.  We
------
expect that the level of competition will increase in the future from existing
competitors and from other companies that may enter our existing or future
markets with solutions that may be less costly or provide higher performance or
additional features. Our principal competitors in the optical storage market
include MediaTek, Sanyo and Ricoh; with new competitors emerging in Via
Technologies, Inc. and Ali Corporation.  Our principal competitors in the
digital office market include Adobe Systems, Inc., Peerless Systems
Corporation, Electronics for Imaging, Inc., Oasis Semiconductor, Analog
Devices, Agilent, TAK ASIC, and in-house, captive suppliers.  We also expect
increased competition from the merchant market in the future.  Many of these
existing competitors as well as those customers expected to compete in the
future have substantially greater financial, manufacturing, technical,
marketing, distribution and other resources, broader product lines and longer
standing relationships with customers than we do.  In addition, much of our
success is dependent on the success of our OEM customers.  Our OEM customers in
both the optical storage and digital imaging markets compete fiercely with one
another for market share in a market characterized by rapid development cycles,
short product life cycles and ever-increasing consumer demand for greater
performance and functionality at reduced prices.


                                      34

<PAGE>


ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
        OF OPERATIONS - (Continued)


     We anticipate that we will have to continue to lower the prices of many of
our products to stay competitive.  The markets for most of the applications for
our products, especially in the optical storage market, are characterized by
intense price competition.  As the markets for these products mature and
competition increases, as has been the trend for the optical storage market, we
anticipate that average sales prices on products will decline.  If we are
unable to reduce costs sufficiently to offset declines in average sales prices
or are unable to successfully introduce new higher performance products with
higher average sales prices, our operating results will suffer greatly.

     The future growth of the digital office market is highly dependent on
OEMs' continuing to outsource an increasing portion of their product
development work.  While the trend toward outsourcing on the part of our OEM
customers has accelerated in recent years, any reversal of this trend, or a
change in the way they outsource, could seriously harm our business.
Similarly, significant market trends leading to changes in the way our
competitors do business may enable them to compete more effectively against Oak
than they have in the past.  Additionally, changes in strategy by our
competitors, for example price reductions, new product introductions or new
marketing/distribution methods, could make it more difficult for us to compete
effectively, cause reduced market demand for our products or render our
products obsolete.

     Oak and its OEM customers may be unable to compete successfully against
current or future competitors.  Competitive pressures faced by Oak and its
customers may result in reduced revenues and profit margins and otherwise
seriously harm our business, financial condition and results of operations.

     Oak May Be Unable To Protect Its Intellectual Property and Proprietary
     ----------------------------------------------------------------------
Rights, Which May Affect Its Ability to Compete.   We consider our technology
-----------------------------------------------
to be proprietary and rely on a combination of patents, trademarks, copyrights,
trade secret laws, confidentiality procedures and licensing arrangements to
protect our intellectual property rights.  However, these measures afford only
limited protection.  The steps that we take to protect our proprietary
information may not be adequate to prevent misappropriation of our technology.
For example, our competitors may be able to effectively design around our
patents, or our patents may be challenged, invalidated or circumvented.  Our
competitors may also independently develop technologies that are substantially
equivalent or superior to our technology.  In addition, the rights granted
under those patents may not necessarily provide competitive advantages.
Moreover, while Oak holds or has applied for patents relating to the design of
its products, some of its products are based in part on standards, for which it
does not hold patents or other intellectual property rights.  The laws of
certain foreign countries in which our products are or may be manufactured or
sold, including various countries in Asia, may not protect our products or
intellectual property rights to the same extent as do the laws of the United
States and thus make the possibility of piracy of our technology and products
more likely.

     While we intend to seek additional international and United States patents
on our technology, it is possible that no additional patents may be issued from
any of our applications that are pending or in the process of being prepared.
Additional patents may not be issued in all countries where our products can be
sold.  Any claims allowed from pending applications or applications in
preparation may not be of sufficient scope or strength to provide meaningful
protection or any commercial advantage to us.

     Oak also generally enters into confidentiality agreements with its
employees and consultants and confidentiality and license agreements with its
customers and potential customers.  We generally limit access to and
distribution of the source and object code of our software and other
proprietary information.  With respect to our page description language
software and drivers for the digital office market and in limited circumstances
with respect to firmware and drivers for our Optical Storage products, we grant
licenses that give our customers access to and restricted use of the source
code of our software.  This increases the likelihood of misappropriation or
misuse of our technology.  Accordingly, despite our precautions, it may be
possible for unauthorized third parties to copy certain portions of our
technology or to obtain and use information that we regard as proprietary.  The
steps we take may not be adequate to prevent misappropriation of our technology
or to provide an adequate remedy in the event of a breach or misappropriation
by others.  Furthermore, we may initiate claims or litigation against third
parties for infringement of our proprietary rights or to establish the validity
of our proprietary rights and in the past has incurred significant legal
expenses in connection with claims of this type we have initiated.
Additionally, we may be required to defend and indemnify against third party
infringement claims pursuant to terms of existing agreements with our
customers.  In January 2001, Samsung was notified by Pitney Bowes that its use
of our iRET technology infringed Pitney Bowes U.S. Patent No. 4,386,272.  Oak
is defending Samsung against this allegation of infringement pursuant to its
indemnification obligation under an earlier license agreement between Samsung
and XLI, a subsidiary of Oak.

     Any litigation by or against Oak could result in significant expense to
Oak and divert the efforts of its technical and management personnel, whether
or not that litigation results in a favorable determination for us.  In the
event of an adverse result in any litigation, we could be required to pay
substantial damages, cease the manufacture, use and sale of infringing
products, expend significant resources to develop non-infringing technology,
discontinue the use of certain processes or obtain licenses to the infringing
technology.  We may not be able to develop new technology or license the
infringing technology on reasonable terms, or at all.  Any development or
license of the technology could require us to expend substantial time and other
resources.

     Oak May Be Unable To Obtain Third Party Intellectual Property Rights or
     -----------------------------------------------------------------------
May Be Liable For Significant Damages.  Certain technology used in Oak's
-------------------------------------
products is licensed from third parties, and in connection with these licenses,


                                      35

<PAGE>


ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
        OF OPERATIONS - (Continued)


Oak is required to fulfill confidentiality obligations and, in some cases, pay
royalties.  Some of our products require various types of copy protection
software that we must license from third parties.  Should we lose our rights
to, or be unable to obtain the necessary copy protection software, we would be
unable to sell and market these products.  Oak's agreements with third parties
often have no specified term and may be terminated by either party in the event
of breach by the other.  Our business could be adversely affected by the loss
for any reason of these third-party agreements.  Given the trend to include
increasing levels of functionality on a chip, in the future it may be necessary
or desirable for Oak to seek additional licenses to intellectual property
rights held by third parties or purchase products manufactured or sold by third
parties with respect to some or all of its product offerings.  However, those
licenses or purchases may not be available on terms acceptable to Oak, if at
all.  If we are unable to enter into those license arrangements on acceptable
terms or to maintain our current licenses on acceptable terms, our business,
financial condition and results of operations could suffer.

     In addition, the semiconductor industry is characterized by vigorous
protection and pursuit of intellectual property rights, which has resulted in
significant, often protracted and expensive litigation.  Oak or its foundries
may, from time to time, be notified of claims that we may be infringing patents
or other intellectual property rights owned by third parties.  If necessary or
desirable, we may seek licenses under those patents or other intellectual
property rights.  However, these licenses may not be offered or the terms of
any offered licenses might not be acceptable to us.  If we fail to obtain a
license from a third party for technology used by Oak, we may incur substantial
liabilities and suspend the manufacture of products or the use by our foundries
of processes requiring the technology.

     Oak has historically indemnified its customers for certain costs and
damages of patent infringement in circumstances where an Oak product is the
factor creating the customer's infringement exposure.  This practice generally
excludes coverage in circumstances where infringement arises out of the
combination of Oak products with products of others or where infringement
arises based on modifications made by the customer to Oak's products.  In
January 2001, Samsung was notified by Pitney Bowes that its use of Oak's iRET
technology infringed Pitney Bowes U.S. Patent No. 4,386,272.  Oak is defending
Samsung against this allegation of infringement pursuant to its indemnification
obligation under an earlier license agreement between Samsung and XLI, a
subsidiary of Oak.  This indemnification practice, however, could have a
material adverse effect on the results of operations.

     Although patent disputes in the semiconductor industry have often been
settled through cross-licensing arrangements, we may not be able in any or
every instance, to settle an alleged patent infringement claim through a cross-
licensing arrangement.  We have a more limited patent portfolio than many of
our competitors.  If a successful claim is made against Oak or its customers
and a license is not made available to us on commercially reasonable terms or
we are required to pay substantial damages or awards, our business, financial
condition and results of operations would be materially adversely affected.

     Oak Depends on Third Party Foundries And Vendors to Manufacture Products.
     ------------------------------------------------------------------------
Oak contracts with independent foundries to manufacture a majority of its
products and with independent vendors to assemble and test these products.  If
we fail to adequately manage our relationships with these foundries and
vendors, our ability to


                                      36


<PAGE>


ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
        OF OPERATIONS - (Continued)


manufacture and sell our products and our results of operations would be
negatively impacted.  We rely on our foundries to allocate to us a portion of
their foundry capacity sufficient to meet our needs to produce products of
acceptable quality and with acceptable manufacturing yield and to deliver
products to us in a timely manner.  These foundries fabricate products for
other companies and some manufacture products of their own design.  If these
foundries fail or are unable to satisfy our product, quality and other
requirements, our business, financial condition and results of operation could
suffer.

     We also rely on third-party subcontractors to assemble and test our
products.  If these subcontractors fail to meet our production requirements,
our business, financial condition and operating results would suffer.

     Our reliance on independent manufacturers and third party assembly and
testing vendors involve a number of additional risks, including:

     o The loss of any foundry as a supplier;

     o Inability to expand foundry capacity in a period of increased demand for
       our products;

     o Inability to obtain timely and adequate deliveries from current or
       future suppliers;

     o Delays in shipments of our products resulting in delay;

     o Disruption of operations at any of our manufacturing facilities;

     o Product defects and the difficulty of detecting and remedying product
       defects resulting in a delay of shipment to customers or customer
       rejection;

     o The unavailability of, or interruption in access to, certain process
       technologies; and

     o Reduced control over delivery schedules, quality assurance and costs.

     Oak generally does not use multiple sources of suppliers for its products.
As a result, the likelihood of and the consequences from the occurrence of
these factors are magnified.  In fiscal year 2002, Oak did not experience any
material delays of its wafer deliveries from its primary manufacturer.  While
we believe we have sufficient capacity to meet our needs through calendar 2002,
we have no firm commitments in place.  We may not be able to secure capacity
for our manufacturing needs or may experience delays in the future.

     Oak's Failure to Accurately Forecast Demand for Its Products Could
     ------------------------------------------------------------------
Negatively Impact Its Results of Operations.  Under its foundry agreements, Oak
-------------------------------------------
is required to place non-cancelable orders and purchase its products on an
approximately three-month rolling basis.  Our customers, on the other hand,
generally place purchase orders with us less than four weeks prior to delivery
that may be rescheduled or under certain circumstances may be cancelled,
without significant penalty.  This limits our ability to react to fluctuations
in demand for our products.  If we overestimate the product necessary to fill
orders, or fail to foresee a technology change that could render a product
obsolete, we will build excess inventories, which could harm our gross margins
and operating results.  If we underestimate the product necessary to fill
orders, we may not be able to obtain an adequate supply of products which could
harm our revenues.  We have experienced inventory write-offs of our Optical
Storage products in the past, such as the inventory write off taken in the
fourth quarter of fiscal year 2002, primarily due to unforeseen and rapid
changes in our customers' demand, in particular speed changes, and consequently
experienced rapid product obsolescence.

     Product supply and demand fluctuations common to the semiconductor
industry are historically characterized by periods of manufacturing capacity
shortages immediately followed by periods of overcapacity, which are caused by
the addition of manufacturing capacity in large increments.  The industry has
moved from a period of capacity shortages in the first half of calendar year
2000, to the current condition of excess capacity.  We cannot predict whether
Oak can or will achieve timely, cost-effective access to that capacity when
needed, or if there will be a capacity shortage again in the future.

     Oak Derives A Large Portion of Its Revenues from International Sales,
     --------------------------------------------------------------------
Depends on Foreign Subcontractors and is Subject to the Risks of Doing Business
-------------------------------------------------------------------------------
in Foreign Countries.  A large portion of our revenues
--------------------

                                      37


<PAGE>


ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
        OF OPERATIONS - (Continued)


are derived from international sales.  International sales, principally to
Korea, Japan, and Europe, accounted for approximately 89%, 84% and 75% of our
net revenues for fiscal 2002, 2001 and 2000, respectively.  Oak also depends on
foreign subcontractors for the manufacture of its products.  Most of our
foreign sales and purchases are negotiated in US dollars, although invoicing is
occasionally done in local currency.  As a result, we may be subject to the
risks of currency fluctuations in the foreign countries in which we do
business.

     Oak also is subject to other risks of conducting business outside of the
United States.  These risks include:

     o Unexpected changes in, or impositions of, foreign legislative or
       regulatory requirements;

     o Delays resulting from difficulty in obtaining export licenses for
       certain technology;

     o Tariffs, quotas and other trade barriers and restrictions;

     o Longer payment cycles;

     o Greater difficulty in collecting accounts receivable;

     o Potentially adverse taxes and adverse tax consequences;

     o The burdens of complying with a variety of foreign laws;

     o Political, social and economic instability;

     o Potential hostilities;

     o Changes in government, diplomatic or trade relationships; and

     o Fluctuations in foreign currencies

     As an example, Oak's significant investment in foundry capacity in Taiwan
exposes it to the risk of political instability in Taiwan, including the
potential for conflict between Taiwan and the People's Republic of China.  We
have several significant OEM customers in Japan, South Korea, and other parts
of Asia.  Adverse economic circumstances in Japan and elsewhere in Asia could
affect these customers' willingness or ability to do business with Oak in the
future or their success in developing and launching devices containing our
products.

     Oak Depends on a Limited Number of Customers for a Substantial Portion of
     -------------------------------------------------------------------------
Its Revenues, and a Loss Of, or a Significant Reduction in Purchases By,
------------------------------------------------------------------------
Current Major Customers which is not offset by a gain or, or a significant
--------------------------------------------------------------------------
increase in purchases by, new or current customers, Would Significantly Reduce
------------------------------------------------------------------------------
Oak's Revenues. A limited number of customers historically have accounted for a
--------------
substantial portion of Oak's net revenues.  In fiscal 2002, 2001 and 2000,
sales to our top ten customers accounted for approximately 69%, 82% and 78%,
respectively, of our net revenues.  In fiscal 2002, LG Electronics accounted
for 20% of total net revenues while Mitsumi and Ionics accounted for 11% of
total net revenues individually.  In fiscal 2001, LG Electronics accounted for
31% of total net revenues. In fiscal 2000, LG Electronics accounted for 26% of
total net revenues and Hewlett-Packard Company accounted for 16%.

     We expect that sales to a limited number of customers will continue to
account for a substantial portion of our net revenues for the foreseeable
future.  We do not have long-term purchase agreements with any of our
customers.  Customers generally purchase our products subject to cancelable
short-term purchase orders.  We cannot predict whether our current customers
will continue to place orders, whether existing orders will be canceled, or
whether customers who have ordered products will pay invoices for delivered
products.  Our policy in Taiwan is to secure a letter of credit prior to
product shipment to minimize the risk of non-payment.  We have experienced
significant changes from year to year in the composition of our major customer
base and believe this pattern will continue. Our revenues from the Optical
Storage Group will also depend on whether our OEM customers are successful in
selling their optical drives both in aftermarket and to PC OEM customers.  In
part, to address this risk, we are continuing our efforts to increase
penetration in existing large customers as well as engage new large OEM
customers. The current weakness in demand being experienced in semiconductor
and PC markets, coupled with the overall poor macroeconomic environment,
however, makes it difficult to forecast future financial performance.  In
addition, some of our customers have chosen, and may continue to choose, to
award their design wins and business on a project-by-project basis to different
vendors.  The current economic recession notwithstanding, the loss of, or a
significant reduction in, purchases or commitments by current major customers
which is not offset by corresponding increases from other current or future
customers would have a material adverse effect on our business, financial
condition and results of operations.  If sales to current customers cease or
are reduced, we may be unable to obtain the orders from new customers necessary
to offset any such losses or reductions.  Moreover, we may not be able to
qualify our independent foundries for potential new customers or do so in a
timely manner.

     Oak Is A Defendant In Several Lawsuits.  Oak and various of its directors
     --------------------------------------
and former officers are parties to a consolidated class action lawsuit filed on
behalf of all persons who purchased or acquired Oak common stock for the period
from July 27, 1995 to May 22, 1996, alleging state securities law and other
violations.  Additionally, various of Oak's directors and former officers are
defendants in three consolidated derivative actions which allege a breach of
fiduciary duty and a claim under California securities laws.  Based on its
current information, Oak believes the class action and derivative suits to be
without merit and will defend its position vigorously.  Although it is
reasonably possible we may incur losses upon resolution of these claims, an
estimate of loss or range of loss cannot be made.  No provision for any
liability that may result upon adjudication has been made in Oak's financial
statements.  Oak is also a party to various other legal proceedings, including
a number of patent-related matters.  In connection with these lawsuits,
however, management time has been, and will continue to be, expended and Oak
has incurred, and expects to continue to incur, substantial legal and other
expenses.


                                      38

<PAGE>


ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
        OF OPERATIONS - (Continued)


     Oak may need to continue to Invest cash flow in Operations as well as
     ---------------------------------------------------------------------
Capital purchases for Tools and Equipment, and The Inability to Raise the
-------------------------------------------------------------------------
Additional Capital Necessary to Fund These Investments On Acceptable Terms
--------------------------------------------------------------------------
Could Seriously Harm Our Business.  In order to remain competitive, Oak must
---------------------------------
continue to make investments Research and Development, development tools in new
facilities and capital equipment.  Significant amounts of capital additions
could be required in subsequent years.  Additionally, in order to obtain an
adequate supply of wafers, especially wafers manufactured using advanced
process techniques, we have entered into and will continue to consider various
possible transactions, including various "take or pay" contracts that commit
Oak to purchase specified quantities of wafers over extended periods.
Manufacturing arrangements such as these may require substantial capital
investment, which may require us to seek additional financing.  We believe that
existing liquid resources and funds generated from operations, if any, combined
with the ability to borrow funds will be adequate to meet our operating and
capital requirements and obligations into the foreseeable future.   We may,
from time to time, seek additional equity or debt financing.  However, those
funds, when needed, might not be available on terms that we find acceptable.
Any future equity financing will also lead to dilution to existing
shareholders.

     Oak May Make Future Acquisitions Or Enter Into Joint Ventures That May Not
     --------------------------------------------------------------------------
Be Successful.  In the future, Oak may investigate and may thereafter acquire
-------------
additional businesses, products and technologies, or enter into joint venture
arrangements, that could complement or expand its business.  Acquisitions
involve numerous risks and costs including:

     o Difficulties in integration of the operations, technologies, and
       products of the acquired companies;

     o Diverting management's attention from normal daily operations of the
       business;

     o Entering markets in which there is limited direct prior experience and
       where competitors have stronger market positions;

     o Coordination of sales, marketing and research and development;

     o Potential loss of key employees; and

     o The maintenance of corporate culture, controls, procedures and policies.

     In addition, investments in emerging technology present risks of loss of
value of one or more of the investments due to failure of the technology to
gain the predicted market acceptance.  Also, any future acquisitions could
require Oak to issue dilutive equity securities, incur debt or contingent
liabilities or write-off in-process research and development and other
acquisition-related expenses.  Further, we may not be able to integrate
acquired


                                      39


<PAGE>


ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
        OF OPERATIONS - (Continued)


businesses, products or technologies with our existing operations.  If we are
unable to fully integrate an acquired business, product or technology, we may
not receive the intended benefits of that acquisition.

     Oak Will Depend On Key Personnel To Manage Its Business, and the Loss of
     ------------------------------------------------------------------------
Any Key Personnel Could Seriously Harm Its Business.  Our future performance
---------------------------------------------------
depends, to a significant degree, on the retention and contribution of members
of Oak's senior management as well as other key personnel including highly
skilled engineering and technical employees.  In particular, it is important
for Oak to retain the services of Young K. Sohn, our current chairman and chief
executive officer, and for the Company to hire a new General Manager for its
Optical Storage Group that has the requisite technical and business expertise
to effectively manage the operations of the Optical Storage Group.  We continue
to recruit financial, technical and operational personnel.  Competition for
these people is intense, and we may not be able to attract and retain qualified
replacements or additional technical or operational personnel.  We may not be
successful in finding suitable replacements for any senior management personnel
who may leave Oak.

     Provisions in Oak's Charter Documents And Rights Plan Could Make It More
     ------------------------------------------------------------------------
Difficult To Acquire Oak And May Reduce The Market Price Of Oak Stock.  Our
---------------------------------------------------------------------
board of directors has the authority to issue up to 2.0 million shares of
preferred stock and to determine the price, rights, preferences, privileges and
restrictions, including voting rights, of those shares without any further vote
or action by the stockholders.  The rights of the holders of common stock, may
be subject to, and may be adversely affected by, the rights of the holders of
any preferred stock that may be issued in the future.  The issuance of
preferred stock may have the effect of delaying, deferring or preventing a
change of control of Oak without further action by the stockholders and may
adversely affect the voting and other rights of the holders of common stock.
We have no present plans to issue shares of preferred stock.  Further, certain
provisions of our charter documents, including provisions eliminating the
ability of stockholders to take action by written consent and limiting the
ability of stockholders to raise matters at a meeting of stockholders without
giving advance notice, may have the effect of delaying or preventing changes in
control or management of Oak, which could have an adverse effect on the market
price of the stock.  In addition, our charter documents do not permit
cumulative voting and provide that our board of directors will be divided into
three classes, each of which serves for a staggered three-year term, which may
also make it more difficult for a third-party to gain control of the board of
directors.

     In addition, 400,000 shares of our preferred stock are designated as
series A junior participating preferred stock under a rights plan, commonly
referred to as a "poison pill".  Under certain circumstances involving a
proposed change-in-control of Oak, the rights related to the series A junior
participating preferred stock may be triggered, the effect of which may delay
or prevent a third party from gaining control of or acquiring us.


                                      40

<PAGE>


ITEM 7A.     QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

     Most of Oak's foreign sales are negotiated in US dollars; however,
invoicing is occasionally done in local currency.  As a result, Oak may be
subject to the risks of currency fluctuations.  Assets and liabilities which
are denominated in non-functional currencies are re-measured into the
functional currency on a monthly basis and the resulting gain or loss is
recorded within non-operating income in the statement of operations.  Many of
Oak's non-functional currency receivables and payables are hedged through
managing net asset positions, product pricing and other means.  Our strategy is
to minimize its non-functional currency net assets or net liabilities in our
foreign subsidiaries.  Our policy is not to speculate in financial instruments
for profit on the exchange rate price fluctuations, trade in currencies for
which there are not underlying exposures, or enter into trades for any currency
to intentionally increase the underlying exposure.  As of June 30, 2002, Oak
had foreign currency forward exchange contracts to exchange Yen for
approximately $2.2 million.  Oak uses financial instruments, including local
currency debt arrangements, to offset the gains or losses of the financial
instruments against gains or losses on the underlying operations cash flows or
investments.  If foreign currency rates fluctuate by 10% from rates at June 30,
2002 and 2001, the effect on our consolidated financial statements would not be
material.  However, there could be a material effect on our financial
statements in the future.

     Oak's cash equivalents and short-term investments ("debt and equity
investments") are exposed to financial market risk due to fluctuation in
interest rates, which may affect its interest income and the fair values of its
investments.  Oak manages the exposure to financial market risk by performing
ongoing evaluation of its investment portfolio and investing in short-term
investment grade corporate securities and U.S. government and other agencies'
obligations, which mature within the next 24 months.  In addition, Oak does not
use investments for trading or other speculative purposes.  Not withstanding
the foregoing, due to the divestiture of the Broadband business in January
2000, we are in the unusual position of also holding an investment in 293,794
shares of Conexant Systems Inc. common stock which had an original book value
of $68.05 per share.  During fiscal 2001, Oak reduced the basis of this
investment to a book value of $8.95 per share as a result of a permanent
impairment in the market value of the common stock.  This resulted in a charge
to non-operating expenses of $17.4 million during the fourth quarter of fiscal
2001.  On June 25, 2002, a stock dividend was declared to Conexant shareholders
in connection with the merger between Alpha Industries, Inc. and the wireless
communications business of Conexant to create and form Skyworks Solutions, Inc.
For each Conexant share, the Company received 0.351 shares of Skyworks
Solutions Inc., or a total of 103,121 shares, and will continue to hold their
existing Conexant shares.  For fiscal 2002, the Company reduced the combined
basis in these two investments to a book value of $1.62 per share for Conexant
shares and $5.55 per share for Skyworks shares due to a further decline in the
market value of the common stock which the Company believes to be other than
temporary.  This resulted in an additional charge to non-operating expenses of
$1.6 million during fiscal 2002.

      Due to the short maturities of its investments, the carrying values
generally approximate the fair value. If market interest rates were to increase
immediately and uniformly by 10% from levels as of June 30, 2002 and 2001, the
decline in the fair value of the portfolio would not be material.  Further, Oak
has the ability to hold its fixed income investments until maturity and,
therefore, we would not expect to recognize such an adverse impact in income or
cash flows.


ITEM 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

     The Financial Statements and Supplementary Data of Oak required by this
item are set forth at the pages indicated at Item 14(a).


ITEM 9.  CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
         FINANCIAL DISCLOSURE

     Not Applicable.


                                      41

<PAGE>


                                   PART III


ITEM 10.  DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

     The information required by this item concerning our directors is
incorporated by reference to the sections captioned "Election of Directors" and
"Section 16(a) Beneficial Ownership Reporting Compliance" contained in the
Proxy Statement related to Oak's 2002 Annual Meeting of Stockholders, to be
filed by Oak with the Securities and Exchange Commission within 120 days of the
end of our fiscal year pursuant to General Instruction G(3) of Form 10-K (the
"Proxy Statement").  Certain information required by this item concerning
executive officers is set forth in Part I of this Report in "Business -
Management" and certain other information required by this item is incorporated
by reference from the section captioned "Section 16(a) Beneficial Ownership
Reporting Compliance" contained in the Proxy Statement.


ITEM 11.  EXECUTIVE COMPENSATION

     The information required by this item is incorporated by reference to the
section captioned "Executive Compensation and Other Matters" contained in the
Proxy Statement.


ITEM 12.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

     The information required by this item is incorporated by reference to the
sections captioned "Security Ownership of Certain Beneficial Owners and
Management" contained in the Proxy Statement.


ITEM 13.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

     The information required by this item is incorporated by reference to the
sections captioned "Executive Compensation - Compensation Committee Interlocks
and Insider Participation" and "Certain Relationships and Related Transactions"
contained in the Proxy Statement.



                                      42


<PAGE>


                                    PART IV


ITEM 14.  EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K

(a) The following documents are filed as a part of this Report:


<TABLE>
<CAPTION>

                                                                           Page
                                                                           ----
<S>                                                                        <C>
1  Financial Statements.

   Report of Independent Accountants........................................ 49

   Independent Auditors' Report............................................. 50

   Consolidated Balance Sheets - As of June 30, 2002 and 2001............... 51


   Consolidated Statements of Operations - For Each of the Years in the
     Three Year Period Ended June 30, 2002.................................. 52


   Consolidated Statements of Stockholders' Equity - For Each of the Years
     in the Three Year Period Ended June 30, 2002........................... 53

   Consolidated Statements of Cash Flows - For Each of the Years in the
     Three Year Period Ended June 30, 2002.................................. 54



   Notes to Consolidated Financial Statements............................... 55

2  Financial Statement Schedule.  The following Financial Statement Schedule
   of the Registrant is filed as part of this report:

   Schedule II--Valuation and Qualifying Accounts........................... 82

</TABLE>

   All other schedules are omitted because they are not applicable or the
required information is shown in the Consolidated Financial Statements or notes
thereto.


3  Exhibits.  The following Exhibits are filed as part of, or incorporated
   --------
   by reference into, this report:

<TABLE>
<CAPTION>

Exhibit
Number                            Exhibit Title
------                            -------------
<S>    <C>
 3.01   The Company's Restated Certificate of Incorporation, amended (1)

 3.02   The Company's Restated Bylaws (2)

 3.03   Certificate of Correction to the Restated Certificate of Incorporation
        of the Company (16)

 4.01   Form of Specimen Certificate for the Company's Common Stock (3)

 4.02   Amended and Restated Registration Rights Agreement dated as of October
        15, 1993 among the Company and various investors (3)


                                      43


<PAGE>

 4.03  The Company's Restated Certificate of Incorporation, as amended (See
       Exhibit 3.01)


 4.04  The Company's Restated Bylaws (See Exhibit 3.02)


 4.05  Form of Certificate of Designation of Series A Junior Participating
       Preferred Stock of the Company dated August 18, 1997 (16)

 4.06  Rights Agreement between the Company and BankBoston, N.A. dated August
       19, 1997 (16)


 4.07  Amendment to the Rights Agreement between the Company, BankBoston, N.A.
       and EquiServe Trust Company, N.A., dated October 15, 2001 (27)


10.01  1988 Stock Option Plan, as amended and related documents (3)*

10.02  1994 Stock Option Plan and related documents (3) and amendment thereto
       dated February 1, 1996(4)*

10.03  1994 Outside Directors' Stock Option Plan and related documents (3)*

10.04  1994 Employee Stock Purchase Plan (3)*

10.05  401(k) Plan and related documents (3) and Amendment Number One and
       Supplemental Participation Agreement thereto (5)*

10.07  Lease Agreement dated August 22, 1994 between John Arrillaga, Trustee,
       or his Successor Trustee, UTA dated 7/20/77 (John Arrillaga Separate
       Property Trust) as amended and Richard T. Peery, Trustee, or his
       Successor Trustee, UTA dated 7/20/77 (Richard T. Peery Separate Property
       Trust) as amended, and Justin Jacobs, Jr., dba Siri-Kifer Investments, a
       joint venture, and the Company (lease agreement for 140 Kifer Court,
       Sunnyvale, California) (3), and amendment thereto dated June 15, 1995
       (5)

10.08  Form of Indemnification Agreement, between the Company and each of its
       Directors and executive officers (14)


10.09  VCEP Agreement dated July 30, 1990 between the Company and Advanced
       Micro Devices, Inc. (3)

10.1   Product License Agreement dated April 13, 1993 between the Company and
       Media Chips, Inc., as amended September 16, 1993 (3)

10.11  Resolutions of the Board of Directors of the Company dated July 27, 1994
       setting forth the provisions of the Executive Bonus Plan (3)(12)*

10.12  Employee Incentive Plan effective January 1, 1995 (3)*

10.13 Option Agreement between Oak Technology, Inc., and Taiwan Semiconductor
      Manufacturing Co., Ltd. dated as of August 8, 1996 (14)**

10.14 Foundry Venture Agreement between the Company and United Microelectronics
      Corporation dated as of October 2, 1995 (6)(12)

10.15 Fab Ven Foundry Capacity Agreement among the Company, Fab Ven and United
      Microelectronics Corporation dated as of October 2, 1995 (7)(12)



                                      44

<PAGE>


10.16 Written Assurances Re: Foundry Venture Agreement among the Company,
      United Microelectronics Corporation and Fab Ven dated as of October 2,
      1995 (8)(12)

10.17 Lease Agreement dated June 15, 1995 between John Arrillaga, Trustee, or
      his Successor Trustee, UTA dated 7/20/77 (John Arrillaga Separate
      Property Trust) as amended and Richard T. Peery, Trustee, or his
      Successor Trustee, UTA dated 7/20/77 (Richard T. Peery Separate Property
      Trust) as amended, and the Company (lease agreement for 130 Kifer Court,
      Sunnyvale, California) (9), and amendments thereto dated June 15, 1995
      and August 18, 1995 (10)

10.18 Deposit Agreement dated November 8, 1995 between Chartered Semiconductor
      Manufacturing Ltd. and the Company (11), and Amendment Agreement (No. 1)
      thereto dated September 25, 1996 (13)**

10.19 Amendment Agreement (No. 2) dated April 7, 1997 to Deposit Agreement
      dated November 8, 1995 between Chartered Semiconductor Manufacturing Ltd.
      and the Company (15) and addendum thereto dated September 26, 1997 (17)**

10.2  First Amendment to Plan of Reorganization and Agreement of Merger dated
      October 27, 1995 among the Company, Oak Acquisition Corporation, Pixel
      Magic, Inc. and the then shareholders of Pixel dated June 25, 1996 and
      Second Amendment thereto dated June 13, 1997 (16)**

10.21 First Amendment to Non-Compete and Technology Transfer Agreement by and
      among the Company, Pixel Magic, Inc. and Peter D. Besen dated June 13,
      1997 (16)**

10.22 Agreement of Termination of Employment Agreement between Pixel Magic,
      Inc. and Peter D. Besen dated June 13, 1997 (16)

10.23 Agreement of Termination of Employment Agreement between Pixel Magic,
      Inc. and Don Schulsinger dated June 13, 1997 (16)

10.24 Release and Settlement Agreement between the Company and United
      Microelectronics Corporation dated July 31, 1997 (16)**

10.25 Sublease Agreement dated December 1, 1997 between Global Village
      Communication, Inc. and the Company (lease agreement for 1150 East Arques
      Avenue, Sunnyvale, California) and accompanying lease and amendment
      thereto (18)

10.26 Amendment to Option Agreement be and between Taiwan Semiconductor
      Manufacturing Co., Ltd., and the Company (19)**

10.27 Settlement Agreement between Winbond Electronics Corporation and the
      Company (19)**

10.28 Amendment Agreement (No. 3) to Deposit Agreement dated November 8, 1995
      between Chartered Semiconductor Manufacturing Ltd. and Oak Technology
      Inc.  (20)

10.29 Employment Agreement between Oak Technology Inc. and Young K. Sohn dated
      February 27, 1999 (21)

10.3  Loan agreement between Oak Technology Inc. and Young K. Sohn dated
      February 27, 1999 (21)

10.31 Oak Technology Inc. Executive Stock Option Plan (21)


                                      45

<PAGE>


10.32 Letter Agreement dated January 22, 1999 between the Special Committee of
      the Board of Directors of Oak Technology, Inc. and David T. Tsang and Ta-
      Lin Hsu (21)

10.33 Amendment to Option Agreement dated June 30, 1999 between Oak Technology
      Inc. and Taiwan Semiconductor Manufacturing Co., Ltd. (22)

10.34 Agreement and Plan of Merger and Reorganization between Oak Technology,
      Inc., Vermont Acquisition Corp. and Xionics Document Technologies, Inc.
      dated July 29, 1999 (22)

10.35 Executive Officer Severance Agreement (23)

10.36 Executive Officer Severance Agreement Allowing for Acceleration of Option
      Vesting (24)

10.37 Amendment to Oak Technology, Inc. 1994 Stock Option Plan (25)

10.38 Amendment to Oak Technology, Inc. 1994 Employee Stock Option Plan (26)

10.39 Amendment to Oak Technology, Inc. 1994 Stock Option Plan (28)

10.40 1994 Outside Directors' Stock Option Plan (as Amended and Restated
      February 5, 2002) (29)

10.41 Amended and Restated 1994 Employee Stock Purchase Plan (as Amended and
      Restated February 5, 2002) (30)

10.42 Amended and Restated 1994 Employee Stock Purchase Plan (as Amended and
      Restated February 5, 2002 and Further Amended Effective July 2, 2002)
      (31)

23.1  Consent of Independent Accountants

23.2  Consent of Independent Auditors

99.1  Certification of Chief Executive Officer and Chief Financial Officer
      Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of
       the Sarbanes-Oxley Act of 2002, filed herewith

-------------------------------
<FN>
(1)  Incorporated herein by reference to Exhibit 3.01 of the Company's
     Quarterly Report on Form 10-Q for the quarter ended March 31, 1996.

(2)  Incorporated herein by reference to Exhibit 3.05 filed with the Company's
     Registration Statement on Form S-1 (File No. 33-87518) declared effective
     by the Securities and Exchange Commission on February 13, 1995 (the
     "February 1995 Form S-1").

(3)  Incorporated herein by reference to the Exhibit with the same number filed
     with the February 1995 Form S-1.

(4)  Incorporated herein by reference to Exhibit 10.1 filed with the Company's
     Registration Statement on Form S-8 (File No. 333-4334) on May 2, 1996.

(5)  Incorporated herein by reference to the Exhibit with the same number filed
     with the Company's Annual Report on Form 10-K for the year ended June 30,
     1996.

(6)  Incorporated herein by reference to Exhibit 2.1 filed with the Company's
     Form 8-K dated October 2, 1995 (the "October 1995 form 8-K").


                                      46


<PAGE>



(7)  Incorporated herein by reference to Exhibit 2.2 filed with the October
     1995 Form 8-K.

(8)  Incorporated herein by reference to Exhibit 2.3 filed with the October
     1995 Form 8-K.

(9)  Incorporated herein by reference to Exhibit 10.08 filed with the Company's
     Annual Report on Form 10-K for the year ended June 30, 1995.

(10) Incorporated herein by reference to Exhibit 10.08 filed with the Company's
     Annual Report on Form 10-K for the year ended June 30, 1996.

(11) Incorporated herein by reference to Exhibit 10.04 filed with the Company's
     Quarterly Report on Form 10-Q for the quarter ended December 31, 1995.

(12) Confidential treatment has been granted with respect to portions of this
     Exhibit.

(13) Incorporated herein by reference to Exhibit 10.17 filed with the Company's
     Annual Report on Form 10-K for the year ended June 30, 1996.

(14) Incorporated herein by reference to the Exhibit with the same number filed
     with the Company's Quarterly Report on Form 10-Q for the quarter ended
     September 30, 1996.

(15) Incorporated herein by reference to the Exhibit with the same number filed
     with the Company's Quarterly Report on Form 10-Q for the quarter ended
     March 31, 1997.

(16) Incorporated herein by reference to the Exhibit with the same number filed
     with the Company's Annual Report on Form 10-K for the year ended June 30,
     1997.

(17) Incorporated herein by reference to the Exhibit with the same number filed
     with the Company's Quarterly Report on Form 10-Q for the quarter ended
     September 30, 1997.

(18) Incorporated herein by reference to the Exhibit with the same number filed
     with the Company's Quarterly Report on Form 10-Q for the quarter ended
     December 31, 1997.

(19) Incorporated herein by reference to the Exhibit with the same number filed
     with the Company's Quarterly Report on Form 10-Q for the quarter ended
     March 31, 1998.

(20) Incorporated herein by reference to the Exhibit with the same number filed
     with the Company's Quarterly Report on Form 10-Q for the quarter ended
     December 31, 1998.

(21) Incorporated herein by reference to the Exhibit with the same number filed
     with the Company's Quarterly Report on Form 10-Q for the quarter ended
     March 31, 1999.

(22) Incorporated herein by reference to the Exhibit with the same number filed
     with the Company's Registration Statement No. 333-92541 on Form S-4 dated
     December 10, 1999.

(23) Incorporated herein by reference to Exhibit 10.1 filed with the Company's
     Quarterly Report on Form 10-Q for the quarter ended March 31, 2001.

(24) Incorporated herein by reference to Exhibit 10.2 filed with the Company's
     Quarterly Report on Form 10-Q for the quarter ended March 31, 2001.

(25) Incorporated herein by reference to Exhibit 99.1 filed with the Company's
     Registration Statement No. 333-65182 on Form S-8 dated July 16, 2001.

(26) Incorporated herein by reference to Exhibit 99.2 filed with the Company's
     Registration Statement No. 333-65182 on Form S-8 dated July 16, 2001.


                                      47


<PAGE>


(27) Incorporated herein by reference to the Exhibit with the same number filed
     with the Company's Quarterly Report on Form 10-Q for the quarter ended
     December 31, 2001.

(28) Incorporated herein by reference to Exhibit 99.1 filed with the Company's
     Registration Statement No. 333-84136 on Form S-8 dated March 11, 2002.

(29) Incorporated herein by reference to Exhibit 10.1 filed with the Company's
     Quarterly Report on Form 10-Q for the quarter ended March 31, 2002.

(30) Incorporated herein by reference to Exhibit 10.2 filed with the Company's
     Quarterly Report on Form 10-Q for the quarter ended March 31, 2002.

(31) Incorporated herein by reference to Exhibit 99.1 filed with the Company's
     Registration Statement No. 333-98739 on Form S-8 dated August 26, 2002.


+     Previously Filed

*     Indicates Management incentive plan.

**     Confidential treatment granted and/or requested as to portions of the
Exhibit.
</FN>
</TABLE>


(b) Reports on Form 8-K.
    -------------------

Not applicable.


Trademark Acknowledgments
-------------------------


     Oak Technology, Inc. and SimpliCD are registered trademarks of the
Company. The Oak logo, Pixel Magic, XLI Corporation, iDSP, iCodec, and iRET,
are trademarks of the Company.

     All other brand names or trademarks appearing in the Annual Report on Form
10-K are the property of their respective owners.


                                      48

<PAGE>


                     REPORT OF INDEPENDENT ACCOUNTANTS


To the Board of Directors and Stockholders of
Oak Technology, Inc:


In our opinion, the consolidated financial statements listed in the
accompanying index present fairly, in all material respects, the financial
position of Oak Technology, Inc. and its subsidiaries at June 30, 2002 and
2001, and the results of their operations and their cash flows for the two
years then ended in conformity with accounting principles generally accepted in
the United States of America.  In addition, in our opinion, the financial
statement schedule listed in the accompanying index appearing under Item 14
(a)(2) for the two-years in the period ended June 30, 2002 presents fairly, in
all material respects, the information set forth therein when read in
conjunction with the related consolidated financial statements.  These
financial statements and financial statement schedule are the responsibility of
the Company's management; our responsibility is to express an opinion on these
financial statements and financial statement schedule based on our audits.  We
conducted our audits of these statements in accordance with auditing standards
generally accepted in the United States of America, which require that we plan
and perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement.  An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements, assessing the accounting principles used and
significant estimates made by management, and evaluating the overall financial
statement presentation.  We believe that our audits provide a reasonable basis
for our opinion.




PricewaterhouseCoopers LLP

San Jose, California
July 23, 2002, except for Note 18 which is as of July 29, 2002


                                      49

<PAGE>



                         INDEPENDENT AUDITORS' REPORT


The Board of Directors and Stockholders
Oak Technology, Inc.:


We have audited the accompanying consolidated statements of operations,
stockholders' equity, and cash flows of Oak Technology, Inc. and subsidiaries
(the Company) for the year ended June 30, 2000.  In connection with our audit
of the consolidated financial statements, we have also audited the consolidated
financial statement schedule II "Valuation and Qualifying Accounts", insofar as
it relates to the year ended June 30, 2000.  These consolidated financial
statements and consolidated financial statement schedule are the responsibility
of the Company's management.  Our responsibility is to express an opinion on
these consolidated financial statements and consolidated financial statement
schedule based on our audit.

We conducted our audit in accordance with auditing standards generally accepted
in the United States of America.  Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement.  An audit includes examining, on
a test basis, evidence supporting the amounts and disclosures in the financial
statements.  An audit also includes assessing the accounting principles used
and significant estimates made by management, as well as evaluating the overall
financial statement presentation.  We believe that our audit provides a
reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the results of operations and cash flows of
Oak Technology, Inc. and subsidiaries for the year ended June 30, 2000, in
conformity with accounting principles generally accepted in the United States
of America.  Also, in our opinion, the related consolidated financial statement
schedule, when considered in relation to the basic consolidated financial
statements taken as a whole, presents fairly, in all material respects, the
information set forth therein.


/s/ KPMG LLP

Mountain View, California
July 24, 2000


                                      50

<PAGE>


                     OAK TECHNOLOGY, INC. AND SUBSIDIARIES

                          CONSOLIDATED BALANCE SHEETS
               (in thousands, except per share and share data)


<TABLE>
<CAPTION>

                                                               June 30,
                                                       ------------------------
                                                          2002         2001
                                                          ----         ----
<S>                                                     <C>         <C>
                                    ASSETS

Current assets:
  Cash and cash equivalents............................  $ 38,252     $ 25,141
  Short-term investments...............................   104,414       98,887
  Accounts receivable, net of allowance for doubtful
    accounts of $3,604 and $3,198, respectively........    10,096       18,347
  Inventories..........................................     4,929        6,626
  Prepaid expenses and other current assets............     5,535        6,884
                                                         --------     --------
     Total current assets..............................   163,226      155,885
Property and equipment, net............................    18,961       18,448
Intangible assets, net.................................    19,886       29,337
Other assets...........................................       803          569
                                                         --------     --------
Total assets...........................................  $202,876     $204,239
                                                         ========     ========


LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:
  Accounts payable.....................................    14,065        8,161
  Accrued expenses.....................................    16,951       13,680
  Deferred revenue.....................................     2,970        4,337
                                                         --------     --------
     Total current liabilities.........................    33,986       26,178
Other long-term liabilities............................       899          318
                                                         --------     --------

Total liabilities......................................    34,885       26,496
                                                         --------     --------

Commitments and contingencies (Notes 13 and 14)

Stockholders' equity:
  Preferred stock, $0.001 par value; 2,000,000 shares
    authorized; none issued and outstanding as of
    June 30, 2002 and 2001.............................        --           --

  Common stock, $0.001 par value; 130,000,000 shares
    authorized at June 30, 2002 and 2001; 60,285,392
    shares issued and 55,987,912 shares outstanding as
    of June 30, 2002; and 58,628,451 shares issued and
    54,330,971 shares outstanding as of June 30, 2001..        60           59

  Additional paid-in capital...........................   246,587      229,280
  Treasury stock.......................................   (23,273)     (23,273)
  Retained deficit.....................................   (56,411)     (29,461)
  Accumulated other comprehensive income...............     1,028        1,138
                                                         --------     --------
      Total stockholders' equity.......................   167,991      177,743
                                                         --------     --------
Total liabilities and stockholders' equity               $202,876     $204,239
                                                         ========     ========


</TABLE>

See accompanying notes to consolidated financial statements.


                                      51


<PAGE>


                     OAK TECHNOLOGY, INC. AND SUBSIDIARIES

                     CONSOLIDATED STATEMENTS OF OPERATIONS
                     (in thousands, except per share data)


<TABLE>
<CAPTION>

                                                      Year Ended June 30,
                                                -------------------------------
                                                   2002       2001       2000
                                                   ----       ----       ----
<S>                                             <C>        <C>       <C>
Revenues:
  Product revenues.............................. $115,638   $141,294  $ 65,348
  Software and other revenues...................   30,995     34,889    21,107
                                                 --------   --------  --------
    Total revenues..............................  146,633    176,183    86,455

Cost of revenues and operating expenses:
  Cost of product revenues......................   71,252     85,706    34,577
  Cost of software and other revenues...........    4,710      6,401     6,343
  Research and development expenses.............   53,207     50,628    49,151
  Selling, general, and administrative expenses.   31,543     36,607    33,159
  Amortization of intangibles...................   12,566     14,716    10,516
  Restructuring charges.........................    3,213      1,765     3,285
  Acquired in-process research and development..       --         --    10,533
                                                 --------   --------  --------
    Operating loss..............................  (29,858)   (19,640)  (61,109)

Gain on sale of business unit...................       --         --    22,075
Impairment loss.................................   (1,581)   (17,371)       --
Other non-operating income, net.................    6,619      8,429     6,172
                                                 --------   --------  --------

Loss before income taxes........................  (24,820)   (28,582)  (32,862)
Income tax expense..............................    2,130      2,050        --
                                                 --------   --------  --------

Net loss........................................ $(26,950)  $(30,632) $(32,862)
                                                 ========   ========  ========

Net loss per share - basic and diluted.......... $  (0.49)  $  (0.56) $  (0.71)
                                                 ========   ========  ========

Weighted average common and potential common
  shares used in computing basic and diluted net
  loss per share................................   55,254     54,274    46,057
                                                 ========   ========  ========

</TABLE>

See accompanying notes to consolidated financial statements.



                                      52

<PAGE>


                     OAK TECHNOLOGY, INC. AND SUBSIDIARIES

                CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
                                (in thousands)

<TABLE>
<CAPTION>


                                                                                            Accumulated
                                  Common Stock     Additional  Treasury Stock    Retained     Other       Total
                               -------------------             ----------------
                               Number of $.001 Par  Paid-In    Number of        Earnings Comprehensive Stockholders' Comprehensive
                                Shares    Value      Capital    Shares     Cost  (Deficit) Income (Loss)  Equity          Loss
                                 -----     -----     -------    ------     ----   --------  -------------  ------         ----
<S>                            <C>        <C>       <C>        <C>        <C>    <C>        <C>         <C>            <C>

Balances, Ju1y 1, 1999.........   42,917  $    42  $ 164,784   (2,001)  $ (9,437) $  34,033  $    --      $189,422
Net loss.......................       --       --         --       --         --    (32,862)      --       (32,862)     $(32,862)
Other comprehensive loss -
  change in net unrealized
  loss on investments..........       --       --         --       --         --         --   (6,016)       (6,016)       (6,016)
                                                                                                                        --------
Comprehensive loss.............                                                                                         $(38,878)
                                                                                                                        ========
Repurchase of common stock.....       --       --         --     (381)    (1,820)        --       --        (1,820)
Issuance of common stock in
  connection with purchase of
  Xionics Document Technologies    9,483       10     45,163       --         --         --       --        45,173
Exercise of stock options......    2,216        2      6,057       --         --         --       --         6,059
Employee stock purchase plan...      444        1      1,353       --         --         --       --         1,354
                                --------  -------  ---------   ------   --------  ---------  -------      --------
Balances, June 30, 2000........   55,060       55    217,357   (2,382)   (11,257)     1,171   (6,016)      201,310
Net loss.......................       --       --         --       --         --    (30,632)      --       (30,632)     $(30,632)
Other comprehensive income -
  change in net unrealized gain
  on investments, net of
  realized losses..............       --       --         --       --         --         --    7,154         7,154         7,154
                                                                                                                        --------
Comprehensive loss.............                                                                                         $(23,478)
                                                                                                                        ========
Repurchase of common stock.....       --       --         --   (1,915)   (12,016)        --       --       (12,016)
Exercise of stock options......    3,379        3     10,206       --         --         --       --        10,209
Employee stock purchase plan...      189        1      1,717       --         --         --       --         1,718
                                --------  -------  ---------  -------   --------  ---------  -------      --------
Balances, June 30, 2001........   58,628       59    229,280   (4,297)   (23,273)   (29,461)   1,138       177,743
Net loss.......................       --       --         --       --         --    (26,950)      --       (26,950)     $(26,950)
Other comprehensive income -
  change in net unrealized gain
  on investments, net of
  realized losses..............       --       --         --       --         --         --     (110)         (110)         (110)
                                                                                                                        --------
Comprehensive loss.............                                                                                         $(27,060)
                                                                                                                        ========
Income tax benefit for employee
  stock option transactions....       --       --      9,719       --         --         --       --         9,719
Exercise of stock options......    1,460        1      6,090       --         --         --       --         6,091
Employee stock purchase plan...      197       --      1,498       --         --         --       --         1,498
                                --------  -------  ---------  -------   --------  ---------  -------      --------
Balances, June 30, 2002........   60,285  $    60  $ 246,587   (4,297)  $(23,273) $ (56,411) $ 1,028      $167,991
                                ========  =======  =========  =======   ========  =========  =======      ========

</TABLE>

See accompanying notes to consolidated financial statements.


                                      53

<PAGE>


                     OAK TECHNOLOGY, INC. AND SUBSIDIARIES
                     CONSOLIDATED STATEMENTS OF CASH FLOWS
                                  (in thousands)

<TABLE>
<CAPTION>

                                                      Year Ended June 30,
                                                -------------------------------
                                                   2002       2001       2000
                                                   ----       ----       ----
<S>                                             <C>        <C>       <C>
Cash flows from operating activities:
Net loss.......................................  $(26,950)  $(30,632) $(32,862)
Adjustments to reconcile net loss to net cash
  provided by (used in) operating activities:
  Depreciation and amortization................    19,694     22,557    17,459
  Gain on sale of business.....................        --         --   (22,075)
  Acquired in-process technology...............        --         --    10,533
  Loss on equity method investments, net.......        --         --     1,863
  Impairment loss on equity securities.........     1,581     17,371        --
  Restructuring charges........................        --         --     1,270
  Foundry deposit reserve adjustments..........        --         --       700
  Loss on disposal of fixed assets.............        82         31     1,381
  Deferred income taxes........................       389     (1,086)     (741)
Changes in operating assets and liabilities:
  Accounts receivable..........................     8,523        (53)   (5,247)
  Inventories..................................     1,822     13,511   (18,318)
  Foundry deposits.............................        --         --     9,061
  Prepaid expenses, other current assets and
    other assets...............................     1,049      6,310     1,606
  Income tax receivable........................    14,719         --        --
  Accounts payable and accrued expenses........     3,471     (9,578)   19,306
  Income taxes payable, deferred revenue and
    other liabilities..........................      (810)     1,688    (2,487)
                                                 --------   --------  --------
      Net cash provided by (used in) operating
        activities.............................    23,570     20,119   (18,551)
                                                 --------   --------  --------
Cash flows from investing activities:
Purchases of short-term investments............  (122,899)  (126,495) (193,870)
Proceeds from matured short-term investments...   115,681    119,095   219,853
Additions to property and equipment, net.......    (7,592)    (6,582)   (4,566)
Other acquisitions and equity investments......        --         --    (4,281)
Proceeds from sale of business unit............        --         --     4,900
Acquisition of Xionics, net of cash acquired...        --         --    (9,453)
Acquisition of Accel, net of cash acquired.....    (3,238)        --        --
                                                 --------   --------  --------
      Net cash provided by (used in) investing
        activities.............................   (18,048)   (13,982)   12,583
                                                 --------   --------  --------
Cash flows from financing activities:



Repayment of debt..............................        --         (7)      (23)
Treasury stock acquisition.....................        --    (12,016)   (1,820)
Issuance of common stock.......................     7,589     11,927     7,411
                                                 --------   --------  --------
      Net cash provided by (used in) financing
        activities.............................     7,589        (96)    5,568
                                                 --------   --------  --------
Net increase (decrease) in cash and cash
  equivalents..................................    13,111      6,041      (400)
Cash and cash equivalents, beginning of period.  $ 25,141   $ 19,100  $ 19,500
                                                 --------   --------  --------
Cash and cash equivalents, end of period.......  $ 38,252   $ 25,141  $ 19,100
                                                 ========   ========  ========

Supplemental information:
Cash paid during the period:
  Interest.....................................  $     --   $     59  $     --
                                                 ========   ========  ========
  Income taxes.................................  $  3,917   $  1,792  $     --
                                                 ========   ========  ========
Equity securities received in sale of business.  $     --   $     --  $ 20,000
                                                 ========   ========  ========
Fair value of stock options assumed in Xionics
  acquisition..................................  $     --   $     --  $  8,380
                                                 ========   ========  ========
Fair value of stock issued for Xionics
  acquisition..................................  $     --   $     --  $ 36,793
                                                 ========   ========  ========

</TABLE>


See accompanying notes to consolidated financial statements.


                                      54

<PAGE>


                     OAK TECHNOLOGY, INC. AND SUBSIDIARIES

                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


(1)  THE COMPANY

     Oak Technology, Inc. and subsidiaries  ("Oak" or the "Company") designs,
develops and markets high performance integrated semiconductors, software and
platform solutions to original equipment manufacturers ("OEMs") worldwide that
serve the optical storage, and digital imaging equipment markets.  The
Company's products consist primarily of integrated circuits and supporting
software and firmware, all designed to store and distribute digital content,
thereby enabling its OEM customers to deliver cost-effective, powerful systems
to the end user for the home and enterprise.  The Company contracts with
independent foundries to manufacture all of its products, enabling the Company
to focus on its design strengths, minimize fixed costs and capital expenditures
and gain access to advanced manufacturing facilities.  The Company's mission is
to be a leading solution provider for the storage and distribution of digital
content.

     The Company's operations are organized along its two market-focused
groups: the Optical Storage Group and the Imaging Group.  The Imaging Group
comprises the combination of the Company's earlier acquisition of Xionics
Document Technologies, Inc. and its Pixel Magic subsidiary, serving the digital
imaging equipment market.

     The Company was originally incorporated in California in 1987 and was
reincorporated in Delaware in 1994.  The Company has facilities in: Woburn,
Massachusetts; San Diego, California; Austin, Texas; Tucson, Arizona; Taipei,
Taiwan; Yokohama City, Kanagawa and Osaka Japan; Seoul, Korea; Manchester,
England; and Dortmund, Germany.


(2)  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES


     Basis of Presentation and Preparation
     -------------------------------------

     The accompanying consolidated financial statements include the accounts of
the Company and its wholly owned subsidiaries.  All significant intercompany
transactions and accounts have been eliminated in consolidation.


     Use of Estimates
     ----------------

     The preparation of financial statements in conformity with generally
accepted accounting principles in the United States of America requires
management to make estimates and assumptions that affect the reported amount of
assets and liabilities and disclosure of contingent assets and liabilities as
of the date of the financial statements and the reported amounts of revenues
and expenses during the reporting period.  Actual results could differ from
those estimates.


     Cash Equivalents and Investments
     --------------------------------

     The Company's policy is to invest cash in excess of operating requirements
in interest-bearing investments.  Securities purchased with remaining
maturities of three months or less at the date of acquisition are considered to
be cash equivalents.  Securities purchased with remaining maturities greater
than three months at the date of acquisition are included in short-term
investments.

     The Company accounts for its investments in debt and equity securities
with readily determined fair values as "held-to-maturity," "available-for-sale"
or "trading" and establishes accounting and reporting requirements for each
classification.  The Company has classified all securities held at June 30,
2002 and


                                      55

<PAGE>


                     OAK TECHNOLOGY, INC. AND SUBSIDIARIES

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

June 30, 2001 as available-for-sale securities.  Such securities are reported
at fair value with unrealized gains or losses, if material, included in other
comprehensive income and reported as a separate component of stockholders'
equity.  Realized gains and losses are reported as a component of other non-
operating income or loss.


     Fair Value of Financial Instruments
     -----------------------------------

     The carrying value of the Company's financial instruments, including cash
and cash equivalents, accounts receivable and foreign currency forward exchange
contracts approximates fair value.  Cash and cash equivalents and accounts
receivable approximate fair value due to their short-term nature.


     Derivative Instruments and Hedging Activities
     ---------------------------------------------

     The Company periodically enters into economic hedges by purchasing foreign
exchange contracts as a hedge against foreign currency denominated accounts
receivables or fixed sales commitments.  The Company does not enter into
foreign exchange contracts for speculative or trading purposes.  As of June 30,
2002, the Company had short-term foreign currency exchange contracts with face
values of approximately $2.2 million to purchase U.S. Dollars with Japanese Yen
for accounts receivables and sales commitments denominated in Japanese Yen.
The impact of recording the fair values of the forward contracts and unrealized
gains or losses in the accounts receivable was not material for the periods
presented.


     Concentrations of Credit Risk
     -----------------------------

     Financial instruments which potentially subject the Company to
concentrations of credit risk are primarily cash and cash equivalents, short-
term investments and accounts receivable.  The Company's cash equivalents and
short-term investments are primarily in money market accounts, certificates of
deposit, corporate notes and US government obligations.  The Company's short-
term investments have maturities ranging from 2002 through 2004.  Also included
in cash and cash equivalents as of June 30, 2002 and 2001, are approximately
$8,030,000 and $7,213,000, respectively, in accounts with foreign banks and
financial institutions primarily in Taiwan and Japan.  The Company periodically
discounts notes receivable with recourse due from some customers with banks in
Japan.  As of June 30, 2002 and 2001, the Company had no discounted notes
receivable outstanding.

     Generally, the Company requires no collateral on trade receivables,
although a substantial portion of export sales are guaranteed by letters of
credit.  The Company believes that credit risks are substantially mitigated by
its credit evaluation process and its maintenance of reserves for estimated
credit losses.


     Inventories
     -----------

     Inventories are stated at the lower of cost (first in, first out) or
market.  The Company periodically reviews its inventories for potential slow-
moving or obsolete items and writes down specific items to net realizable value
as appropriate.


                                      56

<PAGE>


                     OAK TECHNOLOGY, INC. AND SUBSIDIARIES

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)


     Depreciation and Amortization
     -----------------------------

     Property and equipment is stated at cost.  Depreciation is computed using
the straight-line method.  Useful lives of three to five years are used for
computer equipment, purchased software and furniture and fixtures; useful lives
of up to five years are used for leasehold improvements and a useful life of 60
years is used for a building.


     Amortization of Intangible Assets
     ---------------------------------

     Goodwill, purchased technology and other intangible assets are amortized
on a straight-line basis over periods of 3 to 5 years.  In accordance with SFAS
No. 142, beginning July 1, 2002, the Company will no longer amortize goodwill
and assembled workforce and will periodically assess these assets for
impairment.


     Equity Investments
     ------------------

     Where the Company has investments in which it has the ability to exercise
significant influence over operating and financial policies, these investments
are accounted for using the equity method.  Accordingly, the Company's share of
the income/(loss) in these investments is included in other operating income.


     Long-Lived Assets
     -----------------

     The Company reviews its long-lived assets, including its intangible
assets, for impairment whenever events or changes in circumstances indicate
that the carrying amount of an asset may not be recoverable.  Recoverability of
assets held and used is measured by a comparison of the carrying amount of an
asset to the future undiscounted net cash flows expected to be generated by
such asset.  If the carrying amount is in excess of the future undiscounted net
cash flows of such assets, an impairment is recognized and is measured by the
amount by which the carrying value of the asset exceeds its fair value.  Assets
to be disposed of are reported at the lower of their carrying amount or fair
value less cost to sell.

     In assessing the recoverability of the Company's goodwill and other
intangible assets, the Company must make assumptions regarding estimated future
cash flows and other factors to determine the fair value of the respective
assets.  If these estimates or their related assumptions change in the future,
the Company may be required to record impairment charges for these assets not
previously recorded.  The Company will adopt SFAS No. 142, "Goodwill and Other
Intangible Assets" for its fiscal year beginning July 1, 2002 and will be
required to analyze its goodwill for impairment issues within the first six
months of fiscal 2003 and then on a periodic basis thereafter.  At this time,
management does not expect the adoption of SFAS 142 to have a material effect
on the Company's financial position or results of operations.


     Revenue Recognition
     -------------------

     The Company recognizes product revenue when persuasive evidence of an
arrangement exists, delivery has occurred, the price is fixed or determinable
and collection is reasonably assured.  Under these criteria, product revenue is
generally recognized upon shipment of product to customers, net of accruals for
estimated sales returns and allowances.

     Software and other revenues include software license fees, services,
software maintenance and royalty revenues.  Software and other revenues
originate primarily from the business operations which were acquired from
Xionics on January 11, 2000.


                                      57

<PAGE>


                     OAK TECHNOLOGY, INC. AND SUBSIDIARIES

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)


     Revenue from transactions involving the Company's software products is
accounted for in accordance with Statement of Position ("SOP") 97-2 "Software
Revenue Recognition" and SOP 98-9, "Software Revenue Recognition with Respect
to Certain Arrangements".  SOP 97-2 generally requires revenue earned on
software arrangements involving multiple elements to be allocated to each
element based on relative fair values of the elements.  The determination of
the fair value is based on evidence that is specific to the vendor.  When the
Company does not have evidence of the fair value for one or more of the
delivered elements in a multiple-element arrangement, the residual method is
applied to recognize revenue.  Under the residual method, the total fair value
of the undelivered elements is deferred and subsequently recognized in
accordance with SOP 97-2.  When the Company does not have evidence of the fair
value for all elements in a multiple-element arrangement, all revenue from the
arrangement is deferred until such evidence exists or until all elements are
delivered.

     Revenue from software is recognized upon shipment of software and related
documentation, based upon fixed price purchase orders from customers provided
there are no obligations remaining and collectibility of the receivable is
reasonably assured.  Revenue from software maintenance contracts is deferred
and recognized ratably as it is earned over the term of the contract, generally
one year.  Unearned software maintenance revenue is included in deferred
revenue.  In addition, deferred revenue includes certain prepaid royalties and
advance billings under software development contracts for services not yet
performed.  Service revenue is recognized as the service is performed.  Royalty
revenue is the amount that is contractually due and collectible.  The Company
recognizes revenue under agreements for non-recurring engineering services
based upon time and materials or by using the percentage of completion method
of accounting based on the ratio of actual labor hours incurred to total
estimated labor hours for individual fixed price contracts.  Provisions for any
estimated losses on uncompleted contracts are made in the period in which such
losses become evident or estimatable.


     Foreign Currency Translation and Transactions
     ---------------------------------------------

     The majority of the Company's purchasing and sales transactions are
denominated in US dollars, which is considered to be the functional currency of
the Company and its subsidiaries.  Certain sales to customers in Japan and
Taiwan are invoiced in local currencies.  Monetary assets and liabilities of
the Company's foreign subsidiaries are remeasured into U.S. dollars from the
local currency at rates in effect at period-end and non-monetary assets and
liabilities are remeasured at historical rates.  Revenues and expenses are
remeasured at average rates during the period.  Gains and losses arising from
the remeasurement of local currency financial statements are included in other
non-operating income.


Stock-Based Compensation
------------------------

     The Company accounts for stock option grants, as permitted by SFAS No.
123, Accounting For Stock-Based Compensation, in accordance with the provisions
of Accounting Principles Board (APB) Opinion No. 25, Accounting For Stock
Issued To Employees.  As such, compensation expense is recorded on the date of
grant if the current market price of the underlying stock exceeds the exercise
price.  In accordance with SFAS No. 123, the Company discloses pro forma loss
and pro forma loss per share amounts assuming the Company had accounted for
employee stock option grants using the fair value-based method defined in SFAS
No. 123.  In March 2000, the FASB issued FASB Interpretation No. 44 (FIN 44),
Accounting for Certain Transactions Involving Stock Compensation - an
Interpretation of APB Opinion No. 25.  FIN 44 clarifies certain elements of APB
Opinion No. 25.  Among other issues, this interpretation clarifies: the
definition of employee for purposes of applying APB Opinion No. 25, the
criteria for determining whether a plan qualifies as non-compensatory, the
accounting consequences of various modifications to the terms of a previously
fixed stock option award, and the accounting for an exchange of stock
compensation in a business combination. The Company adopted this interpretation
during fiscal 2001, effective as of the beginning of the year. The adoption of
this interpretation did not have a material impact on the Company's
consolidated financial position or results of operations.


                                      58

<PAGE>


                     OAK TECHNOLOGY, INC. AND SUBSIDIARIES

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)


     Income Taxes
     ------------

     The Company records income taxes using an asset and liability approach
that results in the recognition of deferred tax assets and liabilities for the
expected future tax consequences of events that have been recognized
differently in the Company's consolidated financial statements and tax returns.
In estimating future tax consequences, all expected future events other than
enactment of changes in tax laws or rates are considered.  A valuation
allowance is established when necessary to reduce deferred tax assets to
amounts expected to be realized.  Under certain provisions of the Internal
Revenue Code of 1986, as amended, the availability of the Company's net
operating loss and tax credit carryforwards may be subject to limitation if it
should be determined that there has been a change in ownership of more than 50%
of the value of the Company's stock.  Such determination could limit the
utilization of net operating loss and tax credit carryforwards.


     Net Loss Per Share
     ------------------

     Basic net loss per share is computed using the weighted average number of
common shares outstanding during the period.  Diluted net loss per share is
computed using the weighted average number of common and dilutive common
equivalent shares outstanding during the period, using the treasury stock
method for options and warrants.  The computation of diluted net loss per share
excludes common equivalent shares since they are anti-dilutive in a loss
period.

     The following is a reconciliation of the numerators and denominators of
the basic and diluted loss per share computations for the periods presented (in
thousands except per share amounts):


<TABLE>
<CAPTION>

                                                      Year Ended June 30,
                                                -------------------------------
                                                   2002       2001       2000
                                                   ----       ----       ----
<S>                                             <C>        <C>       <C>
Net loss.......................................  $(26,950)  $(30,632) $(32,862)
Shares:
  Weighted average common shares...............    55,254     54,274    46,057
  Dilutive stock options and other common stock
    equivalents................................        --         --        --
                                                 --------   --------  --------
    Dilutive potential common shares...........    55,254     54,274    46,057
                                                 ========   ========  ========

Loss per share:
  Basic........................................  $  (0.49)  $  (0.56) $  (0.71)
                                                 ========   ========  ========
  Diluted......................................  $  (0.49)  $  (0.56) $  (0.71)
                                                 ========   ========  ========

</TABLE>

     All outstanding options and warrants were excluded from dilutive earnings
per share calculation because of their anti-dilutive impact on the Company's
loss per share.


     Comprehensive Loss
     ------------------

     The components of comprehensive loss, as required by SFAS 130 in fiscal
2002, 2001 and 2000 were due entirely to net unrealized losses on short-term
investments (see Note 3) and as presented in the Statement of Stockholder's
Equity.


                                       59

<PAGE>


                     OAK TECHNOLOGY, INC. AND SUBSIDIARIES

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)


     Reclassifications
     -----------------

     Certain prior year items have been reclassified to be consistent with
current year presentation.  The reclassifications have no effect on previously
disclosed net loss or stockholders' equity.


     Recently Issued Accounting Standards
     ------------------------------------

     In July 2001, the FASB issued SFAS No. 142, "Goodwill and Other Intangible
Assets", which is effective for fiscal years beginning after December 15, 2001.
SFAS No. 142 requires, among other things, the discontinuance of goodwill
amortization.  In addition, the standard includes provisions upon adoption for
the reclassification of certain existing recognized intangibles as goodwill,
reassessment of the useful lives of existing recognized intangibles,
reclassification of certain intangibles out of previously reported goodwill and
the testing for impairment of existing goodwill and other intangibles.  Oak
will adopt SFAS No. 142 for its fiscal year beginning July 1, 2002.  Upon
adoption of SFAS No. 142, the Company will no longer amortize goodwill, and
assembled workforce with a net carrying value of approximately $13.3 million at
June 30, 2002.  In lieu of amortization the Company will be required to
periodically perform an impairment review of its goodwill balance beginning
with the initial adoption.  The Company currently does not expect to record any
material impairment charges upon completion of the initial review.  There are
approximately $7 million of net intangible assets remaining on the balance
sheet at June 30, 2002 that will continue to amortize, approximately $5 million
of which will amortize in fiscal 2003.

     On October 3, 2001, the FASB issued SFAS 144, "Accounting for the
Impairment or Disposal of Long-Lived Assets." SFAS 144 supersedes SFAS 121,
"Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets
to be disposed of." The primary objectives of SFAS 144 are to develop one
accounting model based on the framework established in SFAS 121 for long-lived
assets to be disposed of by sale, and to address significant implementation
issues. The Company will adopt SFAS 144 for its fiscal year beginning July 1,
2002.  At this time, management does not expect the adoption of SFAS 144 to
have a material effect on the Company's financial position or results of
operations.

     In June 2002, the FASB issued SFAS No. 146, "Accounting for Exit or
Disposal Activities" ("SFAS 146"). SFAS 146 addresses significant issues
regarding the recognition, measurement, and reporting of costs that are
associated with exit and disposal activities, including restructuring
activities that are currently accounted for under EITF No. 94-3, "Liability
Recognition for Certain Employee Termination Benefits and Other Costs to Exit
an Activity (including Certain Costs Incurred in a Restructuring)." The scope
of SFAS 146 also includes costs related to terminating a contract that is not a
capital lease and termination benefits that employees who are involuntarily
terminated receive under the terms of a one-time benefit arrangement that is
not an ongoing benefit arrangement or an individual deferred-compensation
contract.  SFAS 146 will be effective for exit or disposal activities that are
initiated after December 31, 2002 and early application is encouraged.  We will
adopt SFAS 146 for our third fiscal quarter beginning January 1, 2003 and do
not expect that the adoption will have a material impact on our financial
position, results of operations, or cash flows.


                                      60

<PAGE>


                     OAK TECHNOLOGY, INC. AND SUBSIDIARIES

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)


(3)  CASH, CASH EQUIVALENTS AND SHORT-TERM INVESTMENTS

     As of June 30, 2002, all investments were considered available-for-sale
securities and consisted of the following (in thousands):


<TABLE>
<CAPTION>

                                                                    Estimated
                                            Amortized   Unrealized     Fair
                                               Cost        Gain       Value
                                               ----        ----       -----
<S>                                         <C>           <C>        <C>
Money market funds........................   $ 38,252      $   --     $ 38,252
Certificates of deposit...................      2,513          --        2,513
Corporate notes...........................     40,113         300       40,413
US government obligations.................     59,712         728       60,440
Equity securities.........................      1,048          --        1,048
                                             --------      ------     --------
                                             $141,638      $1,028     $142,666
                                             ========      ======     ========

</TABLE>


     As of June 30, 2002, approximately $87.8 million of these investments had
contractual maturities within one year and approximately $54.9 million had
contractual maturities between one and two years.  These investments were
classified on the consolidated balance sheet as follows (in thousands):

<TABLE>
<S>                                                             <C>
Cash and cash equivalents....................................... $ 38,252
Short-term investments..........................................  104,414
                                                                 --------
                                                                 $142,666
                                                                 ========

</TABLE>

     Due to the divestiture of the Broadband business in January 2000, the
Company has an investment in 293,794 shares of Conexant Systems Inc. common
stock which had an original book value of $68.05 per share.  During fiscal
2001, the Company reduced the basis of this investment to a book value of $8.95
per share as a result of an impairment in the market value of the common stock
which the Company believes was other than temporary.  This resulted in a charge
to non-operating expenses of $17.4 million during fiscal 2001.

     On June 25, 2002, a stock dividend was declared to Conexant shareholders
in connection with the merger between Alpha Industries, Inc. and the wireless
communications business of Conexant to create and form Skyworks Solutions, Inc.
For each Conexant share, the Company received 0.351 shares of Skyworks
Solutions Inc., or a total of 103,121 shares, and will continue to hold their
existing Conexant shares.  For fiscal 2002, the Company reduced the combined
basis in these two investments to a book value of $1.62 per share for Conexant
shares and $5.55 per share for Skyworks shares due to a further decline in the
market value of the common stock which the Company believes to be other than
temporary.  This resulted in an additional charge to non-operating expenses of
$1.6 million during fiscal 2002.

     As of June 30, 2002, the Company had outstanding, an irrevocable $1.2
million standby letter of credit in connection with its real estate lease on
the Sunnyvale, California facility and an irrevocable $2.0 million standby
letter of credit in connection with its real estate lease on the Woburn,
Massachusetts facility.  In both cases, these were required under the terms of
the real estate leases.  The financial institution issuing the letters of
credit requires collateral to be pledged against these outstanding letters of
credit.  As of June 30, 2002, the Company had pledged $3.7 million of US
government obligations as collateral at the issuing financial institution.


<PAGE>


                     OAK TECHNOLOGY, INC. AND SUBSIDIARIES

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)


     As of June 30, 2001, all investments were considered available-for-sale
securities and consisted of the following (in thousands):


<TABLE>
<CAPTION>
                                                                    Estimated
                                             Amortized  Unrealized    Fair
                                                Cost       Gain       Value
                                                ----       ----       -----
<S>                                         <C>             <C>        <C>
Money market funds.........................  $ 25,141     $   --     $ 25,141
Certificates of deposit....................       517         --          517
Corporate notes............................    46,119        447       46,566
US government obligations..................    48,484        691       49,175
Equity securities..........................     2,629         --        2,629
                                             --------     ------     --------
                                             $122,890     $1,138     $124,028
                                             ========     ======     ========

</TABLE>

     As of June 30, 2001, approximately $31.6 million of these investments had
contractual maturities within one year and approximately $92.4 million had
contractual maturities between one and two years.  These investments were
classified on the consolidated balance sheet as follows (in thousands):


<TABLE>
<S>                                                                <C>
Cash and cash equivalents.......................................... $ 25,141
Short-term investments.............................................   98,887
                                                                    --------
                                                                    $124,028
                                                                    ========

</TABLE>

     As of June 30, 2001, the Company had an outstanding irrevocable $2.0
million standby letter of credit in connection with its real estate lease on
the Woburn, Massachusetts facility.  This letter of credit was required under
the terms of the real estate lease.  The financial institution issuing the
letter of credit requires collateral to be pledged against the outstanding
letter of credit.  As of June 30, 2001, the Company had pledged $2.2 million of
US government obligations as collateral at the issuing financial institution.


(4)  INVENTORIES

     Inventories consisted of the following (in thousands):

<TABLE>
<CAPTION>

                                                              June 30,
                                                       ------------------------
                                                          2002         2001
                                                          ----         ----
<S>                                                     <C>         <C>
Purchased materials and work in process...............   $ 1,056     $ 3,724
Finished goods........................................     3,873       2,902
                                                         -------     -------
                                                         $ 4,929     $ 6,626
                                                         =======     =======

</TABLE>

                                      62


<PAGE>


                     OAK TECHNOLOGY, INC. AND SUBSIDIARIES

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)


(5)  PROPERTY AND EQUIPMENT, NET

     Property and equipment consisted of the following (in thousands):



<TABLE>
<CAPTION>

                                                              June 30,
                                                       ------------------------
                                                          2002         2001
                                                          ----         ----
<S>                                                     <C>         <C>
Land..................................................   $  3,487    $  3,487
Building, vehicles and leasehold improvements.........      4,922       3,017
Computers, equipment and purchased software...........     43,209      38,155
Furniture and fixtures................................      1,921       2,723
                                                         --------    --------
                                                           53,539      47,382
Less accumulated depreciation and amortization........    (34,578)    (28,934)
                                                         --------    --------
                                                         $ 18,961    $ 18,448
                                                         ========    ========

</TABLE>


(6)  INTANGIBLE ASSETS, NET

     Intangible assets consisted of the following (in thousands):

<TABLE>
<CAPTION>

                                                               June 30,
                                                       ------------------------
                                                          2002         2001
                                                          ----         ----
<S>                                                     <C>         <C>
Purchased technology..................................   $ 29,094    $ 29,094
Goodwill..............................................     23,443      20,328
Other intangibles.....................................      6,309       6,309
                                                         --------    --------
                                                           58,846      55,731
Accumulated amortization..............................    (38,960)    (26,394)
                                                         --------    --------
                                                         $ 19,886    $ 29,337
                                                         ========    ========

</TABLE>

     At June 30, 2002 and 2001, intangible assets consisted of purchased
technology, goodwill and other miscellaneous intangibles acquired via a series
of acquisitions including Accel, Xionics, Viewpoint, XLI and ODEUM.  Purchased
technology and other specific intangibles such as acquired workforce, patents,
tradename and other miscellaneous acquisition expenses have been identified via
independent fair value appraisals.  Goodwill represents the excess purchase
price over the fair value of assets acquired.  See Note 10 for a more in-depth
discussion of each acquisition.  All intangible assets are being amortized over
a period of three to five years from the respective dates of acquisition.  Upon
adoption of SFAS No. 142 for the fiscal year starting July 1, 2002, the Company
will no longer amortize goodwill, and assembled workforce with a net carrying
value of approximately $13.3 million at June 30, 2002.  At June 30, 2002, there
are approximately $7 million of net intangible assets remaining on the balance
sheet that will continue to amortize, approximately $5 million of which will
amortize in fiscal 2003.


                                      63


<PAGE>

                     OAK TECHNOLOGY, INC. AND SUBSIDIARIES

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)


 (7)  ACCRUED EXPENSES

     Accrued expenses consisted of the following (in thousands):


<TABLE>
<CAPTION>

                                                               June 30,
                                                       ------------------------
                                                          2002         2001
                                                          ----         ----
<S>                                                     <C>         <C>
Compensation and benefits related items...............   $  4,520    $  5,366
Accrued legal and other fees..........................        521         365
Taxes payable.........................................      6,502       1,503
Royalties.............................................         --         139
Restructuring (see Note 17)...........................      2,057         831
Other.................................................      3,351       5,476
                                                         --------    --------
                                                         $ 16,951    $ 13,680
                                                         ========    ========

</TABLE>


(8)  REVOLVING LINE OF CREDIT

     The Company has established a revolving credit line with two Taiwanese
financial institutions.  Under these arrangements, the Company may borrow up to
an aggregate amount of approximately $7.7 million subject to annual renewal
without collateral.  As of June 30, 2002 and 2001, there were no borrowings
outstanding at any financial institution.


(9)  OTHER NON-OPERATING INCOME

     Non-operating income, net consisted of the following (in thousands):



<TABLE>
<CAPTION>

                                                      Year Ended June 30,
                                                -------------------------------
                                                   2002       2001       2000
                                                   ----       ----       ----
<S>                                             <C>        <C>       <C>
Interest income................................. $  5,838   $  8,009  $  6,555
Interest expense................................       --        (59)      (32)
Foreign currency gain (loss)....................      242       (207)      760
Loss on equity method investments...............       --         --    (1,863)
Other income....................................      539        686       752
                                                 --------   --------  --------
                                                 $  6,619   $  8,429  $  6,172
                                                 ========   ========  ========

</TABLE>


(10)  ACQUISITIONS, DIVESTITURES AND INVESTMENTS

     Acquisitions
     ------------

     On July 5, 2001, the Company acquired privately held Accel Technology,
K.K. ("Accel") a company based in Osaka, Japan which develops the mechanical
construction and design of computers and relevant equipment, such as CD-R/RW
drives and DVD players.  This acquisition allows Oak to move more quickly into
the consumer space by providing turnkey platforms to consumer electronics
customers to minimize their development efforts.  The Company paid
approximately $3.2 million in cash for all the outstanding common shares and
stock options of Accel.  The transaction has been accounted for under SFAS No.
141, "Business


                                      64


<PAGE>

                     OAK TECHNOLOGY, INC. AND SUBSIDIARIES

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)


Combinations," using the purchase method of accounting.  The results of
operations of Accel have been included in the results of Oak's consolidated
financial statements from July 12, 2001.  The historical operations of Accel
are not material to the financial position or results of operations of the
Company; therefore, no pro forma information is presented.  The acquisition
resulted in goodwill of approximately $3.1 million which is not being amortized
in accordance with the provisions of SFAS 141 and 142.

     On April 24, 2000 the Company signed an Asset Purchase Agreement by and
between Oak, TCD Labs and the shareholders of TCD Labs.  Under the agreement,
the Company paid $1.5 million in cash for the net assets of TCD and may be
liable for an additional $1.5 million in contingent payments for the
achievement of specific milestones, as well as a percentage of the direct
contribution margins, both of which may be earned over the next three years.
The acquisition was accounted for using the purchase method of accounting.

     On January 11, 2000, the shareholders of both the Company and Xionics
Document Technologies, Inc. (Xionics) approved a definitive acquisition
agreement.  Xionics designs, develops and markets innovative software and
silicon solutions for printing, scanning, copying, processing and transmitting
digital documents to computer peripheral devices that perform document imaging
functions.  Such devices include printers, copiers, scanners and multifunction
peripherals that perform a combination of these imaging functions.  Under the
terms of the acquisition agreement, Oak issued approximately 9.5 million shares
of its common stock and paid approximately $34.7 million in cash to acquire all
of the common stock of Xionics.  The Company recorded a charge of approximately
$9.9 million against earnings in the third fiscal quarter of 2000 in order to
write off the cost of in-process research and development acquired in the
merger.

     At the acquisition date, Xionics had several in-process research and
development projects in each of its product groups: languages, drivers, MFP's
and its new complementary product for a Tandem copy/print engine. In each
product group there were projects that had not yet achieved technological
feasibility.  As image processing represents a very specialized market, it is
unlikely that Xionics' in process technology could be successfully deployed in
alternative market applications.  Further, it was determined that there was
significant technological risk and substantial development expenses relating to
each of the products under development.  As a result, the Company took a $9.9
million charge against earnings in fiscal 2000 in order to reflect an
allocation of the purchase price associated with the value of the in process
research and development which, due to its uncertain future value at the date
of acquisition, could not be considered an investment in an asset.

     The valuation of the acquired in-process research and development used by
the Company was supported by independent fair valuation studies.  The estimated
value of in-process research and development was derived using the "Income
Approach", which values an asset based on future cash flows that could
potentially be generated by the asset over its estimated useful life.  The
future cash flows were discounted to their present value utilizing a discount
rate of 14%.  The amounts of the purchase price technology assigned to the fair
values of in-process research and development and purchased technology
represent management's best estimate.  The Company did not anticipate any
material changes from historical pricing, margins and expense levels in its
valuation assumptions.

     In addition to the $9.9 million charge taken, approximately $45.8 million
(representing the fair value of net intangible assets acquired in the merger)
has been recorded as intangible assets on the Company's balance sheet and is
being amortized over three to five years.  The $45.8 million is made up of
$18.6 million in purchased technology, $18.9 million in Goodwill and $8.3
million in other miscellaneous intangible assets including Acquired Workforce,
Patents, Tradename and certain acquisition costs.  The transaction has been
accounted for under the purchase method of accounting, and accordingly, the
financial statements include the results of operations of Xionics from the date
of acquisition.


                                      65


<PAGE>

                     OAK TECHNOLOGY, INC. AND SUBSIDIARIES

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)


     The amounts and components of the purchase price and the allocation of the
purchase price to assets purchased are as follows (in thousands):

<TABLE>
<S>                                                               <C>
Cash............................................................   $34,715
Common stock....................................................    36,793
Fair value of Xionics stock options assumed.....................     8,380
                                                                   -------
  Total purchase price..........................................   $79,888
                                                                   =======

Fair value of net tangible assets of Xionics....................   $24,187
Intangible assets and goodwill..................................    45,843
Purchase of in-process research and development.................     9,858
                                                                   -------
     Total net tangible and intangible assets acquired..........   $79,888
                                                                   =======

</TABLE>

     The following unaudited pro forma financial information presents the
combined results of operations of Oak and Xionics as if the acquisition had
occurred as of the beginning of fiscal 2000 after giving effect to certain
adjustments, including amortization of intangibles.  The unaudited pro forma
financial information does not necessarily reflect the results of operations
that would have occurred had the combined companies constituted a single entity
during such periods, and is not necessarily indicative of results which may be
obtained in the future.


<TABLE>
<CAPTION>
                                                                June 30,
                                                                  2000
                                                                  ----
<S>                                                            <C>
In thousands except for per share data:
Pro forma revenues............................................. $104,721
Pro forma net loss............................................. $(35,682)
Pro forma basic and diluted loss per share..................... $  (0.68)

</TABLE>

     Equity Investments
     ------------------

     During the second quarter of fiscal 2000 the Company made an equity
investment in a start-up venture, Earjam.com, with a first payment of
approximately $1.0 million for a minority equity position.  The Company
recorded a charge of $0.2 million against earnings in the second fiscal quarter
of 2000 to write-off the amount of the investment allocated to in-process
research and development.  In January 2000, the Company made an additional $2.0
million payment in Earjam.com during the third quarter of fiscal 2000 and
recorded an additional special charge of $0.3 million in the third fiscal
quarter of 2000 to write-off the remaining amount of the investment allocated
to in-process research and development.  The amounts allocated to the in-
process research and development charges during the second and third quarters
of fiscal 2000 were determined through an established valuation technique used
in the high technology industry.  The amount allocated to in-process research
and development was expensed upon acquisition, because technological
feasibility had not been established and no alternative uses exist.  The
investment has been accounted for under the equity method of accounting.
Although the companies are continuing to work together, as of June 30, 2000,
due to a shift in the sentiment of the equity markets with respect to financing
internet based start-up ventures and concerns about Earjam.com's ability to
finance ongoing operations, the Company decided to write-down the remaining
book value of this investment as the decline was other than temporary.


                                      66


<PAGE>

                     OAK TECHNOLOGY, INC. AND SUBSIDIARIES

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)


     Divestiture
     -----------

     On June 21, 2000, the Company received notice that a company in which it
held a small equity investment had been sold.  The Company had indirectly
acquired this equity interest through the acquisition of Xionics and valued it
at fair market value on the date of acquisition.  Subsequent to the
acquisition, significant economic events occurred that resulted in an increase
in the fair value of the investment.  Under the terms of the sales agreement,
Oak recorded a receivable for $2.6 million in other current assets which was
subsequently received and a gain in other income of $1.2 million.

     On January 19, 2000, the Company announced the sale of its broadband
business group located in the United Kingdom and associated intellectual
property in the United States to Conexant Systems, Inc.  Under the terms of the
agreement, Oak received $24.9 million in cash and 293,794 shares of Conexant
Systems Inc. common stock which had an original book value of $68.05 per share.
The Company realized a gain of $22.1 million from the sale.  During fiscal
2001, the Company reduced the basis of the shares of Conexant Systens Inc.
common stock to a book value of $8.95 as a result of an impairment in the
market value of the common stock which the Company believes is other than
temporary resulting in a charge to non-operating expenses of $17.4 million.

     On June 25, 2002, a stock dividend was declared to Conexant shareholders
in connection with the merger between Alpha Industries, Inc. and the wireless
communications business of Conexant to create and form Skyworks Solutions, Inc.
For each Conexant share, the Company received 0.351 shares of Skyworks
Solutions Inc., or a total of 103,121 shares, and will continue to hold their
existing Conexant shares.  For fiscal 2002, the Company reduced the combined
basis in these two investments to a book value of $1.62 per share for Conexant
shares and $5.55 per share for Skyworks shares due to a further decline in the
market value of the common stock which the Company believes to be other than
temporary resulting in an additional charge to non-operating expenses of $1.6
million.


 (11)  INCOME TAXES

     The components of the income tax expense are as follows (in thousands):


<TABLE>
<CAPTION>

                                                      Year Ended June 30,
                                                -------------------------------
                                                   2002       2001       2000
                                                   ----       ----       ----
<S>                                             <C>        <C>       <C>
Current:
  Federal....................................... $     --   $    120  $     --
  State.........................................       --         --         2
  Foreign.......................................    1,741      3,016       739

Deferred:
  Federal.......................................       --         --        --
  State.........................................       --         --        --
  Foreign.......................................      389     (1,086)     (741)
                                                 --------   --------  --------
Total income tax expense........................ $  2,130   $  2,050  $     --
                                                 ========   ========  ========

</TABLE>


                                      67


<PAGE>

                     OAK TECHNOLOGY, INC. AND SUBSIDIARIES

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)


     The domestic and foreign components of the net loss before income taxes
are as follows (in thousands):


<TABLE>
<CAPTION>

                                                      Year Ended June 30,
                                                -------------------------------
                                                   2002       2001       2000
                                                   ----       ----       ----
<S>                                             <C>        <C>       <C>
US net loss before income taxes................. $(27,062)  $(32,313) $(31,102)
Foreign net income (loss) before income taxes...    2,242      3,731    (1,760)
                                                 --------   --------  --------
Net loss before income taxes.................... $(24,820)  $(28,582) $(32,862)
                                                 ========   ========  ========


</TABLE>


     A reconciliation between the income tax expense (benefit) computed at the
federal statutory rate and the effective tax rate is as follows (in thousands):


<TABLE>
<CAPTION>
                                                      Year Ended June 30,
                                                -------------------------------
                                                   2002       2001       2000
                                                   ----       ----       ----
<S>                                             <C>        <C>       <C>
Benefit at federal statutory tax rate........... $ (8,687)  $(10,003) $(11,502)
State income tax, net of federal benefit........       --         --         2
Rate differential on foreign income including
  withholding taxes.............................    2,043        662        (2)
Goodwill amortization...........................    1,490      1,603       797
Utilization of prior year net operating loss....       --     (2,580)       --
Valuation allowance.............................    7,284     12,368    10,705
                                                 --------   --------  --------
Total income tax expense........................ $  2,130   $  2,050  $     --
                                                 ========   ========  ========

</TABLE>

     The tax effects of temporary differences that give rise to deferred tax
assets and deferred tax liabilities are as follows (in thousands):

<TABLE>
<CAPTION>

                                                               June 30,
                                                       ------------------------
                                                          2002         2001
                                                          ----         ----
<S>                                                     <C>          <C>
Deferred Tax Assets:

  Net operating loss carryforwards.....................  $ 34,271     $ 44,920
  Tax credits..........................................    16,301       18,482
  Various reserves and accruals........................     6,250        7,620
  Acquired intangibles.................................     1,257           --
  Other................................................       508          651
  Capitalized research and development.................     1,244           --
                                                         --------     --------
    Total gross deferred tax assets....................    59,831       71,673
  Less valuation allowance.............................   (59,031)     (68,781)
                                                         --------     --------
  Gross deferred tax assets, net of valuation allowance       800        2,892
Deferred Tax Liabilities:
  Acquired intangibles.................................        --       (1,108)
  Fixed assets depreciation differences................      (800)      (1,395)
                                                         --------     --------
  Total gross deferred tax liabilities.................      (800)      (2,503)
                                                         --------     --------
  Net deferred tax assets..............................  $     --     $    389
                                                         ========     ========

</TABLE>


                                      68

<PAGE>

                     OAK TECHNOLOGY, INC. AND SUBSIDIARIES

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)


     The Company has set up a valuation allowance of $59,031,000 as of June 30,
2002.  Given the recent operating results of the Company, management believes a
full valuation is warranted.  Included in the valuation allowance as of June
30, 2002 is tax benefits attributable to non-compensatory stock options of
$16,433,000 which, when realized, will be a credit to additional paid-in-
capital.

     As of June 30, 2002 and 2001, the Company has federal and state net
operating loss ("NOL") carryforwards of approximately $91,387,000 and
$109,521,000, respectively, available to reduce future income subject to income
taxes.  The federal net operating loss carryforwards will begin to expire in
fiscal year 2019.  As of June 30, 2002 and 2001, the Company has state net
operating loss carryforwards of approximately $54,080,000 and $73,240,000,
respectively.  State net operating loss carryforwards expire in fiscal years
2004 through 2006.

     As of June 30, 2002 and 2001, the Company has federal research and
experimentation credit carryforwards of approximately $9,250,000 and
$7,442,000, respectively, which expire from 2011 to 2021.  The Company also has
state research and experimentation tax credit carryforwards of approximately
$8,654,000 and $6,334,000, respectively, which will be carried forward
indefinitely.

     As of June 30, 2002 and 2001, the cumulative amount of unremitted earnings
of non-US subsidiaries which the Company had not provided US taxes is
approximately $5,410,000 and $13,171,000, respectively.  The additional taxes
that could arise if those earnings were to be remitted to the US would not be
material after consideration of existing foreign tax credits.  It is
management's intent that these earnings will remain indefinitely invested
outside the US.


(12)  COMMITMENTS

     Leases
     ------

     The Company leases its US headquarters and certain facilities and
equipment under non-cancelable operating leases.  The Company is responsible
for its share of expenses under the terms of certain of the leases.

     Future minimum lease payments under non-cancelable operating leases are as
follows (in thousands):


<TABLE>
<CAPTION>

     Year Ending June 30,
     --------------------
    <S>                                                               <C>
     2003..........................................................    $ 6,536
     2004..........................................................      6,308
     2005..........................................................      6,316
     2006..........................................................      6,602
     2007..........................................................      4,149
     Thereafter....................................................        295
                                                                       -------
                                                                       $30,206
                                                                       =======

</TABLE>

     Rent expense was approximately $4,193,000, $3,103,000 and $2,602,000 for
the years ended June 30, 2002, 2001 and 2000, respectively.


                                      69

<PAGE>

                     OAK TECHNOLOGY, INC. AND SUBSIDIARIES

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)


     Inventory Purchase Commitments
     ------------------------------

     The Company subcontracts all of its manufacturing to independent
foundries.  As of June 30, 2002 and 2001, the Company had approximately $5.3
million and $4.4 million, respectively, in outstanding non-cancelable purchase
commitments with various wafer fabrication subcontractors.


(13)  CONTINGENCIES

     The Company and various of its directors and former officers are parties
to a consolidated class action lawsuit filed on behalf of all persons who
purchased or acquired the Company's common stock (excluding the defendants and
parties related to them) for the period July 27, 1995 through May 22, 1996.
This state court proceeding, designated IN RE OAK TECHNOLOGY SECURITIES
LITIGATION, Master File No. CV758510 was filed in Santa Clara County Superior
Court in Santa Clara, California.  The plaintiffs alleged violations of
California securities laws and statutory deceit provisions as well as breaches
of fiduciary duty and abuse of control.  The plaintiffs sought unspecified
monetary damages.  The court dismissed all claims except the California
Corporations Code Sections 25400/25500 cause of action against the Company,
four officers and the Company's investment bankers and securities analysts.

     On July 16, 1998, the court provisionally certified a national class of
all persons who purchased the Company's stock during the class period.  On
August 5, 2000 the court granted Company's motion for summary judgment and
entered judgment in favor of the Company.  The plaintiffs have appealed the
court's decision which is currently under review by the Sixth District Court of
Appeal.  Based on its current information, the Company believes this suit to be
without merit and will continue to defend its position vigorously.  Although it
is reasonably possible the court's ruling may be overturned on appeal and the
Company may incur a loss upon an adverse conclusion of these claims, an
estimate of any such loss cannot be made.

     Additionally, various of the Company's directors and former officers are
defendants in three consolidated derivative actions pending in Santa Clara
County Superior Court in Santa Clara, California, entitled IN RE OAK TECHNOLOGY
DERIVATIVE ACTION, Master File No. CV758510.  This lawsuit, which asserts a
claim for breach of fiduciary duty and a claim under California securities law
based upon the officers' and directors' trading in securities of the Company,
has been stayed pending resolution of the above described class actions.  The
plaintiffs are seeking monetary damages, equitable relief and an accounting for
the defendants' sales of shares of the Company's common stock.  Based on its
current information, the Company believes the suits to be without merit and
will defend its position vigorously.  Although it is reasonably possible the
Company may incur a loss upon conclusion of these claims, an estimate of any
such loss cannot be made.

     If any of the above pending actions are decided adversely to the Company,
it would likely have a material adverse affect on the Company's financial
condition, cash flows and results of operations.

     On October 27, 1997, the Company filed a complaint in the United States
District Court, Northern District of California against UMC for breach of
contract, breach of the covenant of good faith and fair dealing and fraud based
on UMC's breach of a settlement agreement entered into by Oak and UMC as a
means to resolve an ITC action filed by Oak based on the Company's belief that
UMC was violating U.S. trade laws by the unlicensed importing or selling of
certain CD-ROM controllers that infringed one or more of the Company's United
States patents. Under the terms of the settlement agreement, effective July 31,
1997, UMC agreed to cease and desist the manufacture and/or importation into
the United States of its specified CD-ROM controllers, except under certain
limited conditions which expired on January 31, 1998.  The settlement agreement
additionally provided for the withdrawal of the Company's ITC complaint against
UMC.

     On December 24, 1997, UMC answered the Company's complaint and
counterclaimed by asserting causes of action for rescission, restitution,
fraudulent concealment, mistake, lack of mutuality, interference and


                                      70

<PAGE>

                     OAK TECHNOLOGY, INC. AND SUBSIDIARIES

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)


declaratory judgment of non-infringement, invalidity and unenforceability of
the Oak patent that was the subject of the ITC action filed against UMC.

     In a related action to the lawsuit that was commenced by the Company
against UMC, on December 19, 1997, MediaTek, a UMC affiliated, Taiwanese
entity, filed a complaint in the United States District Court, Northern
District of California, against the Company for declaratory judgment of non-
infringement, invalidity and unenforceability of the Oak patent that was the
subject of the original ITC action against UMC, and intentional interference
with prospective economic advantage.  The Company filed its answer on January
8, 1998, denying all the allegations.  The Company believes UMC's counterclaims
and Mediatek's claims to be without merit.

     On June 11, 1998, the cases were consolidated for all purposes and stayed
under 28 U.S.C. Section 1659, based on the judge's conclusion that the civil
action involves the same issues before the International Trade Commission,
initiated by Oak a second time as a result of the alleged breach of the
settlement agreement.  The stay was lifted due to the final resolution of the
second ITC investigation and the decision of the Federal Circuit Court of
Appeals on May 2, 2001 affirming the Commission's determination that there was
no infringement of the Company's U.S. Patent No. 5,581, 715. The Federal
Circuit Court of Appeals did not review the Commission's determination that the
Company's U.S. Patent No. 5,581,715 was valid and enforceable.  As a result of
the decision rendered by the Federal Circuit Court of Appeals, and the lifting
of the stay on the consolidated action pending in the United States District
Court, Northern District of California, the parties are proceeding with the
litigation. The trial in is scheduled to commence in January 2003.

     If any of the above pending actions with respect to UMC and MediaTek are
decided adversely to the Company, it would likely have a material adverse
affect on the Company's financial condition, cash flows and results of
operations.

     On January 4, 2001 Samsung Electronics, a customer of the Company's
Imaging Group, received a notification from Pitney Bowes alleging that the
resolution enhancement technology (iRET) Samsung acquired from Xerographic
Laser Images Corporation, Inc. ("XLI") in 1996 infringes Pitney Bowes U.S.
Patent No. 4,386,272 ("272 patent").  XLI is a subsidiary of the Company as a
result of an acquisition in the first quarter of Fiscal Year 1999.  The terms
of the agreement for the licensing of the iRET technology to Samsung require
the Company, as successor in interest to XLI's assets and liabilities, to
defend and indemnify Samsung from claims alleging the iRET technology supplied
to Samsung infringes the intellectual property rights of a third party.  On
June 18, 2001 Pitney Bowes filed a complaint in the District Court of
Connecticut, naming Samsung and others, claiming infringement of the '272
patent.  On June 28, 2001 Samsung formally requested the Company to defend
Samsung and the Company agreed to do so.  Other XLI customers are also subject
to Pitney Bowes allegation of infringement of the '272 patent.  On September 7,
2001, the Company filed a motion to intervene on behalf of itself and for the
benefit of any of its customers who may be subject to the Pitney Bowes
allegations, in the District Court of Connecticut.  The motion to intervene was
granted on December 12, 2001.  On February 5, 2002, this action was transferred
to the United States District Court, District of Kentucky.  The parties are
proceeding with this litigation.

     If the above pending action, with respect to the Company's indemnification
obligation in such action, is decided adversely, it would likely have a
material adverse affect on the Company's financial condition, cash flows and
results of operations.

     In January of 2002, the Company received a notice letter of infringement
from Syndia Corporation, an assignee of U.S. Patent No. 4,702, 808 (" '808
patent") and U.S. Patent No. 5,131,941(" '941 patent") issued to Mr. Jerome
Lemelson. The '808 and '941 patents claim certain plasma enhanced chemical
vapor deposition etch processes that are use in the manufacture of
semiconductor chips. The notice letter asserts that the Company's use and sale
of semiconductor chips manufactured using processes claimed by the '808 and
'941 patents constitutes an infringement The Company uses TSMC to manufacture
its semiconductor products, and has notified TSMC of the claims made by Syndia.
The terms of an indemnification agreement between the Company


                                      71

<PAGE>

                     OAK TECHNOLOGY, INC. AND SUBSIDIARIES

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)


and TSMC require TSMC to indemnify Oak from claims alleging the manufacturing
processes used by TSMC infringes the intellectual property rights of a third
party. Pursuant to the terms of the indemnification agreement between the
parties, TSMC has agreed to indemnify and hold the Company harmless against the
claims made by Syndia.

     If TSMC fails to indemnify and hold the Company harmless, and Syndia is
successful in its claim for infringement, it would likely have a material
adverse affect on the Company's financial condition, cash flows and results of
operations.


(14)  STOCKHOLDERS' EQUITY

     The Company is authorized to issue two classes of stock, preferred stock
and common stock, each with a par value of $0.001 per share.  The Company has
paid no cash dividends on its Common Stock since its incorporation and
anticipates that for the foreseeable future it will continue to retain any
earnings for use in its business.


     Preferred Stock
     ---------------

     The Company's Board of Directors has authorized 2,000,000 undesignated
shares of preferred stock; none of these preferred shares have been issued.
The Board is authorized, subject to any limitations prescribed by Delaware law,
to provide for the issuance of shares of preferred stock in one or more series,
to establish the number of shares to be included in each series, and to fix the
powers, preferences and rights of the shares.


     Stock Repurchase Plan
     ---------------------

     On January 22, 1998, the Company announced that its board of directors had
authorized the repurchase of up to 2.0 million shares of its common stock
either in the open market or in private transactions.  As of June 30, 1999 the
Company had repurchased all 2.0 million shares for approximately $9.4 million.
On July 29, 1999 the Company announced that its Board of Directors had approved
a stock repurchase plan authorizing up to an additional four million shares of
the Company.  Repurchase was to be made from time to time at certain price
thresholds over a one-year period.  In fiscal 2000, the Company repurchased an
additional 381,000 of its common stock for $1.8 million at $4.78 per share.  As
of June 30, 2000, the Company was holding approximately 2.4 million shares in
treasury stock for approximately $11.3 million.  On January 23, 2001, the
Company's Board of Directors approved a stock repurchase authorizing the
repurchase of up to four million shares of Oak Technology common stock in the
open market or privately negotiated transactions over a one year period, unless
further extended by the Board.  The plan authorized but does not require the
Company to repurchase all four million shares.  During fiscal 2001, the Company
repurchased 1,915,000 of its common stock for approximately $12.0 million at an
average price of $6.275 per share.  As of June 30, 2002, the Company has
approximately 4.3 million shares of treasury stock at a book value of
approximately $23.3 million.


     Stock Options
     -------------

     Upon the re-incorporation of the Company in Delaware in February 1995, the
Company assumed the obligations of its predecessor under the 1988 Stock Option
Plan (the "1988 Plan"), as amended and restated.  The Company does not intend
to issue any additional options under the 1988 Plan.

     In December 1994, the Board of Directors approved the 1994 Stock Option
Plan (the "1994 Plan") under which 6,000,000 shares of Common Stock, determined
after the effect of a two for one stock split, were reserved for issuance.
6,000,000 additional shares were approved in November 1998, 1,900,000 shares
were


                                      72

<PAGE>


                     OAK TECHNOLOGY, INC. AND SUBSIDIARIES

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)


approved in December 2000 and 1,900,000 shares were approved in February 2002.
Under the 1994 Plan, either incentive or non-qualified options to purchase the
Company's common stock may be granted to employees as determined by the Board
of Directors at prices generally at market value at the date of grant (110% in
certain cases of non-qualified options).  Non-qualified options may be granted
to employees, other non-employee directors and consultants as determined by the
Board of Directors at prices not lower than 85% of market value at the date of
grant.  The Board of Directors also has the authority to set exercise dates
(generally no longer than five years from date of grant), payment terms and
other provisions for each grant.

     In December 1994 the Board of Directors also approved the 1994 Outside
Directors' Stock Option Plan (the "Directors Plan"), under which 500,000 shares
of Common Stock, determined after the effect of a two for one stock split, were
reserved for issuance.  The Directors Plan provides for the automatic grant of
options to purchase shares of Common Stock to non-employee Directors of the
Company.

     On July 17, 2001, the Company's Board of Directors authorized a stock
option exchange program in which employees who held Oak options at a grant
price of $15.00 or above had the option to exchange their existing options for
new options to be issued at a later date (at least 6 months from date of
cancellation) or to continue to hold the options they presently hold.  In
accordance with the exchange program, 776,480 existing options were cancelled
on September 14, 2001 and were replaced with new grants on March 18, 2002.

     Stock options are subject to vesting, generally over 50 months, and
typically have a ten-year life.  Under the 1988 Plan, shares are exercisable
prior to vesting and are held in escrow until vested; however, unvested shares
are subject to a right of repurchase by the Company at their original purchase
price upon termination of employment.  Unexercised options expire 90 days after
termination of employment with the Company.

     A summary of all the Company's stock option plans is set forth below:

<TABLE>
<CAPTION>

                                             Weighted                 Weighted
                                             Average                  Average
                                 Options     Exercise     Options     Exercise
                               Outstanding    Price     Exercisable    Price
                               -----------    -----     -----------    -----
<S>                           <C>           <C>         <C>           <C>
Balances, June 30, 1999....... 10,351,164    $ 3.44      2,417,486     $3.90
Granted.......................  7,509,503    $ 7.29
Exercised..................... (2,216,406)   $ 2.64
Canceled...................... (2,397,369)   $ 3.76
                               ----------
Balances, June 30, 2000....... 13,246,892    $ 5.70      5,005,923     $3.25
Granted.......................  3,968,580    $10.67
Exercised..................... (3,378,678)   $ 3.00
Canceled...................... (2,949,868)   $ 8.02
                               ----------
Balances, June 30, 2001....... 10,886,926    $ 7.72      4,076,770     $5.32
Granted.......................  5,164,980    $ 8.51
Exercised..................... (1,460,132)   $ 4.17
Canceled...................... (1,943,392)   $13.41
                               ----------
Balances, June 30, 2002....... 12,648,382    $ 7.58      4,565,006     $6.75
                               ==========

</TABLE>


     In connection with the Company's acquisition during fiscal 2000 of
Xionics, the Company assumed all outstanding options granted by Xionics prior
to the acquisition date which converted into 3.3 million Company options.


                                      73


<PAGE>

                     OAK TECHNOLOGY, INC. AND SUBSIDIARIES

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)


     The weighted average fair market values of options granted in fiscal years
2002, 2001 and 2000 were $6.36, $7.71 and $5.19, respectively.

     The following table provides information regarding the Company's
outstanding stock options in plans approved by stockholders compared to those
stock options issued outside of stockholder-approved plans as of June 30, 2002:


<TABLE>
<CAPTION>
                                    (a)            (b)             (c)
                                                                Number of
                                                                Security
                                                                Remaining
                                                              Available for
                                                             Future Issuance
                               Number of       Weighted       Under Equity
                              Securities   Average Exercise    Compensation
                             to be Issued      Price of      Plans (Excluding
                             Upon Exercise   Outstanding   Securities Reflected
                              of Options       Options        in Column (a))
                              ----------       -------        --------------
<S>                           <C>              <C>             <C>
Equity compensation plans
  approved by stockholders.... 11,343,382       $ 8.10          1,344,759
Equity compensation plans not
  approved by stockholders....  1,305,000       $ 3.00                 --
                              -----------                      ----------
Total......................... 12,648,382       $ 7.58          1,344,759
                              ===========                      ==========

</TABLE>

     The following table summarizes information about the stock options
outstanding as of June 30, 2002:


<TABLE>
<CAPTION>
                          Options Outstanding            Options Exercisable
                   --------------------------------- --------------------------
                                 Weighted
                                  Average    Weighted                 Weighted
                   Options at    Remaining    Average   Shares at     Average
                    June 30,  Contractual Life Exercise  June 30,     Exercise
Exercise Prices       2002      (Years)       Price        2002        Price
---------------       ----       -----        -----        ----        -----
<S>                <C>           <C>        <C>         <C>           <C>
$ 0.00 to $ 3.00     2,345,952    6.51       $ 2.79      2,045,122     $ 2.79
$ 3.01 to $ 4.00       522,402    6.59       $ 3.30        333,259     $ 3.28
$ 4.01 to $ 8.00     5,252,150    9.05       $ 5.89        630,458     $ 6.24
$ 8.01 to $12.00     1,529,697    8.83       $10.58        286,443     $11.32
$12.01 to $14.00     2,308,185    8.14       $13.03      1,226,782     $13.07
$14.01 to $26.00       689,996    9.43       $15.03         42,942     $18.35
                   -----------                          ----------
$ 0.00 to $26.00    12,648,382    8.30       $ 7.58      4,565,006     $ 6.75
                   ===========                          ==========

</TABLE>

     At June 30, 2002, options to purchase 1,344,759 shares were available for
future grants under the Company's stock option plans.


                                      74


<PAGE>

                     OAK TECHNOLOGY, INC. AND SUBSIDIARIES

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)


     Stock Purchase Plan
     -------------------

     In December 1994, the Board of Directors approved the 1994 Stock Purchase
Plan (the "Stock Purchase Plan") under which 600,000 shares of common stock
were reserved for issuance with the stock split; 1,000,000 additional shares
were approved in November 1998, 700,000 shares were approved in December 2000,
and 500,000 shares were approved in July 2002.  The Stock Purchase Plan permits
eligible employees to purchase shares at a price equal to 85% of the market
value at certain pre-defined dates.  Under the Stock Purchase Plan, 197,679,
189,520, and 444,012 shares were issued in fiscal years 2002, 2001 and 2000 at
weighted average prices of $7.58, $9.06 and $3.05 and weighted average fair
values of $3.61, $6.86 and $1.51, respectively.  At June 30, 2002, 719,283
shares were available for future issuance under the Stock Purchase Plan.


     Stockholders Rights Plan
     ------------------------

     On August 19, 1997 the Board of Directors of the Company declared a
dividend of one preferred share purchase right (a "Right") for each outstanding
share of Common Stock, par value $0.001 per share (the "Common Stock") of the
Company.  The dividend was payable on August 29, 1997 (the "Record Date") to
the stockholders of record on that date.  Each Right entitles the registered
holder to purchase from the Company one one-thousandth of a share (a "Unit") of
Series A Junior Participating Preferred Stock, par value $0.001 per share of
the Company at a price of $60.00 per Unit subject to adjustment.  The
description and terms of the Rights are set forth in a Rights Agreement dated
as of August 19, 1997 between the Company and BankBoston, N.A., as Rights
Agent.  The Rights expire on August 19, 2007.


     Fair Value Information
     ----------------------

     The Company applies APB Opinion 25 and related Interpretations in
accounting for its stock options plans.  As the fair value of the options at
the date of grant were equivalent to the exercise price, no compensation cost
has been recognized for its stock option plans or its Stock Purchase Plan.  Had
compensation cost for the Company's option plans been determined consistent
with FASB Statement No. 123, the Company's net loss and net loss per share
would have been increased to the pro forma amounts indicated below (in
thousands, except per share data):


<TABLE>
<CAPTION>
                                                      Year Ended June 30,
                                                -------------------------------
                                                   2002       2001       2000
                                                   ----       ----       ----
<S>                                             <C>        <C>       <C>
Net loss:
  As reported................................... $(26,950)  $(30,632) $(32,862)
  Pro forma..................................... $(42,627)  $(43,156) $(44,009)

Basic and diluted net loss per share:
  As reported................................... $  (0.49)  $  (0.56) $  (0.71)
  Pro forma..................................... $  (0.77)  $  (0.80) $  (0.96)

</TABLE>


                                      75

<PAGE>

                     OAK TECHNOLOGY, INC. AND SUBSIDIARIES

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)


     The fair value of each option grant is estimated on the date of grant
using the Black-Scholes option-pricing model with a dividend yield of zero
percent and the following weighted average assumptions:


<TABLE>
<CAPTION>

                              Stock Option Plans       Stock Purchase Plan
                            ----------------------    ----------------------
                            2002     2001    2000     2002     2001     2000
                            ----     ----    ----     ----     ----     ----
<S>                        <C>      <C>     <C>      <C>      <C>      <C>
Expected life (years)....   5.40     5.25    3.76     0.50     0.50     0.50
Expected volatility......     92%      88%     79%      92%      88%      79%
Risk-free interest rate..   4.37%    5.31%   6.11%    2.55%    5.27%    6.11%

</TABLE>


(15)  EMPLOYEE BENEFIT PLAN

     In July 1990, the Company adopted a 401(k) Profit Sharing Plan ("401(k)
Plan") which is intended to qualify under section 401(k) of the Internal
Revenue Code of 1986, as amended.  The 401(k) Plan covers substantially all of
the Company's US employees.  Participants may elect to contribute a percentage
of their compensation to this plan, up to the statutory maximum amount.  The
Company makes contributions to the 401(k) Plan based on 25% of an employee's
contribution up to a maximum of 1.25% of total compensation.  Approximately
$412,000, $408,000 and $326,000 in matching contributions were recorded during
fiscal years 2002, 2001 and 2000, respectively.


(16)  RESTRUCTURING

     During fiscal 2002, the Company recorded restructuring charges of $3.2
million related to the reduction in force of approximately 70 employees company
wide due to the restructuring of the overall business as well as additional
probable losses on a sublease where the tenant experienced financial difficulty
and abandoned the facility with approximately five years remaining on the
sublease.  The Company expects that the remaining amounts payable under the
terms of the sublease will be paid in cash by the end of fiscal 2003.  All
severance related amounts are expected to be paid in cash prior to December 31,
2002.

     During fiscal 2001, the Company recorded restructuring charges of $2.6
million related to the reduction in force due to the restructuring of the
overall business and the planned sublease of the resulting excess office space
offset by a recovery of $0.8 million related to fiscal 2000 restructuring.
Approximately 30 employees were included in the reduction in force.  During
fiscal 2000, the Company had accrued $3.3 million as restructuring charges,
primarily related to the abandonment of its leased facility in Andover,
Massachusetts.  The Company was able to negotiate a new sublease of the
previously abandoned facility.  This recovery resulted in a net restructuring
charge of $1.8 million to the fiscal 2001 income statement.

     The expenses relating to the fiscal 2001 and 2002 restructuring charges
are summarized as follows (in thousands):


<TABLE>
<CAPTION>

                          Severance     Facilities       Other         Total
                          ---------     ----------       -----         -----
<S>                       <C>            <C>             <C>          <C>
Balance, June 30, 2000..   $    --        $ 1,270         $   --       $ 1,270
Provision recorded......     1,631             --            134         1,765
Provision utilized......    (1,631)          (538)           (35)       (2,204)
                           -------        -------         ------       -------
Balance, June 30, 2001..        --            732             99           831
Provision Recorded......     2,124          1,089             --         3,213
Provision Utilized......    (1,740)          (164)           (83)       (1,987)
                           -------        -------         ------       -------
Balance, June 30, 2002..   $   384        $ 1,657         $   16       $ 2,057
                           =======        =======         ======       =======

</TABLE>

                                      76

<PAGE>

                     OAK TECHNOLOGY, INC. AND SUBSIDIARIES

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)


(17)  SEGMENT INFORMATION

     SFAS No. 131 establishes standards for the reporting by public business
enterprises of information about operating segments, products and services,
geographic areas, and major customers.  The method for determining what
information to report is based on the way that management organizes the
operating segments within the Company for making operational decisions and
assessments of financial performance.  The Company's chief operating decision-
maker is considered to be the chief executive officer ("CEO").

     For the first two quarters of fiscal year 2000, Oak Technology had three
reportable segments offering different product lines to each of its target
markets: Optical Storage, Imaging and Consumer.  The Optical Storage Group
provides high-performance controllers for CD-ROM and CD-RW to OEM's who serve
the optical storage market.  The Imaging Group provides high-performance
imaging systems for the digital imaging environment, including products used in
digital laser copiers and printers as well as multifunction peripherals.  The
Consumer Group targeted its products for the digital entertainment system
market, with focus on integrated circuits for video disk player systems (DVD
and VCD) and digital broadcast applications.  With the sale of the broadband
business to Conexant in early January 2000, the Company has two remaining
reportable segments: Optical Storage and Imaging.  The Company evaluates
operating segment performance based on net revenues and direct operating
expenses of these segments.  The accounting policies of the operating segments
are the same as those described in the summary of accounting policies.  Imaging
segment information reported for the fiscal year ended June 30, 2001 and 2000
includes the effects of the Xionics acquisition completed on January 11, 2000.
The Company does not allocate assets to its individual operating segments.  No
reportable segments have been aggregated.

     Information about reported segment income or loss is as follows for the
years ended June 30, 2002, 2001 and 2000 (in thousands):



<TABLE>
<CAPTION>

                                                 2002       2001       2000
                                                 ----       ----       ----
<S>                                           <C>         <C>       <C>
Net revenues:
  Optical Storage............................. $ 98,743    $116,864   $ 36,035
  Imaging.....................................   47,890      59,319     46,156
  Consumer....................................       --          --      4,264
                                               --------    --------   --------
                                               $146,633    $176,183   $ 86,455
                                               ========    ========   ========

Cost of goods sold and direct operating
  expenses:
  Optical Storage............................. $ 96,145    $104,346   $ 43,764
  Imaging.....................................   31,055      38,162     37,118
  Consumer....................................       --          --      9,843
                                               --------    --------   --------
                                               $127,200    $142,508   $ 90,725
Contribution Margin:
  Optical Storage............................. $  2,598    $ 12,518   $ (7,729)
  Imaging.....................................   16,835      21,157      9,038
  Consumer....................................       --          --     (5,579)
                                               --------    --------   --------
                                               $ 19,433    $ 33,675   $ (4,270)
                                               ========    ========   ========

</TABLE>


                                      77


<PAGE>


                     OAK TECHNOLOGY, INC. AND SUBSIDIARIES

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)


     A reconciliation of the totals reported for the operating segments to the
applicable line items in the consolidated financial statements for the fiscal
years ended June 30, 2002, 2001 and 2000 is as follows (in thousands):


<TABLE>
<CAPTION>

                                                 2002       2001       2000
                                                 ----       ----       ----
<S>                                           <C>        <C>       <C>
Contribution margin from operating segments..  $ 19,433   $ 33,675  $  (4,270)

Indirect costs of goods sold and expenses....    26,384     28,993     25,562
Amortization of intangibles..................    12,566     14,716     10,516
Depreciation expense.........................     7,128      7,841      6,943
Acquired in-process research and development.        --         --     10,533
Restructuring expenses.......................     3,213      1,765      3,285
                                               --------   --------   --------
Total operating loss.........................   (29,858)   (19,640)   (61,109)
Gain on sale of business.....................        --         --     22,075
Other income (loss)..........................    (5,038)    (8,942)     6,172
                                               --------   --------   --------
Loss before taxes............................  $(24,820)  $(28,582)  $(32,862)
                                               ========   ========   ========

</TABLE>


     Indirect costs of goods sold and operating expenses includes all costs and
expenses not specifically charged to the operating segments in the financial
information reviewed by Oak's chief decision making officer.  These include
inventory reserve provisions and adjustments; operating overhead included in
consolidated cost of goods sold; corporate research and development expenses;
and most of the Oak's selling, general and administrative expenses.


                                      78


<PAGE>


                     OAK TECHNOLOGY, INC. AND SUBSIDIARIES

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)


     Oak maintains operations in the United States, Taiwan, Japan, United
Kingdom, Korea and Germany.  Activities in the United States consist of
corporate administration, product development, logistics and worldwide sales
management.  Foreign operations consist of regional sales and limited board-
level manufacturing.

     The following distribution of net revenues for the years ended June 30,
2002, 2001 and 2000 are as follows (in thousands):

<TABLE>
<CAPTION>

                                                      Year Ended June 30,
                                                -------------------------------
                                                   2002       2001       2000
                                                   ----       ----       ----
<S>                                             <C>       <C>        <C>
Revenue from unaffiliated customers originating
  from:
  North America................................ $ 16,488   $ 28,775   $ 21,881
  Japan........................................   56,819     70,485     27,856
  Korea........................................   32,473     64,629     29,428
  Taiwan.......................................   21,060      9,438        932
  Europe.......................................    2,571      2,173      2,933
  Philippines..................................   16,178         --         --
  Other........................................    1,044        683      3,425
                                                --------   --------   --------
                                                $146,633   $176,183   $ 86,455
                                                ========   ========   ========

</TABLE>

     The following distribution of identifiable assets by geographic areas and
property and equipment as of June 30, 2002, 2001 and 2000 are as follows (in
thousands):


<TABLE>
<CAPTION>

                                                      Year Ended June 30,
                                                ------------------------------
                                                   2002       2001       2000
                                                   ----       ----       ----
<S>                                            <C>        <C>        <C>
Identifiable assets:
  United States................................ $183,935   $181,669   $208,562
  Japan........................................    8,555     10,644      9,544
  Taiwan.......................................    8,974      7,491     12,036
  Korea........................................      284        368         --
  Europe.......................................    1,128      4,067      6,258
                                                --------   --------   --------
                                                $202,876   $204,239   $236,400
                                                ========   ========   ========


Property and equipment, net:
  United States................................ $ 12,764   $ 11,765   $ 13,820
  Japan........................................      577        363        430
  Taiwan.......................................    4,845      4,955      5,089
  Korea........................................      135        178         --
  Europe.......................................      640      1,187        399
                                                --------   --------   --------
                                                $ 18,961   $ 18,448   $ 19,738
                                                ========   ========   ========
</TABLE>


                                      79

<PAGE>


                     OAK TECHNOLOGY, INC. AND SUBSIDIARIES

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)


     The following table summarizes the annual percentage contribution to net
revenues by customers when sales to such customers exceeded 10% of net revenues
and the associated percentage of total accounts receivable due from these
customers.  Customers included herein were primarily from the Optical Storage
business segment.


<TABLE>
<CAPTION>

                                                 Percentage Of Net Revenues
                                                     Year Ended June 30,
                                                -------------------------------
                                                   2002       2001       2000
                                                   ----       ----       ----
<S>                                               <C>       <C>        <C>
A.............................................     20%       31%        26%
B.............................................     11%       --         --
C.............................................     11%       --         --
D.............................................     --        --         16%

</TABLE>
<TABLE>
<CAPTION>
                                                       Percentage of Net
                                                      Accounts Receivable
                                                         As of June 30,
                                                   --------------------------
                                                   2002       2001       2000
                                                   ----       ----       ----
<S>                                               <C>        <C>        <C>
F..............................................    34%        21%         --
C..............................................    24%        --          --
G..............................................    14%        --          --
H..............................................    12%        --          --
I..............................................    --         19%         --
E..............................................    --         15%         --
A..............................................    --         10%         17%
D..............................................    --         --          11%
J..............................................    --         --          11%


</TABLE>


(18)  SUBSEQUENT EVENTS

     On July 29, 2002, the Company's Board of Directors approved a stock
repurchase authorizing the repurchase of up to four million shares of Oak
Technology common stock in the open market or privately negotiated transactions
over a two-year period, unless further extended by the Board.  The plan
authorized but does not require the Company to repurchase all four million
shares.


                                      80


<PAGE>

                     OAK TECHNOLOGY, INC. AND SUBSIDIARIES

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)


(19)  QUARTERLY RESULTS - UNAUDITED


<TABLE>
<CAPTION>
                                                             Three Months Ended
                          ---------------------------------------------------------------------------------------
                          Sept. 30,   Dec. 31,   Mar. 31,   June 30,   Sept. 30,   Dec. 31,   Mar. 31,   June 30,
                             2000       2000       2001       2001       2001        2001       2002       2002
                             ----       ----       ----       ----       ----        ----       ----       ----
                                                    (In Thousands, Except Per Share Data)
<S>                       <C>        <C>       <C>         <C>       <C>         <C>        <C>        <C>
Total revenues............ $ 50,988   $ 60,633  $ 27,730    $ 36,832  $ 33,301    $ 36,288   $ 42,096   $ 34,948
Gross profit.............. $ 25,963   $ 28,292  $ 11,400    $ 18,421  $ 16,243    $ 18,344   $ 21,158   $ 14,926
Operating income (loss)... $   (940)  $  1,200  $(14,129)   $ (5,771) $ (7,647)   $ (7,368)  $ (2,868)  $(11,975)
Net income (loss)......... $  1,284   $  2,825  $(12,661)   $(22,080) $ (6,249)   $ (6,264)  $ (1,740)  $(12,697)
Basic net income (loss)
  per share (1)........... $   0.02   $   0.05  $  (0.23)   $  (0.41) $  (0.11)   $  (0.11)  $  (0.03)  $  (0.23)
Diluted net income (loss)
  per share (1)........... $   0.02   $   0.05  $  (0.23)   $  (0.41) $  (0.11)   $  (0.11)  $  (0.03)  $  (0.23)
Shares used in basic per
  share calculations (1)..   53,472     54,726    54,884      54,034    54,540      55,027     55,567     55,890
Shares used in diluted per
  share calculations (1)..   63,130     62,014    54,884      54,034    54,540      55,027     55,567     55,890

------------------------
<FN>
(1) Computed on the basis described in Note 2 of Notes to Consolidated
    Financial Statements.
</FN>
</TABLE>

                                      81


<PAGE>




                                                                    SCHEDULE II


                     OAK TECHNOLOGY, INC. AND SUBSIDIARIES
                       VALUATION AND QUALIFYING ACCOUNTS
                                 (In thousands)


<TABLE>
<CAPTION>

                                             Additions
                                             Charged To
                                  Beginning  Costs and  Deductions  Ending
Allowance For Doubtful Accounts    Balance    Expenses  Write-offs  Balance
-------------------------------    -------    --------  ----------  -------
<S>                                <C>         <C>        <C>       <C>
Year ended June 30, 2002.......     $3,198      $1,659    $(1,253)   $3,604
                                    ======      ======    =======    ======

Year ended June 30, 2001.......     $  671      $2,739    $  (212)   $3,198
                                    ======      ======    =======    ======

Year ended June 30, 2000.......     $  555      $  155    $   (39)   $  671
                                    ======      ======    =======    ======


</TABLE>

                                      82


<PAGE>

                                  SIGNATURES

     Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, as amended, the Registrant has duly caused this Report to
be signed on its behalf by the undersigned, thereunto duly authorized.


Date: August 28, 2002                              OAK TECHNOLOGY, INC.

                                            By:      /s/ YOUNG K. SOHN
                                               --------------------------------
                                                      Young K. Sohn,


     Chairman of the Board of Directors, President and Chief Executive Officer
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints Young K. Sohn and John S. Edmunds, and each of
them, his true and lawful attorneys-in-fact and agents, with full power of
substitution and resubstitution, to sign any and all amendments (including
post-effective amendments) to this Annual Report on Form 10-K and to file the
same, with all exhibits thereto and other documents in connection therewith,
with the Securities and Exchange Commission, granting unto each of  said
attorneys-in-fact and agents,  full power and authority to do and perform each
and every act and thing requisite and necessary to be done in connection
therewith, as fully to all intents and purposes as he or she might or could do
in person, hereby ratifying and confirming all that each of said attorneys-in-
facts and agents, or his substitute or substitutes, or any of them, shall do or
cause to be done by virtue hereof.


<TABLE>
<CAPTION>

          Name                    Title                             Date
          ----                    -----                             ----
<S>                    <C>                                     <C>
  /s/ YOUNG K. SOHN     Chairman of the Board of Directors,     August 28, 2002
-----------------------   President and Chief Executive Officer
    Young K. Sohn        (Principal Executive Officer)

 /s/ JOHN S. EDMUNDS    Senior Vice President of Finance and    August 28, 2002
-----------------------   Chief Financial Officer
   John S. Edmunds       (Principal Financial and Accounting
                          Officer)

 /s/ RICHARD B. BLACK   Director                                August 28, 2002
-----------------------
   Richard B. Black


  /s/ DAVID J. RYNNE    Director                                August 28, 2002
-----------------------
   David J. Rynne


  /s/ PETER J. SIMONE   Director                                August 28, 2002
-----------------------
  Peter J. Simone

 /s/ TIMOTHY TOMLINSON  Director                                August 28, 2002
-----------------------
  Timothy Tomlinson

  /s/ ALBERT Y. C. YU   Director                                August 28, 2002
-----------------------
   Albert Y. C. Yu


</TABLE>


                                      83


<PAGE>