<PAGE>

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

                                    FORM 10-Q

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

                  For the quarterly period ended March 28, 1999

                                       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 number: 0-22068

                     LEVEL ONE COMMUNICATIONS, INCORPORATED
-------------------------------------------------------------------------------
             (Exact name of registrant as specified in its charter)

             DELAWARE                                         33-0128224
   -------------------------------                      -------------------
   (State or other jurisdiction of                         (IRS Employer
    incorporation or organization)                      Identification No.)

                 9750 GOETHE ROAD, SACRAMENTO, CALIFORNIA 95827
-------------------------------------------------------------------------------
                    (Address of principal executive offices)

                                 (916) 855-5000
-------------------------------------------------------------------------------
              (Registrant's telephone number, including area code)

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

                                Yes _X_     No ___

         The number of shares of Common Stock, par value $.001 per share, of the
registrant outstanding on May 7, 1999 was 39,293,500

<PAGE>

                                     INDEX


<TABLE>
<CAPTION>
                                                                                PAGE
                                                                                ----
<S>                                                                             <C>
PART I.   FINANCIAL INFORMATION

Item 1.   Financial Statements

               Consolidated Balance Sheets as of March 28, 1999, and............  3
               December 27, 1998

               Unaudited Consolidated Statements of Income for the  ............  4
               Three Months ended March 28, 1999 and March 29, 1998

               Unaudited Consolidated Statements of.............................  5
               Cash Flows for the Three Months ended March 28, 1999
               and March 29, 1998

               Notes to Financial Statements (Unaudited).......................   6

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

PART II.  OTHER INFORMATION

Item 1.   Legal Proceedings                                         ...........  14

Item 5.   Other Information                                         ...........  14

Item 6.   Exhibits and Reports on Form 8-K                          ...........  14

          Signatures                                                ........... S-1
</TABLE>


                                       2
<PAGE>

                     LEVEL ONE COMMUNICATIONS, INCORPORATED

                           CONSOLIDATED BALANCE SHEETS
                   As of March 28, 1999 and December 27, 1998

<TABLE>
<CAPTION>
(IN THOUSANDS)
                                                                   March 28, 1999      December 27, 1998
                                                                   --------------      -----------------
                                                                    (Unaudited)
<S>                                                                <C>                 <C>
ASSETS
  Current Assets:
    Cash and cash equivalents                                       $  50,304             $  28,794  
    Short-term investments                                             64,887                92,712  
    Trade accounts receivable, net of allowance for doubtful           
      accounts of $418 and $418 for March 28, 1999 and 
      December 27, 1998, respectively                                  34,201                35,820  
    Other receivables                                                   2,752                 2,620  
    Inventories                                                        29,320                20,495  
    Other current assets                                               14,500                 6,077  
                                                                    ----------            ---------- 
                                                                                                     
       Total current assets                                           195,964               186,518  
                                                                                                     
    Property and equipment, net                                        58,293                48,899  
                                                                                                     
    Long-term investments                                              76,970                68,577  
    Foundry deposits                                                    1,143                16,460  
    Other assets                                                        5,795                 5,836  
                                                                    ----------            ---------- 
       Total assets                                                 $ 338,165             $ 326,290  
                                                                    ----------            ---------- 
                                                                    ----------            ---------- 
                                                                                                     
LIABILITIES AND SHAREHOLDERS' EQUITY                                                                 
  Current Liabilities:                                                                             
    Current portion of capital lease obligations                    $   1,441                 1,241  
    Accounts payable                                                   17,447                22,319  
    Accrued payroll costs                                               5,984                 9,925  
    Deferred revenue                                                    3,857                 4,082  
    Income taxes payable                                                3,221                   227  
    Other accrued liabilities                                           8,229                 8,623  
                                                                    ----------            ---------- 
       Total current liabilities                                       40,179                46,417  
                                                                                                      
    Convertible subordinated notes                                    115,000               115,000  
    Capital lease obligations, less current portion                     1,029                 1,545  
    Deferred lease expense                                                 95                   136  
                                                                    ----------            ---------- 
       Total liabilities                                              156,303               163,098  
                                                                                                     
  Shareholders' Equity:                                                                              
    Common Stock, no par value                                        130,013               124,412  
       Authorized - 236,250 shares                                                                
       Outstanding - 39,108 for March 28, 1999,                                                   
         and 38,511 for December 27, 1998                                                        
                                                                                                     
    Unrealized gain on investments                                      1,262                   481  
    Retained earnings                                                  50,587                38,299  
                                                                    ----------            ---------- 
       Total shareholders' equity                                     181,862               163,192  
                                                                    ----------            ---------- 
  Total liabilities and shareholders' equity                        $ 338,165             $ 326,290  
                                                                    ----------            ---------- 
                                                                    ----------            ---------- 
</TABLE>


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


                                       3

<PAGE>


                            LEVEL ONE COMMUNICATIONS, INCORPORATED
                         UNAUDITED CONSOLIDATED STATEMENTS OF INCOME

<TABLE>
<CAPTION>
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)                For the Three Months Ended
                                                -------------------------------------------
                                                   March 28, 1999         March 29, 1998
                                                ------------------     --------------------
<S>                                              <C>                   <C>
Revenues                                               $   84,286               $   56,630
Cost  of revenues                                          34,718                   23,526
                                                ------------------     --------------------

          Gross margin                                     49,568                   33,104

Research and development                                   17,185                   12,553
Sales and marketing                                        11,341                    9,414
General and administrative                                  4,211                    4,166
                                                ------------------     --------------------
          Total operating expenses                         32,737                   26,133

Operating income                                           16,831                    6,971

Interest income                                             2,853                    2,140
Interest expense                                           (1,307)                  (1,705)
Other income (expense)                                        (37)                      23
                                                ------------------     --------------------

Income before provision for income taxes                   18,340                    7,429

Provision for income taxes                                  6,052                    3,700
                                                ------------------     --------------------
Net income                                             $   12,288               $    3,729
                                                ------------------     --------------------
                                                ------------------     --------------------

Basic earnings per share                               $     0.32               $     0.10
                                                ------------------     --------------------
                                                ------------------     --------------------

Diluted earnings per share                             $     0.28               $     0.10
                                                ------------------     --------------------
                                                ------------------     --------------------
</TABLE>



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


                                       4

<PAGE>

                         LEVEL ONE COMMUNICATIONS, INCORPORATED
                    UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
                                                                                    For the Three Months Ended
                                                                               -------------------------------------
(IN THOUSANDS)                                                                  March 28, 1999      March 29, 1998
                                                                               -----------------   -----------------
<S>                                                                            <C>                 <C>
Cash flows from operating activities:
      Net income                                                                     $   12,288          $    3,729
      Adjustments to reconcile net income to net cash
         provided by (used in) operating activities:
           Depreciation and amortization                                                  6,074               3,669
      Changes in assets and liabilities, net of effect of acquisitions:
           Trade accounts receivable                                                      1,619              (2,443)
           Other receivables                                                               (132)              1,373
           Inventories                                                                   (8,825)             (2,534)
           Deferred income taxes                                                         (3,808)                  -
           Prepaid expenses                                                              (4,615)                (73)
           Accounts payable and accrued liabilities                                      (3,447)                971
           Deferred revenues                                                               (225)                764
           Deferred lease expense                                                           (41)                (41)
                                                                               -----------------   -----------------

      Net cash provided by (used in) operating activities                                (1,112)              5,415
                                                                               -----------------   -----------------
Cash flows from investing activities:
      Purchase of debt and equity securities available-for-sale                         (36,655)            (40,236)
      Maturities and sales of debt and equity securities available-for-sale              58,868              33,006
      Purchases of non-marketable equity securities                                      (2,000)                  -
      Net capital expenditures                                                          (15,235)             (6,361)
      Net (payments) refunds for foundry deposits and other assets                       15,125              (1,203)
                                                                               -----------------   -----------------

      Net cash provided by (used in) investing activities                                20,103             (14,794)
                                                                               -----------------   -----------------

Cash flows from financing activities:
      Net principal payments under capital lease obligations                               (316)                327
      Proceeds from issuance of notes                                                         -               1,799
      Proceeds from issuance of stock, net of
         repurchases and costs of issuance                                                2,835               1,335
                                                                               -----------------   -----------------

      Net cash provided by financing activities                                           2,519               3,461
                                                                               -----------------   -----------------

Net increase (decrease) in cash and cash equivalents                                     21,510              (5,918)
Cash and cash equivalents at beginning of period                                         28,794              27,694
                                                                               -----------------   -----------------
Cash and cash equivalents at end of period                                           $   50,304          $   21,776
                                                                               -----------------   -----------------
                                                                               -----------------   -----------------

Supplementary disclosure of cash and noncash transactions 
      Cash payments for:
              Interest                                                               $    2,338          $    2,770
              Income taxes                                                                3,254                 492
</TABLE>

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


                                       5

<PAGE>

                     LEVEL ONE COMMUNICATIONS, INCORPORATED

                    NOTES TO FINANCIAL STATEMENTS (UNAUDITED)

NOTE 1. BASIS OF PRESENTATION

         The accompanying unaudited financial statements have been prepared 
by Level One Communications, Incorporated ("Level One" or the "Company") in 
accordance with generally accepted accounting principles for interim 
financial information and with the instructions to Form 10-Q and Article 10 
of Regulation S-X. Accordingly, they do not include all of the information 
and footnotes required by generally accepted accounting principles for 
complete financial statements. In the opinion of management, all adjustments 
(consisting of normal recurring accruals) considered necessary for a fair 
presentation have been included. Operating results for the three month 
periods ended March 28, 1999 and March 29, 1998 are not necessarily 
indicative of the results that may be expected for the year ending January 2, 
2000. The information reported in these financial statements should be read 
in conjunction with the financial statements and footnotes contained in the 
Company's Annual Report Form 10-K filed with the Securities and Exchange 
Commission for the year ended December 27, 1998, and subsequent filings with 
the Securities and Exchange Commission.

         All share and per share numbers in this Report have been restated to 
reflect the effect of stock splits. Additionally, in connection with the 
stock splits, proportional adjustments were made to the numbers of shares of 
common stock issuable upon exercise of all outstanding stock options, 
warrants and other outstanding obligations of the Company.

NOTE 2.  BUSINESS COMBINATIONS

         On March 4, 1999, the Company and Intel Corporation entered into a 
definitive stock-for-stock merger agreement valued at approximately $2.2 
billion under which Intel would acquire Level One. The acquisition is aimed 
at providing advanced networking capabilities through increased bandwidth and 
functionality through silicon integration. Under the terms of the agreement, 
each share of Level One stock would be exchanged for 0.86 shares of Intel 
stock, after adjusting for Intel's two-for-one stock split announced in 
January 1999 and effective April 11, 1999. Approximately 37.2 million shares 
of Intel stock would be issued, assuming the conversion of Level One's 
outstanding convertible subordinated notes into Level One common stock when 
permissible under their terms. The completion of this transaction is subject 
to compliance with regulatory requirements, Level One stockholder approval, 
and other conditions customary in a transaction of this type.

NOTE 3. COMPREHENSIVE INCOME

         Comprehensive income is defined as the change in equity of a 
business enterprise during a period from transactions and other events and 
circumstances from nonowner sources. For the Company, comprehensive income 
includes net income reported on the income statement and changes in the fair 
value of its available-for-sale securities reported as a separate component 
of shareholders' equity. The Company's total comprehensive income for the 
periods ended March 28, 1999 and March 29, 1998 was $13.1 million and $3.7 
million, respectively.


                                       6

<PAGE>

NOTE 4.  EARNINGS PER SHARE

         The following is a reconciliation of the numerator (income) and 
denominator (shares) of basic and diluted earnings per share for the three 
month periods ended March 28, 1999 and March 29, 1998. No conversion is 
assumed for the convertible subordinated notes for the quarter ending March 
29, 1998 because it would have an anti-dilutive effect on earnings per share.

<TABLE>
<CAPTION>
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)              INCOME       SHARES     PER SHARE
                                                                               AMOUNT
                                                     ----------   ---------  ------------
<S>                                                  <C>          <C>        <C>
QUARTER ENDING:
Net income:
      March 28, 1999                                  $12,288
      March 29, 1998                                    3,729

BASIC EPS: Income available to
  common stockholders
      March 28, 1999                                  $12,288       38,830       $  0.32
      March 29, 1998                                    3,729       36,143          0.10

Effect of dilutive securities:
  Convertible debentures:
      March 28, 1999                                  $   854        4,312       $  0.20
      March 29, 1998                                        -            -             -

  Options:
      March 28, 1999                                        -        3,306
      March 29, 1998                                        -        2,955

DILUTED EPS: Income available to common
  stockholders plus assumed conversions
      March 28, 1999                                  $13,142       46,448       $  0.28
      March 29, 1998                                    3,729       39,098          0.10
</TABLE>


NOTE 5.  INVENTORIES

         Inventories are stated at the lower of cost (first in, first out) or 
market and include materials, labor and manufacturing overhead costs. 
Inventories consisted of:

<TABLE>
<CAPTION>
(IN THOUSANDS)
                                    March 28, 1999       December 27, 1998
                                  -----------------     -------------------
<S>                               <C>                   <C>
Raw materials                         $      4,319             $     2,486
Work-in-process                             11,675                   9,827
Finished goods                              13,326                   8,182
                                  -----------------     -------------------
     Total inventories                $     29,320            $     20,495
                                  -----------------     -------------------
                                  -----------------     -------------------
</TABLE>



                                       7

<PAGE>

NOTE 6.  PROPERTY AND EQUIPMENT

         Property and equipment are recorded at cost and depreciation is 
provided on a straight-line basis over their useful lives. Property and 
equipment consists of:

<TABLE>
<CAPTION>
         (IN THOUSANDS)                           March 28, 1999      December 27, 1998
                                                -----------------   --------------------- 
         <S>                                    <C>                 <C>                   
         Machinery and equipment                    $   59,397             $    49,857    
         Furniture and fixtures                         40,603                  34,943    
         Leasehold improvements                          5,455                   5,420    
                                                -----------------   --------------------- 
                                                       105,455                  90,220    
         Less-Accumulated depreciation                 (47,162)                (41,321)   
                                                -----------------   --------------------- 
                                                      $ 58,293             $    48,899    
                                                -----------------   --------------------- 
                                                -----------------   --------------------- 
</TABLE>

NOTE 7.  SEGMENT REPORTING

         The following is a summary of the Company's revenue by market and
geographic area for the three month period ended March 28, 1999 and March 29,
1998:

<TABLE>
<CAPTION>
(IN THOUSANDS)                              MARCH 28, 1999        MARCH 29, 1998
                                          -------------------   ------------------
<S>                                       <C>                   <C>
Revenues:
     Networking                               $61,942                $37,898
     Telecom                                   20,963                 20,925
     Other                                      1,381                 (2,193)
                                          -------------------   ------------------
     Total                                    $84,286                $56,630
                                          -------------------   ------------------
                                          -------------------   ------------------
     United States                            $46,763                $34,711
     Singapore                                  9,614                  4,647
     Taiwan                                    17,338                  4,956
     Other foreign countries                   10,571                 12,316
                                          -------------------   ------------------
     Total                                    $84,286                $56,630
                                          -------------------   ------------------
                                          -------------------   ------------------
</TABLE>


         Geographic area data is based on product shipment destination or 
royalty payer location.

         Export sales as a percentage of revenues were 44.5% and 38.7% for 
the three months ended March 28, 1999 and March 29, 1998, respectively.

         Sales to Flextronics Technologies Inc. were 12.4% of total revenues 
and sales to Accton Technology Corp. were 12.2% of total revenues during the 
first quarter of 1999. No single customer accounted for more than 10% of 
total revenues is the first quarter of 1998.

         Long-lived assets consist of net property and equipment and foundry 
deposits. The following geographic summary of long-lived assets is based on 
physical location:

<TABLE>
<CAPTION>
(IN THOUSANDS)                              MARCH 28, 1999        DECEMBER 27, 1998
                                          -------------------   ----------------------
<S>                                       <C>                  <C>
Long-lived assets:
     United States                               $    49,741           $       44,629
     Singapore                                         6,943                   17,634
     Other foreign countries                           2,752                    3,096
                                          -------------------   ----------------------
                                 Total           $    59,436           $       65,359
                                          -------------------   ----------------------
                                          -------------------   ----------------------
</TABLE>

         The decrease in long-lived assets in Singapore is due to foundry 
deposit refunds.


                                       8

<PAGE>

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

         The following information should be read in conjunction with the 
unaudited interim financial statements and the notes thereto included in Item 
1 of this Quarterly Report on Form 10-Q, the Management's Discussion and 
Analysis of Financial condition and Results of Operations contained in Level 
One's Annual Report on Form 10-K for the period ended December 27, 1998 filed 
with the Securities and Exchange Commission on March 29, 1999, and any 
subsequent filings with the Securities and Exchange Commission.

         This report contains forward-looking statements that involve risks 
and uncertainties. The statements contained in this report that are not 
purely historical are forward-looking statements within the meaning of 
Section 27A of the Securities Act of 1933 and Section 21E of the Securities 
Exchange Act of 1934, including without limitation statements regarding the 
Company's expectations, beliefs, intentions or strategies regarding the 
future. All forward-looking statements included in this document are based on 
information available to the Company on the date hereof, and the Company 
assumes no obligation to update any such forward-looking statements. The 
Company's actual results could differ materially from those anticipated in 
these forward-looking statements. See "Factors that May Affect Future 
Results."

RESULTS OF OPERATIONS

         REVENUES. Revenues for the first quarter of 1999 increased 48.8% to 
$84.3 million from $56.6 million for the same quarter of 1998. The continued 
growth in revenues is due to the successful introduction of new products and 
increased sales of existing products to customers in the Company's target 
market segments. In the first quarter of 1999 Flextronics Technologies, Inc. 
represented 12.4% of total revenues and Accton Technology Corp. represented 
12.2% of total revenues.

         Export sales, primarily consisting of sales to customers located in 
Canada, Europe, and Asia, in the first quarter of 1999 were 44.5% of revenues 
versus 38.7% of revenues in the same quarter of 1998. All sales were in U.S. 
dollars, thereby eliminating any foreign currency impact on revenues and net 
income. The dollar increase in international sales is attributable to 
increased sales to foreign manufacturing facilities and subcontractors of 
domestic customers and the Company's increased international marketing and 
sales efforts.

         The Company believes future revenue growth will depend on the 
success and timing of new products along with continued sales growth of 
existing products. New products are generally incorporated into a customer's 
product or system at the design stage. However, design wins may precede 
volume sales by six months or more. No assurance can be given that any design 
win will result in future revenues. Future revenue growth could also be 
impacted by the consummation of the proposed merger with Intel Corporation. 
See "Notes to Supplemental Financial Statements (Unaudited) - Note 2 - 
Business Combinations."

         GROSS MARGIN. Product gross margin is affected by several factors, 
including selling prices, the mix between older and newer products, test 
equipment utilization, manufacturing yields, timing of cost reductions and 
the mix between direct and distributor sales. Margins on domestic and 
international sales are similar. Gross product margins for the first quarter 
of 1999 were 58.8% versus 58.5% for the first quarter of 1998. This increase 
is due to the impact of continuing cost reduction efforts.

         RESEARCH AND DEVELOPMENT. Research and development ("R&D") expenses 
were $17.2 million or 20.4% of revenues in the first quarter of 1999 versus 
$12.6 million or 22.2% of revenues in the first quarter of 1998. The dollar 
increase in research and development expense is due to additions to Level 
One's design engineering staff and related new product design expenses, while 
the decline in spending as a percent of revenues is a result of higher 
revenue growth than the growth in research and development costs.

         SALES AND MARKETING. Sales and marketing expenses were $11.3 million 
or 13.5% of revenues in the first quarter of 1999 versus $9.4 million or 
16.6% of revenues in the first quarter of 1998. The dollar increases in sales 
and marketing expenses are largely due to increased sales, sales support and 
field 


                                       9

<PAGE>

application engineering headcount and the associated expense increases. The 
Company has also increased its international sales offices and support staff.

         GENERAL AND ADMINISTRATIVE. General and administrative expenses for 
the first quarter of 1999 were $4.2 million or 5.0% of revenues versus $4.2 
million or 7.4% of revenues in the first quarter of 1998. The decline in 
spending as a percent of revenues is a result of the growth in revenues while 
not increasing general and administrative costs.

         NET INTEREST AND OTHER INCOME. The Company earns interest on its 
cash and investments and incurs interest expense on its convertible 
subordinated notes and on capital lease obligations used to finance certain 
equipment. Net interest and other income for the first quarters of 1999 and 
1998 was $1.5 million and $.5 million, respectively.

         LIQUIDITY AND CAPITAL RESOURCES. The Company's primary sources of 
liquidity as of March 28, 1999, consisted of $115.2 million in cash, cash 
equivalents and short-term investments. Working capital was $155.8 million at 
March 28, 1999 versus $140.1 million at December 27, 1998.

         During the first three months of fiscal 1999 the Company used $1.1 
million of net cash in operating activities compared to $5.4 million provided 
by operating activities during the first three months of fiscal 1998. The 
increase in cash used in operating activities for the first three months of 
fiscal 1999 was primarily due to increases in the balances of certain current 
asset accounts and a decrease in current liabilities. These changes are 
primarily due to timing and the expansion of the Company's business, and do 
not reflect material changes in the way the Company conducts operations.

         Cash provided by investing activities during the first three months 
of fiscal 1999 totaled $20.1 million compared to $14.8 million used in 
investing activities in the first three months of fiscal 1998. The primary 
source of cash from investing activities during the first three months of 
fiscal 1999 was the maturity of investments available-for-sale and a foundry 
capacity agreement deposit refund of $15.0 million offset by cash used for 
capital expenditures. The Company spent $15.2 million for capital 
expenditures in the first three months of fiscal 1999 as compared to $6.4 
million in the first three months of fiscal 1998.

         Cash provided from financing activities for the first three months 
of fiscal 1999 and 1998 totaled $2.5 million and $3.5 million, respectively. 
The primary source of cash from financing activities for the first three 
months of fiscal 1999 was from the issuance of common stock under the 
Company's employee stock option and stock purchase plans.

         Management believes that, in addition to current financial 
resources, adequate capital resources are available to satisfy the Company's 
investment and capital programs. Management believes that the Company's cash 
flow is sufficient to maintain its current operations.

FACTORS THAT MAY AFFECT FUTURE RESULTS

LEVEL ONE'S RELIANCE ON THIRD PARTIES TO MANUFACTURE, ASSEMBLE AND TEST ITS 
PRODUCTS MAY RESULT IN INCREASED COSTS OR DELAYS

         Because Level One does not manufacture the silicon wafers used for 
its products, Level One depends on its wafer suppliers to produce wafers in 
sufficient quantities to meet customer demand at acceptable yields and at 
competitive prices. Level One also depends on wafer suppliers to assemble, 
test and deliver wafers on time. In 1994 and 1995, Level One's wafer 
suppliers reduced shipments without prior notice, which resulted in increased 
costs and delays that required Level One to transfer the production of some 
products to a new supplier. Supply agreements with wafer suppliers cannot 
eliminate this risk since Level One's suppliers may not be able to produce 
enough wafers to meet increased demand because of their own capacity 
limitations.


                                       10

<PAGE>

IN ORDER TO COMPETE EFFECTIVELY IN THE SEMICONDUCTOR INDUSTRY, LEVEL ONE 
NEEDS TO CONTINUALLY DEVELOP NEW PRODUCTS THAT GAIN MARKET ACCEPTANCE

         In the semiconductor industry, price competition is intense and 
product life cycles are short. As a result, the average selling price for 
Level One's products decreases rapidly as new or competing products are 
introduced. To compensate, Level One relies on obtaining yield improvements 
to reduce manufacturing costs and on introducing new products which 
incorporate advanced features that result in higher average selling prices. 
To the extent that Level One does not successfully develop and timely 
introduce new products that achieve market acceptance, or to the extent that 
Level One does not achieve sufficient cost reductions on existing products to 
maintain margins, Level One may be adversely impacted. To be successful, 
Level One must identify new product opportunities, stay ahead of its 
competitors so that their products will not render Level One's products 
obsolete or noncompetitive, and gain market acceptance of its products with 
target customers. Because of the increasing complexity of Level One's new 
products, Level One could experience delays in completing development and 
introduction of new products that could adversely impact its anticipated 
market share for new products. Level One may be adversely affected by a 
failure in any of these areas.

LEVEL ONE'S RECENT ACQUISITIONS PLACE A STRAIN ON LEVEL ONE'S MANAGEMENT AND 
PERSONNEL RESOURCES

         In July 1998, Level One acquired Acclaim Communications, Inc. In 
late November 1998, Level One acquired Jato Technologies, Inc. In order to 
successfully integrate these two newly acquired businesses and successfully 
manage Level One's existing business, Level One will need to expand and 
refine its management and personnel resources. Level One will also need to 
significantly increase its development, testing, quality control, marketing, 
logistics and service capabilities. If Level One does not effectively expand 
and deploy its resources to meet these needs, Level One's business may be 
adversely impacted.

ASSERTING AND DEFENDING INTELLECTUAL PROPERTY RIGHTS MAY IMPACT LEVEL ONE'S 
RESULTS OF OPERATIONS REGARDLESS OF SUCCESS

         In the semiconductor industry, competitors often assert intellectual 
property infringement claims against one another. The success of Level One's 
business depends on its ability to successfully defend its intellectual 
property. This litigation may have a material impact on Level One's financial 
condition regardless of whether or not Level One is successful. There is no 
assurance that Level One will be successful in defending or asserting its 
intellectual property rights.

EXCESS OR INSUFFICIENT INVENTORIES MAY ADVERSELY IMPACT LEVEL ONE'S REVENUES 
AND EARNINGS

         If Level One produces excess or insufficient product inventories 
because it does not accurately anticipate customer demand, Level One's 
revenues and earnings could be materially adversely impacted. This may happen 
for three reasons. First, some of Level One's customers place orders with 
long lead-times that may be canceled or rescheduled without significant 
penalty. Second, Level One's inventory risk increases during periods of 
strong demand and/or restricted semiconductor capacity because, based on 
Level One's past experience, customers often over-order to assure adequate 
supply and then may cancel or postpone orders without notice or significant 
penalty if other product becomes available. Third, component shortages from 
Level One's customers' suppliers could cause those customers to cancel or 
delay plans to incorporate Level One's products into the design of target 
products, resulting in the cancellation or delay of orders for Level One's 
products.


                                       11

<PAGE>

THE COMPLETION OF LEVEL ONE'S 4% CONVERTIBLE NOTE OFFERING HAS INCREASED 
LEVEL ONE'S INTEREST EXPENSE AND MAY LIMIT LEVEL ONE'S ABILITY TO OBTAIN 
ADDITIONAL FINANCING FOR WORKING CAPITAL, ACQUISITIONS OR OTHER PURPOSES

         In September 1997, Level One incurred approximately $115 million in 
additional debt as a result of its issuance of 4% Convertible Subordinated 
Notes due 2004. These notes increased Level One's ratio of long-term debt to 
total capitalization from 3.0% at June 29, 1997, to 39.0% at March 28, 1999. 
This increased leverage has increased Level One's interest expense 
substantially. This increased leverage could adversely affect Level One's 
ability to obtain additional financing for working capital, acquisitions or 
other purposes and could make Level One more vulnerable to economic downturns 
and competitive pressures. This increased leverage could also affect Level 
One's liquidity, as a substantial portion of available cash from operations 
may have to be applied to meet debt service requirements and, in the event of 
a cash shortfall, Level One could be forced to reduce other expenditures 
and/or forego potential acquisitions to be able to meet such requirements.

THE FAILURE OF LEVEL ONE'S KEY SUPPLIERS TO BE YEAR 2000 COMPLIANT AND LEVEL 
ONE'S FAILURE TO DEVELOP YEAR 2000 CONTINGENCY PLANS COULD CAUSE LEVEL ONE TO 
EXPERIENCE MANUFACTURING INTERRUPTIONS OR DELAYS THAT COULD ADVERSELY IMPACT 
LEVEL ONE'S BUSINESS, FINANCIAL CONDITION OR RESULTS OF OPERATIONS

         Level One is currently in the process of determining whether there 
are any critical areas in its business that are not Year 2000 compliant. 
Level One has begun a comprehensive project to prepare its computer systems 
for the Year 2000. Level One presently estimates that the total cost of 
addressing its Year 2000 problems will be approximately $500,000, of which 
approximately 48% has been expended to date. This cost estimate was derived 
utilizing numerous assumptions, including the assumption that Level One has 
already identified its most significant Year 2000 problems and that the 
assessment, remediation and contingency plans of its third party suppliers 
will be fulfilled in a timely manner without significant additional cost to 
Level One. Level One believes that there is a remote possibility of an 
adverse impact on its business due to problems with its internal systems or 
products. Level One's products have no date specific functions or date 
dependencies and will operate according to published specifications through 
the Year 2000 and dates into the 21st century. As part of its Year 2000 
assessment, Level One is contacting key suppliers of products and services to 
determine whether such suppliers' operations, products and services are Year 
2000 capable and/or to monitor their progress toward Year 2000 compliance. If 
Level One's suppliers are not Year 2000 compliant, Level One could experience 
manufacturing interruptions or shutdowns, decreased yields, quality 
inconsistencies, delayed or inaccurate product testing, delivery delays, or 
service interruptions. It is possible that one or more of these problems 
could have a material adverse effect on Level One's business, financial 
condition, or results of operations. There is also a risk because Level One 
has not yet fully developed Year 2000 contingency plans to address any 
failure of Level One's Year 2000 assessment to identify and remediate 
significant Year 2000 risks to its business operations. Development of 
contingency plans is in progress and will continue during calendar year 1999. 
Such plans could include accelerating replacement of affected equipment or 
software, using back-up equipment and software, developing temporary manual 
procedures to compensate for system deficiencies, and identifying Year 2000 
capable suppliers and service providers. There can be no assurance that any 
such contingency plans would adequately address the Year 2000 problem. The 
failure to develop a successful contingency plan could result in significant 
delays and inefficiency in Level One's business which could have a material 
adverse effect on Level One's business, financial condition and results of 
operations.


                                       12

<PAGE>

THE FAILURE OF LEVEL ONE TO COMPLETE THE PROPOSED MERGER WITH INTEL 
CORPORATION COULD ADVERSELY AFFECT LEVEL ONE'S STOCK PRICE AND FUTURE 
OPERATING RESULTS

         Certain risks are inherent in the proposed merger with Intel 
Corporation, including, but not limited to, the failure of the proposed 
merger to occur. Level One's pre-merger stock price is significantly 
influenced by the stock price of Intel. Any fluctuations in the stock price 
of Intel may have an effect on the stock price of Level One prior to the 
completion of the merger. The failure of the proposed merger to occur could 
have a material adverse effect on Level One's stock price as well as Level 
One's future operating results due to the write-off of pre-merger costs 
incurred and possible market stigma.


                                       13

<PAGE>

                           PART II - OTHER INFORMATION

ITEM 1.  LEGAL PROCEEDINGS.

         On February 12, 1999, the Company and Zekko Corp. ("Zekko"), an 
entity in which the Company has made an equity investment, jointly filed a 
complaint in the United States District Court for the Eastern District of 
California against Vision Tek, L.P. ("Vision Tek") and certain of its 
principals alleging claims of fraud and breach of fiduciary duty and seeking 
a judgment declaring the respective rights and obligations of Zekko under an 
Option and License Agreement, dated as of October 8, 1997, entered into 
between Zekko, Vision Tek and certain of Vision Tek's principals (the "Option 
and License Agreement"). On February 16, 1999, Vision Tek filed an action 
against the Company and Zekko in the District Court for the City and County 
of Denver, Colorado seeking a declaratory judgment that neither Zekko nor the 
Company has any rights to the technology licensed to Zekko under the Option 
and License Agreement.

         There are no other material pending legal proceedings, other than 
routine litigation incidental to the Company's business, to which the Company 
is a party or of which any of its property is the subject.

ITEM 5.  OTHER INFORMATION.

         On April 27, 1999, the Company and Intel announced that the parties 
have received clearance from the Federal Trade Commission and the Department 
of Justice to consummate the proposed merger. The proposed merger is expected 
to be completed following the approval of the merger by the Company's 
stockholders.

ITEM 6.  EXHIBITS AND REPORTS ON FORM 8-K.

         (a)      Exhibits.

                  Exhibit 27.1 - Financial Data Schedule

         (b)      Reports on Form 8-K.

                           Amendment No. 1 to Form 8-K, filed on February 3,
                  1999, to report under Item 5 certain supplementary financial
                  information related to the registrant's November 24, 1998
                  acquisition of Jato Technologies, Inc.

                           Form 8-K, filed on March 8, 1999, to report under
                  Item 5 the issuance of the March 4, 1999 press release
                  announcing an agreement for Intel Corporation to acquire Level
                  One Communications, Incorporated.






                                       14

<PAGE>

                                  SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the 
Registrant has duly caused this report to be signed on its behalf by the 
undersigned thereunto duly authorized.

Date:    May 12, 1999             LEVEL ONE COMMUNICATIONS,
                                  INCORPORATED

                                  By:  /s/ ROBERT S. PEPPER
                                     ----------------------------------
                                       Robert S. Pepper, Ph.D.
                                       Chairman of the Board of Directors,
                                       President and Chief Executive Officer
                                       (Principal Executive Officer)

Date:    May 12, 1999             By:  /s/ JOHN KEHOE
                                       -------------------------------
                                       John Kehoe
                                       Senior Vice President and Chief
                                       Financial Officer
                                       (Principal Financial Officer)





                                      S-1