<PAGE>
 
                      SECURITIES AND EXCHANGE COMMISSION
                            Washington, D.C.  20549
                              ____________________

                                   FORM 10-K

(Mark One)
[X]  Annual report pursuant to Section 13 or 15(d) of the Securities Exchange 
     Act of 1934
     For the fiscal year ended DECEMBER 31, 1998 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 1-10068
                                               -------
                              ACUSON CORPORATION
            (Exact name of registrant as specified in its charter)


            DELAWARE                                     94-2784998
     ------------------------                  ---------------------------------
     (State of Incorporation)                  (IRS Employer Identification No.)

                             1220 CHARLESTON ROAD
                  P. O. BOX 7393 MOUNTAIN VIEW, CA 94039-7393
                   (Address of principal executive offices)
                                        
     Registrant's telephone number, including area code, is (650) 969-9112
                                                            --------------
                              ___________________

          Securities registered pursuant to Section 12(b) of the Act:
     Title of Each Class              Name of Each Exchange on Which Registered 
-------------------------------     -------------------------------------------
Common Stock, $0.0001 par value                   New York Stock Exchange
 
Preferred Stock Purchase Rights                   New York Stock Exchange

          Securities registered pursuant to Section 12(g) of the Act:
                                      None

                              ___________________

  Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes [X] No [_]
                                                       

  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 registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [X]

  The aggregate market value of the Registrant's voting stock held by non-
affiliates on March 5, 1999 (based upon the NYSE closing price on such date) was
approximately $413,114,184.

  As of March 5, 1999, there were 26,760,433 shares of the Registrant's Common
Stock outstanding.

                      DOCUMENTS INCORPORATED BY REFERENCE

  Parts of the following documents are incorporated by reference in Parts II and
III of this Form 10-K Report: (1) Proxy Statement for registrant's Annual
Meeting of Stockholders to be held June 8, 1999 (other than the Compensation
Committee Report and Performance Graph contained therein) (Part III), and (2)
registrant's Annual Report to Stockholders for the fiscal year ended December
31, 1998 (Part II).

_______________________________________________________________________________ 
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PART I
ITEM 1
BUSINESS


GENERAL BUSINESS

Acuson Corporation ("Acuson" or the "Company") is a manufacturer, worldwide
marketer and service provider of high-performance systems that generate,
display, archive and retrieve medical diagnostic ultrasound images. Hospitals,
clinics and healthcare delivery systems throughout the world use Acuson products
for a broad range of clinical applications including radiology, cardiology,
obstetrical/gynecological ("ob/gyn") and peripheral vascular.

Set forth below is a description of the Company's business. This description
includes forward-looking statements that involve risks and uncertainties. These
forward-looking statements are based on current expectations and the Company
assumes no obligation to update this information. The Company's actual results
could differ materially from those discussed here. Factors that could cause or
contribute to such differences include, but are not limited to, those discussed
in the "Investment Risks" section set forth below as well as in the sections
entitled "Competition" and "Government Regulation."


COMPANY HISTORY

The Company was incorporated in California in 1981 and changed its state of
incorporation to Delaware in 1986. Since its inception, the Company has focused
exclusively on systems that generate, display, archive and retrieve medical
diagnostic ultrasound images.

The first generation system, the Acuson 128 ultrasound system, launched in 1983,
was based on an advanced computer-based ultrasound architecture. Over its seven-
year life, the system grew to support many additional new ultrasound modes,
transducers (the hand-held device that transmits and receives the ultrasound
signals) and other capabilities.

Acuson's second generation system, the Acuson 128XP(R) ultrasound system, was
introduced in July 1990. This more configurable system provides a greater number
of application-specific configurations for a broader range of clinical use. The
system's greater flexibility has allowed the Company to address a wider spectrum
of clinical specialties and pricing segments in both the domestic and
international ultrasound markets.

The AEGIS(R) digital image and data management system was introduced by Acuson
in October 1992. The AEGIS system is a Picture Archiving and Communication
System (PACS) product and provides capabilities for the capture and storage of
ultrasound examinations for on-line review, archiving and transmission within
the hospital and/or clinical environment and over wide-area networks. This
system also enables the images produced by Acuson's platforms to be effectively
translated into final reports, which can be faxed to the referring physician.

During 1996, Acuson introduced two new ultrasound platforms, the Sequoia (R)
ultrasound systems and the Aspen(TM) ultrasound system, to be sold along with
the 128XP system. The Sequoia 512 ultrasound system for general imaging
applications and the Sequoia C256 echocardiography system for cardiology
applications were introduced in April 1996, and began shipping in July 1996. The
Sequoia platform is Acuson's highest performance ultrasound platform.

In October 1996, Acuson announced its second major ultrasound product
introduction of the year: the Aspen ultrasound system. The Aspen system resulted
from a convergence of select technologies from the Sequoia platform and other
Acuson innovations to create a high-performance platform that is sold at a lower
price than the Sequoia systems but at a premium to the 128XP system. The Aspen
system began shipping in November 1996.

During 1997, Acuson introduced Native(TM) Tissue Harmonic Imaging (NTHI), the
first major upgrade to the Sequoia platform. When compared to images not using
NTHI, NTHI produces significantly clearer diagnostic images for a portion of the
patient population that is considered difficult to image. Difficult-to-image
patients may be obese, elderly, extremely muscular or may suffer from the side
effects of chemotherapy, smoking or cardiac surgery. NTHI overcomes the imaging
challenges posed by this patient population by transmitting the echoes at lower
frequencies to improve 

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penetration into the body, while receiving and processing only the higher
frequency echoes produced by the body's inherent harmonic characteristics. The
result is a significant improvement in image clarity and tissue contrast
resolution. During 1998, the Company introduced the Advanced Imaging Option for
the Aspen system. This option combines into one high-performance upgrade, NTHI
and DELTA(R) differential echo amplification, which enhances contrast
resolution while maintaining detail resolution.

A second major product introduction in 1997 was the MICROSON(TM) high-resolution
transducer family. MICROSON transducers enable clinicians to visualize with
extraordinary detail tiny structures that are very close to the surface of the
skin. MICROSON transducers are particularly useful in musculoskeletal
examinations to look at nerves, tendons and muscles and in imaging small parts,
such as breasts, thyroid glands and testicles. MICROSON transducers are
available for Sequoia, Aspen and 128XP systems.

Also during 1997, Acuson introduced several new products for the digital
storage, transmission and review of ultrasound images, expanding the Company's
role in providing products to enhance the productivity and efficiency of the
ultrasound department. In May 1997, the Company introduced the WorkPro(TM)
productivity package, an upgrade to the AEGIS system. In June 1997, the Company
introduced the ViewPro(TM) image review software package and the WebPro(TM) web-
based package, two other cost-effective solutions that allow ultrasound images
to be reviewed off-line and transferred to remote sites via the Internet or an
intranet. In November 1998, the Company launched the WS3000(TM) Ultrasound PACS
Workstation. The WS3000 Workstation is a complete Windows(R) NT
hardware/software solution for use with the AEGIS system and includes features
that enable increased exam review productivity and the ability to create final
reports on-line.

During 1998, the Company introduced the Perspective(TM) Advanced Display Option
for the Sequoia and Aspen systems. This option provides a practical and
comprehensive package of display capabilities, including FreeStyle(TM) Extended
Imaging, 3D fetal assessment surface rendering and 3D organ assessment
volumetric rendering.

In 1998, Acuson announced that the Company was developing a new intracardiac
ultrasound catheter called the AcuNav (TM) Diagnostic Ultrasound Catheter. The
AcuNav catheter contains a fully functional ultrasound transducer miniaturized
to fit into the tip of a catheter just over 3 millimeters in diameter. The
catheter is inserted through the femoral vein directly into the heart, and is
intended to increase image clarity and allow physicians to clearly visualize
chambers, valves and devices within the heart. The Company is currently
conducting clinical trials of the AcuNav catheter in preparation for submission
of a 510(k) application to obtain premarket clearance from the United States
Food and Drug Administration.

ACUSON'S PRODUCTS AND TECHNOLOGIES

The Company's ultrasound platforms - the Sequoia ultrasound platform, the Aspen
ultrasound platform and the 128XP ultrasound platform - are designed to bring
cost-effective solutions to clinical applications such as radiology, cardiology,
ob/gyn and peripheral vascular. Acuson believes that this family of ultrasound
systems provides the following benefits when compared with other ultrasound
technologies.

     IMAGING PERFORMANCE. Acuson's systems are designed to provide superior
     image quality through greater detail resolution, contrast resolution and
     image uniformity. In addition, Acuson systems provide superior clinical
     sensitivity for a broad range of Doppler and color Doppler applications,
     which are used to detect, measure and depict blood flows.

     VERSATILITY. Acuson's breadth of product offerings provides customers with
     a wide range of choices depending on their budgetary and clinical needs.

     RELIABILITY. The Company's thousands of ultrasound systems under warranty
     or full-service contract in North America have averaged more than 99.9%
     cumulative uptime since 1983.

     UPGRADABILITY. Acuson's ultrasound systems have an upgradable core
     architecture. Every Acuson 128 system shipped since 1983 can be upgraded to
     perform every diagnostic capability the Company now offers on new 128XP
     systems. In many cases, the changes are accomplished simply with new
     software. In other cases, customers purchase new hardware options or
     transducers, which also include new software to control 

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     performance. All three of the Company's ultrasound platforms are designed
     to follow the same philosophy of upgradability that was established with
     the Acuson 128 platform.

     EASE OF USE. Acuson's philosophy of system design and its system
     architecture allow for greater ease of use. The portability and
     maneuverability of the Sequoia and Aspen platforms help increase hospital
     efficiency and productivity, while the ergonomic design of the new systems
     and transducers enhances both doctor and patient comfort levels.

SEQUOIA ULTRASOUND PLATFORM. The Sequoia platform relies on four proprietary
cornerstones: Coherent Image Formation, Doppler technology, transducer
technology with patented connectors and the DIMAQ(TM) integrated ultrasound
workstation. The list price of a Sequoia system starts at $200,000.

     COHERENT IMAGE FORMATION. Sequoia systems use patented coherent image
     formation technology and scan with digital processing channels to acquire
     and encode phase and amplitude data. These encoded data are then assembled
     to create images based on full echo information.

     DOPPLER TECHNOLOGY. Acuson's advances in Doppler technology on the Sequoia
     systems include SST(TM) Color Doppler and Solo(TM) Spectral Doppler.

       SST COLOR DOPPLER. With SST Color Doppler, the Sequoia C256 and Sequoia
       512 systems use multiple beamformers to produce high spatial resolution
       color Doppler images at high frame rates.

       SOLO SPECTRAL DOPPLER. The Sequoia systems use a dedicated audio
       beamformer for spectral Doppler. This results in a high degree of
       sensitivity and clarity of information throughout the entire spectral
       waveform.

     TRANSDUCER TECHNOLOGY. The Sequoia platform includes a new family of
     transducers that feature new acoustic, connector and ergonomic design.
     These transducers offer a new level of high frequency capability and low
     noise performance. The new patented Sequoia transducer connector features a
     pinless design, while maintaining 612 simultaneous connections. In
     addition, these transducers offer expanded MultiHertz(R) multiple frequency
     imaging capabilities.

     DIMAQ INTEGRATED ULTRASOUND WORKSTATION. The Sequoia platform integrates a
     special-purpose ultrasound workstation into the system architecture. The
     DIMAQ integrated ultrasound workstation has direct access to exam data
     generated in the system. It offers real-time digital image processing, such
     as DELTA differential echo amplification, and runs special application
     programs. DELTA differential echo amplification is a patented, real-time
     processing technique for improving wall visualization and tissue
     conspicuity. The DIMAQ workstation provides connectivity and DICOM (the
     medical industry standard for digital imaging and communication)
     capability.

ASPEN ULTRASOUND PLATFORM. The Aspen ultrasound system resulted from a
convergence of select technologies from the Sequoia ultrasound platform and
other Acuson innovations to create a high-performance platform at a lower price
than the Sequoia systems. The Aspen platform is built on four major
cornerstones: technology convergence, value engineering, transducer technology
and the DIMAQ integrated ultrasound workstation. The list price of an Aspen
system starts at $150,000.

     TECHNOLOGY CONVERGENCE. As mentioned above, the Aspen platform represents a
     convergence of select technologies from the Sequoia platform and other
     Acuson innovations. One example of these innovations that is currently
     unique to the Aspen system is Convergent(TM) Color Doppler, which improves
     color Doppler performance in such applications as renal, obstetric,
     gynecological and small parts imaging.

     VALUE ENGINEERING. Value engineering provides versatility and
     upgradability, system portability and ergonomics. The Aspen system is
     compact, lightweight and provides a keyboard design that places the most
     frequently used controls at the user's fingertips.

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     TRANSDUCER TECHNOLOGY. The Aspen platform supports more than 20 transducers
     addressing all major ultrasound clinical applications. The Aspen system
     accommodates new transducers designed specifically for the Aspen platform
     as well as select transducers from both the 128XP and the Sequoia systems.

     DIMAQ INTEGRATED ULTRASOUND WORKSTATION. Similar to the Sequoia platform,
     the DIMAQ workstation is a special-purpose ultrasound workstation that is
     completely integrated within the Aspen architecture. The DIMAQ workstation,
     which includes the hardware foundation for DICOM software and real-time
     JPEG compression and decompression, has direct access to exam data
     generated in the system. It offers real-time digital image processing and
     runs special application programs.

128XP ULTRASOUND PLATFORM. The Acuson 128XP system is a clinically versatile,
cost-effective ultrasound system. Since its introduction in 1990, several major
upgrades to the 128XP system have been introduced, including Color Doppler
Energy, Acoustic Response Technology/Tissue Contrast Resolution ("ART/TCR"),
DTI(TM) Doppler Tissue Imaging, EF(TM) Extended Frequency upgrade and the
PerformancePlus(TM) update. The 128XP system also has incorporated features and
functions from the Sequoia and Aspen platforms, such as a wide array of
transducer technologies and new diagnostic functions. The Company currently
plans to introduce the NTHI upgrade option on its 128XP system during 1999. The
list price of a 128XP system starts at $80,000.

PICTURE ARCHIVING AND COMMUNICATION SYSTEM (PACS) PRODUCTS. The AEGIS system is
a PACS product that enables the capture and storage of ultrasound examinations
for on-line review, archiving and transmission within the hospital and over
wide-area networks, improving the effectiveness of the overall ultrasound system
and aiding in improving the timeliness and quality of the diagnosis. The AEGIS
system allows connectivity to DICOM PACS and printers and supports ultrasound
systems from Acuson and from other manufacturers. The list price of the AEGIS
system depends on the size and capability of the network with a typical system
ranging in list price from $125,000 to $350,000.

Acuson attempts to protect its intellectual property through a combination of
trade secrets and, where appropriate, copyrights, trademarks and patents. The
Company also relies substantially on its unpatented proprietary know-how. See
"Investment Risks - Patents and Proprietary Technology" for a detailed
discussion as well as certain risk factors.


SERVICE

The Company employs a staff of full-time service engineers who service Acuson
systems in North America and in the countries where Acuson has international
subsidiaries. Service to customers in other international areas is provided
through the Company's independent distributors.

Acuson warrants its products for 12 months and thereafter provides service
through service contracts and other time and material arrangements. All domestic
ultrasound systems under Acuson warranty or full-service contracts are
guaranteed to have 99.0% uptime, and such systems have averaged more than 99.9%
cumulative uptime since 1983.

Systems under warranty or service contract receive periodic maintenance by
Acuson service engineers, who also install new system capabilities or software
upgrades and respond to customer service requests. These services may be
purchased from the Company's service organization by customers who do not have a
service contract with Acuson.

Service revenue was 19.8%, 19.5% and 24.6% of total net sales in 1998, 1997 and
1996, respectively. See Part II, Item 7 - "Management's Discussion and Analysis
of Financial Condition and Results of Operations." See also "Investment Risks -
Service" below for certain risk factors related to the Company's service
business.


MARKETING AND SALES

The Company sells its products primarily to hospitals, clinics, private and
governmental institutions and healthcare agencies and doctors' offices. The
Company and its subsidiaries employ their own full-time sales, service and
applications staff in North America, certain European countries, Australia and
Japan. Acuson sells through independent distributors in other European
countries, Asia, Latin America and the Middle East. The Company typically sells
its products below the list price, as part of its marketing strategy, and also
leases its equipment to customers under sales-

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type leases. See Note 4 of Notes to Consolidated Financial Statements contained
in Part II, Item 8 for additional information on the Company's sales-type
leasing activities.

The Company targets the high-end segments of the ultrasound market and focuses
its efforts on the following major hospital-based ultrasound market segments:
United States General Imaging, United States Cardiovascular and International.
The Company entered the United States General Imaging market in 1983. The major
sub-segments of this market include radiology, peripheral vascular and ob/gyn.
Radiology includes examinations of abdominal organs, the gastrointestinal tract,
the urinary tract, the musculoskeletal structure and small parts such as the
breasts, testes and thyroid. The peripheral vascular sub-segment focuses
primarily on examinations of the vessels of the leg and neck. Applications of
ob/gyn center on examinations of the female reproductive system and the
developing fetus.

The Company entered the United States Cardiovascular market in 1988. Cardiology
applications center on examinations of the heart and proximate vessels, while
cardiovascular applications extend to include the entire vascular system.

The Company entered the international market segment in 1984. International
markets generally include the same range of clinical ultrasound applications as
the domestic market.

See Note 10 of Notes to Consolidated Financial Statements contained in Part II,
Item 8 for information concerning the Company's operating segments and
additional geographic information.

The sales process for ultrasound systems typically requires six to eighteen
months between initial customer contact and placement of an order. On-site
demonstrations are often part of the customer's evaluation process, and
customers frequently make side-by-side comparisons of performance and other
features of competing systems. Acuson employs a staff of applications personnel
who operate the system during sales demonstrations and who also train physicians
and ultrasound technicians on the use of the system after delivery.


COMPETITION

Acuson competes primarily on the basis of the major clinical and efficiency
benefits of the imaging performance, versatility, reliability, upgradability,
digital image management, ease of use and price of its products.

The Company believes that its product capabilities can enable physicians to make
earlier, more accurate and/or more confident diagnoses and also can provide
superior long-term economic value. As do virtually all companies in the
industry, Acuson offers on-site system demonstrations to customers during the
sales process, and customers frequently evaluate equipment performance and other
factors. The markets for the Company's products have become increasingly
competitive and price is often a factor in the purchase decision.

The Company's ultrasound equipment competes with systems offered by a number of
companies and their affiliates abroad, including ATL Ultrasound, Inc. ("ATL"), a
division of Philips Medical Systems; Aloka Co., Ltd.; General Electric Company;
Hewlett-Packard Company; Hitachi Corporation; Siemens Medical Systems, Inc. and
Toshiba Medical Systems, Inc. All of these competitors have significantly
greater financial and other resources and generally compete in more medical
imaging and other market segments and countries than Acuson. While the Company
believes that its Sequoia and Aspen systems provide superior and advanced
capabilities and features, the products offered to date by these competitors in
some cases include features and capabilities not currently offered by Acuson and
in some cases are substantially less expensive than Acuson's products. See
"Investment Risks - Competition" below.

Diagnostic ultrasound is generally less expensive than other competing imaging
modalities such as computed tomography and magnetic resonance imaging, and, in
certain applications, offers capabilities that make it the modality of choice
regardless of cost. However, no assurance can be given that such price and/or
performance advantages can be maintained in comparison to other current or
future imaging modalities. In addition, ultrasound systems compete with other
imaging modalities for limited hospital funding. See "Investment Risks -
Ultrasound Market Changes" below.


PRODUCT DEVELOPMENT

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One of Acuson's fundamental beliefs is that technological innovations can
provide the best solutions for cost-constrained medical environments. The
Company spent $57,600,000, $57,300,000 and $60,900,000 on product development in
1998, 1997 and 1996, respectively. See "Company History" and "Acuson's Products
and Technologies" above.

Since Acuson's founding, virtually all product development has taken place at
the Company's headquarters in Mountain View, California. The Company maintains a
strong commitment to product development programs to develop proprietary
technologies. Product development is subject to certain risk factors. See
"Investment Risks - Products" below.


GOVERNMENT REGULATION

As a manufacturer of medical devices, Acuson is subject to extensive regulation
by federal, state and local governmental authorities, such as, the United States
Food and Drug Administration (the "FDA") and the California Department of Health
Services. Obtaining FDA clearances or approvals of the Company's products can be
time consuming, lengthy, uncertain and expensive and can delay the marketing and
sale of the Company's products. The Company's products generally require either
FDA 510(k) premarket clearance or a premarket approval ("PMA"). The review of a
PMA application generally takes one to two years from the date the PMA is
accepted for filing, but may take significantly longer. It generally takes from
four to twelve months from submission to obtain 510(k) premarket clearance, but
may take longer. The FDA has recently been more rigorous in its 510(k) clearance
process, which has generally resulted in a longer review period. See "Investment
Risks - Regulation by Government Agencies" below. Congress also recently passed
the FDA Modernization Act of 1997, which enacts significant changes in how FDA
regulates medical devices. The practical effects of this new law on the Company
are not known at this time.

Manufacturers of medical devices marketed in the United States are required to
adhere to FDA's applicable Quality Systems Regulations ("QSR") which include
testing, design, control and documentation requirements. Manufacturers also must
comply with Medical Device Reporting ("MDR") requirements that a firm report to
the FDA certain adverse events associated with the Company's devices. The
Company is subject to routine inspection by the FDA and certain state agencies
for compliance with QSR requirements, MDR requirements and other applicable
regulations. The FDA uses its statutory authority vigorously during inspections
of companies and in other enforcement matters. The FDA has recently finalized
changes to the QSR regulations and has promulgated new MDR regulations, both of
which will likely increase the cost of compliance with QSR requirements. The
Company also is subject to numerous federal, state and local laws relating to
such matters as healthcare "fraud and abuse," safe working conditions,
manufacturing practices, environmental protection, fire hazard control and
disposal of hazardous or potentially hazardous substances. Changes in existing
requirements and implementation and adoption of new requirements could have a
material adverse effect on the Company's business, financial condition and
results of operations. Although Acuson believes that it is in compliance with
all applicable regulations of the FDA, the State of California and other
federal, state, and local governmental authorities, current regulations depend
heavily on administrative interpretation, and there can be no assurance that the
Company will not incur significant costs to comply with laws and regulation in
the future or that laws and regulations will not have a material adverse effect
upon the Company's business, financial condition or results of operations. In
addition, the potential effects on the Company of heightened enforcement of
federal, state and local regulations cannot be predicted.

The Federal government regulates hospital and physician payments for diagnostic
examinations furnished to Medicare beneficiaries, including related capital
equipment acquisition costs. For inpatient services, hospitals are reimbursed
under the Medicare prospective payment system ("PPS") that pays hospitals a
fixed amount for services provided to an inpatient based on the patient's
diagnosis-related group ("DRG"), which is established based on principal and
secondary diagnoses and discharge status, rather than reimbursing the hospital
for its actual costs incurred. For capital costs related to inpatient services,
in 1991 Medicare began to phase in over a ten-year period a prospective payment
system that incorporates an add-on to the DRG-based payment. Under the Balanced
Budget Act of 1997 ("BBA"), capital payments to hospitals will be reduced by 2.1
percent between October 1, 1997 and September 30, 2002.

For certain hospital outpatient services, including ultrasound examinations,
reimbursement currently is based on the lesser of the hospital's costs or
charges, or a blended amount composed of the hospital's reasonable costs and the
fee schedule amount that Medicare reimburses for such services when furnished in
a physician's office. The BBA required 

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hospital outpatient reimbursement to shift to a prospective payment system by
1999. However, because the Health Care Financing Administration ("HCFA") is
experiencing Year 2000 problems, implementation of the outpatient PPS has been
delayed until April 2000 at the earliest. Since final regulations implementing
this new payment system have not been issued, it is unclear what impact this new
system will have on payment for ultrasound services. Until January 2000, capital
acquisition costs for services furnished to hospital outpatients will be
reimbursed on the basis of 90 percent of the reasonable costs actually incurred
by the hospital. Thereafter, payment for capital will be folded into the new
outpatient PPS methodology. In general, prospective payment systems for both
inpatient and outpatient hospital services, where reimbursement is based on a
fixed fee rather than actual costs incurred, could have a negative impact on
hospital purchases of expensive equipment.

Physicians are reimbursed for Medicare services according to a fee schedule. Fee
schedule payments include a component to reimburse physicians for the practice
expenses incurred in their office practices, including expenses such as the
purchase of ultrasound devices. On January 1, 1999, HCFA revised the manner in
which practice expenses are valued from the current historical charge basis to a
resource basis. For 1999, physician payments for ultrasound services experienced
very little change under the new payment system. However, these values are
considered interim for the next four years and still could change significantly
over this period.

The Administration and Congress from time to time consider various Medicare and
other healthcare reform proposals. Some of these proposals could affect
significantly both private and public reimbursement for healthcare services,
including diagnostic devices, and could adversely affect the demand for such
devices.

Reimbursement for services rendered to Medicaid beneficiaries is determined
pursuant to each state's Medicaid plan, which is established by state law and
regulations, subject to requirements of federal law and regulations. The BBA has
allowed states even more control over coverage and payment issues. The impact on
the Company of this greater state control on Medicaid payment for diagnostic
services is uncertain.

Federal and state laws also regulate the sale of medical devices, the referral
of patients for diagnostic examinations utilizing such devices, and the
submission of claims to third party payers (including Medicare and Medicaid).
These laws include physician self-referral prohibitions, antikickback laws, and
false claims laws. The Company seeks to structure its arrangements with
hospitals, physicians, and other customers to be in compliance with these
federal and state laws, and to keep up-to-date on developments concerning their
application by various means including consultation with legal counsel. However,
the Company is unable to predict how these laws will be applied in the future,
and no assurances can be given that its arrangements will not become subject to
scrutiny under them.

Since June 1998, medical device companies wishing to sell products into those
European countries that are members of the European Union are required to place
the CE mark on their products. To be able to place that mark on its products,
Acuson must comply with the standards of the European Medical Device Directive
(the "MDD"), and be subject to annual surveillance audits by a certified
organization to assure conformity to the MDD. The Company is currently certified
as compliant with the relevant requirements of the MDD and the Company will
undertake activities designed to assure continued compliance; however, no
assurance can be given that the Company will continue to be able to place the CE
mark on its products. If the Company loses its ability to place the CE mark on
its products, the Company will not be able to sell its products into the
European Union. In 1998, sales into the European Union accounted for
approximately 19.0% of the Company's revenues.


MANUFACTURING

The Company primarily manufactures its products at its Mountain View, California
facility. In October 1994, Acuson acquired Sound Technology Incorporated
("STI"), a transducer manufacturer located in State College, Pennsylvania. STI
provides complementary technical capabilities to the Company's established
Transducer Division. For other sub-assemblies, the Company generally
subcontracts with outside vendors for assembly and fabrication and in addition,
produces some components at its own facility in Canoga Park, California. Sub-
assemblies are produced according to the Company's designs or specifications.
The Company performs assembly, testing and quality assurance at various stages
of completion.

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Component parts and microprocessors for the Company's products and some
specialty transducers are purchased from outside vendors. A number of such items
currently have limited or single sources of supply. See "Investment Risks -
Manufacturing" below.

The Company builds units to a marketing forecast that is updated periodically
and utilizes a commercially available computer system for manufacturing,
accounting and sales order processing. Because it builds to forecast, the
Company does not consider its backlog a significant indicator of business
levels.


EMPLOYEES

As of December 31, 1998, the Company had 1,894 full-time employees. The Company
considers its relations with its employees to be good.


INVESTMENT RISKS

In evaluating and understanding Acuson's business and financial prospects and
the potential success of any Acuson product, and in evaluating any forward-
looking statement contained in this document or otherwise, prospective investors
and stockholders should carefully consider the factors set forth below.

  PRODUCTS. During 1996, Acuson introduced two major new products, the Sequoia
and Aspen ultrasound systems. There is no guarantee that sales of such products
will increase or continue at their current rate. As more Aspen and Sequoia
systems enter the clinical environment, continued market acceptance will depend
in part on the actual and perceived performance and quality of these products in
that clinical environment. In addition, the Company believes that the continued
success of these products will also depend on the timely and successful
completion of future product enhancements and capabilities. The Company has a
number of these new product enhancements and capabilities as well as additional
new products, including the AcuNav ultrasound catheter, under development at any
time. There is no guarantee, however, as to when, if ever, the development of
such products and product enhancements and capabilities will be completed.

  COMPETITION. Diagnostic ultrasound is a well-established field in which there
are a number of competitors. The Company competes with several companies and
their affiliates such as ATL, Aloka Co., Ltd., General Electric Company,
Hewlett-Packard Company, Hitachi Corporation, Siemens Medical Systems, Inc., and
Toshiba Medical Systems, Inc., all of which have significantly greater financial
and other resources. In addition, most of these companies compete in more
medical imaging and other market segments and countries than the Company. While
the Company believes that its Sequoia and Aspen systems provide superior and
advanced capabilities and features, the products offered to date by these
competitors in some cases include features and capabilities not currently
offered by the Company and in some cases are substantially less expensive than
the Company's products.

Market success in diagnostic ultrasound is heavily dependent on the purchaser's
evaluation of the system's diagnostic value, cost, ease of use and safety. Any
established or new ultrasound company may introduce a system or upgrades to an
existing system that is equal to or superior to the Company's products in
quality or performance and no assurance can be given that the Company's products
will remain competitive with existing or future products. If a competitor
introduces a new product, customers may delay submitting new orders to the
Company and may cancel orders in the backlog.

  ULTRASOUND MARKET CHANGES. Diagnostic ultrasound is generally less expensive
than other competing imaging modalities such as computed tomography and magnetic
resonance imaging, and, in certain applications, offers capabilities that make
it the modality of choice regardless of cost. However, these price and/or
performance advantages may not continue in comparison to other current or future
imaging modalities. In addition, ultrasound systems compete with other imaging
modalities for limited hospital funding.

The trends of health care provider consolidation, medical cost containment and
intense competitive pressures are continuing in the market. These factors have
placed increased pressures on ultrasound system pricing and along with start-up
and other manufacturing costs of the Company's new product lines, have
contributed to the decline in the 

                                       9
<PAGE>
 
Company's gross margins over the last several years. For example, the Company's
gross margins have declined from 61.3% in 1990 to 47.3% in 1998. Further, the
U.S. government is continuing to consider Medicare reforms. The Company believes
that future revenues and profitability will continue to be impacted by these
uncertainties, especially in the Company's domestic markets. Although some
portions of the international ultrasound markets are experiencing some economic
growth, it is uncertain whether this is a temporary or permanent trend.

As health care provider consolidation and medical cost containment continue in
the market, customers are relying to an increased degree on national sales
contracts. In 1997, the Company was awarded a number of national contracts, some
of which are exclusive for a number of years. If the Company is unsuccessful at
obtaining future national contracts, the Company may be precluded from selling
to certain large customers or buying groups. In addition, the exclusive
contracts may be canceled during their term by the customer or may not be
renewed.

  PATENTS AND PROPRIETARY TECHNOLOGY. Acuson attempts to protect its
intellectual property through a combination of trade secrets and, where
appropriate, copyrights, trademarks and patents. The Company owns or has rights
to greater than 100 U.S. patents (plus many international counterparts),
covering certain aspects of its systems, and it has over 150 U.S. patent
applications pending (plus many international counterparts). No assurances can
be given as to the breadth or degree of protection patents, copyrights,
trademarks or trade secrets will afford the Company.

The Company's competitors also rely on patents to protect their technology, and
numerous physicians, universities and other individuals or entities in the
ultrasound field are patenting many ultrasound inventions. The Company has from
time to time received notices from such competitors and other entities or
individuals that the Company may need a license to one or more of their patents
in order to continue to sell its products. Such a competitor, individual or
entity may have, or may be granted, a patent to which the Company must obtain a
license if it wishes to market and sell any one or more of its products. To
date, patent disputes involving the Company have ultimately been resolved
through licensing arrangements, sometimes involving the payment of royalties by
the Company. There can be no assurance that the Company will be able to obtain a
license to any patent (if so required) or that such a license will be available
on reasonable financial or other terms.

The Company also relies heavily on its unpatented proprietary know-how. No
assurance can be given that others will not be able to develop substantially
equivalent proprietary information to the Company's, or otherwise obtain access
to the Company's know-how.

  REGULATION BY GOVERNMENT AGENCIES. As a manufacturer of medical devices,
Acuson is subject to extensive regulation by federal, state and local
governmental authorities, such as the FDA and the California Department of
Health Services. Obtaining FDA market clearances or approvals can be time
consuming, lengthy and expensive and there can be no assurance that the
necessary clearance or approval will be granted the Company or that FDA review
will not involve delays adversely affecting the Company. For example, the
Company believes that the time it takes to obtain clearance for new products has
increased and the FDA has been more rigorous in its 510(k) clearance process.

Manufacturers of medical devices marketed in the United States are required to
adhere to numerous regulations, including Quality Systems Regulations ("QSR"),
which address testing, design, control and documentation requirements.
Manufacturers also must comply with Medical Device Reporting ("MDR")
requirements that a firm report to the FDA certain adverse events associated
with a Company's devices. The Company is subject to routine inspection by the
FDA and certain state agencies for compliance with QSR requirements, MDR
requirements and other applicable regulations. The Company believes the FDA is
using its statutory authority more vigorously during inspections of companies
and in other enforcement matters. The FDA has recently finalized changes to the
QSR regulations and has promulgated new MDR regulations, both of which will
likely increase the cost of compliance with QSR requirements. Congress also
recently passed the FDA Modernization Act of 1997, which enacts significant
changes in how the FDA regulates medical devices. The Company also is subject to
numerous federal, state and local laws relating to such matters as health care
"fraud and abuse," safe working conditions, manufacturing practices,
environmental protection, fire hazard control and disposal of hazardous or
potentially hazardous substances. Changes in existing requirements and
implementation and adoption of new requirements could have a material adverse
effect on the Company's business, financial condition and results of operations.
Although Acuson believes that it is in compliance with all applicable
regulations of the FDA, the State of California and other federal, state and
local governmental authorities, current regulations depend heavily on
administrative interpretation, and there can be no assurance that the Company
will not incur significant costs to comply with laws and regulations in the
future or that laws and regulations will not have a material adverse effect upon
the 

                                       10
<PAGE>
 
Company's business, financial condition or results of operations. In addition,
the potential effects on the Company of heightened enforcement of federal, state
and local regulations cannot be predicted.

Federal and state regulations also govern or influence the reimbursement to
health care providers of fees and capital equipment costs in connection with
medical examinations of certain patients. Changes in current policies, including
implementation of a new hospital outpatient reimbursement system, could impact
reimbursement for the purchase and/or operation of the Company's equipment by
such providers and thereby adversely affect future sales of the Company's
products. In particular, the Clinton Administration and the Congress continue to
debate and consider various Medicare and other health care reform proposals that
could significantly affect both private and public reimbursement for health care
services. Some of these proposals, if enacted into law, could reduce
reimbursement for or the incentive to use diagnostic devices and procedures and
thus could adversely affect the demand for diagnostic devices, including the
Company's products.

Acuson and its customers are subject to various federal and state laws
pertaining to physician self-referral prohibitions, antikickback laws and false
claims laws. Acuson seeks to structure its sales, marketing and other activities
to comply with these and other laws. However, given the broad reach of these
laws, there can be no assurance that Acuson's activities would not be subject to
scrutiny and/or challenge at some time in the future.

Since June 1998, medical device companies wishing to sell products into those
European countries that are members of the European Union have been required to
place the CE mark on their products. To be able to place that mark on its
products, Acuson must comply with the standards of the MDD, and be subject to
annual surveillance audits by a certified organization to assure conformity to
the MDD. The Company is currently certified as compliant to the relevant
requirements of the MDD and the Company will undertake activities designed to
assure continued compliance; however, no assurance can be given that the Company
will continue to be able to place the CE mark on its products. If the Company
loses its ability to place the CE mark on its products, the Company will not be
able to sell its products into the European Union. In 1998, sales into the
European Union accounted for approximately 19.0% of the Company's revenues.

  EMPLOYEES. Acuson believes that its continued success and future growth will
depend on, among other factors, its ability to continue to attract and retain
skilled employees. The loss of a significant number of employees could adversely
affect its business, most significantly by delaying the development of new
products and product enhancements. The job market in the Silicon Valley area is
very competitive, especially for skilled electrical and software engineers.
There can be no assurance that the Company will be able to retain or hire key
employees.

  MANUFACTURING. Component parts and microprocessors for the Company's products
and some specialty transducers are purchased from outside vendors. A number of
such items currently have limited or single sources of supply, and disruption or
termination of those sources could have a temporary adverse effect on shipments
and the financial results of the Company. The Company believes that it could
ultimately develop alternate sources for all such items, but that sales could be
lost or deferred as a result of doing so.

  SERVICE. Approximately 19.8% of the Company's 1998 revenues were derived from
the Company's service activities, including the sales of service contracts and
time and material services. Increasing cost containment pressures in the market
have adversely impacted the number of customers purchasing service contracts and
the prices of those contracts, but this impact has been somewhat offset by the
Company's increased installed base and an increase in time and material
services. The Company believes that the trend away from service contracts will
continue and there can be no assurance that the Company will be able to continue
to maintain its current levels of service contract revenue. Further, the
introduction of the Sequoia and Aspen products by the Company will continue to
reduce sales of new service contracts and options to the 128XP system installed
base. In addition, the Company has made significant expenditures in establishing
remote diagnostic and other service programs unique to the Sequoia and Aspen
systems. There can be no assurance that this investment will be profitable, as
the success of the Aspen and Sequoia service program will depend in part on the
number of Aspen and Sequoia systems sold. Finally, the Company has seen an
increasing trend for hospitals to purchase asset management contracts, in which
all of the hospital's medical equipment and in some cases, other assets, are
managed and serviced by third parties. As Acuson does not sell asset management
services and only services Acuson ultrasound systems, this increased trend
toward asset management contracts could have an adverse impact on the Company's
sales of service contracts and its time and materials service business.

                                       11
<PAGE>
 
  INTERNATIONAL OPERATIONS AND INTERNATIONAL RECEIVABLES. The Company's
international business is subject to risks of potential negative impacts from
economic weakness in certain countries in Asia, Latin America and Europe and by
adverse economic impacts from currency fluctuations in its worldwide operations.
As the Company's international business has grown, the Company has an increasing
percentage of its receivables in other countries. Political instability,
currency fluctuations or other issues may impact the ability of the Company to
collect receivables in foreign countries. The following table, in thousands,
summarizes the Company's foreign receivables in excess of $3.0 million at
December 31, 1998:

                                      December 31, 1998
                                  ------------------------
            Italy                          $14,081
            Brazil                          12,567
            France                           7,034
            Japan                            6,221
            China                            5,744
            Germany                          5,506
            Sweden                           3,974
            Switzerland                      3,617

  DERIVATIVE FINANCIAL INSTRUMENTS. The Company is subject to market risk due to
fluctuations in foreign currency exchange rates. The Company manages this risk
through established policies and procedures that include the use of derivative
financial instruments. The Company routinely enters into forward foreign
currency exchange contracts to hedge amounts due from selected subsidiaries
denominated in foreign currencies against fluctuations in exchange rates. The
purpose of the hedging activities is to minimize the effect of foreign exchange
rate movements on the Company's operating results and on the cash flows it
receives from its foreign subsidiaries. Currently, the Company neither engages
in foreign currency speculation nor holds or issues financial instruments for
trading purposes. Because the Company only enters into forward currency exchange
contracts as hedges, any change in currency rates would not result in a material
gain or loss, as any gain or loss on the underlying transaction being hedged
would be offset by the gain or loss on the forward currency contract. For this
reason, the Company believes that neither its exposure to foreign currency
exchange rate risk nor any potential near-term losses in future earnings, fair
values or cash flows from reasonably possible near-term changes in market rates
or prices would be material. Forward currency contract terms are typically not
more than three months and the counterparties to the exchange contracts are
major domestic and international financial institutions. See Note 2 of Notes to
Consolidated Financial Statements contained in Part II, Item 8 for additional
information regarding the Company's forward foreign currency exchange contracts
and accounting treatment thereof.

  EURO CONVERSION. On January 1, 1999, eleven of the fifteen member countries of
the European Union adopted the Euro as their common legal currency. Following
the introduction of the Euro, the local currencies of the participating
countries are scheduled to remain legal tender until June 30, 2002. During this
transition period goods and services may be paid for in either Euros or the
participating country's local currency. Thereafter, only the Euro will be legal
tender in the participating countries. The Company believes its current
accounting systems are capable of accommodating the Euro conversion with minimal
intervention and that the conversion will not have a material impact on the
competitiveness of its products in Europe. The Company also believes any costs
of addressing the Euro conversion will not have a material impact on the
Company's financial statements.

  COMPANY'S COMPUTING ENVIRONMENT. The Company uses a centralized computing
environment to control its order administration, financial and manufacturing
processes. During 1997, the company initiated a two-phase project to replace its
outdated computing environment with an enterprise-wide, integrated business
information system to control many of its operating systems including order
administration, service and financial and manufacturing processes. The first
phase of this project was substantially completed during 1998 and the second
phase is currently scheduled to be completed during the latter half of 2000. The
Company has retained an experienced consulting organization to assist in the
conversion, however, the Company's future shipments and results could be
adversely impacted if, during and following the conversion, there are
significant problems with the system.

  YEAR 2000 READINESS. The Company is taking steps to ensure its products and
services will continue to operate on and after January 1, 2000. In addition to
the new business information system noted above, which is year 2000 ready and
will be replacing a significant portion of the Company's critical systems, the
Company is currently engaged in a three-

                                       12
<PAGE>
 
phase project to evaluate and remedy those systems not being replaced. The first
phase, completed in May 1998, included a comprehensive inventory of the
Company's systems by an experienced consulting firm and an analysis and
determination of the criticality of each system. This phase included the
evaluation of both information technology ("IT") and non-IT systems. Non-IT
systems include systems or hardware containing embedded technology such as
microcontrollers. The second phase was completed in December 1998, and focused
on confirming the year 2000 readiness of those systems identified in phase one.
The third and final phase, which is expected to be completed during the third
quarter of 1999, will involve taking any needed corrective action to make all
remaining critical systems and components year 2000 ready and to develop a
contingency plan in the event any non-compliant critical systems are not
remedied by January 1, 2000. The Company expects the project to be successfully
completed during the third quarter of 1999 and has established a year 2000
steering committee, comprised of senior executives, and a dedicated program
office to track and monitor the progress of the project. However, if by January
1, 2000, systems material to the Company's operations have not been made year
2000 ready, the year 2000 issue could have a material impact on the Company's
financial statements. To date, the costs incurred by the Company with respect to
this project have not been material and future anticipated costs are not
expected to be material.

The Company's products being shipped today are year 2000 ready and the Company
believes its products previously shipped are either year 2000 ready or can be
made year 2000 ready by customer purchase of an upgrade.

The Company has also been communicating with suppliers and others it does
business with to coordinate year 2000 readiness. The responses received by the
Company to date have indicated that steps are currently being undertaken to
address this concern.

Based upon the steps being taken to address this issue and the progress to date,
the Company does not expect the financial impact of the year 2000 date
conversion to be material to its financial position or results of operations.
However, if preventative and/or corrective actions by the Company or those the
Company does business with are not made in a timely manner, the year 2000 issue
could have a material adverse effect on the Company's financial statements. The
Company primarily sells its products to hospitals, clinics and other customers
within the healthcare industry. Should the year 2000 issue impact the ability
and willingness of these customers to purchase capital equipment, the year 2000
issue could have a material adverse impact on the Company's financial
statements.

  INDUSTRY CONSOLIDATION. During 1998, Philips Medical Systems completed its
acquisition of ATL Ultrasound, Inc. The Company believes that consolidations
such as this may provide its competitors with significantly greater financial
and other resources with which to compete in the marketplace. As companies
attempt to strengthen or hold their market positions, future consolidation
within the industry could lead to increased variability in the Company's
operating results and could have a material adverse impact on the Company's
financial statements.

  EARTHQUAKE. The Company's research and development and manufacturing
activities, its corporate headquarters and other critical business operations
are located near major earthquake faults. In the event of a major earthquake,
the ultimate impact on the Company, significant suppliers and the general
infrastructure is unknown, but operating results could be materially affected.
The Company is not insured for losses and interruptions caused by earthquakes.

Acuson, AEGIS, DELTA, MultiHertz, Sequoia and 128XP are registered trademarks
and AcuNav, Aspen, Convergent, DIMAQ, DTI, EF, FreeStyle, MICROSON, Native,
PerformancePlus, Perspective, Solo, SST, ViewPro, WS3000, WebPro and WorkPro are
trademarks of Acuson Corporation. Windows is a registered trademark of Microsoft
Corporation.

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

                                       13
<PAGE>
 
ITEM 2
PROPERTIES

The Company leases its facilities under operating leases. The principal offices
and manufacturing space are located in Mountain View, California. In addition,
the Company leases manufacturing facilities in Canoga Park, California and State
College, Pennsylvania, and sales and service facilities in various locations in
the United States and abroad. The Company believes its facilities are adequate
for its present needs, in good condition and suitable for their intended uses.
 
================================================================================

ITEM 3
LEGAL PROCEEDINGS

On October 27, 1994, the Company was sued in Ghent, Belgium, by Cormedica NV, in
connection with the Company's termination of its distributor relationship with
Cormedica. In the suit, Cormedica seeks indemnities and damages in the amount of
approximately $2.5 million, plus interest. This suit is still in the fact-
finding stage. The Company intends to defend this suit vigorously.
 
================================================================================

ITEM 4
SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

No matters were submitted to a vote of security holders during the fourth
quarter of the fiscal year covered by this report.
 
================================================================================

ITEM 4A

DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT. The directors and executive
officers of the Company and their ages as of March 31, 1999 are as follows:

<TABLE> 
<CAPTION> 
     NAME                          AGE       POSITION
     ----                          ---       --------
<S>                                <C>       <C>    
Samuel H. Maslak                   50        Chairman of the Board and Chief Executive Officer
Robert J. Gallagher                55        Vice Chairman of the Board and Senior Vice President
Albert L. Greene                   49        Director
Karl H. Johannsmeier               70        Director
Daniel R. Dugan                    44        President
Barry Zwarenstein                  50        Vice President, Chief Financial Officer
Edward P. Cornell                  54        Senior Vice President, Engineering
Rick E. Smith                      52        Senior Vice President, Worldwide Sales and Marketing
Bradford C. Anker                  53        Vice President, Manufacturing
Charles H. Dearborn                46        Vice President, Human Resources and Legal Affairs, General Counsel and Secretary
L. Thomas Morse                    55        Vice President, Corporate Controller
</TABLE>

SAMUEL H. MASLAK co-founded the Company in September 1981, and has been Chief
Executive Officer and a director since that date. He was President of the
Company from September 1981 until May 1995. He was appointed Chairman of the
Board in May 1995.

ROBERT J. GALLAGHER joined Acuson in January 1983 as Vice President, Finance and
Chief Financial Officer. Mr. Gallagher became Executive Vice President in March
1991, was Chief Operating Officer from January 1994 until March 1999, and was
President of the Company from May 1995 until November 1997, when he was
appointed Vice Chairman of the Board. He retired as Chief Operating Officer in
March 1999 and is currently a Senior Vice President of the Company.

                                       14
<PAGE>
 
ALBERT L. GREENE is the President, Chief Executive Officer and Co-founder of
HealthCentral.com, a web-based software and information services company. Mr.
Greene served from 1990-1998 as Chief Executive Officer of Sutter Health East
Bay, Alta Bates Health Systems and Alta Bates Medical Center in Berkeley. He was
Chair of The California Healthcare Association in 1998. Mr. Greene is also a
director of Quadramed (NASDAQ, QMDC), a healthcare information technology and
solutions provider.

KARL H. JOHANNSMEIER served as a director of the Company from September 1981 to
May 1994 and has also served as a director from March 1995 to the present. He
founded Optimetrix Corporation, a semiconductor processing equipment company,
where he served as President and Chief Executive Officer from 1976 to 1981 and
as Chairman of the Board of Directors from 1976 to 1984. Optimetrix Corporation
was acquired by Eaton Corporation in 1982. Mr. Johannsmeier has been a private
investor over the last twenty years.

DANIEL R. DUGAN joined the Company in 1984 in a sales management role. He has
held several senior positions in sales and marketing including Senior Vice
President, Worldwide Sales, Service and Marketing to which he was promoted in
1994. In 1997 he was promoted to President and is currently responsible for all
functional areas of the Company.

BARRY ZWARENSTEIN joined the Company in November 1998 as Vice President, Chief
Financial Officer. Prior to working for Acuson, Mr. Zwarenstein served as Chief
Financial Officer, FMC Europe from 1992 to 1996 and as Senior Vice President,
Finance & Business Development and Chief Financial Officer for Logitech, S.A.
from 1996 to 1998.

EDWARD P. CORNELL joined the Company in September 1997 as Vice President,
Engineering and was promoted to Senior Vice President, Engineering in November
1997. From 1990 to 1997, Mr. Cornell was Vice President of Engineering and
Product Development for Pitney Bowes, Inc. in Stamford, CT. For the prior 16
years, Mr. Cornell was employed by General Electric at their Corporate R&D
Center and in Operations.

RICK E. SMITH joined the Company in 1992 as Director of Sales, General Imaging
and was promoted to Vice President, General Imaging Business Unit in 1995 and
Vice President, North America Business Operations in June 1998. He became Senior
Vice President, Worldwide Sales and Marketing in March 1999.

BRADFORD C. ANKER joined the Company in December 1983 and has served as Vice
President, Manufacturing since that date.

CHARLES H. DEARBORN joined the Company in October 1988 and has served as General
Counsel since that date. He was elected Secretary of the Company in February
1991 and Vice President in February 1995. He was appointed Vice President, Human
Resources and Legal Affairs in June 1997.

L. THOMAS MORSE joined the Company in July 1983 and has served as Corporate
Controller since that date. He was elected an officer of the Company in March
1989 and Vice President, Corporate Controller in February 1991.

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

                                       15
<PAGE>
 
PART II
ITEM 5
MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

The information required by Item 5 of Form 10-K is incorporated by reference to
the information contained in the section captioned "Market for Registrant's
Common Equity and Related Stockholder Matters" in the Company's Annual Report to
Stockholders for the fiscal year ended December 31, 1998 (the "1998 Annual
Report").
 
================================================================================

ITEM 6
SELECTED CONSOLIDATED FINANCIAL DATA

The information required by Item 6 of Form 10-K is incorporated by reference to
the information contained in the section captioned "Selected Consolidated
Financial Data" in the Company's 1998 Annual Report.
 
================================================================================

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

The information required by Item 7 of Form 10-K is incorporated by reference to
the information contained in the section captioned "Management's Discussion and
Analysis of Financial Condition and Results of Operations" in the Company's 1998
Annual Report.
 
================================================================================

ITEM 7A
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

The information required by Item 7A of Form 10-K is incorporated by reference to
the information contained in the section captioned "Management's Discussion and
Analysis of Financial Condition and Results of Operations" and Note 2 of "Notes
to Consolidated Financial Statements" in the Company's 1998 Annual Report.
 
================================================================================

ITEM 8
FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

  The information required by Item 8 of Form 10-K is incorporated by reference
to the consolidated financial statements and notes thereto, and to the section
captioned "Quarterly Data" in the Company's 1998 Annual Report.

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

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

None.

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

  With the exception of the information specifically incorporated by reference
from the 1998 Annual Report in Part II of this Form 10-K, the Company's 1998
Annual Report is not to be deemed filed as part of this Form 10-K.

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

                                       16
<PAGE>
 
PART III
ITEM 10
DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

  DIRECTORS. The information required by Item 10 of Form 10-K with respect to
directors is incorporated by reference to the information contained in the
sections captioned "Nomination and Election of Directors" and "Section 16(a)
Beneficial Ownership Reporting Compliance" in the Registrant's definitive Proxy
Statement for the Annual Meeting of Stockholders to be held on June 8, 1999 (the
"Proxy Statement"). See also pages 14 and 15 of this Form 10-K.

  EXECUTIVE OFFICERS. See pages 14 and 15 of this Form 10-K.

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

ITEM 11
EXECUTIVE COMPENSATION

  The information required by Item 11 of Form 10-K is incorporated by reference
to the information contained in the sections captioned "Compensation of
Directors and Executive Officers," "Options Granted to Executive Officers,"
"Aggregated Option Exercises in Last Fiscal Year and Fiscal Year-End Option
Values," "Employment Contracts, Termination of Employment and Change in Control
Arrangements" and "Compensation Committee Interlocks and Insider Participation"
in the Proxy Statement.

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

ITEM 12

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

  The information required by Item 12 of Form 10-K is incorporated by reference
to the information contained in the section captioned "Share Ownership of
Directors, Executive Officers and Certain Beneficial Owners" in the Proxy
Statement.

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

ITEM 13
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

  The information required by Item 13 of Form 10-K is incorporated by reference
to the information contained in the section captioned "Certain Relationships and
Other Transactions" in the Proxy Statement.

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

                                       17
<PAGE>
 
PART IV
ITEM 14
EXHIBITS, FINANCIAL STATEMENT SCHEDULES
AND REPORTS ON FORM 8-K

NOTE: This copy of the Company's Form 10-K does not include Exhibits.

(a)  The following documents are filed as part of this Form 10-K:

      (1) Financial Statements. The following consolidated financial statements
          of Acuson Corporation and Report of Independent Public Accountants are
          incorporated into this Form 10-K Report by reference to the section
          entitled "Financial Contents" of the Company's 1998 Annual Report:

               Consolidated Statements of Operations and Comprehensive Income --
                     For the Three Years Ended December 31, 1998

               Consolidated Balance Sheets -- As of December 31, 1998 and 1997
 
               Consolidated Statements of Stockholders' Equity -- For the Three
               Years Ended December 31, 1998
               
               Consolidated Statements of Cash Flows -- For the Three Years
               Ended December 31, 1998
 
               Notes to Consolidated Financial Statements
 
               Report of Independent Public Accountants
 
               Supplementary Information
                    Quarterly Data (Unaudited)

      (2) Financial Statement Schedules. The following financial statement
          schedule of Acuson Corporation for the three years ended December 31,
          1998 is filed as part of this Form 10-K:
          
                                                                         Page
                                                                         ---- 
 
          Report of Independent Public Accountants on Valuation and 
          Qualifying Accounts Schedule                                    S-1
 
          Valuation and Qualifying Accounts For The Three Years Ended 
          December 31, 1998 (Schedule II)                                 S-2
 
          All other schedules are omitted because they are not applicable or the
          required information is shown in the consolidated financial statements
          or notes incorporated herein by reference to the Company's 1998 Annual
          Report.

                                       18
<PAGE>
 
(3)   Exhibits. The following Exhibits are filed as part of, or incorporated
by reference into, this Form 10-K:

<TABLE> 
       <S>                                                                              <C> 
       3.1   Restated Certificate of Incorporation, as amended (Exhibit 3.8)            *
           
       3.2   Bylaws, as amended

       4.1   Rights Agreement, dated as of June 8, 1998, between Acuson Corporation     ***
             and BankBoston, N.A., as Rights Agent, as amended (Exhibit 1)

       10.1  The Company's 1986 Supplemental Stock Option Plan, as amended (Exhibit     ///(1)
             10.3)

       10.2  Form of Supplemental Stock Option (Exhibit 10.7)                           /(1)

       10.3  Series A Preferred Stock Purchase Agreement, dated January 6, 1982,        *
             between the Company and the Purchasers listed on Schedule A thereto
             (Exhibit 10.8)

       10.4  Series B Preferred Stock Purchase Agreement, dated March 29, 1983,         *
             between the Company and the Purchasers listed on Schedule A thereto
             (Exhibit 10.9)

       10.5  Series C Convertible Preferred Stock Purchase Agreement, dated March 30,   *
             1984, between the Company and the Purchasers listed on Exhibit A thereto
             (Exhibit 10.10)

       10.6  Lease of office space, dated May 15, 1990, between Shoreline Investments   ++
             III and the Company (Exhibit 19.1)

       10.7  Lease of office space, dated May 15, 1990, between Shoreline Investments   ++
             III and the Company (Exhibit 19.2)

       10.8  Lease of office space, dated May 15, 1990, between Shoreline Investments   ++
             III and the Company (Exhibit 19.3)

       10.9  Lease of office space, dated May 15, 1990, between Shoreline Investments   ++
             VI and the Company (Exhibit 19.4)

       10.10 Lease of office space, dated May 15, 1990, between Shoreline Investments   ++
             V and the Company (Exhibit 19.5)

       10.11 Lease of office space, dated May 15, 1990, between Shoreline Investments   ++
             VI and the Company (Exhibit 19.6)

       10.12 Lease of office space, dated May 15, 1990, between Shoreline Investments   ++
             VI and the Company (Exhibit 19.7)

       10.13 Lease of office space, dated May 15, 1990, between Shoreline Investments   ++
             VII and the Company (Exhibit 19.8)

       10.14 The Company's 1991 Stock Incentive Plan, as amended                        (1)

       10.15 Form of the Company's Supplemental and Non-Employee Director Supplemental  (1)
             Options under the 1991 Stock Incentive Plan and related exercise 
             documents, as amended

       10.16 Non-Negotiable Secured Promissory Note, dated August 8, 1991, of Daniel    ++++(1)
             R. Dugan (Exhibit 19.1)

       10.17 Second Deed of Trust, dated August 8, 1991, between Daniel R. Dugan and    ++++
             First American Title Insurance Company, as Trustee (Exhibit 19.2)

       10.18 Lease of office space, dated July 31, 1991, between Shoreline Investments  ++++
             V and the Company (Exhibit 19.3)
</TABLE> 

                                       19
<PAGE>
 
<TABLE> 
          <S>                                                                                          <C>   
          10.19     Lease of office space, dated January 31, 1992, between Shoreline Investments V     ##
                    and the Company (Exhibit 19.1)

          10.20     Form of Amendment Number 1 to Supplemental Stock Option Terms Under the Company's  ////(1)
                    1986 Supplemental Stock Plan and 1991 Stock Incentive Plan   (Exhibit 10.1)

          10.21     Form of Supplemental Stock Option Terms Under the Company's 1991 Stock Incentive   ////(1)
                    Plan (Exhibit 10.2)

          10.22     The Company's 1995 Employee Stock Purchase Plan, as amended                        (1)

          10.23     The Company's 1995 Stock Incentive Plan, as amended                                (1)

          10.24     Credit Agreement, dated March 28, 1997, between Acuson Corporation and ABN AMRO
                    Bank N. V., as Agent for Lenders, as amended

          10.25     Acuson Management Incentive Plan, as amended                                       (1)

          10.26     Non-Negotiable Secured Promissory Note, dated April 24, 1998, of Edward P.         &
                    Cornell (Exhibit 10.1)

          10.27     Deed of Trust, dated April 24, 1998, between Edward P. Cornell and Commonwealth    &
                    Land Title Company, as Trustee

          10.28     Promissory Note, dated September 11, 1998, between Acuson Corporation and Banque
                    Nationale de Paris

          10.29     Letter agreement, dated September 11, 1998, between Acuson Corporation and Banque
                    Nationale de Paris

          10.30     Form of Change of Control Agreement for Certain Executive Officers of the Company  (1)

          10.31     Form of the Company's 1995 Stock Incentive Plan                                    (1)

           11.1     Statement regarding computation of per share earnings for the fiscal year ended    @
                    December 31, 1994 (Exhibit 11.6)

           13.1     The portion of the Annual Report to security holders for the fiscal year ended
                    December 31, 1998, which is incorporated by reference

           21.1     Subsidiaries of the Company

           23.1     Consent of Independent Public Accountants

           27.1     Financial Data Schedule for the year ended December 31, 1998
</TABLE>

(b)  The Company filed no reports on Form 8-K during the fourth quarter of the
     fiscal year covered by this report.

        *    Incorporated by reference to the indicated exhibit in the Company's
             Registration Statement on Form S-1 (File No. 33-7838), as amended.

      ***    Incorporated by reference to the indicated exhibit in the Company's
             Form 8-A dated December 31, 1998.

       ++    Incorporated by reference to the indicated exhibit in the Company's
             Form 10-Q Quarterly Report for the quarterly period ended June 30,
             1990.

     ++++    Incorporated by reference to the indicated exhibit in the Company's
             Form 10-Q Quarterly Report for the quarterly period ended September
             28, 1991.

                                       20
<PAGE>
 
       ##    Incorporated by reference to the indicated exhibit in the Company's
             Form 10-Q Quarterly Report for the quarterly period ended March 28,
             1992.

        /    Incorporated by reference to the indicated exhibit in the Company's
             Form 10-K Annual Report for the fiscal year ended December 31,
             1993.

      ///    Incorporated by reference to the indicated exhibit in the Company's
             Form 10-Q Quarterly Report for the quarterly period ended July 2,
             1994.

     ////    Incorporated by reference to the indicated exhibit in the Company's
             Form 10-Q Quarterly Report for the quarterly period ended October
             1, 1994.

        @    Incorporated by reference to the indicated exhibit in the Company's
             Form 10-K Annual Report for the fiscal year ended December 31,
             1994.

        &    Incorporated by reference to the indicated exhibit in the Company's
             Form 10-Q Quarterly Report for the quarterly period ended July 4,
             1998.

      (1)    Management contract or compensatory plan required to be filed as an
             exhibit.

                                       21
<PAGE>
 
SIGNATURES



  Pursuant to the requirements of Section 13 or 15(d) 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.




                                ACUSON CORPORATION
 
 
March 29, 1999                  By /s/ Samuel H. Maslak
                                   ---------------------  
                                       Samuel H. Maslak
                                       Chairman and Chief Executive Officer
                                                  
March 29, 1999                  By /s/ Barry Zwarenstein
                                   ---------------------
                                       Barry Zwarenstein
                                       Vice President, Chief Financial
                                       Officer (Principal Financial Officer)

March 29, 1999                  By /s/ L. Thomas Morse
                                   -------------------     
                                       L. Thomas Morse
                                       Vice President, Corporate Controller
                                       (Principal Accounting Officer)

                                       22
<PAGE>
 
SIGNATURES



  Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.

<TABLE>
<CAPTION>
SIGNATURE                                                       TITLE                          Date
-----------------------------------------------------------------------------------------------------------------------
 <S>                                    <C>                                                 <C> 
/s/ Samuel H. Maslak                    Chairman and Chief Executive Officer                March 29, 1999
-----------------------
(Samuel H. Maslak)
 
/s/ Robert J. Gallagher                 Vice Chairman and Senior Vice President             March 29, 1999
-----------------------
(Robert J. Gallagher)
 
/s/ Barry Zwarenstein                   Vice President, Chief Financial Officer             March 29, 1999
-----------------------
(Barry Zwarenstein)                     (Principal Financial Officer)
 
/s/ L. Thomas Morse                     Vice President, Corporate Controller                March 29, 1999
-----------------------                 (Principal Accounting Officer)
(L. Thomas Morse)
 
/s/ Albert L. Greene                    Director                                            March 29, 1999
-----------------------
(Albert L. Greene)
 
/s/ Karl H. Johannsmeier                Director                                            March 29, 1999
------------------------
(Karl H. Johannsmeier)
</TABLE>

                                       23
<PAGE>
 
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS ON SCHEDULE


     We have audited in accordance with generally accepted auditing standards,
the financial statements included in Acuson Corporation's Annual Report to
Shareholders incorporated by reference in this Form 10-K, and have issued our
report thereon dated January 29, 1999. Our audit was made for the purpose of
forming an opinion on those statements taken as a whole. The schedule listed at
Part IV, Item 14(a)(2) is the responsibility of the Company's management and is
presented for purposes of complying with the Securities and Exchange
Commission's rules and is not part of the basic financial statements. This
schedule has been subjected to the auditing procedures applied in the audit of
the basic financial statements and, in our opinion, fairly states in all
material respects the financial data required to be set forth therein in
relation to the basic financial statements taken as a whole.



/s/ Arthur Andersen LLP



San Jose, California
January 29, 1999


                                      S-1
<PAGE>
 
ACUSON CORPORATION                                       SCHEDULE II

VALUATION AND QUALIFYING ACCOUNTS
FOR THE THREE YEARS ENDED DECEMBER 31, 1998
(In thousands)



<TABLE>
<CAPTION>
                                        BALANCE AT          CHARGED TO
                                        BEGINNING           COSTS AND                              BALANCE AT END
                                        OF PERIOD            EXPENSES           WRITE-OFFS           OF PERIOD
                                       -----------          -----------        -------------       --------------
<S>                                    <C>                  <C>                <C>                 <C>        
ALLOWANCE FOR DOUBTFUL ACCOUNTS:
     Year ended:
          December 31, 1996             $2,998              $   442             $   (472)          $2,968
          December 31, 1997             $2,968              $   868             $   (361)          $3,475
          December 31, 1998             $3,475              $   212             $   (126)          $3,561
 
ACCRUED WARRANTY:
     Year ended:
          December 31, 1996             $4,440              $ 9,526             $ (7,942)          $6,024
          December 31, 1997             $6,024              $15,207             $(12,276)          $8,955
          December 31, 1998             $8,955              $14,357             $(15,014)          $8,298
</TABLE>


                                      S-2