<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, 1997 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  0-14953
                                                -------
                              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                                New York Stock Exchange
$0.0001 par  value


          Securities registered pursuant to Section 12(g) of the Act:
                         Common Stock Purchase Rights

                               _________________

  Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the 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 ((S) 229.405 of this chapter) 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.  [__]

  The aggregate market value of the Registrant's voting stock held by non-
affiliates on March 6, 1998 (based upon the NYSE closing price on such date) was
approximately $513,561,110.

  As of March 6, 1998, there were 28,432,449 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 May 27, 1998 (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, 1997 (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 medical diagnostic ultrasound
systems and image management products. 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. 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 medical diagnostic ultrasound, including ultrasound systems and
products for the digital storage, review and transmission of 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. This
greater flexibility has allowed the Company to address a wider spectrum of
clinical specialties and pricing segments in both the international and domestic
ultrasound markets.

The AEGIS(R) digital image and data management system, introduced by Acuson in
October 1992, provides capabilities for the capture and storage of ultrasound
examinations for on-line review, archiving and transmission within the hospital
and clinical environments and over wide-area networks.

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. The Aspen system began shipping in November
1996.

Also during 1996, the Company introduced its EF(TM) Extended Frequency imaging
upgrade for the 128XP platform. The extended frequency technology, which
provides high-resolution, high-frequency imaging, resulted from the development
of the Aspen ultrasound system.

1997 HIGHLIGHTS
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During 1997, Acuson introduced Native(TM) Tissue Harmonic Imaging, the first
major upgrade to the Sequoia platform. Native Tissue Harmonic Imaging produces
significantly clearer diagnostic images in a portion of the patient population
considered to be 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. Generally speaking, Native Tissue Harmonic Imaging
overcomes the imaging challenges posed by this patient population by
transmitting lower frequency sound waves to improve 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.

A second major technology 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.

For the 128XP system, the Company introduced the PerformancePlus(TM) update,
which includes two new measurement tools designed to make fetal and infant
measurements easier and faster, and calculation enhancements that allow
clinicians to display fetal weight in pounds and ounces on the patient
worksheet. The PerformancePlus update also includes several features that make
using the 128XP system easier and more efficient.

Acuson also introduced several new products for the digital storage,
transmission and review of ultrasound images, expanding the Company's role in
providing technologies to enhance the productivity and efficiency of the
ultrasound department. In May, the Company introduced the WorkPro(TM)
productivity package, an upgrade to the AEGIS system. In June, the Company
introduced the ViewPro(TM) image review software 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.

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, along with the AEGIS digital image and data management system, provide
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 achieved greater 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 performance. The
     new Sequoia and Aspen ultrasound platforms are designed to follow the same
     philosophy of upgradability that was established with the Acuson 128
     platform.
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     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. Sequoia system technology 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 the Sequoia systems ranges from
$200,000 to $350,000.

     COHERENT IMAGE FORMATION. Sequoia systems use multiple beamformers and scan
     with digital processing channels to acquire and encode both 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 512 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 workstation has direct access to exam data generated in the system.
     It offers real-time digital image processing, such as DELTA(TM)
     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. DICOM is the
     standard format for networking medical systems in the hospital and private
     office environment.

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 Sequoia technology. 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 the Aspen system ranges
from $150,000 to $250,000.

     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. 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 Extended Frequency upgrade and the
PerformancePlus software update. The 128XP system has also incorporated
features and functions from the Sequoia and Aspen platforms, such as a wide
array of transducer technologies and new diagnostic functions.  The list price
of the 128XP system ranges from $80,000 to $150,000.

AEGIS DIGITAL IMAGE AND DATA MANAGEMENT SYSTEM. The AEGIS system enables the
capture and storage of ultrasound examinations for on-line review, archiving and
transmission within the hospital and over wide-area networks. The AEGIS system
allows connectivity to DICOM PACS (picture archiving and communication systems)
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.

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, South America and the Middle East.

The Company 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 9 of Notes to Consolidated Financial Statements contained in Item 8 for
a summary of operations by geographic region.

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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.


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 purchase 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 19.5%, 24.6% and 24.6% of total net sales in 1997, 1996 and
1995, 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.


COMPETITION

Acuson competes primarily on the basis of the major clinical benefits of the
imaging performance, versatility, reliability, upgradability, 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"),
Aloka Co., Ltd., Diasonics Vingmed Ultrasound, Ltd., a division of Elbit Medical
Imaging, Ltd. ("Diasonics"), General Electric Company, Hewlett-Packard Company,
Hitachi Corporation, Siemens Medical Systems, Inc. and Toshiba Medical Systems,
Inc. Most 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 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 conventional x-ray, 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.

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PRODUCT DEVELOPMENT

One of Acuson's fundamental beliefs is that technological innovations can
provide the best solutions for cost-constrained medical environments. The
Company spent $57,300,000, $60,900,000 and $66,400,000 on product development in
1997, 1996 and 1995, respectively. See "Company History" and "Acuson 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 - New 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, including marketing clearance or approval of the Company's products by
the FDA. The process of obtaining such clearances or approvals to market
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 a 510(k) premarket clearance or a premarket approval
("PMA") by the FDA. 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 the FDA regulates medical devices. One purpose
of this Act is to streamline certain processes relating to medical devices. The
practical effect of this new law on the Company is not known at this time.
Provisions of the new law began to take effect in February 1998.

Manufacturers of medical devices marketed in the United States are required to
adhere to applicable regulations setting forth detailed Good Manufacturing
Practices ("GMP") requirements, which include testing, 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 GMP
requirements, MDR requirements and other applicable regulations. 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
GMP regulations and has promulgated new MDR regulations, both of which will
likely increase the cost of compliance with GMP 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 regulations 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 reimbursement for diagnostic examinations
furnished to Medicare beneficiaries, including related physician services and
capital equipment acquisition costs. For example, Medicare reimbursement for
operating costs for ultrasound examinations performed on hospital inpatients
generally is set under the Medicare prospective payment system ("PPS")
diagnosis-related group ("DRG") regulations. Under PPS, Medicare pays hospitals
a fixed amount for services provided to an inpatient based on his or her DRG,
rather than reimbursing for the actual costs incurred by the hospital. Patients
are assigned to a DRG based on their principal and secondary diagnoses,
procedures performed during the hospital stay, age, gender and discharge status.

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For capital costs for inpatient services, prior to October 1, 1991, Medicare
reimbursed hospitals an amount based on 85 percent of the actual reasonable
costs they had incurred. On October 1, 1991, Medicare began to phase in over a
ten year period a prospective payment system for capital costs which
incorporates an add-on to the DRG-based payment to cover capital costs and which
replaces the reasonable cost-based methodology. The Balanced Budget Act of 1997
("BBA"), enacted in law August 5, 1997, will further reduce capital payments to
hospitals 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, 42 percent of which is based on the hospital's
reasonable costs and 58 percent of which is based on the fee schedule amount
that Medicare reimburses for such services when furnished in a physician's
office. For the fiscal years 1991 through 1998 (beginning October 1, 1990),
reimbursement for the cost portion of the blend has been reduced by 5.8 percent.
The BBA requires capital outpatient reimbursement to shift from a cost basis to
a prospective payment system by 1999. Because the Health Care Financing
Administration ("HCFA") has not yet proposed regulations to implement the
outpatient PPS, it is unclear what impact such a change 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.

Until January 1, 1992, Medicare generally reimbursed physicians on the basis of
their reasonable charges or, for certain physicians, including radiologists, on
the basis of a "charge-based" fee schedule. On January 1, 1992, Medicare began
to phase in over a five-year period a new system that reimburses all physicians
based on the lower of their actual charges or a fee schedule amount based on a
"resource-based relative value scale." Relative value units representing
practice expenses, such as equipment costs, currently account for approximately
42 percent of a physician's Medicare fee schedule payment for a particular
service. Under the BBA, HCFA is required to implement by January 1, 1999, a
revised methodology for calculating practice expense relative value units from
the current historical basis to a resource basis. HCFA already has proposed to
establish two separate practice expense values for each physician service - one
for when a service is furnished in a facility setting and another for when the
service is performed in a physician's office. Typically, for a service that
could be provided in either setting, the practice expense value would be higher
when the service is performed in a physician's office as it would cover a
physician's costs such as for equipment, supplies, and overhead. At this time,
HCFA has yet to issue regulations setting new practice expense values. Certain
revisions that HCFA might make in these values could have a negative effect on
physician reimbursement for ultrasound services provided in a facility and a
positive effect on physician reimbursement for ultrasound services provided in a
physician's office.

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
revised the Medicaid program to allow states even more control over coverage and
payment issues. In addition, the HCFA already has granted many states waivers to
allow for greater control of the Medicaid program at the state level. The impact
on the Company of this greater state control on Medicaid payment for diagnostic
services is uncertain.

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) seeking reimbursement for such
services, are subject to various federal and state laws pertaining to health
care "fraud and abuse," including physician self-referral prohibitions,
antikickback laws, and false claims laws. Subject to certain enumerated
exceptions, the federal physician self-referral law, also known as Stark II,
prohibits a physician from referring Medicare or Medicaid patients to an entity
in which the physician (or a family member) has an ownership interest or
compensation relationship if the referral is for a "designated health service,"
which is defined explicitly to include radiology services such as ultrasound
services. Although final regulations implementing Stark II have not yet been
issued by the United States Department of Health and Human Services, proposed
regulations were issued in January 1998. Under the proposed regulations, the
definition of radiology services subject to the Stark II restriction would
expressly exclude screening mammography services (i.e., mammography services
furnished to asymptomatic patients), but not diagnostic mammography (i.e.,
mammography services furnished to symptomatic patients). The Stark II law, as
well as physician self-referral restrictions that exist in a number of states
and which apply regardless of whether Medicare or Medicaid patients are
involved, may result in lower utilization of certain diagnostic procedures,
including ultrasound services, which may 

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affect the demand for the Company's products. Antikickback laws make it illegal
to solicit, offer, receive, or pay any remuneration in exchange for, or to
induce, the referral of business, including the purchase of medical devices from
a particular manufacturer or the referral of patients to a particular supplier
of diagnostic services utilizing such devices. False claims laws prohibit anyone
from knowingly and willfully presenting, or causing to be presented, claims for
payment to third party payers (including Medicare and Medicaid) that are false
or fraudulent, for services not provided as claimed, or for medically
unnecessary services. Violations of fraud and abuse laws are punishable by
criminal and/or civil sanctions including, in some instances, imprisonment and
exclusion from participation in federal health care programs such as Medicare
and Medicaid.

The Clinton Administration and the Congress from time to time consider various
Medicare and other healthcare reform proposals that could significantly affect
both private and public reimbursement for healthcare 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.

In addition to the federal laws described above, there are state laws and
regulations regarding the manufacture and sale of healthcare products and
diagnostic devices, and reimbursement for such products and their use. These
laws and regulations also are subject to future changes whose impact cannot be
projected.

Commencing in June 1998, medical device companies wishing to sell products into
those European countries that are members of the European Union, must 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
1997, sales into the European Union accounted for approximately 20.0% 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.

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, 1997, the Company had 1,815 full-time employees. The Company
considers its relations with its employees to be good.


INVESTMENT RISKS

                                       9
<PAGE>
 
________________________________________________________________________________

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.

  NEW 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 of these products in that
clinical environment. In addition, the Company believes that the continued
success of the new products will depend as well on the timely and successful
completion of future product enhancements and capabilities. While the Company
has a number of these new product enhancements and capabilities as well as
additional new products under development at any time, there is no guarantee 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., Diasonics, General Electric
Company, Hewlett-Packard Company, Hitachi Corporation, Siemens Medical Systems,
Inc., and Toshiba Medical Systems, Inc., most 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. During 1997, a number of the
Company's competitors introduced new systems designed to compete with the
Company's systems. As these competitive systems are delivered in the market,
sales of the Company's systems may be adversely impacted.

  ULTRASOUND MARKET CHANGES. Diagnostic ultrasound is generally less expensive
than other competing imaging modalities such as conventional x-ray, 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 Company's gross margins over the last several
years. For example, the Company's gross margins have declined from 61.3% in 1990
to 47.2% in 1997. 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 temporary
or permanent.

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 

                                       10
<PAGE>
 
________________________________________________________________________________

than sixty U.S. patents (plus many international counterparts), covering certain
aspects of its systems, and it has over one hundred U.S. (plus many
international counterparts) patent applications pending. 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, including marketing clearance or approval of the Company's
products by the FDA. The process of obtaining such 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 setting forth detailed Good Manufacturing
Practices requirements, which include testing, control and documentation
requirements. Manufacturers also must comply with Medical Device Reporting
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 GMP 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
GMP regulations and has promulgated new MDR regulations, both of which will
likely increase the cost of compliance with GMP requirements. Congress also
recently passed the FDA Modernization Act of 1997 which enacts significant
changes in how the FDA regulates medical devices. Provisions of the new law
began to take effect in February 1998. 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 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 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.

                                       11
<PAGE>
 
________________________________________________________________________________

Acuson and its customers are subject to various federal and state laws
pertaining to health care "fraud and abuse," including physician self-referral
prohibitions, antikickback laws and false claims laws. Acuson structures 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.

In addition to the federal laws described above, there are state laws and
regulations regarding the manufacture and sale of health care products and
diagnostic devices, and reimbursement for such products and their use. These
laws and regulations also are subject to future changes whose impact cannot be
projected.

Commencing in June 1998, medical device companies wishing to sell products into
those European countries that are members of the European Union, must place the
CE mark on their products. In order 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 1997, sales into the
European Union accounted for approximately 20.0% 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 19.5% of the Company's 1997 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 the sale 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 new
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. Currently, most
Aspen and Sequoia systems sold are still under one year warranty. 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.

  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 and Europe and by the strength of
the U.S. dollar. As the Company's international business has grown, the Company
has an increasing percentage of its receivables in other countries. In Italy and
Brazil the amount of receivables exceeds $11,000,000. In France the amount of
receivables exceeds $6,000,000 and in China, the amount of receivables exceeds
$5,000,000. Political instability or 

                                       12
<PAGE>
 
________________________________________________________________________________

other issues may impact the ability of the Company to collect receivables in
foreign countries. The Company enters into foreign currency exchange contracts
as described in Note 2 to its Consolidated Financial Statements for the year
ended December 31, 1997 and does not believe it has significant risk from
changes in exchange rates.

  YEAR 2000 COMPLIANCE AND THE COMPANY'S COMPUTING ENVIRONMENT. The Company uses
a centralized computing environment to control its order administration,
financial and manufacturing processes. During 1997, the Company decided to
replace its existing computing environment with an enterprise-wide business
information system in two phases. Both phases of this conversion are scheduled
to be completed before 2000. The new system will control many of the significant
aspects of the Company's operations and the Company has retained an experienced
consulting organization to assist in the conversion. However, the Company's 1998
shipments and results could be adversely impacted if, following the conversion,
there are significant problems with the new system. When this new system is
operational, the Company believes its computer systems will be year 2000
compliant.

  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, MultiHertz, Sequoia, XP and 128XP are registered trademarks and
Aspen, Convergent, DELTA, DIMAQ, EF, MICROSON, Native, PerformancePlus, Solo,
SST, ViewPro, WebPro and WorkPro are trademarks of Acuson 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. 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, 1998 are as follows:

<TABLE>
<CAPTION>
NAME                         Age                                  Position
-------------------------  -------  ---------------------------------------------------------------------
<S>                        <C>      <C>
Samuel H. Maslak                49  Chairman of the Board and Chief Executive Officer
Robert J. Gallagher             54  Vice Chairman of the Board and Chief Operating Officer (Principal
                                    Financial Officer)
Albert L. Greene                48  Director
Karl H. Johannsmeier            69  Director
Alan C. Mendelson               50  Director
Daniel R. Dugan                 43  President
Edward P. Cornell               53  Senior Vice President, Engineering
Bradford C. Anker               52  Vice President, Manufacturing
Charles H. Dearborn             45  Vice President, Human Resources and Legal Affairs, General Counsel
                                    and Secretary
L. Thomas Morse                 54  Vice President, Corporate Controller 
</TABLE>

SAMUEL H. MASLAK co-founded the Company in September 1981 and has served as
Chief Executive Officer and a director since that date. He served as 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, Chief Operating Officer in January 1994 and was elected a director of the
Company in May 1994, and President of the Company in May 1995. He was appointed
Vice Chairman of the Board in November 1997.

                                       14
<PAGE>
 
________________________________________________________________________________

ALBERT L. GREENE became a director of the Company in March 1995.  Mr. Greene
served as President and Chief Executive Officer of Alta Bates Medical Center in
Berkeley, California from May 1990 until March 1998 and as President and Chief
Executive Officer of Alta Bates Health System from February 1996 to March 1998.
In February 1996, Mr. Greene was appointed and continues to serve as Chief
Executive Officer of Sutter Health East Bay Service Area. He sits on the board
of the Alta Bates Medical Center Board of Trustees, Alta Bates Health System
Board of Directors, Sutter Delta Medical Center Board of Trustees, Sutter Solano
Medical Center Board of Trustees and serves as Chair of the Sutter Health East
Bay Service Area Planning Council. In 1998, he was elected Chair of the
California Healthcare Association. Mr. Greene is also a director of Quadramed
Corporation.

KARL H. JOHANNSMEIER served as a director of the Company from September 1981 to
May 1994 and also has 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.

ALAN C. MENDELSON became a director of the Company in March 1995. Mr. Mendelson
has been a partner in the law firm of Cooley Godward LLP since January 1980 and
was the Managing Partner of its Palo Alto office from May 1990 to March 1995 and
from November 1996 to November 1997. Mr. Mendelson was Acting General Counsel of
Cadence Design Systems, Inc., an electronic design automation software company,
from November 1995 until June 1996. Mr. Mendelson is also a director of Isis
Pharmaceuticals, Inc., a biopharmaceutical company and CoCensys, Inc., a
biopharmaceutical company.

DANIEL R. DUGAN joined the Company in 1984 as Western Regional Sales Manager,
became National Sales Manager in October 1988 and Director, North American Sales
in August 1989. From November 1989 through April 1991, he served as Vice
President of Ultrasound Business Operations at Toshiba America Medical Systems,
Inc. In April 1991, Mr. Dugan rejoined Acuson as Vice President, Field
Operations. He became Senior Vice President, Worldwide Sales, Service and
Marketing in February 1994 and President of the Company in November 1997.

EDWARD P. CORNELL joined the Company in September 1997 as Vice President,
Engineering and was promoted to Senior Vice President, Engineering in November
1997. Prior to working for Acuson, Mr. Cornell served as Vice President of
Engineering for Pitney-Bowes, Inc.

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, 1997 (the "1997 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 1997 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 1997
Annual Report.
________________________________________________________________________________

ITEM 7A
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Not Applicable.
________________________________________________________________________________

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 1997 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 1997 Annual Report in Part II of this Form 10-K, the Company's 1997
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 May 27, 1998 (the
"Proxy Statement").

  EXECUTIVE OFFICERS.  See page 14 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," 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 1997 Annual Report:
 
                Consolidated Statements of Operations -- For the Three Years
                Ended December 31, 1997
 
                Consolidated Balance Sheets -- As of December 31, 1997 and 1996
 
                Consolidated Statements of Stockholders' Equity -- For the Three
                Years Ended December 31, 1997
 
                Consolidated Statements of Cash Flows -- For the Three Years
                Ended December 31, 1997
 
                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,
         1997 is filed as part of this Form 10-K:
 
<TABLE> 
<CAPTION> 
                                                                                                                Page
                                                                                                                ----
<S>                                                                                                         <C> 
         Report of Independent Public Accountants on Valuation and Qualifying Accounts Schedule                  S-1
 
         Valuation and Qualifying Accounts For The Three Years Ended December 31, 1997 (Schedule II)             S-2
</TABLE> 
 
         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 1997 Annual
         Report.

                                       18
<PAGE>
 
________________________________________________________________________________

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

                <C>   <S>                                                                                 <C>
                  3.1  Restated Certificate of Incorporation, as amended (Exhibit 3.8)                     *
                  3.2  Bylaws as amended (Exhibit 3.1)                                                     @@@
                  4.1  Rights Agreement, dated as of May 5, 1988, between Acuson Corporation               
                       and The First National Bank of Boston, as Rights Agent (Exhibit 1)                  ***
                 10.1  The Company's 401(k) Plan, as amended (Exhibit 10.1)                                ****(1)
                 10.2  The Company's 1986 Employee Stock Purchase Plan (the "1986 Purchase                     
                       Plan"), as amended (Exhibit 10.2)                                                   /(1)
                 10.3  Form of Employee Stock Purchase Agreement to be used under the 1986                 
                       Purchase Plan (Exhibit 10.5)                                                        *(1)
                 10.4  The Company's 1982 Incentive Stock Option Plan, as amended (Exhibit 10.4)           /(1)          
                 10.5  Form of Incentive Stock Option and related exercise documents (Exhibit 10.5)        **(1)
                 10.6  The Company's 1986 Supplemental Stock Option Plan, as amended (Exhibit 10.6)        /(1)
                 10.7  Form of Supplemental Stock Option (Exhibit 10.7)                                    /(1)
                 10.8  Series A Preferred Stock Purchase Agreement, dated January 6, 1982,                 
                       between the Company and the Purchasers listed on Schedule A thereto
                       (Exhibit 10.8)                                                                      *
                 10.9  Series B Preferred Stock Purchase Agreement, dated March 29, 1983,                  
                       between the Company and the Purchasers listed on Schedule A thereto
                       (Exhibit 10.9)                                                                      *
                10.10  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)                                                                              *
                10.11  Lease of office space, dated May 15, 1990, between Shoreline Investments III and    
                       the Company (Exhibit 19.1)                                                          ++
                10.12  Lease of office space, dated May 15, 1990, between Shoreline Investments III and    
                       the Company (Exhibit 19.2)                                                          ++
                10.13  Lease of office space, dated May 15, 1990, between Shoreline Investments III and    
                       the Company (Exhibit 19.3)                                                          ++
                10.14  Lease of office space, dated May 15, 1990, between Shoreline Investments VI and    
                       the Company (Exhibit 19.4)                                                          ++
                10.15  Lease of office space, dated May 15, 1990, between Shoreline Investments V and      
                       the Company (Exhibit 19.5)                                                          ++
                10.16  Lease of office space, dated May 15, 1990, between Shoreline Investments VI and     
                       the Company (Exhibit 19.6)                                                          ++
                10.17  Lease of office space, dated May 15, 1990, between Shoreline Investments VI and     
                       the Company (Exhibit 19.7)                                                          ++
                10.18  Lease of office space, dated May 15, 1990, between Shoreline Investments VII and    
                       the Company (Exhibit 19.8)                                                          ++
</TABLE>

                                       19
<PAGE>
 
________________________________________________________________________________


<TABLE>
             <S>       <C>                                                                                <C>
                10.19  The Company's 1991 Stock Incentive Plan, as amended (Exhibit 10.3)                  =(1)
                10.20  Form of the Company's Supplemental and Non-Employee Director Supplemental Options   
                       under the 1991 Stock Incentive Plan and related exercise documents as amended
                       (Exhibit 10.23)                                                                     /(1)
                10.21  Non-Negotiable Secured Promissory Note, dated August 8, 1991, of Daniel R. Dugan             
                       (Exhibit 19.1)                                                                      ++++(1)
                10.22  Second Deed of Trust, dated August 8, 1991, between Daniel R. Dugan and First       
                       American Title Insurance Company, as Trustee (Exhibit 19.2)                         ++++
                10.23  Lease of office space, dated July 31, 1991, between Shoreline Investments V and    
                       the Company (Exhibit 19.3)                                                          ++++
                10.24  First Amendment to the Company's 401(k) Plan (Exhibit 10.31)                        #(1)
                10.25  Lease of office space, dated January 31, 1992, between Shoreline Investments V      
                       and the Company (Exhibit 19.1)                                                      ##
                10.26  Officers' Bonus Plan (Exhibit 10.30)                                                ####(1)
                10.27  Form of Amendment Number 1 to Supplemental Stock Option Terms Under the Company's   
                       1986 Supplemental Stock Plan and 1991 Stock Incentive Plan   (Exhibit 10.1)         ////(1)
                10.30  Form of Supplemental Stock Option Terms Under the Company's 1991 Stock Incentive             
                       Plan (Exhibit 10.2)                                                                 ////(1)
                10.31  Credit Agreement between Acuson Corporation and the First National Bank of          
                       Boston, as Agent, dated July 2, 1992 as amended, dated April 14, 1995 (Exhibit
                       10.1)                                                                               @@
                10.32  The Company's 1995 Employee Stock Purchase Plan, as amended (Exhibit 10.1)          =(1)
                10.33  The Company's 1995 Stock Incentive Plan, as amended (Exhibit 10.2)                  =(1)
                10.34  Credit Agreement, dated March 28, 1997, between Acuson Corporation and ABN AMRO     
                       Bank N. V., as Agent for Lenders (Exhibit 4.1)                                      =
                10.35  Acuson Management Incentive Plan (Exhibit 10.35)                                    (1)
                 11.1  Statement regarding computation of per share earnings for the fiscal year ended     
                       December 31, 1993 (Exhibit 11.2)                                                    /
                 11.2  Statement regarding computation of per share earnings for the fiscal period ended   
                       April 2, 1994 (Exhibit 11.1)                                                        //
                 11.3  Statement regarding computation of per share earnings for the fiscal period ended   
                       July 2, 1994 (Exhibit 11.1)                                                         ///
                 11.4  Statement regarding computation of per share earnings for the fiscal period ended  
                       October 1, 1994 (Exhibit 11.1)                                                      ////
                 11.5  Statement regarding computation of per share earnings for the fiscal year ended     
                       December 31, 1994 (Exhibit 11.6)                                                    @
                 11.6  Statement regarding computation of per share earnings for the fiscal period ended   
                       April 1, 1995 (Exhibit 11.1)                                                        @@
                 13.1  The portion of the Annual Report to security holders for the fiscal year ended
                       December 31, 1997, which is incorporated by reference.

</TABLE>

                                       20
<PAGE>
 
________________________________________________________________________________

<TABLE>
               <C>     <S>                                                                              <C>
                 21.1  Subsidiaries of Registrant
                 23.1  Consent of Independent Public Accountants
                 27.1  Financial Data Schedule for the year ended December 31, 1997
 
</TABLE>
(b) The Registrant filed no reports on Form 8-K during the fourth quarter of the
    fiscal year covered by this report.


<TABLE>
<CAPTION>
     <C>     <S>
        *    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 10-K Annual Report for the fiscal year ended
             December 31, 1987.
      ***    Incorporated by reference to the indicated exhibit in the Company's Form 8-K dated May 5, 1988.
     ****    Incorporated by reference to the indicated exhibit in the Company's Form 10-K Annual Report for the fiscal year ended
             December 31, 1990.
        +    Incorporated by reference to the indicated exhibit in the Company's Form 10-K Annual Report for the fiscal year ended
             December 31, 1989.
       ++    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 June 29, 1991.
     ++++    Incorporated by reference to the indicated exhibit in the Company's Form 10-Q Quarterly Report for the quarterly period
             ended September 28, 1991.
        #    Incorporated by reference to the indicated exhibit in the Company's Form 10-K Annual Report for the fiscal year ended
             December 31, 1991.
       ##    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-Q Quarterly Report for the quarterly period
             ended September 26, 1992.
     ####    Incorporated by reference to the indicated exhibit in the Company's Form 10-K Annual Report for the fiscal year ended
             December 31, 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 April 2, 1994.
     ///     Incorporated by reference to the indicated exhibit in the Company's Form 10-Q Quarterly Report for the quarterly period
             ended July 2, 1994.

</TABLE>

                                       21
<PAGE>
 
________________________________________________________________________________

<TABLE>
<CAPTION>
   <C>       <S>
     ////    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 April 1, 1995.
      @@@    Incorporated by reference to the indicated exhibit in the Company's Form 10-Q Quarterly Report for the quarterly period
             ended July 1, 1995.
        &    Incorporated by reference to the indicated exhibit in the Company's Form 10-Q Quarterly Report for the quarterly period
             ended September 28, 1996.
        =    Incorporated by reference to the indicated exhibit in the Company's Form 10-Q Quarterly Report for the quarterly period
             ended March 29, 1997.
       (1)   Management contract or compensatory plan required to be filed as an exhibit.
 
</TABLE>

                                       22
<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.

<TABLE> 
<CAPTION> 
                                ACUSON CORPORATION
<S>                             <C>
March 27, 1998                  By /s/ Samuel H. Maslak
                                   --------------------
                                       Samuel H. Maslak
                                       Chairman and Chief Executive Officer

March 27, 1998                  By /s/ Robert J. Gallagher
                                   -----------------------
                                       Robert J. Gallagher
                                       Vice Chairman and Chief Operating
                                       Officer (Principal Financial Officer)

March 27, 1998                  By /s/ L. Thomas Morse
                                   -------------------
                                       L. Thomas Morse
                                       Vice President, Corporate Controller

</TABLE> 



                                       23
<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 27, 1998
 (Samuel H. Maslak)

/s/ Robert J. Gallagher
-----------------------                 Vice Chairman and Chief Operating Officer       March 27, 1998
 (Robert J. Gallagher)                  (Principal Financial Officer)

/s/ L. Thomas Morse
-------------------                     Vice President, Corporate Controller            March 27, 1998
 (L. Thomas Morse)

/s/ Albert L. Greene
--------------------                    Director                                        March 27, 1998
 (Albert L. Greene)      

/s/ Karl H. Johannsmeier
------------------------                Director                                        March 27, 1998
 (Karl H. Johannsmeier)

/s/ Alan C. Mendelson
---------------------                   Director                                        March 27, 1998
 (Alan C. Mendelson)

</TABLE> 



                                      24
<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, 1998. 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, 1998

                                      S-1
<PAGE>
 
________________________________________________________________________________

ACUSON CORPORATION                                                   SCHEDULE II

VALUATION AND QUALIFYING ACCOUNTS
FOR THE THREE YEARS ENDED DECEMBER 31, 1997
(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, 1995                    $3,432             $  (175)            $   (259)              $2,998
          December  31, 1996                    $2,998             $   442             $   (472)              $2,968
          December  31, 1997                    $2,968             $   868             $   (361)              $3,475
 
ACCRUED WARRANTY:
      Year ended:
          December  31, 1995                    $4,475             $ 8,146             $ (8,181)              $4,440
          December  31, 1996                    $4,440             $ 9,526             $ (7,942)              $6,024
          December  31, 1997                    $6,024             $15,207             $(12,276)              $8,955
</TABLE>

                                      S-2