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

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

                                   FORM 10-Q

<TABLE>
<C>        <S>
   /X/     QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
           SECURITIES EXCHANGE ACT OF 1934
</TABLE>

                 FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2000

                                       OR

<TABLE>
<C>        <S>
   / /     TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
           SECURITIES EXCHANGE ACT OF 1934
</TABLE>

        FOR THE TRANSITION PERIOD FROM ______________ TO ______________

                          COMMISSION FILE NO. 0-25298

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

                              OAK TECHNOLOGY, INC.
             (Exact name of registrant as specified in its charter)

<TABLE>
<S>                                            <C>
               DELAWARE                                     77-0161486
    (State or other jurisdiction of                      (I.R.S. Employer
    incorporation or organization)                     Identification No.)
</TABLE>

                                139 KIFER COURT
                          SUNNYVALE, CALIFORNIA 94086
          (Address of principal executive offices, including zip code)

                                 (408) 737-0888
              (Registrant's telephone number, including area code)

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

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

    As of March 31, 2000, there were outstanding 52,110,911 shares of the
Registrant's Common Stock, par value $0.001 per share.

--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
<PAGE>
                     OAK TECHNOLOGY, INC. AND SUBSIDIARIES
                                   FORM 10-Q
                                     INDEX
                      FOR THE QUARTER ENDED MARCH 31, 2000

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

Item 1.  Financial Statements

         Condensed Consolidated Balance Sheets as of March 31, 2000
           and June 30, 1999.........................................      3

         Condensed Consolidated Statements of Operations for the
           Three Months and
           Nine Months Ended March 31, 2000 and 1999.................      4

         Condensed Consolidated Statements of Cash Flows for the Nine
           Months Ended March 31, 2000 and 1999......................      5

         Notes to Condensed Consolidated Financial Statements........      6

Item 2.  Management's Discussion and Analysis of Financial Condition
           and Results of Operations.................................     14

Item 3.  Quantitative and Qualitative Disclosures About Market
           Risk......................................................     30

PART II--OTHER INFORMATION

Item 1.  Legal Proceedings...........................................     32

Item 2.  Changes in Securities.......................................     35

Item 3.  Defaults upon Senior Securities.............................     35

Item 4.  Submission of Matters to a Vote of Security Holders.........     35

Item 5.  Other Information...........................................     36

Item 6.  Exhibits and Reports on Form 8-K............................     36

SIGNATURES...........................................................     37

Exhibit Index........................................................     38
</TABLE>

                                       2
<PAGE>
PART I--FINANCIAL INFORMATION

ITEM 1.  FINANCIAL STATEMENTS

                     OAK TECHNOLOGY, INC. AND SUBSIDIARIES

                     CONDENSED CONSOLIDATED BALANCE SHEETS

                           (IN THOUSANDS, UNAUDITED)

<TABLE>
<CAPTION>
                                                              MARCH 31,   JUNE 30,
                                                                2000        1999
                                                              ---------   --------
<S>                                                           <C>         <C>
                                      ASSETS
Current assets:
  Cash and cash equivalents.................................  $ 39,228    $ 19,500
  Short-term investments....................................    95,803     113,703
  Accounts receivable, net of allowance for doubtful
    accounts of $443 and $555, respectively.................    14,919       8,251
  Inventories, net..........................................     9,710       1,819
  Current portion of foundry deposits.......................     3,620       9,061
  Prepaid expenses and other current assets.................     8,416      11,121
                                                              --------    --------
    Total current assets....................................   171,696     163,455
Property and equipment, net.................................    19,930      22,039
Foundry deposits............................................        --       7,760
Intangible assets, net......................................    47,110       7,569
Other assets................................................     5,348       3,017
                                                              --------    --------
    Total assets............................................  $244,084    $203,840
                                                              ========    ========

                       LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
  Notes payable and current portion of long-term debt.......  $     19    $     25
  Accounts payable..........................................    11,847       3,648
  Accrued expenses..........................................    14,893       8,467
  Deferred revenue..........................................     4,281         379
                                                              --------    --------
    Total current liabilities...............................    31,040      12,519
Long-term debt..............................................        --           5
Deferred income taxes.......................................     1,438       1,438
Other long-term liabilities.................................       258         457
                                                              --------    --------
    Total liabilities.......................................    32,736      14,419
                                                              --------    --------
Stockholders' equity:
  Preferred stock, $0.001 par value; 2,000,000 shares
    authorized; None issued and outstanding as of March 31,
    2000 and June 30, 1999..................................        --          --
  Common stock, $0.001 par value; 130,000,000 shares
    authorized as of March 31, 2000 and 60,000,000 shares
    authorized as of June 30, 1999; 54,493,391 shares issued
    and 52,110,911 shares outstanding as of March 31, 2000
    and 42,916,721 shares issued and 40,915,241 outstanding
    as of June 30, 1999.....................................        52          41
  Additional paid-in capital................................   215,566     164,784
  Treasury stock............................................   (11,254)     (9,437)
  Retained earnings.........................................     6,200      34,033
  Accumulated other comprehensive income....................       784          --
                                                              --------    --------
    Total stockholders' equity..............................   211,348    $189,421
                                                              --------    --------
    Total liabilities and stockholders' equity..............  $244,084    $203,840
                                                              ========    ========
</TABLE>

     See accompanying notes to condensed consolidated financial statements.

                                       3
<PAGE>
                     OAK TECHNOLOGY, INC. AND SUBSIDIARIES

                CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

                     (IN THOUSANDS, EXCEPT PER SHARE DATA)

                                  (UNAUDITED)

<TABLE>
<CAPTION>
                                                       THREE MONTHS ENDED     NINE MONTHS ENDED
                                                            MARCH 31,             MARCH 31,
                                                       -------------------   -------------------
                                                         2000       1999       2000       1999
                                                       --------   --------   --------   --------
<S>                                                    <C>        <C>        <C>        <C>
Net revenues.........................................  $ 28,502   $ 15,965   $ 49,674   $ 57,793
Cost of revenues.....................................    12,567      8,590     24,249     30,615
                                                       --------   --------   --------   --------
    Gross profit.....................................    15,935      7,375     25,425     27,178

Research and development expenses....................    12,260     11,208     36,138     34,233
Selling, general and administrative expenses.........     8,824      8,630     25,041     26,817
Amortization of intangibles..........................     3,588      1,328      7,363      3,614
Restructuring........................................     1,420         --      1,420         --
Acquired in-process technology.......................    10,158         --     10,383      7,161
                                                       --------   --------   --------   --------
    Operating loss...................................   (20,315)   (13,791)   (54,920)   (44,647)

Gain on sale of business unit........................    22,378         --     22,378         --
Other nonoperating income, net.......................       954        839      5,081      4,326
                                                       --------   --------   --------   --------
    Gain (loss) before income taxes..................     3,017    (12,952)   (27,461)   (40,321)

Income taxes (benefit)...............................       372     (1,907)       372     (5,404)
                                                       --------   --------   --------   --------
    Net income (loss)................................  $  2,645   $(11,045)  $(27,833)  $(34,917)
                                                       ========   ========   ========   ========

Net income (loss) per share
  Basic..............................................  $   0.05   $  (0.27)  $  (0.63)  $  (0.86)
                                                       ========   ========   ========   ========
  Diluted............................................  $   0.04   $  (0.27)  $  (0.63)  $  (0.86)
                                                       ========   ========   ========   ========
Shares used in computing net income (loss) per share
  Basic..............................................    49,850     40,768     43,958     40,791
                                                       ========   ========   ========   ========
  Diluted............................................    59,573     40,768     43,958     40,791
                                                       ========   ========   ========   ========
</TABLE>

     See accompanying notes to condensed consolidated financial statements.

                                       4
<PAGE>
                     OAK TECHNOLOGY, INC. AND SUBSIDIARIES

                CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

                           (IN THOUSANDS, UNAUDITED)

<TABLE>
<CAPTION>
                                                               NINE MONTHS ENDED
                                                                   MARCH 31,
                                                              -------------------
                                                                2000       1999
                                                              --------   --------
<S>                                                           <C>        <C>
Cash flows from operating activities:
  Net loss..................................................  $(27,833)  $(34,917)
  Adjustments to reconcile net loss to net cash used in
    operating activities:
    Depreciation and amortization...........................    12,233      8,693
      Gain on sale of business..............................   (22,378)        --
    Acquired in-process technology..........................    10,383      7,161
    Loss on disposal of property and equipment..............     1,381         --
    Deferred income taxes...................................        --        383
    Equity loss from affiliates.............................       365
    Changes in operating assets and liabilities:
      Accounts receivable...................................    (1,872)     3,176
      Inventories...........................................    (7,891)     5,858
      Foundry deposits......................................     9,061        943
      Prepaid expenses and other current assets.............     2,213      1,914
      Accounts payable, accrued expenses and deferred
        revenue.............................................    11,660       (878)
      Other assets..........................................     1,249       (194)
                                                              --------   --------
        Net cash used in operating activities...............   (11,429)    (7,861)
                                                              --------   --------
Cash flows from investing activities:
    Purchases of short-term investments.....................   (97,170)   (47,642)
    Proceeds from matured short-term investments............   135,854     43,206
    Additions to property and equipment.....................    (3,723)    (4,787)
    Acquisition of Xionics, net of cash acquired............    (9,453)        --
    Equity investment in Earjam.............................    (3,045)        --
    Acquisition of ViewPoint, Inc., net of cash acquired....        --     (9,467)
    Acquisition of XLI Inc. common stock....................        --     (3,675)
    Proceeds from sale of business unit.....................     4,900         --
    Payment of certain XLI Inc. liabilities at acquisition
      date..................................................        --     (2,094)
                                                              --------   --------
        Net cash provided by (used in) investing
          activities........................................    27,363    (24,459)
                                                              --------   --------
Cash flows from financing activities:
    Issuance of debt........................................        --      3,675
    Repayment of debt.......................................       (11)    (3,997)
    Issuances of common stock, net..........................     5,622      1,136
    Treasury stock acquisitions.............................    (1,817)    (2,720)
                                                              --------   --------
        Net cash provided by (used in) financing
          activities........................................     3,794     (1,906)
                                                              --------   --------
Net decrease in cash and cash equivalents...................    19,728    (34,226)
Cash and cash equivalents, beginning of period..............    19,500     59,803
                                                              --------   --------
Cash and cash equivalents, end of period....................  $ 39,228   $ 25,577
                                                              ========   ========
Supplemental information:
  Cash paid (refunded) during the period:
    Interest................................................  $     13   $     48
                                                              ========   ========
    Income taxes............................................  $ (3,726)  $ (8,033)
                                                              ========   ========
    Issuance of common stock and stock options assumed for
      businesses acquired...................................  $ 45,171   $     --
                                                              ========   ========
</TABLE>

     See accompanying notes to condensed consolidated financial statements.

                                       5
<PAGE>
                     OAK TECHNOLOGY, INC. AND SUBSIDIARIES

              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

                                  (UNAUDITED)

1.  BASIS OF PREPARATION

    The accompanying unaudited consolidated financial statements of Oak
Technology, Inc. and Subsidiaries ("Oak" or "The Company") have been prepared in
conformity with generally accepted accounting principles. However, certain
information or footnote disclosures normally included in financial statements
prepared in accordance with generally accepted accounting principles have been
condensed or omitted pursuant to the rules and regulations of the Securities and
Exchange Commission (the "Commission"). In the opinion of management, the
consolidated financial statements reflect all adjustments considered necessary
for a fair presentation of the consolidated financial position, operating
results and cash flows for those periods presented. The results of operations
for the interim periods presented are not necessarily indicative of the results
that may be expected for the full fiscal year or in any future period. This
quarterly report on Form 10-Q should be read in conjunction with the audited
consolidated financial statements and notes thereto for the year ended June 30,
1999, included in the Oak Technology, Inc. (the "Company") 1999 Annual Report on
Form 10-K/A previously filed with the Commission.

RECENTLY ISSUED ACCOUNTING STANDARDS

    In June 1998, the Financial Accounting Standards Board issued SFAS No. 133
"Accounting for Derivative Instruments and Hedging Activities" ("SFAS 133"),
which will be effective for the Company's fiscal year 2001. SFAS No. 133
establishes accounting and reporting standards requiring that every derivative
instrument, including certain derivative instruments embedded in other
contracts, be recorded in the balance sheet as either an asset or liability
measured at its fair value. The statement also requires that changes in the
derivative's fair value be recognized in earnings unless specific hedge
accounting criteria are met. The Company is currently assessing the impact of
this new statement on its consolidated financial position, liquidity, and
results of operations.

    In December 1999, the Securities and Exchange Commission (SEC) issued Staff
Accounting Bulletin No. 101 (SAB 101), Revenue Recognition in Financial
Statements, as amended by SAB 101A, which provides guidance on the recognition,
presentation, and disclosure of revenue in financial statements filed with the
SEC. SAB 101 outlines the basic criteria that must be met to recognize revenue
and provides guidance for disclosures related to revenue recognition policies.
The Company does not expect the adoption of SAB 101 to have a material effect on
its consolidated financial position or results of operations.

2.  CASH, CASH EQUIVALENTS AND SHORT-TERM INVESTMENTS

    At March 31, 2000, in addition to the Company's normal composition of
short-term interest bearing investments the Company was also holding 293,794
common shares of Conexant Systems, Inc. (NASDAQ:CNXT) at a book value and
approximate fair value of $20 million or $68.05 per share. These shares were
received as unregistered stock in consideration for the sale of the Company's
broadband business in January 2000 and were not registered and
available-for-sale until early March 2000.

                                       6
<PAGE>
                     OAK TECHNOLOGY, INC. AND SUBSIDIARIES

        NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                                  (UNAUDITED)

3.  INVENTORIES

    Inventories are stated at the lower of cost (first in, first out) or market
and consisted of the following (in thousands):

<TABLE>
<CAPTION>
                                                            MARCH 31,   JUNE 30,
                                                              2000        1999
                                                            ---------   --------
<S>                                                         <C>         <C>
Purchased parts and work in process.......................   $5,342      $  124
Finished goods............................................    4,368       1,695
                                                             ------      ------
                                                             $9,710      $1,819
                                                             ======      ======
</TABLE>

4.  NET INCOME (LOSS) PER SHARE

    Basic and diluted net loss per share have been computed using the weighted
average number of shares of common stock and dilutive common equivalent shares
from stock options and warrants outstanding in accordance with Statement of
Financial Accounting Standards No. 128, "Earnings per Share." The following
table provides a reconciliation of the components of the basic and diluted loss
per share computations:

<TABLE>
<CAPTION>
                                                        THREE MONTHS ENDED     NINE MONTHS ENDED
                                                             MARCH 31,             MARCH 31,
                                                        -------------------   -------------------
                                                          2000       1999       2000       1999
                                                        --------   --------   --------   --------
<S>                                                     <C>        <C>        <C>        <C>
Net income (loss).....................................  $ 2,645    $(11,045)  $(27,833)  $(34,917)
                                                        =======    ========   ========   ========

Weighted average common shares outstanding used for
  basic earnings (loss) per share.....................   49,850      40,768     43,958     40,791

Effect of dilutive common stock options...............    9,723          --         --         --
                                                        -------    --------   --------   --------

Weighted average common shares outstanding used for
  diluted earnings (loss) per share...................   59,573      40,768     43,958     40,791
                                                        -------    --------   --------   --------

Basic earnings (loss) per share.......................  $  0.05    $  (0.27)  $  (0.63)  $  (0.86)
                                                        =======    ========   ========   ========

Diluted earnings (loss) per share.....................  $  0.04    $  (0.27)  $  (0.63)  $  (0.86)
                                                        =======    ========   ========   ========
</TABLE>

    For the three months ended March 31, 2000 approximately 55,000 potentially
dilutive common shares were not included in the calculation of net income per
share, as they are considered antidilutive. For the three months ended
March 31, 1999 approximately 284,000 potentially dilutive common shares were not
included in the calculation of net diluted loss per share, as they are
considered antidilutive. For the nine months ended March 31, 2000 and 1999
approximately 8,055,000 and 185,000 of potentially dilutive common shares,
respectively, were not included in the calculation of net diluted loss per
share, as they are considered antidilutive.

5.  STOCKHOLDERS' EQUITY

    On July 28, 1999, the Company announced that its Board of Directors approved
a stock repurchase plan authorizing the purchase of up to four million shares of
the Company's common stock. Repurchases

                                       7
<PAGE>
                     OAK TECHNOLOGY, INC. AND SUBSIDIARIES

        NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                                  (UNAUDITED)

5.  STOCKHOLDERS' EQUITY (CONTINUED)
will be made from time to time in open market or privately negotiated
transactions over one year, unless further extended by the Board. From July 28,
1999 to March 31, 2000, the Company repurchased 381,000 shares of the 4 million
shares authorized at a cost of approximately $1.8 million.

    On January 11, 2000, the shareholders of the Company approved an increase of
70 million shares to the authorized number of shares of common stock bringing
the total authorized from 60 million to 130 million shares.

6.  ACQUISITIONS & DIVESTITURES

    On January 11, 2000, the shareholders of both the Company and Xionics
Document Technologies, Inc. (Xionics) approved a definitive acquisition
agreement. Xionics designs, develops and markets innovative software and silicon
solutions for printing, scanning, copying, processing and transmitting digital
documents to computer peripheral devices that perform document imaging
functions. Such devices include printers, copiers, scanners and multifunction
peripherals that perform a combination of these imaging functions.

    Under the terms of the acquisition agreement, Oak issued approximately
9.5 million shares of its common stock and paid approximately $34.7 million in
cash to acquire all of the common stock of Xionics. The Company recorded a
special charge of approximately $9.9 million against earnings in the third
fiscal quarter of 2000 in order to write off the cost of in-process research and
development acquired in the merger. The amount allocated to the in-process
research and development charge was determined through an established valuation
technique used in the high technology industry. The amount allocated to in-
process research and development was expensed upon acquisition, as technological
feasibility had not been established and no alternative uses exist. In addition
to the $9.9 million charge taken, approximately $45.9 million (representing the
fair value of net intangible assets acquired in the merger) has been recorded as
intangible assets on the Company's balance sheet and is being amortized over
three to five years. The transaction has been accounted for under the purchase
method of accounting, and accordingly, the financial statements include the
results of operations of Xionics form the date of acquisition.

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

<TABLE>
<CAPTION>

<S>                                                           <C>
Cash........................................................  $34,715
Common stock................................................   36,793
Fair value of Xionics stock options assumed.................    8,380
                                                              -------
  Total purchase price......................................  $79,888
                                                              -------
Fair value of net tangible assets of Xionics................  $24,051
Intangible assets and goodwill..............................   45,979
Purchase of in-process research and development.............    9,858
                                                              -------
  Total net tangible and intangible assets acquired.........  $79,888
                                                              -------
</TABLE>

    The following unaudited pro forma financial information presents the
combined results of operations of the Oak and Xionics as if the acquisition had
occurred as of the beginning of fiscal 2000 and 1999, after giving effect to
certain adjustments, including amortization of intangibles. The unaudited pro
forma

                                       8
<PAGE>
                     OAK TECHNOLOGY, INC. AND SUBSIDIARIES

        NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                                  (UNAUDITED)

6.  ACQUISITIONS & DIVESTITURES (CONTINUED)
financial information does not necessarily reflect the results of operations
that would have occurred had the combined companies constituted a single entity
during such periods, and is not necessarily indicative of results which may be
obtained in the future.

<TABLE>
<CAPTION>
                                                           NINE MONTHS ENDED
                                                               MARCH 31,
                                                          -------------------
                                                            2000       1999
                                                          --------   --------
<S>                                                       <C>        <C>
In thousands except for per share data:

Pro forma revenues......................................  $ 67,939   $ 80,684

Pro forma net loss......................................   (30,098)   (41,261)

Pro forma basic and diluted (loss) per share............  $  (0.58)  $  (0.81)
                                                          ========   ========
</TABLE>

    In the third quarter of fiscal 2000, the Company recorded a special charge
of $1.4 million primarily due to the planned abandonment of existing Imaging
group facilities in favor of a location where the combined companies can be
located. The company has negotiated a lease for office space in Woburn,
Massachusetts where it plans to combine the Imaging business unit in
August 2000.

    On January 19, 2000, the Company announced the sale of its broadband
business group located in the United Kingdom and associated Intellectual
Property in the United States to Conexant Systems, Inc. Under the terms of the
agreement, Oak received $24.9 million in cash and stock from Conexant. The
Company realized a gain of $22.4 million during the third fiscal quarter of 2000
from the sale.

    During the second quarter of fiscal 2000 the Company made an equity
investment in a start-up venture, Earjam.com, with a first payment of
approximately $1.0 million for a minority equity position. The Company recorded
a special charge of $0.2 million against earnings in the second fiscal quarter
of 2000 to write-off the amount of the investment allocated to in-process
research and development. The Company made an additional $2.0 million payment in
Earjam.com during the third quarter of fiscal 2000 and recorded an additional
special charge of $0.3 million in the third fiscal quarter of 2000 to write-off
the remaining amount of the investment allocated to in-process research and
development. The amounts allocated to the in-process research and development
charges during the second and third quarters of fiscal 2000 were determined
through an established valuation technique used in the high technology industry.
The amount allocated to in-process research and development was expensed upon
acquisition, because technological feasibility had not been established and no
alternative uses exist. The investment has been accounted for under the equity
method of accounting.

    Under the terms of a merger agreement with Xerographic Laser Images
Corporation ("XLI") dated August 11, 1999, the Company may be obligated to pay
up to an additional $10.3 million if revenues from products utilizing XLI's
technologies are in excess of a base amount of $3.7 million for each year of a
3 year period ending December 31, 2000. To date, revenues have not exceeded the
base amount and, accordingly, no additional payments to XLI have been made or
accrued for.

7.  CONTINGENCIES

    The Company and various of its current and former officers and Directors are
parties to a consolidated class action lawsuit filed on behalf of all persons
who purchased or acquired the Company's common

                                       9
<PAGE>
                     OAK TECHNOLOGY, INC. AND SUBSIDIARIES

        NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                                  (UNAUDITED)

7.  CONTINGENCIES (CONTINUED)
stock (excluding the defendants and parties related to them) for the period
July 27, 1995 through May 22, 1996. This state court proceeding, designated IN
RE OAK TECHNOLOGY SECURITIES LITIGATION, Master File No. CV758510 is pending in
Santa Clara County Superior Court in Santa Clara, California. The lawsuit
originally named as defendants several of the Company's venture capital fund
investors, two of its investment bankers and two securities analysts. The
plaintiffs originally alleged violations of California securities laws and
statutory deceit provisions as well as breaches of fiduciary duty and abuse of
control. The plaintiffs seek unspecified monetary damages. After several rounds
of demurrers, the only remaining claim is the California Corporations Code
Sections 25400/25500 cause of action against the Company, four officers and the
Company's investment bankers and securities analysts. On July 16, 1998, the
state court provisionally certified a national class of all persons who
purchased the Company's stock during the class period. The class was
provisionally certified with the order held in abeyance pending resolution of
the question of whether a nationwide class may bring a California Corporations
Code Sections 25400/25500 claim. This issue was resolved in favor of allowing
such nationwide class actions by the California Supreme Court, Case
No. 5058723, on January 4, 1999, in the DIAMOND MULTIMEDIA SECURITIES LITIGATION
appeal by the California Supreme Court. The defendants and certain third parties
have produced documents and a number of depositions have been taken, including
the depositions of those officers of the Company who were officers during the
class period. Discovery will be concluded on June 5, 2000. This action is set
for trial on July 3, 2000. Based on its current information, the Company
believes this suit to be without merit and will defend its position vigorously.
Although it is reasonably possible the Company may incur a loss upon conclusion
of these claims, an estimate of any loss or range of loss cannot be made. No
provision for any liability that may result upon adjudication has been made in
the Company's Consolidated Financial Statements.

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

    The Company is party to various other legal proceedings, including a number
of patent-related matters. In the opinion of management these other legal
proceedings are not likely to have a material adverse effect, if any, on the
Company's consolidated financial position or overall results of operations. In
connection with these matters, however, the Company has incurred, and expects to
continue to incur, legal and other expenses.

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

                                       10
<PAGE>
                     OAK TECHNOLOGY, INC. AND SUBSIDIARIES

        NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                                  (UNAUDITED)

8.  SEGMENT INFORMATION

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

    For the first two quarters of fiscal year 2000, Oak Technology had three
reportable segments offering different product lines to each of its target
markets: Optical Storage, Consumer and Imaging. With the sale of the broadband
business to Conexant in early January 2000, the Company has two remaining
reportable segments: Optical Storage and Imaging. The Company evaluates
operating segment performance based on net revenues and direct operating
expenses of these segments. The accounting policies of the operating segments
are the same as those described in the summary of accounting policies. Imaging
segment information reported for the three months ended March 31, 2000 includes
the effects of the Xionics acquisition completed on January 11, 2000. The
Company does not allocate assets to its individual operating segments. No
reportable segments have been aggregated.

    Information about reported segment income or loss is as follows for the
three and nine months ended March 31, 2000 and 1999 (in thousands):

<TABLE>
<CAPTION>
                                                         THREE MONTHS ENDED     NINE MONTHS ENDED
                                                              MARCH 31,             MARCH 31,
                                                         -------------------   -------------------
                                                           2000       1999       2000       1999
                                                         --------   --------   --------   --------
<S>                                                      <C>        <C>        <C>        <C>
Net Revenues:
  Optical Storage......................................  $12,205    $ 9,865    $ 15,846   $ 39,993
  Imaging..............................................   16,297      5,000      29,564     15,400
  Consumer.............................................       --      1,100       4,264      2,400
                                                         -------    -------    --------   --------
                                                         $28,502    $15,965    $ 49,674   $ 57,793
                                                         =======    =======    ========   ========
Cost of Goods Sold and Direct Operating Expenses:
  Optical Storage......................................  $13,532    $10,543    $ 26,038   $ 36,503
  Imaging..............................................   14,515      5,538      25,267     15,776
  Consumer.............................................       --      4,494      10,065     14,542
                                                         -------    -------    --------   --------
                                                         $28,047    $20,575    $ 61,370   $ 66,821
                                                         =======    =======    ========   ========
Contribution Margin:
  Optical Storage......................................  $(1,327)   $  (678)   $(10,192)  $  3,490
  Imaging..............................................    1,782       (538)      4,297       (376)
  Consumer.............................................       --     (3,394)     (5,801)   (12,142)
                                                         -------    -------    --------   --------
                                                         $   455    $(4,610)   $(11,696)  $ (9,028)
                                                         =======    =======    ========   ========
</TABLE>

                                       11
<PAGE>
                     OAK TECHNOLOGY, INC. AND SUBSIDIARIES

        NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                                  (UNAUDITED)

8.  SEGMENT INFORMATION (CONTINUED)
    A reconciliation of the totals reported for the operating segments to the
applicable line items in the consolidated condensed financial statements for the
three and nine months ended March 31, 2000, is as follows (in thousands):

<TABLE>
<CAPTION>
                                                       THREE MONTHS ENDED     NINE MONTHS ENDED
                                                            MARCH 31,             MARCH 31,
                                                       -------------------   -------------------
                                                         2000       1999       2000       1999
                                                       --------   --------   --------   --------
<S>                                                    <C>        <C>        <C>        <C>
Contribution margin from operating segments..........  $    455   $ (4,610)  $(11,696)  $ (9,028)
  Indirect operating expenses........................     5,604      7,853     24,058     24,844
  Amortization of intangibles........................     3,888      1,328      7,888      3,614
  Restructuring......................................     1,420         --      1,420         --
  Acquired in-process research and development.......     9,858         --      9,858      7,161
Total operating income (loss)........................   (20,315)   (13,791)   (54,920)   (44,647)
                                                       --------   --------   --------   --------
  Gain on sale of business...........................    22,378         --     22,378         --
  Other income.......................................       954        839      5,081      4,326
                                                       --------   --------   --------   --------
Income (loss) before taxes...........................  $  3,017   $(12,952)  $(27,461)  $(40,321)
                                                       ========   ========   ========   ========
</TABLE>

    Indirect operating expenses includes all costs and expenses not specifically
charged to the operating segments in the financial information reviewed by the
Company's chief decision making officer. These include various overhead and
indirect sales expenses as well as corporate marketing and general and
administrative expenses.

    The Company maintains significant operations in the United States, Taiwan
and Japan. Activities in the United States consist of corporate administration,
product research and development, logistics and worldwide sales and marketing
management. Foreign operations consist of regional sales and marketing and
administration.

    The distribution of net revenues for the three and nine months ended
March 31, 2000 and 1999 are as follows (in thousands):

<TABLE>
<CAPTION>
                                                          THREE MONTHS ENDED     NINE MONTHS ENDED
                                                               MARCH 31,             MARCH 31,
                                                          -------------------   -------------------
                                                            2000       1999       2000       1999
                                                          --------   --------   --------   --------
<S>                                                       <C>        <C>        <C>        <C>
Revenue from unaffiliated customers originating from:
  United States.........................................  $ 8,525    $ 1,317    $13,520    $ 7,046
  Japan.................................................    6,937      8,135     15,830     30,831
  Korea.................................................   10,584      1,639     14,120      4,260
  Taiwan................................................       30        303        338      1,768
  Other Asia............................................      728      2,085      3,095      5,906
  Europe................................................    1,698      2,486      2,771      7,982
                                                          -------    -------    -------    -------
                                                          $28,502    $15,965    $49,674    $57,793
                                                          =======    =======    =======    =======
</TABLE>

                                       12
<PAGE>
                     OAK TECHNOLOGY, INC. AND SUBSIDIARIES

        NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                                  (UNAUDITED)

9.  COMPREHENSIVE INCOME

    The following table presents the calculation of comprehensive income as
required by SFAS 130. The components of comprehensive income, net of tax, are as
follows (in thousands):

<TABLE>
<CAPTION>
                                                         THREE MONTHS ENDED     NINE MONTHS ENDED
                                                              MARCH 31,             MARCH 31,
                                                         -------------------   -------------------
                                                           2000       1999       2000       1999
                                                         --------   --------   --------   --------
<S>                                                      <C>        <C>        <C>        <C>
Net income (loss):.....................................   $2,645    $(11,045)  $(27,833)  $(34,917)
  Other comprehensive income (loss):
    Change in unrealized gain (loss) on investments,
      net..............................................      944        (235)       784        (13)
                                                          ------    --------   --------   --------
Total comprehensive income (loss)......................   $3,589    $(11,280)  $(27,049)  $(34,930)
                                                          ======    ========   ========   ========
</TABLE>

10.  SUBSEQUENT EVENTS

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

                                       13
<PAGE>
ITEM 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
         OF OPERATIONS

    EXCEPT FOR THE HISTORICAL FINANCIAL INFORMATION CONTAINED HEREIN, THE
MATTERS DISCUSSED IN THIS QUARTERLY REPORT ON FORM 10-Q MAY BE CONSIDERED
"FORWARD-LOOKING" STATEMENTS WITHIN THE MEANING OF SECTION 27A OF THE SECURITIES
ACT OF 1933, AS AMENDED, AND SECTION 21E OF THE SECURITIES EXCHANGE ACT OF 1934,
AS AMENDED (THE "EXCHANGE ACT"). SUCH STATEMENTS INCLUDE DECLARATIONS REGARDING
THE INTENT, BELIEF OR CURRENT EXPECTATIONS OF THE COMPANY AND ITS MANAGEMENT.
PROSPECTIVE INVESTORS ARE CAUTIONED THAT ANY SUCH FORWARD-LOOKING STATEMENTS ARE
NOT GUARANTEES OF FUTURE PERFORMANCE AND INVOLVE A NUMBER OF RISKS AND
UNCERTAINTIES. ACTUAL RESULTS COULD DIFFER MATERIALLY FROM THOSE INDICATED BY
SUCH FORWARD-LOOKING STATEMENTS AS A RESULT OF CERTAIN FACTORS, INCLUDING THOSE
SET FORTH IN THIS ITEM 2, THOSE DESCRIBED ELSEWHERE IN THIS QUARTERLY REPORT AND
THOSE DESCRIBED IN THE COMPANY'S ANNUAL REPORT ON FORM 10-K/A FOR THE YEAR ENDED
JUNE 30, 1999, OTHER QUARTERLY REPORTS ON FORM 10-Q, FORM S-4, AND OTHER REPORTS
FILED UNDER THE EXCHANGE ACT.

GENERAL

    The Company designs, develops and markets high performance embedded software
and integrated semiconductor solutions to original equipment manufacturers
worldwide that serve the optical storage and digital imaging markets. The
Company's products consist primarily of embedded software, integrated circuits
and supporting software and firmware to provide a complete solution for
customers, thereby enabling them to deliver cost effective, powerful systems to
end users for home and business use. The Company's mission is to be a leading
solutions provider for the storage and distribution of digital content.

    The Company contracts with independent foundries to manufacture all of its
semiconductor products, enabling the Company to focus on its design strengths,
minimize fixed costs and capital expenditures and gain access to advanced
manufacturing facilities. The Company's foundries generally are not obligated to
supply products to the Company for any specific period, in any specific quantity
or at a specific price.

    Excluding the gain of approximately $22.4 million from the sale of the
Company's broadband business group, the Company would have recorded its ninth
consecutive quarterly loss. Low revenues and continued losses are primarily due
to a product transition in the Company's optical storage business, which
historically has accounted for approximately 80% of the Company's revenues.
Volume shipments of its next generation CD-RW controllers are expected to
increase as the Company's OEM customers achieve production volumes. However, the
Company cannot predict the product's ultimate level of customer acceptance, or
if any, the impact of that acceptance on future operating results.

    The Company's quarterly and annual operating results have been, and will
continue to be, affected by a wide variety of factors that could have a material
adverse effect on revenues and profitability during any particular period,
including competitive pressures on selling prices, availability and cost of
foundry capacity and raw materials, fluctuations in yield, loss of any strategic
relationships, the Company's ability to introduce new products in accordance
with OEM design requirements and design cycles, new product introductions by the
Company's competitors and market acceptance of product sold by both the Company
and its customers. To date, Oak has not experienced any material delays in its
wafer deliveries from its primary manufacturers. However, with the current
shortage of foundry capacity, which is expected throughout calendar 2000, there
can be no assurance that delays will not occur in the future.

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

                                       14
<PAGE>
RESULTS OF OPERATIONS

    NET REVENUES.  Net revenues increased 79% to $28.5 million for the three
months ended March 31, 2000 from $16.0 million in the comparable period of
fiscal 1999. This was primarily the result of the additional revenues provided
by Xionics operations after its acquisition in January, 2000, and to a lesser
extent from an increase in shipments of the Company's newly introduced OTI9790
8X CD-RW controller. For the nine month period ended March 31, 2000, net
revenues decreased 14% to $49.7 million from $57.8 million in the comparable
period of fiscal 1999 due to overall product transitions in the optical storage
business as partially offset by the acquisition of the Xionics operations and
the recent success of the OTI9790 8X CD-RW controller.

    Net revenues in the Optical Storage business segment were $12.2 million for
the third quarter of fiscal 2000, representing an 11% increase from the
segment's net revenues of $11.0 million reported in the third quarter of fiscal
1999. This increase is due to shipments of the Company's OTI9790 8X CD-RW
controller during the quarter. Optical Storage business segment revenues were
$20.1 million for the first nine months of fiscal 2000, representing a 53%
decrease from the segment's net revenues of $42.5 million reported in the
comparable period of fiscal 1999. This decrease is primarily the result of the
maturation of the CD-ROM market coupled with a loss of market share in Taiwan
and previous development delays in the Company's next-generation CD-RW
controller.

    Net revenues for the Imaging business segment were $16.3 million for the
three months ended March 31, 2000, representing a 226% increase over the
$5.0 million reported in the third quarter of fiscal 1999. For the first nine
months of fiscal 2000, Imaging business segment revenues were $29.6 million,
representing a 92% increase from the segment's net revenues of $15.4 million
reported in the comparable period of fiscal 1999. These increases were primarily
due to the acquisition of Xionics Document Technologies, Inc, during the current
quarter and to a lesser extent increased revenues from the segment's traditional
compression codec and resolution enhancement products during first three and
nine months of fiscal 2000.

    GROSS MARGIN.  Cost of revenues includes the cost of wafer fabrication;
assembly and testing performed by third-party vendors; direct and indirect costs
associated with the procurement; scheduling and quality assurance functions
performed by the Company, and software development costs. The Company's gross
margin increased to 55.9% in the three months ended March 31, 2000, compared to
46.2% during the comparable period in the prior year. For the first nine months
of fiscal 2000 gross margin increased to 51.2% from 47.0% during the same period
of the prior year. These increases were primarily due to the inclusion of
Xionics software revenues with higher average gross margins than the Company's
traditional product gross margins.

    Gross margin for the Optical Storage business segment was 40% for the third
quarter of fiscal 2000 and for the comparable quarter of the prior year and 31%
for the first nine months of fiscal 2000 compared to 42% for the first nine
months of the prior year. This decrease is primarily due to a shift in product
mix to lower margin products during fiscal 2000.

    Gross margin for the Imaging business segment was 68% for the third quarter
of fiscal year 2000, compared to 59% reported in the third quarter of fiscal
1999 and 65% for the first nine months of fiscal 2000 compared to 61% for the
first nine months of the prior year. These increases were primarily due to the
inclusion of Xionics software revenues with higher average gross margins than
other imaging product gross margins.

    The Company's overall gross margin is subject to change due to various
factors, including, among others, competitive product pricing, yields, wafer
costs, assembly and test costs and product mix. The Company expects that ASPs
for its existing products may continue to decline over time and that ASPs for
each new product may decline significantly over the life of the product. Wafer
Costs from the foundries may also increase over time and there is no assurance
that the Company will be able to pass these potential cost increases, if any, on
to the Company's OEM customers. In addition, given the extremely competitive

                                       15
<PAGE>
nature of the optical storage market, the Company believes that gross margins
for new products in this market may be somewhat lower than historical levels.

    RESEARCH AND DEVELOPMENT EXPENSES.  Research and development costs are
expensed as incurred. Research and development expenses of $12.3 million for the
three months ended March 31, 2000 increased $1.0 million, or 9.4%, from
$11.2 million in the comparable period of the previous fiscal year. This
increase was primarily due to the acquisition of Xionics Document
Technologies, Inc. during the quarter. For the first nine months of fiscal 2000,
research and development expenses of $36.1 million increased $1.9 million, from
$34.2 million in the comparable period of the previous fiscal year. The increase
was primarily due to charges totaling $1.2 million related to the write-off of
intangible assets due to the divestiture of the Company's consumer group,
$0.7 million related to the purchase of licensed technology used for research
and development, and write-offs of obsolete capital equipment of $0.5 million
during the second quarter of fiscal 2000. The Company will continue to invest
substantial resources in research and development of new products in the
Company's target markets: Optical Storage and Imaging.

    SELLING, GENERAL AND ADMINISTRATIVE EXPENSES.  Selling, general and
administrative (S,G&A) expenses increased by 2.2% to $8.8 million for the three
months ended March 31, 2000 from $8.6 million in the comparable period of the
prior year. This increase is primarily due to the acquisition of Xionics
Document Technologies during the quarter. For the first nine months of fiscal
2000, selling, general and administrative expenses decreased by 6.7% to
$25.0 million from $26.8 million during the comparable period of the prior year.
This decrease is primarily due to lower consulting and legal fees during fiscal
2000. S,G&A expenses increased significantly as a percentage of net revenues for
the current fiscal periods over the comparable periods in the prior year due
primarily to a significant decrease in the Company's net revenues in the
comparison periods.

    ACQUIRED IN-PROCESS TECHNOLOGY.  During the third quarter of fiscal 2000 the
Company charged $9.9 million and $0.3 million to operations to record the amount
of the Xionics and Earjam.com purchase price allocated to in-process research
and development, respectively. For the nine months ended March 31, 2000, the
Company charged $9.9 million and $0.5 million to acquired in-process technology
related to the acquisition of Xionics Technologies, Inc. and to the equity
investment in Earjam.com, respectively. The amounts charged were determined
through an established valuation technique used in the high technology industry.
The amount allocated to in-process research and development was expensed upon
acquisition, as technological feasibility had not been established and no
alternative uses exist.

    During the first quarter of fiscal 1999, the Company acquired ViewPoint and
XLI. Of the combined purchase prices of the two companies, $7.2 million was
allocated to IPR&D and was charged to operations ($4.8 million related to
ViewPoint, $2.4 million related to XLI). Substantially all of the remainder of
the purchase price of each of the two companies (aside from allocations to
tangible assets totaling $0.9 million) has been allocated to purchased
technology and other intangible assets (totaling $8.8 million) recorded on the
Company's balance sheet, and will be amortized to operations on a straight-line
basis over three years. During the second and third quarters of fiscal 2000, the
Company made an equity investment in Earjam.com--an Internet based company to
facilitate the downloading of music from the Internet. Of the $3.0 million
investment in Earjam, $0.5 million was allocated to IPR&D and was charged to
operations. The remaining investment of approximately $2.5 million is accounted
for under the equity method of accounting.

    RESTRUCTURING.  During the third quarter of fiscal 2000 the Company accrued
$1.4 million as restructuring charges. Approximately $1.2 million was accrued
for the planned abandonment of its leased facility in Andover, Massachusetts.
The Company negotiated a new lease for 82,000 square feet of office space in
Woburn, Massachusetts and plans to combine its Imaging group at that new
location in August 2000. Approximately $0.2 million was accrued for employee
severance. The Company expects to pay for these charges during fiscal 2001.

                                       16
<PAGE>
    NONOPERATING INCOME.  During the third quarter of fiscal 2000, the Company
sold its broadband business unit located in the United Kingdom for
$24.9 million in cash and stock and recorded a nonoperating gain of
$22.4 million related to the sale.

    OTHER NONOPERATING INCOME.  During the third quarter of fiscal 2000, other
nonoperating income increased to $1.0 million from $0.8 million during third
quarter of fiscal 1999. For the first nine months of fiscal 2000, other
nonoperating income increased to $5.1 million from $4.3 million in the
comparable period of the prior year. This increase is primarily due to increased
interest income from higher average short-term investments and higher interest
rates combined with foreign currency translation gains (related primarily to the
strengthening of the Japanese Yen) recognized during the periods.

    INCOME TAXES.  Management believes that sufficient future taxable income may
not be generated in order to realize all the Company's deferred tax assets.
Accordingly, during fiscal 1999 a full valuation allowance against deferred tax
assets was established. Given this, no income tax benefit was recognized with
respect to operating losses for the first nine months of fiscal 2000. The
Company recorded an income tax provision for foreign income tax withholding of
$0.4 million during the third quarter of fiscal 2000.

FACTORS THAT MAY AFFECT FUTURE RESULTS

    EXPECTED BENEFITS OF THE MERGER WITH XIONICS DOCUMENT TECHNOLOGIES, INC. MAY
NOT BE ACHIEVED.

    In order to realize the benefits of the merger, the Company will have to
effectively integrate the operations and management acquired in the merger,
together with technical research and development, sales and marketing, business
development efforts and also retain key personnel in this process. The
successful execution of these events will involve considerable risk and may not
be successful. If the Company is not successful in accomplishing this
integration, then the objectives of the merger, including improved operating
results will not be realized. A key benefit of the merger is perceived to be the
Company's opportunity to transition from being an integrated circuits provider
to a complete solutions provider for the growing digital office market, and
thereby, gain a larger share of the products outsourced by the Company's
original equipment manufacturer, or OEM, customers. The Company believes that it
will have the resources and technology necessary to be a leading supplier to the
digital office market and will offer one of this industry's most integrated and
flexible platforms. However, if the integration is not successful or is
unexpectedly delayed or more expensive than contemplated, the Company will not
realize these benefits to the fullest extent possible.

    If the benefits of the merger to Company stockholders do not exceed the
costs associated with the merger, which costs include integration costs and the
dilution to the Company's stockholders resulting from the issuance of shares in
connection with the merger, then the financial results of the Company, including
earnings per share, could be adversely affected.

    The market price of the Company's common stock could decline as a result of
the merger if:

    - The integration is unsuccessful or proves to be more expensive or
      time-consuming than expected;

    - The Company does not achieve the perceived benefits of the merger as
      rapidly or to the extent anticipated by third party and other financial
      analysts; or

    - The effect of the merger on the Company's financial results are not
      consistent with the expectations of third party and other financial
      analysts.

    THE COMPANY'S FUTURE FINANCIAL RESULTS WILL BE ADVERSELY IMPACTED BY THE
COSTS OF THE MERGER AND MAY BE FURTHER ADVERSELY IMPACTED BY THE ACCOUNTING
TREATMENT OF THE MERGER.

    The Company took a special charge of approximately $9.9 million against
earnings in the third fiscal quarter of 2000 in order to write off the cost of
in-process research and development acquired in the merger. The Securities and
Exchange Commission has recently begun disapproving large in-process

                                       17
<PAGE>
research and development write-offs. If the write-off is not as the Company
expects, a larger portion of the purchase price paid in the merger will have to
be allocated to the assets on the Company's balance sheet and amortized over a
period of time. This in turn will have an adverse effect on the Company's
earnings per share throughout the amortization period, as a small amount of the
asset booked will be treated as an expense each quarter. In addition to the
$9.9 million charge taken, approximately $45.9 million (representing the fair
value of net intangible assets acquired in the merger) will be recorded on the
Company's balance sheet and amortized over three to five years.

    THE COMPANY HAS EXPERIENCED AND EXPECTS TO CONTINUE TO EXPERIENCE
SIGNIFICANT PERIOD-TO-PERIOD FLUCTUATIONS IN ITS REVENUES AND OPERATING RESULTS,
WHICH MAY RESULT IN VOLATILITY IN THE PRICE OF ITS STOCK

    The Company's quarterly revenues and operating results have varied
significantly in the past and are likely to vary substantially from quarter to
quarter in the future. Accordingly, you should not rely on period-to-period
comparisons as an indication of future performance. In addition, these
variations may cause the Company's stock price to fluctuate. If quarterly
results fail to meet public expectations, the price of the Company's stock may
decline.

    The Company's revenues and operating results are affected by a wide variety
of factors, including factors that generally affect everyone in its industry and
factors that are more specific to its business and product lines. The principal
risk the Company faces in its business and one which has had, and is expected to
continue to have, a significant effect on its revenues and operating results, is
its dependence on the optical storage market. Other factors specific to its
business and product lines include the following:

    - the Company's ability to diversify its product offerings and the markets
      for its products;

    - The current market for its products;

    - The loss or gain of important customers;

    - The timing of significant orders and order cancellations or reschedulings;

    - Pricing policy changes by the Company and its competitors and suppliers;

    - The potential for significant inventory exposure;

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

    - Market acceptance of new products;

    - Increased competition in product lines;

    - Barriers to entry into new product lines;

    - The competitiveness of the Company's customers; and

    - The inability to obtain foundry capacity

    The Company is in the process of diversifying its business so that its
product offerings include not only integrated circuits, but also embedded
software and platform solutions. However, a significant portion of the Company's
revenue will continue to come from its semiconductor product offerings. The
semiconductor industry historically has been characterized by rapid
technological change and product obsolescence, cyclical market patterns and
seasonal customer demand, significant price erosion, periods of over-capacity
and under-capacity, periods of production shortages, variations in manufacturing
costs, including raw materials, and yields, and significant expenditures for
capital equipment and product development. In addition, the industry has
experienced significant economic downturns at various times, characterized by
diminished product demand and accelerated erosion of product prices. Any
downturns in the industry may cause the Company's business, financial condition
and results of operations to suffer.

                                       18
<PAGE>
    The Company has experienced in the past and may in the future experience
substantial period-to-period fluctuations in operating results due to these
general semiconductor industry conditions. The downturns in the industry often
occur in connection with, or in anticipation of, maturing product cycles (of
both the semiconductor companies and their customers) and declines in general
economic conditions. These downturns have been characterized by abrupt
fluctuations in product demand, production over-capacity and subsequent
accelerated erosion of average selling prices, and in some cases have lasted for
more than a year. Even if customers' aggregate demand were not to decline, the
availability of additional capacity can adversely impact pricing levels, which
can also depress revenue levels.

    In addition, the Company's quarterly operating results could be materially
adversely affected by legal expenses incurred in connection with, or any
judgment or settlement in, the Company's ongoing stockholder legal proceedings.
See "The Company is a Defendant in Several Lawsuits."

    THE COMPANY HAS A RECENT HISTORY OF OPERATING LOSSES AND MAY NOT BECOME OR
REMAIN PROFITABLE

    Although the Company experienced periods of profitability following its
reincorporation in Delaware in October 1994 in connection with its initial
public offering (the Company was first incorporated in California in 1987), the
Company has at times sustained significant losses since the initial public
offering and may not become profitable in the future. While the Company had net
income of $5.9 million in fiscal 1998, its current loss trend began in calendar
year 1998, resulting in an operating loss of $9.1 million for fiscal 1998 and an
operating loss of $61.9 million for fiscal 1999 (in each case before adjustments
for non-operating income or loss, or income tax expense or benefit). The
Company's operating losses generally have been due to its dependence on its
optical storage business, which historically has accounted for approximately 80%
of its business. In fiscal 1998, the Company failed to timely and/or adequately
develop its integrated CD-ROM controller product and second generation CD-RW
product. Consequently, for fiscal 1999, the Company was dependent on mature
CD-ROM products and its first generation CD-RW product for its revenue. These
mature products continued to decline in both unit sales volume and average sales
price in each successive quarter. In the third quarter of fiscal 2000, the
Company achieved volume production with its next generation CD-RW product.
However, given certain evolving dynamics in the CD-RW market, including the rate
of adoption of this technology, competition and selling prices, the Company
cannot accurately predict the product's impact on operating results nor can any
assurance be given that revenue from this product will enable the Company to
return to profitability.

    The Company expects that the average selling prices (ASP's) for its optical
storage products will continue to decline over time and that ASPs for each new
optical storage product will decline significantly over the life of the product.
In addition, given the extremely competitive nature of the optical storage
market, the Company believes that gross margins for new products in its optical
storage market will be lower than historical levels. However, the Company
believes that with the additional planned software and solution product
offerings from the Company's Optical and Imaging Groups, gross margins in
general will increase in the future.

    If the Company incurs additional losses or fails to achieve profitability in
the future, this will significantly harm its business and may affect the trading
price of its common stock.

    THE COMPANY'S FINANCIAL PERFORMANCE IS HIGHLY DEPENDENT ON THE TIMELY AND
SUCCESSFUL INTRODUCTION OF NEW PRODUCTS

    The markets for the Company's products are characterized by evolving
industry standards, rapid technological change and product obsolescence. The
Company's financial performance is highly dependent upon timely and successful
execution of next generation and new products, including those from acquired
businesses, particularly in light of the Company's past failure to timely
develop new products for the optical storage market in fiscal 1998 and 1999. The
failure to timely and successfully introduce next generation and new products
that achieve market acceptance in the future could seriously damage the

                                       19
<PAGE>
Company's business, financial condition and results of operations. Specifically,
the Company's performance is highly dependent upon the successful development
and timely introduction of its next generation CD-RW controller, combination DVD
and CD-RW controller, MPEG-2 decoder for the DVD player market, and embedded
imaging processing solutions for the digital office market, in particular,
embedded digital color copier technology and image processing chips for
multifunction peripherals.

    In the optical storage market, particularly DVD, a variety of standards and
formats are being proposed, making it difficult to develop product to market
requirements, and making it even more difficult for the market to develop.
Product delay's in the Company's Optical Storage Group have resulted primarily
from difficulties in allocating engineering personnel among competing projects,
engineering resource limitations, and unanticipated engineering complexity.
Although recently, the Company timely introduced its next generation CD-RW
product and refocused its Optical Storage Group on a defined product roadmap,
there can be no assurance that these or other factors will not contribute to
future delays. In the digital office market in which the Company's recent
acquired business competed with software products and the Company with
integrated circuits, the Company will need to address a variety of other factors
related to that market with respect to new product development. Product delays
in the past in both the Company's Imaging Group and its recently acquired
business have resulted from numerous factors such as changing OEM customer
product specifications, difficulties in allocating engineering personnel among
competing projects, other resource limitations, difficulties with independent
contractors, changing market or competitive requirements and unanticipated
engineering complexity. There can be no assurance that these or other factors
will not contribute to future delays; that OEM customers will tolerate those
delays; or that delayed office devices, once introduced, will meet with market
acceptance or success. Among other technological changes, embedded PDF and color
capability are rapidly emerging as market requirements for printers and other
imaging devices. Some of the Company's competitors have the capacity to supply
these solutions, and some of their solutions are well-received in the
marketplace. The Company faces the challenges of developing products that will
require greater color and image complexity capability including web-based
documents, and to work with higher performing devices in networked environments.
Any significant inability to meet these challenges with the development of
products that can effectively compete in the OEM software and solutions market
could cause future results of operations to differ materially from current
expectations.

    Due to the design complexity of the Company's products, especially with the
increased levels of integration that are required, the Company has previously
experienced delays in completing development and introduction of new products
for the optical storage and the digital office markets. In addition, in light of
the short product life cycles associated in the markets related to acquired
businesses, any delay or unanticipated difficulty associated with new product
development or introduction could result in a material adverse effect on the
Company's business, results of operations and financial condition.

    No assurance can be given that the Company will successfully identify new
product opportunities and develop and bring new products to market in a timely
manner or that its products will be selected for design into the products of its
targeted customers. Also, there can be no assurance that the products of the
Company's customers will be successfully introduced into the market. If the
Company fails in its new product development efforts or its products fail to
achieve market acceptance, its revenues will decline and its business, financial
condition and results of operations will be severely damaged.

    THE COMPANY'S FUTURE REVENUES ARE HIGHLY DEPENDENT ON SALES OF ITS CD-RW
CONTROLLER PRODUCT

    The Company's future revenue generation is highly dependent on its recently
introduced and next generation CD-RW product as well as its combination DVD and
CD-RW product. The Company is no longer developing any CD-ROM controllers, but
since the early part of fiscal 1999 has been instead focusing its development
efforts on controllers for CD-RW and DVD drives. If the Company's recently
introduced CD-RW product fails to achieve market acceptance, it will need other
sources of revenue to offset the previous discontinuation of sales of its CD-ROM
controllers. In fiscal 1999, revenue generated

                                       20
<PAGE>
from the Company's optical storage CD-ROM and CD-R/RW businesses declined 73%
and 36%, respectively, compared to the previous year, primarily due to delays in
the development of the next-generation integrated CD-ROM device and CD-RW
product. Similarly, in fiscal 1998, revenue generated from the Company's optical
storage CD-ROM business declined 25% from the prior year primarily due to delays
in the next-generation single chip and integrated CD-ROM device.

    Although the Company was a leading supplier of CD-RW controllers, due to
product delays in its second generation CD-RW product, the Company lost its
leadership in this market. While the Company is currently in production with its
next generation CD-RW product with a few customers, no assurance can be given
this product or its successor will be competitive in the marketplace or carried
into production by targeted customers. In addition, even if this product proves
to be competitive and is accepted by targeted customers, there is no assurance
that the Company's customers will be successful.

    The Company also faces increased competition in the emerging CD-RW and DVD
markets in both the PC and consumer segments. In addition, the current trend
toward integrating increased functionality on the CD-RW or DVD controller
potentially adds to the development and manufacturing costs of producing the
controller. The Company's revenues and gross margins from its optical storage
controller products will be dependent on the Company's ability to introduce
integrated products for the CD-RW and DVD markets in a commercially competitive
manner.

    The decrease in the overall level of sales of, and prices for, the Company's
CD-ROM and older generation CD-RW controller product due to introductions of
newer products by competitors, the decline in demand for CD-ROM controller
products generally, product obsolescence and delays in the Company's integrated
CD-ROM controller product and its next generation CD-RW product, have had a
material adverse effect on the Company's business, financial condition and
results of operations, and will continue to have that effect if the Company
fails to successfully introduce new and next generation products to the optical
storage market.

    The Company also anticipates that the royalty streams derived from OEMs'
shipments of office equipment containing the Company's products, and the sale of
related products and services to manufacturers of office equipment will account
for a significant portion of its revenue for the foreseeable future, although
not as significant as CD-RW for the remainder of fiscal 2000 and possibly fiscal
2001. In order to assure that the Company will derive future royalty streams
from the shipment of OEM devices, the Company and its OEMs are required to
develop and release in a regular and timely manner new office products with
increased speed, enhanced output resolutions, reduced memory requirements,
multiple functions, and network connectivity. The Company's OEMs are under
tremendous pressure to continually shorten the development cycles of these
products, leading to increased complexity and cost of development to the Company
and its OEMs. The Company's success will depend on, among other things: the rate
at which OEMS serving the digital office market outsource their technology
needs, market acceptance of the Company's technology and products and the office
devices of the Company's OEMs; the ability of the Company and its OEMs to meet
industry changes and market demands in a timely manner; achievement of new
design wins by the Company; successful implementation of the Company's
technology and products in new office devices being developed by its OEMs; and
successful marketing of those devices by the OEMs. Revenues from the office
equipment market will depend heavily on the Company's ability to integrate its
recent acquired business, Xionics Document Technologies, successfully in order
to develop complete product solutions and compete more effectively and
successfully against other suppliers and outsourcers as well as its own OEM
customers and other manufacturers.

    THE COMPANY'S FUTURE REVENUES RELATED TO ITS IMAGING GROUP ARE HIGHLY
DEPENDENT ON ITS RELATIONSHIP WITH HEWLETT-PACKARD

    Historically, contracts and licenses with Hewlett-Packard generated a
significant portion (66% in fiscal 1999) of the revenues related to the digital
office equipment business of Xionics Document Technologies, the company acquired
in the third quarter of fiscal 2000. In addition, the Company's Imaging Group
has

                                       21
<PAGE>
sold integrated circuits to Hewlett-Packard in the past. For the first nine
months of fiscal 2000, sales of integrated circuits to Hewlett-Packard
represented 16% of Oak's Imaging Group's revenue. It is anticipated that revenue
from Hewlett-Packard will constitute a significant portion of the Company's
overall revenues going forward. Therefore, any significant disruption or
deterioration of its relationship with Hewlett-Packard would have a material
adverse effect on the Company's business, results of operations and financial
condition. The Company has met all of its obligations necessary to secure the
right to receive ongoing payments from Hewlett-Packard various agreements with
Hewlett- Packard, and is also current in performing its obligations under these
various agreements. However, there can be no assurance that the Company will
continue to meet all such obligations in the future. Hewlett- Packard has the
right to terminate each of its agreements with the Company if the Company
materially breaches its obligations under that agreement and does not cure such
breach within 30 days. In addition, competitors of the Company, including
without limitation Adobe Systems Inc., Peerless Systems Corporation, Electronics
for Imaging, Inc. and Texas Instruments are continuously engaged in efforts to
expand their business relationship with Hewlett-Packard at the Company's
expense, and are likely to continue those efforts in the future. There can be no
assurance that one or more of the Company's competitors will not be successful
in competing with the Company for some or all of Hewlett-Packard's business.
Further, although Hewlett-Packard has shown a strong tendency to outsource
embedded systems software and development for its office products over the past
several years, there can be no assurance that this trend will continue or that
Hewlett-Packard's internal development groups will not compete successfully for
some or all of this outsourced business in the future. Finally, any adverse
change in Hewlett-Packard's business, results of operations or financial
condition could in turn have a material adverse effect on the Company's
business, results of operations and financial condition.

    THE COMPANY'S MARKETS ARE INTENSELY COMPETITIVE AND EXPERIENCE RAPID
TECHNOLOGICAL CHANGE

    The markets in which the Company competes are intensely competitive and are
characterized by rapid technological change, declining average unit sales prices
and rapid product obsolescence. If the Company cannot successfully respond to
the technological advances of others or if its new products or product
enhancements do not achieve market acceptance, the Company's business, operating
results and financial condition could be seriously harmed. The Company expects
competition to increase in the future from existing competitors and from other
companies that may enter the Company's existing or future markets with solutions
that may be less costly or provide higher performance or additional features.
The Company's principal competitors in the optical storage market are MediaTek,
Toshiba and Ricoh; its principal competitors in the digital office market are
Adobe Systems, Inc., Peerless Systems Corporation, Electronics for
Imaging, Inc., and in-house, captive suppliers, and the Company expects
increased competition from the merchant market in the future. Many of these
existing competitors as well as those customers expected to compete in the
future have substantially greater financial, manufacturing, technical,
marketing, distribution and other resources, broader product lines and longer
standing relationships with customers than the Company. In addition, much of the
Companies success is dependent on the success of its OEM customers. The
Company's OEM customers in both the optical storage, and digital office markets
compete fiercely with one another for market share in a market characterized by
rapid development cycles, short product life cycles and ever-increasing consumer
demand for greater performance and functionality at reduced prices.

                                       22
<PAGE>
    The markets for most of the applications for the Company's products,
especially in the optical storage market, are characterized by intense price
competition. As the markets for these products mature and competition increases,
as has been the trend for the optical storage, the Company anticipates that
average sales prices on products will decline. If the Company is unable to
reduce costs sufficiently to offset declines in average sales prices or is
unable to successfully introduce new higher performance products with higher
average sales prices, operating results will be materially adversely affected.

    The future growth of the digital office market is highly dependent on OEMs'
continuing to outsource an increasing portion of their product development work.
While the trend toward outsourcing on the part of the Company's OEM customers
has accelerated in recent years, any reversal of this trend could have a
material adverse effect on the Company's business, financial condition, and
results of operations. Similarly, significant market trends leading to changes
in the way the Company's competitors do business may enable them to compete more
effectively against the Company than they have in the past. For example, in
response to market demand, Adobe Systems, Inc. has recently begun licensing the
source code of its PostScript page description language interpreters to certain
development partners, including competitors of the Company. These changes, if
they enable competitors to compete more effectively for business from the
Company's customers, could have a material adverse effect on the Company's
business, financial condition and results of operations. Additionally, changes
in strategy by the Company's competitors, for example price reductions, new
product introductions or new marketing/distribution methods, could make it more
difficult for the Company to compete effectively, cause reduced market demand
for the Company's products and/or render the Company's products obsolete.

    There can be no assurance that the Company or its OEM customers will be able
to compete successfully against current or future competitors, or that
competitive pressures faced by it and its customers will not result in reduced
revenues and profit margins and otherwise seriously harm its business, financial
condition and results of operations.

    THE COMPANY MAY BE UNABLE TO PROTECT ITS INTELLECTUAL PROPERTY AND
PROPRIETARY RIGHTS, WHICH MAY AFFECT ITS ABILITY TO COMPETE

    The Company's ability to compete is affected by its ability to protect its
proprietary information. The Company considers its technology to be proprietary
and relies on a combination of patents, trademarks, copyrights, trade secret
laws, confidentiality procedures and licensing arrangements to protect its
intellectual property rights. However, these measures afford only limited
protection. The Company's competitors may be able to effectively design around
the Company's patents. There can be no assurance that any of the Company's
patents will not be challenged, invalidated or circumvented, or that the rights
granted under those patents will provide competitive advantages to the Company.
Moreover, while the Company holds or has applied for patents relating to the
design of its products, some of its products are based in part on standards, for
which it does not hold patents or other intellectual property rights. In
addition, the laws of certain foreign countries in which the Company's products
are or may be manufactured or sold, including various countries in Asia, may not
protect the Company's products or intellectual property rights to the same
extent as do the laws of the United States and thus make the possibility of
piracy of the Company's technology and products more likely. There can be no
assurance that the steps taken by the Company to protect its proprietary
information will be adequate to prevent misappropriation of its technology or
that the Company's competitors will not independently develop technologies that
are substantially equivalent or superior to the Company's technology. Moreover,
the Company intends to seek additional international and United States patents
on its technology. There can be no assurance that additional patents will issue
from any of the Company's pending applications or applications in preparation,
or be issued in all countries where the Company's products can be sold, or that
any claims allowed from pending applications or applications in preparation will
be of sufficient scope or strength to provide meaningful protection or any
commercial advantage to the Company.

                                       23
<PAGE>
    The Company also generally enters into confidentiality agreements with its
employees and consultants and confidentiality and license agreements with its
customers and potential customers, and limits access to and distribution of the
source and object code of its software and other proprietary information. With
respect to its page description language software and drivers for the digital
office market and in limited circumstances with respect to firmware and drivers
for its optical storage products, the Company grants licenses that give its
customers access to and restricted use of the source code of the Company's
software which increases the likelihood of misappropriation or misuse of the
Company's technology. Accordingly, despite the Company's precautions, it may be
possible for unauthorized third parties to copy certain portions of the
Company's technology or to obtain and use information that the Company regards
as proprietary. There can be no assurance that the steps the Company takes will
be adequate to prevent misappropriation of its technology or to provide an
adequate remedy in the event of a breach or misappropriation by others.

    Furthermore, the Company may initiate claims or litigation against third
parties for infringement of the Company's proprietary rights or to establish the
validity of its proprietary rights and in the past has incurred significant
legal expenses in connection with claims of this type it has initiated. Any
litigation by or against the Company could result in significant expense to the
Company and divert the efforts of its technical and management personnel,
whether or not that litigation results in a favorable determination for the
Company. In the event of an adverse result in any litigation, the Company could
be required to pay substantial damages, cease the manufacture, use and sale of
infringing products, expend significant resources to develop non-infringing
technology, discontinue the use of certain processes or obtain licenses to the
infringing technology. There can be no assurance that the Company would be
successful in developing new technology or that those licenses would be
available on reasonable terms, or at all, and any development or license could
require the Company's expenditures of substantial time and other resources.

    THE COMPANY MAY BE UNABLE TO OBTAIN THIRD PARTY INTELLECTUAL PROPERTY RIGHTS
AND/OR MAY BE LIABLE FOR SIGNIFICANT DAMAGES

    Certain technology used in the Company's products is licensed from third
parties, and in connection with these licenses, the Company is required to
fulfill confidentiality obligations and, in some cases, pay royalties. Some of
the Company's products, require various types of copy protection software that
the Company must license from third parties. Should the Company lose its rights
to, or be unable to obtain the necessary copy protection software, the Company
would be unable to sell and market certain of its products. The Company's
agreements with third parties often have no specified term and may be terminated
by either party in the event of breach by the other. The Company's business
could be adversely affected by the loss for any reason of these third-party
agreements. Given the trend to include increasing levels of functionality on a
chip, in the future it may be necessary or desirable for the Company to seek
additional licenses to intellectual property rights held by third parties or
purchase products manufactured and/or sold by third parties with respect to some
or all of its product offerings. There can be no assurance that those licenses
or purchases will be available on terms acceptable to the Company, if at all.
The inability of the Company to enter into those license arrangements on
acceptable terms or to maintain its current licenses on acceptable terms could
have a material adverse effect on the Company's business, financial condition
and results of operations.

    In addition, the semiconductor industry is characterized by vigorous
protection and pursuit of intellectual property rights, which has resulted in
significant, often protracted and expensive litigation. The Company or its
foundries may, from time to time, be notified of claims that the Company may be
infringing patents or other intellectual property rights owned by third parties.
If it is necessary or desirable, the Company may seek licenses under those
patents or other intellectual property rights. However, there can be no
assurance that licenses will be offered or that the terms of any offered
licenses will be acceptable to the Company. The failure to obtain a license from
a third party for technology used by the Company could cause the Company to
incur substantial liabilities and suspend the manufacture of products or the use
by the Company's foundries of processes requiring the technology.

                                       24
<PAGE>
    The Company has historically indemnified its customers for certain costs and
damages of patent infringement in circumstances where the Company's product is
the factor creating the customer's infringement exposure. This practice
generally excludes coverage in circumstances where infringement arises out of
the combination of the Company's products with products of others or where
infringement arises based on modifications made by the customer to the Company's
products. This indemnification practice, however, could have a material adverse
effect on the results of operations.

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

    THE COMPANY DEPENDS ON THIRD PARTY FOUNDRIES AND VENDORS TO MANUFACTURE
PRODUCTS

    The Company contracts with independent foundries to manufacture a majority
of its products and with independent vendors to assemble and test these
products. The Company's failure to adequately manage its relationships with
these foundries and vendors could negatively impact its ability to manufacture
and sell its products and its results of operations.

    The Company relies on its foundries to allocate to the Company a portion of
their foundry capacity sufficient to meet its needs to produce products of
acceptable quality and with acceptable manufacturing yield and to deliver
products to the Company in a timely manner. These foundries fabricate products
for other companies and some manufacture products of their own design. If these
foundries fail or are unable to satisfy the Company's product, quality and other
requirements, the Company's business, financial condition and results of
operation could suffer.

    The Company also relies on third-party subcontractors to assemble and test
its products. The failure of any of these subcontractors to meet the Company's
production requirements could cause the Company's business, financial condition
and operating results to suffer.

    The Company's reliance on independent manufacturers and third party assembly
and testing vendors involves a number of additional risks, including:

    - The loss of any foundry as a supplier;

    - Inability to expand foundry capacity in a period of increased demand for
      the Company's products;

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

    - Delays in shipments of the Company's products;

    - Disruption of operations at any of the Company's manufacturing facilities;

    - Product defects and the difficulty of detecting and remedying product
      defects;

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

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

    As the Company generally does not use multiple services of supply for its
products, the consequences of these factors occurring is magnified.

    During the third calendar quarter of 1999, Taiwan, the location of the
Company's primary wafer manufacturer, Taiwan Semiconductor Manufacturing
Company, experienced a severe earthquake. To date, the Company has not
experienced any material delays of its wafer deliveries from its primary
manufacturer. However, there is a current shortage of foundry capacity that is
expected to last at least through

                                       25
<PAGE>
calendar 2000. Although the Company believes it has sufficient capacity to meet
its needs through calendar 2000, the Company has no firm commitments in place,
and therefore, there is no assurance that the Company will be able to secure
capacity for its manufacturing needs and/or not experience delays in the future.

    THE COMPANY'S FAILURE TO ACCURATELY FORECAST DEMAND FOR ITS PRODUCTS COULD
NEGATIVELY IMPACT ITS RESULTS OF OPERATIONS

    Under its foundry agreements, the Company is required to place
non-cancelable orders and purchase its products on an approximately three-month
rolling basis. The Company's customers, on the other hand, generally place
purchase orders with the Company less than four weeks prior to delivery that may
be rescheduled or under certain circumstances may be cancelled, without
significant penalty. This limits the Company's ability to react to fluctuations
in demand for its products. If the Company overestimates the product necessary
to fill orders, or fails to foresee a technology change that could render a
product obsolete, it will build excess inventories which could harm its gross
margins and operating results. If the Company underestimates the product
necessary to fill orders, it may not be able to obtain an adequate supply of
products which could harm its revenues. The Company has experienced inventory
write-offs of its optical storage products in the past primarily due to
unforeseen and rapid changes in its customers' demand, in particular speed
changes, and consequently experienced rapid product obsolescence.

    Product supply and demand fluctuations common to the semiconductor industry
are historically characterized by periods of manufacturing capacity shortages
immediately followed by periods of overcapacity, which are caused by the
addition of manufacturing capacity in large increments. The industry has moved
from a period of capacity shortages in 1995 to what has been a period of excess
capacity for approximately the last twelve months, and has now returned to a
capacity shortage situation. No assurance can be given that the Company can or
will achieve timely, cost-effective access to that capacity when needed.

    THE COMPANY DERIVES A LARGE PORTION OF ITS REVENUES FROM INTERNATIONAL
SALES, DEPENDS ON FOREIGN SUBCONTRACTORS AND IS SUBJECT TO THE RISKS OF DOING
BUSINESS IN FOREIGN COUNTRIES

    A large portion of the Company's revenues are derived from international
sales. International sales, principally to Japan, Korea, Singapore and Europe,
accounted for approximately 73% and 88% of the Company's net revenues for the
first nine months of fiscal 2000 and 1999, respectively. The Company also
depends on foreign subcontractors for the manufacture of its products. Most of
the Company's foreign sales and purchases are negotiated in US dollars, although
invoicing is often done in local currency. As a result, the Company may be
subject to the risks of currency fluctuations in the foreign countries in which
it does business.

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

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

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

    - Tariffs, quotas and other trade barriers and restrictions;

    - Longer payment cycles;

    - Greater difficulty in collecting accounts receivable;

    - Potentially adverse taxes and adverse tax consequences;

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

    - Political, social and economic instability;

                                       26
<PAGE>
    - Potential hostilities;

    - Changes in diplomatic and trade relationships; and

    - Fluctuations in foreign currencies

    The Company's significant investment in foundry capacity in Taiwan is a
prime example of its exposure to these types of risks. Due to this investment,
the Company is subject to the risk of political instability in Taiwan, including
the potential for conflict between Taiwan and the People's Republic of China. In
addition, the fact that China is the primary market for the Company's consumer
DVD products is another example. Any political or economic instability in China
could significantly reduce the demand for these products.

    Recently Taiwan experienced a severe earthquake. The Company did not incur
any significant damage to its own facilities located in Taipei; however, its
primary wafer manufacturer, Taiwan Semiconductor Manufacturing Company,
experienced a disruption in operations for several weeks. To date, the Company
has not experienced any material delays of its wafer deliveries from its primary
manufacturer.

    In addition, the Company has several significant OEM customers in Japan,
South Korea, and other parts of Asia. Although the adverse economic
circumstances recently prevailing in Japan and elsewhere in Asia have begun to
show signs of abating, they could still affect these customers' willingness or
ability to do business with the Company in the future or their success in
developing and launching in particular office devices containing the Company's
products.

    While these factors or the impact of these factors are difficult to
forecast, any one or more of these factors could adversely affect the Company's
operations in the future or require the Company to modify its current business
practices.

    THE COMPANY DEPENDS ON A LIMITED NUMBER OF CUSTOMERS FOR A SUBSTANTIAL
PORTION OF ITS REVENUES, AND A LOSS OF, OR A SIGNIFICANT REDUCTION IN PURCHASES
BY, CURRENT MAJOR CUSTOMERS WOULD SIGNIFICANTLY REDUCE ITS REVENUES

    The Company has derived a substantial portion of its net revenues from a
limited number of customers and expects this concentration to continue. For the
first nine months of fiscal 2000, sales to the Company's top ten customers
accounted for approximately 69% of the Company's net revenues. In addition, the
Company has experienced significant changes from year to year in the composition
of its major customer base and the Company believes this pattern of significant
change may continue. Customers generally purchase the Company's products
pursuant to short-term purchase orders, and the Company has no long term
purchase agreements with any of its customers. The loss of, or significant
reduction in purchases by, current major customers of the Company would
significantly reduce its revenues.

    THE COMPANY IS A DEFENDANT IN SEVERAL LAWSUITS

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

                                       27
<PAGE>
and will continue to be, expended and the Company has incurred, and expects to
continue to incur, substantial legal and other expenses.

    THE COMPANY MUST CONTINUE TO MAKE SIGNIFICANT CAPITAL INVESTMENTS, AND THE
INABILITY TO RAISE THE ADDITIONAL CAPITAL NECESSARY TO FUND THESE INVESTMENTS ON
ACCEPTABLE TERMS COULD SERIOUSLY HARM THE COMPANY'S BUSINESS

    In order to remain competitive, the Company must continue to make
investments in new facilities and capital equipment, and significant amounts of
capital additions could be required in subsequent years. Additionally, in order
to obtain an adequate supply of wafers, especially wafers manufactured using
advanced process techniques, the Company has entered into and will continue to
consider various possible transactions, including various "take or pay"
contracts that commit the Company to purchase specified quantities of wafers
over extended periods. Manufacturing arrangements such as these may require
substantial capital investment, which may require the Company to seek additional
financing. The Company believes that existing liquid resources and funds
generated from operations, if any, combined with its ability to borrow funds
will be adequate to meet its operating and capital requirements and obligations
into the foreseeable future. The Company believes that the level of a Company's
financial resources is an important factor in its industry. Accordingly, the
Company may from time to time seek additional equity or debt financing. There
can be no assurance that those funds will be available on terms acceptable to
the Company when needed. Any future equity financing will also lead to dilution
to existing shareholders.

    THE COMPANY MAY MAKE FUTURE ACQUISITIONS OR ENTER INTO JOINT VENTURES THAT
MAY NOT BE SUCCESSFUL

    In the future, the Company may acquire additional businesses, products and
technologies, or enter into joint venture arrangements, that could complement or
expand its business. Acquisitions involve numerous risks including:

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

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

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

    - Coordination of sales, marketing and research and development; and

    - Potential loss of key employees.

    - The maintenance of corporate culture, controls, procedures and policies

    In addition, investments in emerging technology present risks of loss of
value of one or more of the investments due to failure of the technology to gain
the predicted market acceptance. Also, any future acquisitions could require the
Company to issue dilutive equity securities, incur debt or contingent
liabilities, amortize goodwill and other intangibles, or write-off in-process
research and development and other acquisition-related expenses. Further, the
Company may not be able to integrate acquired businesses, products or
technologies with its existing operations. If the Company is unable to fully
integrate an acquired business, product or technology, it may not receive the
intended benefits of that acquisition.

    THE COMPANY WILL DEPEND ON KEY PERSONNEL TO MANAGE ITS BUSINESS, AND THE
LOSS OF ANY KEY PERSONNEL COULD SERIOUSLY HARM ITS BUSINESS

    The Company's future performance depends, to a significant degree, on the
retention and contribution of members of the Company's senior management as well
as other key personnel including highly skilled engineering and technical
employees. Specifically, it is important for the Company to retain the services
of Young K. Sohn, the Company's current president and chief executive officer.
The Company is in the process of recruiting technical and operational personnel.
Competition for these people is intense because of this limited number of
candidates and the growth of high-tech companies, and there can be no

                                       28
<PAGE>
assurance that the Company will be able to attract and retain qualified
replacements or additional technical or operational personnel. Moreover, none of
the key technical or senior management personnel of the recently acquired
Xionics Document Technologies are bound by long-term employment arrangements.
There is no assurance that the Company will be able to find suitable
replacements for any senior management personnel who may leave the Company.

    PROVISIONS IN THE COMPANY'S CHARTER DOCUMENTS AND RIGHTS PLAN COULD MAKE IT
MORE DIFFICULT TO ACQUIRE THE COMPANY AND MAY REDUCE THE MARKET PRICE OF THE
COMPANY'S STOCK

    The Company's board of directors has the authority to issue up to 2,000,000
shares of preferred stock and to determine the price, rights, preferences,
privileges and restrictions, including voting rights, of those shares without
any further vote or action by the stockholders. The rights of the holders of
common stock, may be subject to, and may be adversely affected by, the rights of
the holders of any preferred stock that may be issued in the future. The
issuance of preferred stock may have the effect of delaying, deferring or
preventing a change of control of the Company without further action by the
stockholders and may adversely affect the voting and other rights of the holders
of common stock. The Company has no present plans to issue shares of preferred
stock. Further, certain provisions of the Company's charter documents, including
provisions eliminating the ability of stockholders to take action by written
consent and limiting the ability of stockholders to raise matters at a meeting
of stockholders without giving advance notice, may have the effect of delaying
or preventing changes in control or management of the Company, which could have
an adverse effect on the market price of the stock. In addition, the Company's
charter documents do not permit cumulative voting and provide that its board of
directors will be divided into three classes, each of which serves for a
staggered three-year term, which may also make it more difficult for a
third-party to gain control of the board of directors.

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

    LIQUIDITY AND CAPITAL RESOURCES

    Since its inception, the Company has financed its cash requirements from
cash generated from operations, the sale of equity securities, bank lines of
credit and long-term and short-term debt. The Company's principal sources of
liquidity as of March 31, 2000 consisted of approximately $135.0 million in
cash, cash equivalents and short-term investments. The Company also has
approximately $8.7 million in lines of letters of credit with Taiwanese
financial institutions, all of which was available at March 31, 2000. The
Company had outstanding commitments to purchase capital equipment of
approximately $1.5 million at March 31, 2000. Additionally, the Company
repurchased 381,000 shares of its common stock during the nine months ended
March 31, 2000, for a total of approximately $1.8 million.

    During the first nine months of fiscal 2000, cash and cash equivalents
increased by $19.7 million compared to a $34.2 million decrease for the first
nine months of fiscal 1999. The primary sources contributing to the improvement
are described below.

    Cash used in operating activities was $11.4 million in the first nine months
of fiscal 2000, compared to $7.9 million used in the comparable period of fiscal
1999. Although operating cash was negatively affected by a net loss in the first
nine months of fiscal 2000, it was positively impacted by an increase in working
capital. The increase in working capital was attributable to increases in
receivables and inventories which were more than offset by increases in accounts
payable and accrued expenses, and decreases in foundry deposits, prepaid
expenses and other assets.

                                       29
<PAGE>
    The Company's investing activities generated $27.4 million of cash for the
first nine months of fiscal 2000, compared to the use of $24.4 million of cash
in the comparable period of fiscal 1999. Proceeds from matured short-term
investments and cash received from the sale of the broadband business group to
Conexant were the primary sources of cash from investing activities for fiscal
2000 and were partially offset by purchases of short-term investments, the
purchase of Xionics and Earjam.com and additions to property and equipment. This
compares to cash used in investing activities in the comparable period of fiscal
1999, primarily attributed to the Company's investment in Viewpoint and XLI,
additions to property and equipment and purchases of short-term investments.

    The Company's financing activities provided $3.8 million of cash in the
first nine months of fiscal 2000, compared to a use of $1.9 million by financing
activities in the comparable period of fiscal 1999. Cash provided by financing
activities for the first nine months of fiscal 2000 included the issuance of
common stock partially offset by treasury stock acquisitions. In the first nine
months of fiscal 1999 the Company's repayment of debt and treasury stock
acquisitions were partially offset by the issuance of debt and issuances of
common stock.

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

ITEM 3.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

    Most of the Company's foreign sales are negotiated in US dollars; however,
invoicing is often done in local currency. As a result, the Company may be
subject to the risks of currency fluctuations. Assets and liabilities
denominated in non-functional currencies are remeasured into the functional
currency on a monthly basis and the resulting gain or loss is recorded within
non-operating income in the statement of operations. Many of the Company's
non-functional currency receivables and payables are hedged through managing net
asset positions, product pricing and other means. The Company's strategy is to
minimize its non-functional currency net assets or net liabilities in its
foreign subsidiaries. The Company's policy is not to speculate in financial
instruments for profit on the exchange rate price fluctuations, trade in
currencies for which there are not underlying exposures, or enter into trades
for any currency to intentionally increase the underlying exposure. As of
March 31, 2000 and June 30, 1999, the Company had foreign currency exchange
contracts to exchange Yen for US Dollars for approximately $1,650,000 and
$1,030,000, respectively. The Company uses financial instruments, including
local currency debt arrangements, to offset the gains or losses of the financial
instruments against gains or losses on the underlying operations cash flows or
investments. If foreign currency rates fluctuate by 10% from rates at March 31,
2000 and June 30, 1999, the effect on the company's consolidated financial
statements would not be material. However, there can be no assurance that there
will not be a material impact in the future.

    The Company's cash equivalents and short-term investments ("investments")
are normally exposed to financial market risk due to fluctuation in interest
rates, which may affect its interest income and the fair values of its
investments. The Company normally manages the exposure to financial market risk
by performing ongoing evaluation of its investment portfolio and investing in
short-term investment grade corporate securities and U.S. government and other
agencies' obligations maturing within the next

                                       30
<PAGE>
24 months. In addition, the Company typically does not use investments for
trading or other speculative purposes. Due to the short maturities of its
investments, the carrying value approximates the fair value. If market rates
were to increase immediately and uniformly by 10% from levels as of March 31,
2000 and 1999, the decline in the fair value of the portfolio would not be
material. Further, the Company has the ability to hold its fixed income
investments until maturity and, therefore, the Company would not expect to
recognize such an adverse impact in income or cash flows. Due to the divestiture
of the Broadband business, at March 31, 2000 the Company was in the unusual
position of also holding an investment of 293,794 shares of Conexant
Systems Inc. Common Stock at an approximate book and fair value of $ 68.05 per
share. This is a highly volatile equity security with market valuations in the
range of $ 41 to $ 132 since mid January 2000. The original shares were not
registered and available for sale until early March 2000 and the company intends
to convert these shares into cash over time as the market permits.

                                       31
<PAGE>
PART II--OTHER INFORMATION

ITEM 1.  LEGAL PROCEEDINGS

    The Company and various of its current and former officers and Directors are
parties to a consolidated class action lawsuit filed on behalf of all persons
who purchased or acquired the Company's common stock (excluding the defendants
and parties related to them) for the period July 27, 1995 through May 22, 1996.
This state court proceeding, designated IN RE OAK TECHNOLOGY SECURITIES
LITIGATION, Master File No. CV758510 is pending in Santa Clara County Superior
Court in Santa Clara, California. The lawsuit originally named as defendants
several of the Company's venture capital fund investors, two of its investment
bankers and two securities analysts. The plaintiffs alleged violations of
California securities laws and statutory deceit provisions as well as breaches
of fiduciary duty and abuse of control. The plaintiffs seek unspecified monetary
damages. After several rounds of demurrers, the only remaining claim is the
California Corporations Code Sections 25400/25500 cause of action against the
Company, four officers and the Company's investment bankers and securities
analysts. On July 16, 1998, the state court provisionally certified a national
class of all persons who purchased the Company's stock during the class period.
The class was provisionally certified with the order held in abeyance pending
resolution of the question of whether a nationwide class may bring a California
Corporations Code Sections 25400/25500 claim. This issue was resolved in favor
of allowing such nationwide class actions by the California Supreme Court, Case
No. 5058723, on January 4, 1999, in the DIAMOND MULTIMEDIA SECURITIES LITIGATION
appeal by the California Supreme Court. The defendants and certain third parties
have produced documents and a number of depositions have been taken, including
the depositions of those officers of the Company who were officers during the
class period. Discovery will be concluded on June 5, 2000. This action is set
for trial on July 3, 2000. Based on its current information, the Company
believes this suit to be without merit and will defend its position vigorously.
Although it is reasonably possible the Company may incur a loss upon conclusion
of these claims, an estimate of any loss or range of loss cannot be made. No
provision for any liability that may result upon adjudication has been made in
the Company's Consolidated Financial Statements.

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

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

    On July 21, 1997, the Company filed a complaint with the ITC based on the
Company's belief that certain Asian companies were violating U.S. trade laws by
the unlicensed importing or selling of certain CD-ROM controllers that infringed
one or more of the Company's United States patents. The complaint seeks a ban on
the importation into the United States of any infringing CD-ROM controller or
product containing such infringing CD-ROM controller. A formal investigative
proceeding was instituted by the ITC (Investigation No. 337-TA-401) on
August 19, 1997, naming as respondents: Winbond Electronics Corporation
(Winbond); Winbond Electronics North America Corporation; Wearnes Technology
(Private) Ltd.; Wearnes Electronics Malaysia Sendirian Berhad; and Wearnes
Peripheal International (Pte.).

                                       32
<PAGE>
    On March 16, 1998, the Company and Winbond entered into a settlement
agreement pursuant to which Winbond obtained a nonexclusive, royalty-bearing
license to the Company's U.S. patents No.'s 5,535,327 and 5,581,715 and the
Company obtained a nonexclusive, royalty-free license to several Winbond
patents. The settlement agreement provided that the parties would jointly seek
termination and dismissal of investigation No. 337-TA-401 as to Winbond and its
four affiliated companies: Winbond Electronics North America Corporation;
Wearnes Technology (Private) Ltd.; Wearnes Electronics Malaysia Sendirian
Berhad; and Wearnes Peripheal International (Pte.). On April 15, 1998,
Investigation No. 337-TA-401 was ordered terminated as to all parties.

    As originally filed with the ITC, the Company's complaint also identified as
proposed respondents: United Microelectronics Corporation (UMC); Lite-On Group;
Lite-On Technology Corp.; Behavior Tech Computer Corp. and Behavior Tech
Computer (USA) Corp. Prior to the ITC's institution of the formal investigation
proceeding, the Company and UMC entered into a settlement agreement, effective
July 31, 1997, pursuant to which UMC agreed to cease and desist the manufacture
and/or importation into the United States of its specified CD-ROM controllers,
except under certain limited conditions which expired on January 31, 1998. The
settlement agreement additionally provided for the withdrawal of the Company's
ITC complaint against UMC and the above-named Lite-On and Behavior Tech
companies. In September 1997, October 1997, February 1998 and April 1998, the
Company received $2.6 million, $4.7 million, $0.7 million and $2.6 million,
respectively, pursuant to this settlement. Proceeds from the settlement were
recorded as miscellaneous income and included in nonoperating income for the
periods ended September 30, 1997, December 31, 1997, March 31, 1998 and
June 30, 1998, respectively.

    On October 27, 1997, the Company filed a complaint in the United States
District Court, Northern District of California against UMC for breach of
contract, breach of the covenant of good faith and fair dealing and fraud based
on UMC's breach of the settlement agreement arising out of the ITC action, Case
No. C-97-20959. Together with the filing of the complaint, the Company filed a
motion for a preliminary injunction against UMC, seeking to enjoin UMC from
selling the CD-ROM controllers that were the subject of the ITC action and
related settlement agreement, through or to a UMC-affiliated, Taiwanese entity
called MediaTek. On February 23, 1998, the federal court judge denied the
Company's request for a preliminary injunction based on the court's findings
that there was no evidence that UMC was presently engaged in the manufacture of
CD-ROM controllers or other products covered by the settlement agreement. On
December 24, 1997, UMC answered the Company's complaint and counterclaimed
asserting causes of action for recission, restitution, fraudulent concealment,
mistake, lack of mutuality, interference and declaratory judgment of
non-infringement, invalidity and unenforceability of the Oak patent that was the
subject of the original ITC action filed against UMC. The Company believes these
counterclaims to be without merit and will vigorously defend its patent. Both
the Company and UMC seek compensatory and punitive damages. In addition, the
Company seeks permanent injunctive relief. On June 11, 1998, this case was
consolidated for all purposes with a related case brought against the Company by
MediaTek (described below) under Case No. C-97-20959. On the same date, pursuant
to UMC's request, the federal court judge ordered the consolidated action stayed
under 28 U.S.C. Section 1659, based on the judge's conclusion that the civil
action involves the same issues involved in Investigation No. 337-TA-409 before
the International Trade Commission, initiated by Oak (described below). The stay
was to be lifted upon final resolution of Investigation No. 337-TA-409; however,
the judge has ordered that the consolidated action continue stayed pending the
resolution of the parties appeal of the ITC ruling to the Federal Circuit Court
of Appeals. (described below.)

    In a related action to the lawsuit that was commenced by the Company against
UMC (described above), on December 19, 1997, MediaTek, a UMC affiliated,
Taiwanese entity, filed a complaint in the United States District Court,
Northern District of California, against the Company for declaratory judgment of
non-infringement, invalidity and unenforceability of the Oak patent that was the
subject of the original ITC action against UMC, and intentional interference
with prospective economic advantage, Case No. C-97-21126. MediaTek seeks
compensatory damages of not less than $10 million and punitive

                                       33
<PAGE>
damages. The Company filed its answer on January 8, 1998, denying all the
allegations. The Company believes the suit to be without merit and will
vigorously defend its patent. On June 11, 1998, this case was consolidated for
all purposes with a related case brought by the Company against UMC (described
above) under Case No. C-97-20959. On the same date, pursuant to UMC's request,
the federal court judge ordered the consolidated action stayed under 28 U.S.C.
Section1659, based on the judge's conclusion that the civil action involves the
same issues involved in Investigation No. 337-TA-409 before the International
Trade Commission, initiated by Oak (described below). The stay was to be lifted
upon final resolution of Investigation No. 337-TA-409; however, the judge has
ordered that the consolidated action continue stayed pending the resolution of
the parties appeal of the ITC ruling to the Federal Circuit Court of Appeals.
(described below.)

    On April 7, 1998, the Company filed a new complaint with the ITC alleging
that five Asian companies are violating U.S. trade laws by the unlicensed
importing or selling of CD-ROM drive controllers that infringe a United States
patent owned by the Company. The Company's complaint is asserted against United
Microelectronics Corp., MediaTek, Inc., Lite-On Group, Lite-On Technology Corp.
and AOpen, Inc. In its complaint, the Company requests the ITC to investigate
the five above-named companies and to enter an order barring imports into the
United States of their allegedly infringing products and products containing
them, including CD-ROM drives and personal computers. A formal investigative
proceeding was instituted by the ITC (Investigation No. 337-TA-409) on May 8,
1998 naming as respondents United Microelectronics Corp., MediaTek, Inc.,
Lite-On Technology Corp. and AOpen, Inc. The following respondents, all
Taiwanese drive manufacturers, were later added to the proceeding pursuant to an
Initial Determination by the Administrative Law Judge (ALJ) supervising the
Investigation following a motion brought by the Company on August 6, 1998 to add
these respondents: Actima Technology Corp., ASUSTek Computer, Inc., Behavior
Tech Computer Corp., Delta Electronics, Inc. Momitsu Multi Media Technologies,
Pan-International Industrial Corp. and Ultima Electronics Corp. On August 28,
1998, the ALJ entered an Initial Determination that the investigation be
terminated as to respondent UMC. On September 4, 1998, the Company filed a
petition with the Commission for review of the Initial Determination. On
October 7, 1998, the Commission reversed the Initial Determination of the ALJ as
the Commission determined that the Company's complaint against UMC does state an
unfair trade practices claim under Section 337 of the Tariff Act. On
December 23, 1998, the ALJ issued another Initial Determination terminating the
investigation as to respondent UMC for a second time. On December 31, 1998, the
Company filed a petition with the Commission for review of the Initial
Determination. On February 3, 1999, the Commission reversed the Initial
Determination of the ALJ for a second time on the grounds that the Company's
complaint against UMC does state an unfair trade practices claim under
Section 337 of the Tariff Act. On May 10, 1999, the ALJ issued another Initial
Determination terminating the investigation as to respondent UMC for a third
time, finding that UMC's activities were licensed. On May 17, 1999, the Company
filed a petition with the Commission for review of the Initial Determination and
on June 28, 1999, the Commission determined to review the Initial Determination.

    Trial before the ALJ as to all respondents except UMC commenced on
January 11, 1999 and concluded on January 28, 1999. On May 14, 1999, the ALJ
entered an Initial Determination that no unfair trade practices were committed
by Mediatek under Section 337 of the Tariff Act. On May 24, 1999, the Company
filed a petition requesting the Commission to review the Initial Determination
and on June 28, 1999 the Commission determined to review it. On September 27,
1999, the Commission affirmed the ALJ's finding that there were no unfair trade
practices committed by MediaTek under Section 337 of the Tariff Act as the
Commission determined that there was no infringement of the Company's US Patent
No. 5,581,715. On this same date, the Commission also reversed the ALJ's
findings that the Company's patent was invalid and unenforceable and held that
the Company's US Patent No. 5,581,715 was valid and enforceable. The Commission
took no position on the ALJ's Initial Determination terminating UMC from the
investigation.

                                       34
<PAGE>
    On February 24, 2000, the Company appealed the Commission's ruling that no
unfair trade practices were committed by MediaTek under Section 337 of the
Tariff Act to the Federal Circuit Court of Appeals. No decision is expected to
be rendered by the Federal Circuit of Appeals for twelve to eighteen months from
the time of appeal. In connection with this proceeding, the Company will
continue to incur legal fees and other expenses.

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

ITEM 2.  CHANGES IN SECURITIES

    None

ITEM 3.  DEFAULTS UPON SENIOR SECURITIES

    None

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

1.  (a)  The Company's Annual Meeting was held on January 11, 2000.

    (b) The following Directors were elected at the meeting:

<TABLE>
<CAPTION>
                                                                   PERCENTAGE OF
                                                         FOR       VOTES RECEIVED
                                                      ----------   --------------
<S>                                                   <C>          <C>
Ta-Lin Hsu, Ph.D....................................  37,501,607          92%
Albert Y.C. Yu, Ph.D................................  37,506,034          92%
</TABLE>

    The following Directors remained on the Board of Directors subsequent to the
meeting:

                                    Richard B. Black
                                    David D. Tsang
                                    Ta-Lin Hsu
                                    Albert Y.C. Yu
                                    Timothy Tomlinson
                                    Young K. Sohn

    Peter J. Simone became a member of the Board of Directors on January 11,
    2000 pursuant to the terms of the merger agreement between the Company and
    Xionics Document Technologies, Inc.

    (c) Other matters voted on at the meeting were the following:

        To approve the issuance of shares of common stock of Oak, par value
    $0.001 per share, pursuant to a merger agreement by and among Oak, Xionics
    Document Technologies, Inc. and Vermont Acquisition Corp., a wholly owned
    subsidiary of Oak, under which Xionics will become a wholly owned subsidiary
    of Oak:

<TABLE>
<S>                               <C>
For.............................  23,833,612
Against.........................     128,058
Abstain.........................     107,068
</TABLE>

                                       35
<PAGE>
        To approve an amendment to Oak's restated certificate of incorporation
    to authorize an additional 70,000,000 shares of common stock, par value
    $0.001 per share:

<TABLE>
<S>                               <C>
For.............................  23,492,849
Against.........................     448,809
Abstain.........................     127,080
</TABLE>

        To ratify the appointment of KPMG LLP as independent accountants:

<TABLE>
<S>                               <C>
For.............................  34,497,178
Against.........................      54,862
Abstain.........................      88,069
</TABLE>

ITEM 5.  OTHER INFORMATION

    None

ITEM 6.  EXHIBITS AND REPORTS ON FORM 8-K

    (a) The following exhibits are filed as part of this report:

<TABLE>
<CAPTION>
EXHIBIT
NUMBER         EXHIBIT TITLE
-------        -------------
<S>            <C>
Exhibit 10.35  Lease Agreement dated March 16, 2000 between 10 Presidential
                 Way Associates, LLC c/o Norblom Management Company, Inc.
                 and the Company (lease agreement for 10 Presidential Way,
                 Woburn, Massachusetts)
Exhibit 10.36  Bill of Sale and Assignment Agreement between Conexant
                 Systems, Inc. and Oak Technolgy, Inc. dated January 19,
                 2000
Exhibit 27.1   Financial Data Schedule
</TABLE>

    (b) Reports on Form 8-K:

       The Company filed two reports on Form 8-K during the quarter ended
       March 31, 2000. Information regarding the items reported on is as
       follows:

<TABLE>
<CAPTION>
DATE              ITEM REPORTED ON
----              ----------------
<S>               <C>
January 21, 2000  The Company announced the completion of the acquisition of
                    Xionics Document Technologies, Inc.
March 03, 2000    The Company announced the appointment of John S. Edmunds to
                    the position of Vice President of Finance and Chief
                    Financial Officer
</TABLE>

                                       36
<PAGE>
                                   SIGNATURES

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

<TABLE>
<S>                                            <C>
                                               OAK TECHNOLOGY, INC.
                                               (Registrant)

Date: May 12, 2000
                                               /s/ JOHN S. EDMUNDS
                                               --------------------------------------------
                                               John S. Edmunds,
                                               VICE-PRESIDENT FINANCE
                                               CHIEF FINANCIAL OFFICER
                                               (PRINCIPAL FINANCIAL AND ACCOUNTING OFFICER)
</TABLE>

                                       37
<PAGE>
                                 EXHIBIT INDEX

<TABLE>
<CAPTION>
EXHIBIT
NUMBER                  DESCRIPTION
-------                 -----------
<S>                     <C>
Exhibit 10.35           Lease Agreement dated March 16, 2000 between 10 Presidential
                        Way Associates, LLC c/o Norblom Management Company, Inc. and
                        the Company (lease agreement for 10 Presidential Way,
                        Woburn, Massachusetts)

Exhibit 10.36           Bill of Sale and Assignment Agreement between Conexant
                        Systems, Inc. and Oak Technolgy, Inc. dated January 19, 2000

Exhibit 27.01           Financial Data Schedule
</TABLE>

                                       38