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

                      SECURITIES AND EXCHANGE COMMISSION
                            WASHINGTON, D.C. 20549

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

                                  FORM 10-Q

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

                For the Quarterly Period Ended March 31, 2003

                                      OR

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

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

                         Commission File No. 0-25298

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



             Delaware                                      77-0161486
   (State or other jurisdiction                         (I.R.S. Employer
  of incorporation or organization)                  Identification Number)

                               1390 Kifer Road
                         Sunnyvale, California 94086
         (Address of principal executive offices, including zip code)

                                (408) 523-6500
             (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 May 13, 2003, there were outstanding 56,306,587 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, 2003


<TABLE>
<CAPTION>

                                                                           Page
                                                                            No.
                                                                            ---
<S>    <C>                                                                 <C>
                        PART I. FINANCIAL INFORMATION

Item 1. Financial Statements (Unaudited):

          Condensed Consolidated Balance Sheets as of March 31, 2003
            and June 30, 2002...............................................  3

          Condensed Consolidated Statements of Operations for the Three
            Months and Nine Months Ended March 31, 2003 and 2002............  4

          Condensed Consolidated Statements of Cash Flows for the Nine
            Months Ended March 31, 2003 and 2002............................  5

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


Item 2.  Management's Discussion and Analysis of Financial Condition and
           Results of Operations............................................ 25

Item 3.  Quantitative and Qualitative Disclosures About Market Risk......... 43

Item 4.  Control and Procedures............................................. 43


                         PART II. OTHER INFORMATION

Item 1.  Legal Proceedings.................................................. 44

Item 6.  Exhibits and Reports on Form 8-K................................... 46

Signatures.................................................................. 47

Exhibit Index............................................................... 52


</TABLE>

                                       2

<PAGE>

PART I - FINANCIAL INFORMATION
ITEM 1.  FINANCIAL STATEMENTS

                    OAK TECHNOLOGY, INC. AND SUBSIDIARIES
                    CONDENSED CONSOLIDATED BALANCE SHEETS
               (in thousands, except share and per share data)
                                 (Unaudited)


<TABLE>
<CAPTION>

                                                          March 31,   June 30,
                                                            2003        2002
                                                            ----        ----
<S>                                                      <C>         <C>
     ASSETS
Current assets:
  Cash and cash equivalents.............................. $ 13,562    $ 38,252
  Short-term investments.................................   54,313     104,414
  Accounts receivable, net of allowance for doubtful
    accounts of $3,772 and $3,604, respectively..........   10,098      10,096
  Inventories............................................    1,986       4,929
Prepaid expenses and other current assets................   10,165       5,535
                                                          --------    --------
    Total current assets.................................   90,124     163,226
Property and equipment, net..............................   15,481      18,961
Intangible assets, net...................................   31,008       6,611
Goodwill.................................................   27,084      13,275
Other assets.............................................    1,162         803
                                                          --------    --------
Total assets............................................. $164,859    $202,876
                                                          ========    ========

     LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
  Accounts payable....................................... $  7,023    $ 14,065
  Accrued expenses.......................................   30,148      16,951
  Deferred revenue.......................................    3,653       2,970
                                                          --------    --------
    Total current liabilities............................   40,824      33,986
Other long-term liabilities..............................      898         899
                                                          --------    --------
Total liabilities........................................   41,722      34,885
                                                          --------    --------

Contingencies (Note 5)

Stockholders' equity:
  Preferred stock, $0.001 par value; 2,000,000 shares
    authorized; none issued and outstanding as March 31,
    2003 and June 30, 2002...............................       --          --

  Common stock, $0.001 par value; 130,000,000 shares
    authorized at March 31, 2003 and June 30, 2002;
    60,764,038 shares issued and 56,051,558 shares
    outstanding as of March 31, 2003; and 60,285,392
    shares issued and 55,987,912 shares outstanding
    as of June 30, 2002..................................       61          60
  Additional paid-in capital.............................  252,142     246,587
  Treasury stock.........................................  (24,902)    (23,273)
  Accumulated other comprehensive income.................      705       1,028
  Deferred stock compensation............................   (1,852)         --
  Accumulated deficit.................................... (103,017)    (56,411)
                                                          --------    --------
    Total stockholders' equity...........................  123,137     167,991
                                                          --------    --------
Total liabilities and stockholders' equity............... $164,859    $202,876
                                                          ========    ========

</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,
                                       ------------------  ------------------
                                          2003      2002      2003      2002
                                          ----      ----      ----      ----
<S>                                     <C>        <C>       <C>       <C>
Revenues:
  Product revenues......................$ 17,250  $ 35,122  $ 59,407  $ 89,007
  Software and other revenues...........   8,615     6,974    25,067    22,678
                                        --------  --------  --------  --------
    Total revenues......................  25,865    42,096    84,474   111,685
                                        --------  --------  --------  --------

Cost of revenues and operating expenses:
  Cost of product revenues..............   8,785    19,957    29,604    52,862
  Cost of software and other revenues...   1,699       981     5,531     3,078
  Research and development expenses.....  15,755    13,161    46,436    39,167
  Selling, general and administrative
    expenses............................   9,439     7,423    27,631    22,517
  Amortization of intangibles...........   2,468     3,046     6,978     9,520
  Acquisition related expenses
   (see note 6).........................   1,667        --     9,339        --
  Deferred stock compensation
   (see note 6).........................     124        --       206        --
  Restructuring charge..................   4,046       396     7,207     2,424
                                        --------  --------  --------  --------
    Total cost of revenues and operating
      expenses..........................  43,983    44,964   132,932   129,568

      Operating loss.................... (18,118)   (2,868)  (48,458)  (17,883)

Non-operating income, net...............     508     1,573     3,429     5,206
                                        --------  --------  --------  --------
      Loss before income taxes.......... (17,610)   (1,295)  (45,029)  (12,677)

Income taxes............................     366       445     1,577     1,576
                                        --------  --------  --------  --------
      Net loss..........................$(17,976) $ (1,740) $(46,606) $(14,253)
                                        ========  ========  ========  ========

Net loss per basic and diluted share....$  (0.32) $  (0.03) $  (0.83) $  (0.26)
                                        ========  ========  ========  ========

Shares used in computing basic and
  diluted net loss per share............  55,977    55,567    55,953    55,042
                                        ========  ========  ========  ========

</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,
                                                           --------------------
                                                             2003        2002
                                                             ----        ----
<S>                                                        <C>       <C>
Cash flows from operating activities:
  Net loss................................................. $(46,606) $(14,253)
    Adjustments to reconcile net loss to net cash provided
      by operating activities:
      Depreciation and amortization........................   13,894    14,757
      Amortization of deferred stock compensation..........      206        --
      In-process research and development..................    6,960        --
      Other................................................      109        82
      Changes in operating assets and liabilities:
        Accounts receivable................................    2,169     5,052
        Inventories........................................    4,717     1,954
        Prepaid expenses, other current assets and other
          assets...........................................    4,584     1,790
        Accounts payable and accrued expenses..............  (10,997)    3,514
        Deferred income taxes, deferred revenue and other
          liabilities......................................      532     1,332
                                                            --------  --------
            Net cash provided by (used in) operating
              activities...................................  (24,432)   14,228
                                                            --------  --------

Cash flows from investing activities:
  Purchases of short-term investments......................  (95,370)  (86,983)
  Proceeds from matured short-term investments.............  145,148    81,135
  Additions to property and equipment, net.................   (5,281)   (6,288)
  Acquisition of TeraLogic, net of cash acquired...........  (44,959)       --
  Acquisition of Accel, net of cash acquired...............       --    (3,238)
                                                            --------  --------
            Net cash used in investing activities..........     (462)  (15,374)
                                                            --------  --------

Cash flows from financing activities:
  Issuance of common stock, net............................    1,833     6,735
  Treasury stock acquisitions..............................   (1,629)       --
                                                            --------  --------
            Net cash provided by financing activities......      204     6,735
                                                            --------  --------
Net increase (decrease) in cash and cash equivalents.......  (24,690)    5,589
Cash and cash equivalents, beginning of period.............   38,252    25,141
                                                            --------  --------
Cash and cash equivalents, end of period................... $ 13,562  $ 30,730
                                                            ========  ========

Supplemental information:
Cash paid during the period:
  Interest................................................. $     --  $     --
                                                            ========  ========
  Income taxes............................................. $  1,628  $  3,404
                                                            ========  ========

</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 condensed consolidated financial statements of
Oak Technology, Inc. and subsidiaries ("Oak" or the "Company") have been
prepared in conformity with accounting principles generally accepted in the
United States of America.  However, certain information or footnote disclosures
normally included in financial statements prepared in accordance with
accounting principles generally accepted in the United States of America 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 condensed consolidated financial statements reflect all
adjustments considered necessary for a fair presentation of the consolidated
financial position, operating results and cash flows for the 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, 2002, included in the Oak Technology, Inc.
2002 Annual Report on Form 10-K filed with the Commission.


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

     Certain prior period amounts have been reclassified to conform to the
current period presentation.


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

     The Company periodically enters into economic hedges by purchasing foreign
exchange contracts as a hedge against foreign currency denominated accounts
receivables or fixed sales commitments.  The Company does not enter into
foreign exchange contracts for speculative or trading purposes.  As March 31,
2003, the Company did not have any foreign currency exchange contracts
outstanding.


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

     The Company adopted Statement of Financial Accounting Standards No. 142,
"Goodwill and Other Intangible Assets", or SFAS 142, in the first quarter of
fiscal 2003.  SFAS 142 supersedes Accounting Principles Board Opinion No. 17,
Intangible Assets, and discontinues the amortization of goodwill.  In addition,
SFAS 142 includes provisions regarding: 1) the reclassification between
goodwill and identifiable intangible assets in accordance with the new
definition of intangible assets set forth in Statement of Financial Accounting
Standards No. 141, Business Combinations; 2) the reassessment of the useful
lives of existing recognized intangibles; and 3) the testing for impairment of
goodwill and other intangibles.

     Based on criteria set out in SFAS 142, as of July 1, 2002, the Company
reclassified $0.7 million of net assets previously classified as acquired
workforce to goodwill resulting in total goodwill of $13.3 million.  In
accordance with SFAS 142, beginning July 1, 2002, goodwill is no longer
amortized, but is reviewed periodically for impairment on at least an annual
basis and upon the initial adoption of SFAS No. 142. This impairment review
involves a two-step process as follows:

Step 1 -- The Company compares the fair value of its reporting units to the
carrying value, including goodwill of each of those units.  If a unit's fair
value exceeds the carrying value, no further work is performed and no
impairment charge is necessary.  For each reporting unit where the fair value
is less than the carrying value, including goodwill, the Company must perform
Step 2.

Step 2 -- The Company performs an allocation of the fair value of the reporting
unit to its identifiable tangible and non-goodwill intangible assets and
liabilities.  This derives an implied fair value for the reporting unit's
goodwill. The Company then compares the implied fair value of the reporting
unit's goodwill with the carrying amount of the reporting unit's goodwill. If
the carrying amount of the reporting unit's goodwill is greater than the
implied fair value of its goodwill, an impairment charge would be recognized
for the excess.


                                       6


<PAGE>

                      OAK TECHNOLOGY, INC. AND SUBSIDIARIES
      NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
                                 (Unaudited)

     The Company performed Step 1 of the goodwill impairment analysis required
by SFAS 142 as of July 1, 2002 during the quarter ended December 31, 2002 and
concluded that goodwill was not impaired, as the fair value of each reporting
unit exceeded its carrying value, including goodwill.  Accordingly, Step 2 was
not performed.  For purposes of this analysis, the Company defines reporting
units as its operating segments, or where the Company so measures, a lower
level unit or component that more discretely measures the results of an
acquired business within an operating segment.  For instance the Company
measures the Imaging Business Segment in two discrete components, the Hardware
group and the Software group.  The Company's other operating segments do not
have subcomponents.  The fair value of the reporting units was estimated using
the average of the expected present value of future cash flows and of the
market multiple value.  The Company will continue to test for impairment on an
annual basis and on an interim basis if an event occurs or circumstances change
that would more likely than not reduce the fair value of the Company's
reporting units below their carrying amounts.

     Intangible assets subject to amortization are being amortized using the
straight-line method over the following useful lives: purchased technology,
three to five years; patents, five years; and tradenames and others, one to
five years.  No changes were made to the useful lives of amortizable intangible
assets in connection with the adoption of SFAS 142.

     Goodwill and intangible assets are comprised of the following (in
thousands):


<TABLE>
<CAPTION>

                             March 31, 2003              June 30, 2002
                     ----------------------------- ----------------------------
                      Gross                        Gross
                     Carrying Accumulated    Net  Carrying Accumulated    Net
                      Amount  Amortization Balance Amount  Amortization Balance
                      ------  ------------ ------- ------  ------------ -------
<S>                 <C>      <C>          <C>     <C>       <C>         <C>
Amortized intangible
 assets:
 Purchased technology $50,369  $(22,663)  $27,706  $21,989  $(16,444)  $ 5,545
 Patents.............   1,448      (941)      507    1,448      (724)      724
 Tradename and others   3,679      (884)    2,795      684      (342)      342

Unamortized intangible
 assets:
 Goodwill (*)........  27,084        --    27,084   13,275        --    13,275
                      -------  --------   -------  -------  --------   -------
Total................ $82,580  $(24,488)  $58,092  $37,396  $(17,510)  $19,886
                      =======  ========   =======  =======  ========   =======

</TABLE>

     (*)  Goodwill is net of accumulated amortization immediately prior to the
adoption of SFAS No. 142


                                       7


<PAGE>

                      OAK TECHNOLOGY, INC. AND SUBSIDIARIES
      NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
                                 (Unaudited)

     Reconciliation of net loss excluding amortization of goodwill is as
follows (in thousands, except per share data):

<TABLE>
<CAPTION>

                                       Three Months Ended   Nine Months Ended
                                            March 31,            March 31,
                                       ------------------  ------------------
                                          2003      2002      2003      2002
                                          ----      ----      ----      ----
<S>                                    <C>        <C>      <C>       <C>
Net loss as reported..................  $(17,976)  $(1,740) $(46,606) $(14,253)
  Add back amortization of goodwill...        --     1,295        --     3,988
                                        --------   -------  --------  --------
Total adjusted net loss...............  $(17,976)  $  (445) $(46,606) $(10,265)
                                        ========   =======  ========  ========
Basic and diluted earnings per share:
  As reported.........................  $  (0.32)  $ (0.03) $  (0.83) $  (0.26)
                                        ========   =======  ========  ========
  As adjusted.........................  $  (0.32)  $ (0.01) $  (0.83) $  (0.19)
                                        ========   =======  ========  ========

</TABLE>

<TABLE>
<CAPTION>
                                                       Fiscal Year Ended
                                                            June 30,
                                                 -----------------------------
                                                   2002      2001      2000
                                                   ----      ----      ----

<S>                                              <C>       <C>       <C>
Net loss as reported............................  $(26,950) $(30,632) $(32,862)
  Add back amortization of goodwill.............     5,179     5,179     2,589
                                                  --------  --------  --------
Total adjusted net loss.........................  $(21,771) $(25,453) $(30,273)
                                                  ========  ========  ========

Basic and diluted earnings per share:
  As reported...................................  $  (0.49) $  (0.56) $  (0.71)
                                                  ========  ========  ========
  As adjusted...................................  $  (0.39) $  (0.47) $  (0.66)
                                                  ========  ========  ========

</TABLE>

     Estimated future intangible amortization expense, based on current
balances, as of March 31, 2003 is as follows (in thousands):

<TABLE>
<CAPTION>

     Fiscal Year                                    Amount
     -----------                                    ------
    <S>                                           <C>
     2003 (remaining three months)...............  $  2,467
     2004........................................     8,161
     2005........................................     6,263
     2006........................................     6,050
     2007........................................     6,050
     2008........................................     2,017
                                                   --------
     Total.......................................  $ 31,008
                                                   ========

</TABLE>

                                       8

<PAGE>

                      OAK TECHNOLOGY, INC. AND SUBSIDIARIES
      NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
                                 (Unaudited)


     The changes in the carrying amount of goodwill for the nine months ended
March 31, 2003 are as follows (in thousands):

<TABLE>
<CAPTION>
                                     Optical
                                     Storage   Imaging    TeraLogic    Total
                                     -------   -------    ---------    -----
<S>                                 <C>       <C>         <C>        <C>
Balance at June 30, 2002............ $ 3,113    $10,162    $    --    $13,275
Acquisition.........................      --         --     13,809     13,809
                                     -------    -------    -------    -------
Balance at March 31, 2003........... $ 3,113    $10,162    $13,809    $27,084
                                     =======    =======    =======    =======

</TABLE>

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

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

     In November 2002, the Emerging Issues Task Force ("EITF") reached a
consensus on Issue No. 00-21, "Revenue Arrangements with Multiple
Deliverables."  EITF Issue No. 00-21 provides guidance on how to account for
arrangements that involve the delivery or performance of multiple products,
services and/or rights to use assets. The provisions of EITF Issue No. 00-21
will apply to revenue arrangements entered into in fiscal periods beginning
after June 15, 2003.  The Company believes that the adoption of this standard
will have no material impact on its financial statements.

     In November 2002, the FASB issued FASB Interpretation No. 45 ("FIN 45"),
"Guarantor's Accounting and Disclosure Requirements for Guarantees, Including
Indirect Guarantees of Indebtedness of Others."  FIN 45 requires that a
liability be recorded in the guarantor's balance sheet upon issuance of a
guarantee.  In addition, FIN 45 requires disclosures about the guarantees that
an entity has issued, including a reconciliation of changes in the entity's
product warranty liabilities.  The initial recognition and initial measurement
provisions of FIN 45 are applicable on a prospective basis to guarantees issued
or modified after December 31, 2002, irrespective of the guarantor's fiscal
year-end.  The disclosure requirements of FIN 45 are effective for financial
statements of interim or annual periods ending after December 15, 2002.  The
adoption of this standard did not have a material impact on our financial
statements.

     The Company enters into standard indemnification agreements with its
customers in the ordinary course of business.  Pursuant to these agreements,
the Company indemnifies, holds harmless, and agrees to reimburse the
indemnified party, generally business partners or customers, for losses
suffered or incurred in connection with patent, copyright or other intellectual
property infringement claims by any third party with respect to the Company's
products.  The term of these indemnification agreements is generally perpetual,
effective after execution of the agreement.  The maximum potential amount of
future payments the Company could be required to make under these


                                       9

<PAGE>


                      OAK TECHNOLOGY, INC. AND SUBSIDIARIES
      NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
                                 (Unaudited)


indemnification agreements is generally limited to the fees incurred but in
some cases can be unlimited.  However, to date, the Company has not incurred
costs to defend lawsuits or settle claims related to these indemnification
agreements except for one instance which has been adequately covered by its
accruals.

     Through the normal course of business, the Company replaces parts that do
not meet certain agreed upon specifications.  Any returns are typically a
result of exchanging a small number of defective parts with the same non-
defective product.  Such exchanges have historically represented less than 1%
of total shipments.  The warranty periods generally range less than one year.
The Company has not incurred significant expenses under its product or service
warranties.  As a result, the Company believes the potential claims related to
such agreements are minimal and that the warranty liability recorded as of
March 31, 2003 is sufficient to cover such claims.

     The following represents the activity in the warranty accrual for the
nine-month period ended March 31, 2003 (in thousands):

<TABLE>

    <S>                                                              <C>
     Warranty accrual at June 30, 2002..............................  $  250
     Increase due to acquisition....................................      75
     Charges to cost of sales.......................................      56
     Utilization of reserve due to exchange of defective products...     (56)
                                                                      ------
     Warranty accrual at March 31, 2003.............................  $  325
                                                                      ======

</TABLE>

     In December 2002, the FASB issued SFAS No. 148, "Accounting for Stock-
Based Compensation, Transition and Disclosure."   SFAS No. 148 provides
alternative methods of transition for a voluntary change to the fair value
based method of accounting for stock-based employee compensation.  SFAS No. 148
also requires that disclosures of the pro forma effect of using the fair value
method of accounting for stock-based employee compensation be displayed more
prominently and in a tabular format.  Additionally, SFAS No. 148 requires
disclosure of the pro forma effect in interim financial statements. The
transition and annual disclosure requirements of SFAS No. 148 are effective for
fiscal years ended after December 15, 2002.  The interim disclosure
requirements are effective for interim periods beginning after December 15,
2002.  The adoption of this standard during the quarter ended March 31, 2003
did not have a material impact on the Company's financial statements.  (See
Note 7)

     In January 2003, the FASB issued FASB Interpretation No. 46 ("FIN 46"),
"Consolidation of Variable Interest Entities, an Interpretation of ARB No. 51."
FIN 46 requires certain variable interest entities to be consolidated by the
primary beneficiary of the entity if the equity investors in the entity do not
have the characteristics of a controlling financial interest or do not have
sufficient equity at risk for the entity to finance its activities without
additional subordinated financial support from other parties.  FIN 46 is
effective immediately for all new variable interest entities created or
acquired after January 31, 2003.  For variable interest entities created or
acquired prior to February 1, 2003, the provisions of FIN 46 must be applied
for the first interim or annual period beginning after June 15, 2003.  The
Company believes that the adoption of this standard will not have a material
impact on its financial statements.


                                      10

<PAGE>


                      OAK TECHNOLOGY, INC. AND SUBSIDIARIES
      NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
                                 (Unaudited)

2. 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,
                                                            2003        2002
                                                            ----        ----
<S>                                                      <C>         <C>
Purchased parts and work in process.....................  $    839    $  1,056
Finished goods..........................................     1,147       3,873
                                                          --------    --------
                                                          $  1,986    $  4,929
                                                          ========    ========
</TABLE>

3. Net 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 during the period in accordance
with Statement of Financial Accounting Standards (SFAS) No. 128, "Earnings per
Share."  As the Company was in a loss position for all periods presented, there
were no differences between basic and dilutive loss per share.  The following
table provides a reconciliation of the components of the basic and diluted net
loss per share computations (in thousands, except per share data):


<TABLE>
<CAPTION>

                                       Three Months Ended   Nine Months Ended
                                            March 31,            March 31,
                                       ------------------  ------------------
                                          2003      2002      2003      2002
                                          ----      ----      ----      ----
<S>                                    <C>       <C>       <C>       <C>
Net loss from continuing operations...  $(17,976) $ (1,740) $(46,606) $(14,253)
                                        ========  ========  ========  ========

Basic common shares...................    55,977    55,567    55,953    55,042
Effect of dilutive securities:
  Common stock options................        --        --        --        --
                                        --------  --------  --------  --------
Dilutive weighted average shares......    55,977    55,567    55,953    55,042
                                        ========  ========  ========  ========

Net loss per share from continuing
  operations:
  Basic...............................  $  (0.32) $  (0.03) $  (0.83) $  (0.26)
                                        ========  ========  ========  ========
  Diluted.............................  $  (0.32) $  (0.03) $  (0.83) $  (0.26)
                                        ========  ========  ========  ========

</TABLE>

     For the three and nine month periods ended March 31, 2003, there were
approximately 9,660,000 and 9,915,000 weighted average options outstanding,
respectively, which were excluded from the calculation of diluted weighted
average shares outstanding as inclusion of these options would have had an
anti-dilutive effect.

     Similarily, for the three and nine month periods ended March 31, 2002,
there were approximately 238,000 and 2,331,000 weighted average options
outstanding, respectively, which were excluded from the calculation of diluted
weighted average shares outstanding as inclusion of these options would have
had an anti-dilutive effect.


4. Acquisitions
   ------------

     On October 25, 2002, Oak concluded the acquisition of TeraLogic, Inc.


                                      11

<PAGE>


                      OAK TECHNOLOGY, INC. AND SUBSIDIARIES
      NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
                                 (Unaudited)

("TeraLogic") pursuant to an acquisition agreement entered into on October 7,
2002.  The acquisition is comprised of a cash payment of approximately $38
million, the repayment of a debt obligation of approximately $5 million, and
the assumption of approximately $4 million of TeraLogic's debt and obligations
by Oak.  In addition, Oak reserved approximately 2.3 million shares of the
Company's common stock for future issuance to the employees of TeraLogic
pursuant to options granted to them upon closing the transaction.  The
transaction is accounted for under SFAS No. 141, "Business Combinations," using
the purchase method of accounting and accordingly the results of operations of
TeraLogic have been included in the Company's financial statements since the
date of acquisition.

     Oak's primary objective in acquiring Teralogic was to acquire an
established base of qualified HDTV technology along with the associated
business, revenue stream and design wins with significant customers, coupled
with an assembled engineering workforce and body of knowledge that would enable
the Company to continue to develop commercial HDTV technology and participate
in a growing market.  Based on these factors, the purchase price exceeded the
net assets acquired resulting in the recognition of goodwill and other
intangible assets.

     The unaudited pro forma combined financial statements reflect an estimated
purchase price of approximately $49.2 million, as follows (in thousands):

<TABLE>

<S>                                       <C>
Cash payments...........................   $ 43,045
Fair value of stock options granted.....      3,723
Acquisition costs.......................      2,473
                                           --------
Total consideration.....................   $ 49,241
                                           ========
</TABLE>

     Non-qualified options to purchase approximately 2.3 million shares of Oak
common stock with a term of ten years were granted to TeraLogic employees as
part of the acquisition and the corresponding fair value of these options of
$3.7 million was included in the purchase price.  The fair value of stock
options was determined using the Black-Scholes option pricing model, applying a
weighted average expected life of 5.4 years, a weighted average risk-free rate
of 4.37%, an expected dividend yield of zero percent, a volatility of 92% and a
fair value of $2.04 per share.  The intrinsic value of these unvested options,
totaling approximately $2.1 million, has been recorded as Deferred Stock
Compensation and will be amortized over the vesting period of 50 months on a
straight line basis.

     Acquisition costs include $1.1 million of payments to certain shareholders
of TeraLogic for covenants not to compete, $1.0 million of investment banker
fees and $0.4 million of legal and accounting fees.

     The purchase price allocation was as follows (in thousands):

<TABLE>

<S>                                                <C>
Net liabilities acquired..........................  $   (961)
Customer advance assumed..........................    (4,000)
Deferred stock compensation.......................     2,058
In-process research and development...............     6,960
Intangible assets.................................    31,375
Goodwill..........................................    13,809
                                                    --------
                                                    $ 49,241
                                                    ========

</TABLE>

                                      12

<PAGE>

                      OAK TECHNOLOGY, INC. AND SUBSIDIARIES
      NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
                                 (Unaudited)

     The following table summarizes the estimated fair value of the tangible
assets acquired and liabilities assumed at the date of acquisition (in
thousands):

<TABLE>

<S>                                                <C>
Cash and short-term investments.................... $    559
Other current assets...............................    4,187
Inventory..........................................    2,523
Property, plant and equipment......................    3,909
Other assets.......................................      125
Current liabilities................................  (12,264)
                                                    --------
Net liabilities acquired........................... $   (961)
                                                    ========

</TABLE>

     Tangible assets were valued at their respective carrying amounts as the
Company believes that these amounts approximate their current fair values. The
valuation of the acquired intangible assets which was based on management's
estimates and considered various factors including appraisals, resulted in a
value of purchased technology of approximately $28.4 million, trademarks and
others of approximately $1.9 million and covenants not to compete of
approximately $1.1 million.  Purchased technology and trademarks and others are
being amortized over their estimated useful lives of 5 years and the covenants
not to compete is being amortized over their useful lives of 12 to 18 months.
In accordance with SFAS 142, goodwill of approximately $13.8 million is not
amortized and will be tested for impairment at least annually.

     As a result of the acquisition of TeraLogic, the Company incurred
acquisition related charges of approximately $7.8 million during the quarter
ended December 31, 2002 which includes an in-process research and development
charge of $7.0 million and amortization of deferred stock compensation and
other deferred compensation attributable to the acquisition of TeraLogic of
$0.8 million.

     Approximately $7.0 million of the purchase price represents the estimated
fair value of an acquired in-process research and development project that had
not yet reached technological feasibility and had no alternative future use.
Accordingly, this amount was immediately expensed upon the acquisition date.
The Company expects that the technology will be successfully completed by the
fourth quarter of fiscal 2003 with approximately $4 million in remaining costs.
At the time of acquisition, TeraLogic had one material project in process,
Generation 9, an integrated System on a Chip that integrates a previous
generation of the technology with a new Audio DSP Core as well as a MIPS 64 bit
processor and certain other video processing features.  The value of in-process
research and development was determined using the multi-period excess earnings
method by estimating the expected net cash flows from the Generation 9 project
once commercially viable, discounting the net cash flows back to their present
value using a discount rate of 23%.  This rate was based on the industry
segment for the technology, nature of the products to be developed, length of
time to complete the project and overall maturity and history of the
development team.  The net cash flows from the identified project were based on
estimates of revenue, cost of revenue, research and development expenses,
selling general and administrative expenses, and applicable income taxes.
These estimates did not take into account any potential synergies that could be
realized as a result of the acquisition.  Revenues for Generation 9 and the
incremental core technology developed are expected to commence in the fourth
quarter of fiscal 2003 and extend through 2009. We based our revenue
projections on estimates of market size and growth, expected trends in
technology and the expected timing of new product introductions.

     As of March 31, 2003, the Company has incurred approximately $1.6 million
of the estimated $4 million in remaining costs to complete the development of
the Generation 9 project.  As of March 31, 2003, there have been no material
variations from the underlying assumptions that were used in the original
computation of the acquired in-process research and development amount.

     The following unaudited pro forma financial information presents the
combined results of operations of Oak and TeraLogic as if the acquisition had
occurred as of the beginning of fiscal 2002 and 2003, after giving effect to


                                      13

<PAGE>

                      OAK TECHNOLOGY, INC. AND SUBSIDIARIES
      NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
                                 (Unaudited)

certain adjustments, including amortization of intangibles.  The in-process
research and development charge of $7.0 million is not reflected in the
unaudited pro forma combined condensed statement of operations.  The unaudited
pro forma financial information does not necessarily reflect the results of
operations that would have occurred had the combined companies constituted a
single entity during such periods, and is not necessarily indicative of results
which may be obtained in the future.

<TABLE>
<CAPTION>

                                       Three Months Ended   Nine Months Ended
                                            March 31,            March 31,
                                       ------------------  ------------------
                                          2003      2002      2003      2002
                                          ----      ----      ----      ----
<S>                                    <C>        <C>      <C>       <C>
In thousands except for per share data:

Pro forma revenues....................  $ 25,865  $ 45,385  $ 90,508  $120,589
                                        ========  ========  ========  ========

Pro forma net loss....................  $(17,976) $ (8,638) $(55,582) $(37,021)
                                        ========  ========  ========  ========

Pro forma basic and diluted loss per
  share...............................  $  (0.32) $  (0.16) $  (1.00) $  (0.68)
                                        ========  ========  ========  ========

</TABLE>

     On July 5, 2001, the Company acquired privately held Accel Technology,
K.K. ("Accel") a company based in Osaka, Japan which develops the mechanical
construction and design of computers and relevant equipment, such as CD-R/RW
drives and DVD players.  This acquisition allows Oak to move more quickly into
the consumer space by providing turnkey platforms to consumer electronics
customers to minimize their development efforts.  The Company paid
approximately $3.2 million in cash for all the outstanding common shares and
stock options of Accel.  The transaction has been accounted for under SFAS No.
141, "Business Combinations," using the purchase method of accounting.  The
results of operations of Accel have been included in the results of Oak's
consolidated financial statements from July 12, 2001.  The historical
operations of Accel are not material to the financial position or results of
operations of the Company; therefore, no pro forma information is presented.
The acquisition resulted in goodwill of approximately $3.1 million, which will
not be amortized in accordance with the provisions of SFAS 142.


5. Contingencies
   -------------

     Oak and various of its directors and former officers are parties to a
consolidated class action lawsuit filed on behalf of all persons who purchased
or acquired Oak common stock (excluding the defendants and parties related to
them) for the period July 27, 1995 through May 22, 1996.  This state court
proceeding, designated IN RE OAK TECHNOLOGY SECURITIES LITIGATION, Master File
No. CV758510 was filed in Santa Clara County Superior Court in Santa Clara,
California.  The plaintiffs alleged violations of California securities laws
and statutory deceit provisions as well as breaches of fiduciary duty and abuse
of control.  The plaintiffs sought unspecified monetary damages.  The court
dismissed all claims except the California Corporations Code Sections
25400/25500 cause of action against Oak and four former officers. On August 5,
2000 the court granted defendant's motion for summary judgment and entered
judgment in favor of Oak and the former officers.  The plaintiffs appealed the
court's decisions. On February 3, 2003, the Sixth District Court of Appeals
affirmed the trail court's dismissal.  Based on its current information, Oak
believes this suit to be without merit and will continue to defend its position
vigorously.  Although it is a remote possibility, the rulings may be overturned
by the California Supreme Court and Oak may incur a loss upon an adverse
conclusion of these claims, an estimate of any such loss cannot be made.



                                      14


<PAGE>

                      OAK TECHNOLOGY, INC. AND SUBSIDIARIES
      NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
                                 (Unaudited)


     Additionally, various Oak's directors and former officers are defendants
in three consolidated derivative actions pending in Santa Clara County Superior
Court in Santa Clara, California, entitled IN RE OAK TECHNOLOGY DERIVATIVE
ACTION, Master File No. CV758510.  This lawsuit, which asserts a claim for
breach of fiduciary duty and a claim under California securities law based upon
the officers' and directors' trading in securities of Oak during the period
July 27, 1995 through May 22, 1996, has been stayed pending resolution of the
above described class actions.  The plaintiffs are seeking monetary damages,
equitable relief and an accounting for the defendants' sales of shares of Oak
common stock.  Based on its current information, Oak believes the suits to be
without merit and will defend its position vigorously.  Although it is
reasonably possible Oak may incur a loss upon conclusion of these claims, an
estimate of any such loss cannot be made.

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

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

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

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

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

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


                                      15

<PAGE>

                      OAK TECHNOLOGY, INC. AND SUBSIDIARIES
      NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
                                 (Unaudited)

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

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

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

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


6. Acquisition Related Charges and Deferred Stock Compensation
   -----------------------------------------------------------

     Acquisition related expenses include an in-process research and
development charge and certain other cash payments which were committed as part
of the acquisition of TeraLogic.  Deferred stock compensation reflects the
charge related to stock options granted to TeraLogic employees as part of the
acquisition.  These commitments were made to ensure the transfer of employee
knowledge during the integration of the two companies.  Some of these payments
were obligations made by TeraLogic's shareholders prior to the acquisition and
later assumed by Oak to ensure employee stability during the period leading up
to the announcement of the acquisition and for a period of six months after the
acquisition.  The remaining amount relates to unique compensation incentives
designed and negotiated for this particular acquisition to ensure continuity
and complete delivery of the knowledge-based assets acquired from TeraLogic.
As neither obligation is part of Oak's normal operating compensation practices,
they are shown separately in the Company's financial statements.


                                      16

<PAGE>

                      OAK TECHNOLOGY, INC. AND SUBSIDIARIES
      NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
                                 (Unaudited)

     The following table summarizes the acquisition related expenses and
deferred stock compensation (in thousands):

<TABLE>
<CAPTION>

                                       Three Months Ended   Nine Months Ended
                                            March 31,            March 31,
                                       ------------------  ------------------
                                          2003      2002      2003      2002
                                          ----      ----      ----      ----
<S>                                    <C>       <C>       <C>       <C>
Acquisition related expenses related to:

Cost of product revenues............... $    127  $     --  $    180  $     --
Research and development expenses......      554        --       657        --
Selling, general and administrative
  expenses.............................      986        --     1,542        --
In process research and development
  expense..............................       --        --     6,960        --
                                        --------  --------  --------  --------
Total acquisition related expenses..... $  1,667  $     --  $  9,339  $     --
                                        ========  ========  ========  ========


Deferred stock compensation related to:

Cost of product revenues............... $      9  $     --  $     15  $     --
Research and development expenses......       50        --        83        --
Selling, general and administrative
  expenses.............................       65        --       108        --
                                        --------  --------  --------  --------
Total deferred stock compensation
  expenses............................. $    124  $     --  $    206  $     --
                                        ========  ========  ========  ========

</TABLE>


7. Stock Based Compensation
   ------------------------

     Oak applies Accounting Principles Board Opinion No. 25, "Accounting for
Stock Issued to Employees," and related interpretations in accounting for its
stock plans.  Stock options are generally granted with exercise prices
equivalent to fair market value, and no compensation cost is recognized. In
connection with stock options granted through the acquisition of TeraLogic
during the quarter ended December 31, 2002, the Company recorded deferred
stock-based compensation totaling $2.1 million which is being amortized over
the vesting period of the options. Deferred stock compensation expense
recognized as a result of the amortization of these options during the quarter
ended March 31, 2003 and for the nine-month period ended March 31, 2003 was
approximately $124,000 and $206,000, respectively.


                                      17

<PAGE>

                      OAK TECHNOLOGY, INC. AND SUBSIDIARIES
      NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
                                 (Unaudited)

     The following table illustrates the effect on net loss and net loss per
share if the Company had applied the fair value recognition provisions of SFAS
No. 123, "Accounting for Stock-Based Compensation", to stock-based employee
compensation. The following table presents the pro forma information (in
thousands, except per share amounts):

<TABLE>
<CAPTION>

                                       Three Months Ended   Nine Months Ended
                                            March 31,            March 31,
                                       ------------------  ------------------
                                          2003      2002      2003      2002
                                          ----      ----      ----      ----
<S>                                    <C>       <C>       <C>       <C>
Net loss as reported..................  $(17,976) $ (1,740) $(46,606) $(14,253)
                                        ========  ========  ========  ========
Adjustments:
  Stock-based employee compensation
    expense included in net loss......       124        --       206        --

  Stock-based employee compensation
    expense determined under the fair
    value method......................    (6,765)   (3,919)  (16,182)  (11,758)
                                        --------  --------  --------  --------
Pro forma net loss....................  $(24,617) $ (5,659) $(62,582) $(26,011)
                                        ========  ========  ========  ========

Pro forma basic and diluted loss per
  share...............................  $  (0.44) $  (0.10) $  (1.12) $  (0.47)
                                        ========  ========  ========  ========
Basic and diluted loss per share as
  reported............................  $  (0.32) $  (0.03) $  (0.83) $  (0.26)
                                        ========  ========  ========  ========


</TABLE>

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



<TABLE>
<CAPTION>

                               Stock Option Plans       Stock Purchase Plan
                            ------------------------  ------------------------
                             Quarter and Nine Month    Quarter and Nine Month
                              Period Ended March 31,    Period Ended March 31,
                            ------------------------  ------------------------
                               2003          2002          2003       2002
                               ----          ----          ----       ----
<S>                           <C>           <C>           <C>        <C>
Expected life (years)........  5.40          5.40          0.50       0.50
Expected volatility..........    97%           92%           97%        92%
Risk-free interest rate......  3.65%         4.37%         1.55%      2.55%

</TABLE>


8. Restructuring
   -------------

     During the quarter ended March 31, 2003, the Company recorded
restructuring charges of $4.0 million for reduction in force of approximately
110 employees due to the continued reorganization of the Optical Storage group.
This charge included approximately $700,000 of unrealized loss on the sale of
the development group in Osaka, Japan which was completed on April 1, 2003.


                                      18

<PAGE>

                      OAK TECHNOLOGY, INC. AND SUBSIDIARIES
      NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
                                 (Unaudited)

These activities are part of the continued reorganization of the Optical
Storage group which originated during the quarter ended December 31, 2002.

     During the quarter ended December 31, 2002, Company recorded restructuring
expenses of $3.2 million related to the reduction in force of approximately 20
employees, an adjustment of a loss on lease of a previously abandoned leased
office space, and the impairment of two additional existing facilities owned
and held for sale by the Company.  The impairment charge of $1.4 million
attributable to facilities owned and held for sale by the Company is a result
of a decline in fair market value compared to the net book value.  The
adjustment of a loss on lease of a previously abandoned leased office space was
updated during the quarter ended December 2002 due to a change in
circumstances, specifically the continued slow down of the economy after a one
year period which resulted in a more likely outcome of a significant reduction
of potential sublease rental rates during the remaining lease term of 42
months.   This resulted in a charge of $1.2 million during the second quarter
of fiscal 2003 which is expected to reduce the remaining loss on lease net of
any expected sub-lease income.

     During the nine month period ended March 31, 2003, Oak recorded
restructuring charges of $2.4 million related to the reduction in force due to
the restructuring of the overall business and the planned abandonment of an
existing office space.  This represented the reduction in force of
approximately 30 employees.

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

<TABLE>
<CAPTION>
                                   Severance   Facilities    Other      Total
                                   ---------   ----------    -----      -----
<S>                                <C>        <C>         <C>       <C>
Balance, June 30, 2002............. $    384   $  1,657    $     16   $  2,057
Provision recorded during the
  nine month period ended
  March 31, 2003...................    3,934      3,273          --      7,207
Provision utilized during the nine
  month period ended March 31, 2003   (1,789)    (3,027)        (16)    (4,832)
                                    --------   --------    --------   --------
Balance, March 31, 2003............ $  2,529   $  1,903    $     --   $  4,432
                                    ========   ========    ========   ========

 </TABLE>

      All remaining balances at March 31, 2003 are expected to be paid out in
cash.  Amounts related to facilities will be paid over the lease terms through
June 2006 and the remaining amounts are expected to be paid by the end of the
first quarter of fiscal 2004.


9. 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 fiscal year 2002 and 2001, the Company had two reportable segments
which offer different product lines to each of its target markets: Optical
Storage Group and Imaging Group.  The Optical Storage Group provides high-
performance controllers for CD-ROM, CD-RW, and DVD based technologies to OEM's
who serve the optical storage market.  The Imaging Group provides high-
performance imaging systems for the digital imaging environment, including
products used in digital laser copiers and printers as well as multifunction
peripherals.   As a result of the acquisition of TeraLogic on October 25, 2002,
the Company has added a third reportable segment starting in the second quarter
of fiscal 2003, the TeraLogic Group.  The TeraLogic Group provides products
used in advanced video/audio and display processing technology for digital TV,
HDTV, and personal digital video recorders (PVR).  The Company evaluates
operating segment performance based on net revenues and direct operating
expenses of the segment.  The accounting policies of the operating segments are
the same as those described in the summary of


                                      19

<PAGE>

                      OAK TECHNOLOGY, INC. AND SUBSIDIARIES
      NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
                                 (Unaudited)

accounting policies.  No segments have been aggregated.  The Company does not
allocate assets to its individual operating segments.

     Information about reported segment income or loss is as follows for the
three and nine months ended March 31, 2003 and 2002 (in thousands):


<TABLE>
<CAPTION>

                                       Three Months Ended   Nine Months Ended
                                            March 31,            March 31,
                                       ------------------  ------------------
                                          2003      2002      2003      2002
                                          ----      ----      ----      ----
<S>                                    <C>       <C>       <C>       <C>
Net revenues:
  Optical Storage.....................  $  8,448  $ 30,601  $ 37,777  $ 76,427
  Imaging.............................    12,623    11,495    37,623    35,258
  TeraLogic...........................     4,794        --     9,074        --
                                        --------  --------  --------  --------
                                        $ 25,865  $ 42,096  $ 84,474  $111,685
                                        ========  ========  ========  ========

Cost of goods sold and direct operating
  expenses:
  Optical Storage.....................  $ 10,947  $ 26,430  $ 44,896  $ 71,040
  Imaging.............................     7,985     7,496    23,890    22,469
  TeraLogic...........................     7,492        --    12,404        --
                                        --------  --------  --------  --------
                                        $ 26,424  $ 33,926  $ 81,190  $ 93,509
                                        ========  ========  ========  ========

Contribution margin:
  Optical Storage.....................  $ (2,499) $  4,171  $ (7,119) $  5,387
  Imaging.............................     4,638     3,999    13,733    12,789
  TeraLogic...........................    (2,698)       --    (3,330)       --
                                        --------  --------  --------  --------
                                        $   (559) $  8,170  $  3,284  $ 18,176
                                        ========  ========  ========  ========

</TABLE>


                                      20

<PAGE>

                      OAK TECHNOLOGY, INC. AND SUBSIDIARIES
      NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
                                 (Unaudited)

     A reconciliation of the totals reported for the operating segments to the
applicable line items in the condensed consolidated financial statements for
the three and nine months ended March 31, 2003 and 2002, is as follows (in
thousands):

<TABLE>
<CAPTION>

                                       Three Months Ended   Nine Months Ended
                                            March 31,            March 31,
                                       ------------------  ------------------
                                          2003      2002      2003      2002
                                          ----      ----      ----      ----
<S>                                    <C>       <C>       <C>       <C>
Contribution margin from operating
  segments............................ $   (559)  $  8,170  $  3,284  $ 18,176
  Indirect operating expenses.........    6,664      5,715    21,096    18,878
  Depreciation expense................    2,591      1,881     6,916     5,237
  Amortization of intangibles.........    2,467      3,046     6,978     9,520
  Acquisition related expenses........    1,667         --     9,339        --
  Deferred stock compensation.........      124         --       206        --
  Restructuring charge................    4,046        396     7,207     2,424
                                       --------   --------  --------  --------
Total operating loss..................  (18,118)    (2,868)  (48,458)  (17,883)
  Non-operating income, net...........      508      1,573     3,429     5,206
                                       --------   --------  --------  --------
Loss before income taxes               $(17,610)  $ (1,295) $(45,029) $(12,677)
                                       ========   ========  ========  ========

</TABLE>

     Indirect operating expenses include all costs and expenses not
specifically charged to the operating segments in the financial information
reviewed by the Company's chief operating decision-maker.  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, United
Kingdom, Taiwan and Japan.  Activities in the United States consist of
corporate administration, product development, logistics and worldwide sales
management.  Foreign operations consist of regional sales and limited board-
level manufacturing and engineering support services.

     The distribution of net revenues for the three and nine months ended March
31, 2003 and 2002 are as follows (in thousands):


<TABLE>
<CAPTION>

                                       Three Months Ended   Nine Months Ended
                                            March 31,            March 31,
                                       ------------------  ------------------
                                          2003      2002      2003      2002
                                          ----      ----      ----      ----
<S>                                    <C>       <C>       <C>       <C>
Revenue from unaffiliated customers
  originating from:
  North America.......................  $ 5,998   $  3,906  $ 15,551  $ 14,294
  Japan...............................    9,830     13,350    31,774    41,077
  Korea...............................    1,824     13,812     5,237    28,808
  Taiwan..............................    6,984      4,301    26,521    12,115
  Philippines.........................      336      5,792     2,091    11,251
  Europe..............................      713        778     2,878     1,764
  Other...............................      180        157       422     2,376
                                        --------  --------  --------  --------
                                        $ 25,865  $ 42,096  $ 84,474  $111,685
                                        ========  ========  ========  ========

</TABLE>


                                      21

<PAGE>

                      OAK TECHNOLOGY, INC. AND SUBSIDIARIES
      NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
                                 (Unaudited)

     For the three months ended March 31, 2003, two customers accounted for 15%
and 11% of total revenues, respectively.  For the same period of the prior
fiscal year, three customers accounted for 32%, 14% and 11% of total revenues,
respectively.  All of these customers are attributable to the optical storage
group.

     For the nine months ended March 31, 2003, two customers of the optical
storage group accounted for 14% and 11% of total revenues, respectively.  For
the same period of the prior fiscal year, two customers of the optical storage
group accounted for 25% and 11% of total revenues, respectively, and one
customer of the imaging group accounted for 11% of total revenues.

     As of March 31, 2003, three customers accounted for 34%, 21% and 18% of
total net accounts receivable, respectively, and as of June 30, 2002, four
customers accounted for 34%, 24%, 14% and 12% of total net accounts receivable,
respectively.


10. Comprehensive Loss
    ------------------

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


<TABLE>
<CAPTION>

                                       Three Months Ended   Nine Months Ended
                                            March 31,            March 31,
                                       ------------------  ------------------
                                          2003      2002      2003      2002
                                          ----      ----      ----      ----
<S>                                    <C>       <C>       <C>       <C>
Net loss..............................  $(17,976) $ (1,740) $(46,606) $(14,253)
  Other comprehensive income (loss):
    Change in unrealized gain (loss)
      on investments, net.............      (194)   (1,813)     (323)      332
                                        --------  --------  --------  --------
Total comprehensive loss..............  $(18,170) $ (3,553) $(46,929) $(13,921)
                                        ========  ========  ========  ========

</TABLE>


11. Income Taxes
    ------------

     For the three and nine months ended March 31, 2003 and March 31, 2002, the
Company recorded tax expense based on actual taxes incurred.


12. Subsequent Events
    -----------------

Sale of Development Group in Osaka, Japan

     On April 1, 2003, Oak completed the sale of a development group in Osaka,
Japan which focused on the development and design of computers and relevant
equipment, such as CD-R/RW drives and DVD players.  This group was a result of
the acquisition of Accel Technology, K.K. ("Accel") which was completed on July
5, 2001.  The assets and liabilities of this group was sold for proceeds of
approximately $300,000 resulting in an accrued loss of approximately $700,000
which is included in the financial statements as of March 31, 2003 as part of
restructuring expense.  The assets of Accel of approximately $1,063,000 net of
unrealized loss of $700,000 is included in prepaid expenses and other current
assets as of March 31, 2003 as they are considered to be assets held for sale.
The liabilities of Accel of approximately $63,000 is included in accrued
expenses as of March 31, 2003 as they are considered to be liabilities held for
sale.

                                      22

<PAGE>

                      OAK TECHNOLOGY, INC. AND SUBSIDIARIES
      NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
                                 (Unaudited)

Sale of Optical Storage Assets to Sunplus Technology Co., Ltd.
--------------------------------------------------------------

     On April 3, 2003, Oak completed the sale of certain optical storage assets
to Sunplus Technology Co., Ltd. ("Sunplus"), a Taiwan-based publicly held,
fabless integrated circuit design house focused on the consumer market.

     The sale was made pursuant to an Asset Purchase Agreement, dated as of
February 5, 2003 (as amended, on April 3, 2003) by and between Oak and Sunplus.
In the transaction, Oak transferred its Optical Storage business and certain
assets to Sunplus for approximately $30 million, comprised of $16 million in
cash and the equivalent of $14 million in shares of Sunplus common stock to be
issued by Sunplus.  Sunplus shares are traded on the Taiwan Stock Exchange.
Sunplus has established an escrow by contributing $14 million in cash in
conjunction with its obligation to issue Sunplus common stock with a fair
market value based on the average closing price for ten trading days ending two
business days prior to the delivery of shares.  The escrow account was
established to (i) compensate Sunplus for any unknown liabilities incurred in
conjunction with the transaction and (ii) serve as a guaranty for Sunplus'
obligation to Oak to issue shares.  If regulatory approval for the issuance of
shares is not obtained by Sunplus within nine months of closing, Oak will
receive the net cash held in escrow in lieu of Sunplus common stock. The
agreement also calls for the Company to indemnify Sunplus for claims made
against the assets sold for a period of two years limited by the purchase
price.

     Under the asset purchase agreement, Oak has the right to make a minority
investment in Sunext Technology Co., Ltd., a new company created by Sunplus.
Oak and Sunplus also entered into a number of ancillary agreements, including a
license agreement relating to the use by Sunplus of certain Oak patents and a
license by Sunplus granting back to Oak certain rights to continue to use the
Optical Storage technology sold to Sunplus under the Asset Purchase Agreement.

     An estimated summary of the transaction is as follows (in thousands):

<TABLE>

<S>                                                     <C>
Cash due from Sunplus.................................   $ 16,000
Stock due from Sunplus................................     14,000
Less: Net assets transferred..........................     (3,950)
Estimated transaction expenses........................       (325)
Allocated Optical Storage goodwill....................     (1,624)
                                                         --------
Estimated net gain on sale............................   $ 24,101
                                                         ========

</TABLE>


     Net assets transferred represents the net book value of the Optical
Storage inventory and fixed assets transferred to Sunplus as of March 31, 2003.
These assets have been recorded as assets held for sale and included as prepaid
expenses and other current assets as of March 31, 2003.  Transaction expenses
primarily include estimated costs of $325,000 related to legal and accounting
costs.  Allocated Optical Storage Group goodwill represents the pro rata
portion of goodwill included in the Optical Storage Group operating segment
associated with the sale to Sunplus.  The amount of goodwill included in the
disposition is based on the estimated relative fair values of the business sold
to Sunplus and the remaining portion of the Optical Storage Group that has been
retained.  The fair value of the portion of the retained Optical Storage Group
has been determined upon preliminary management estimates that may be subject
to change based upon finalization of a fair value evaluation.


                                      23

<PAGE>

                      OAK TECHNOLOGY, INC. AND SUBSIDIARIES
      NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
                                 (Unaudited)

     The following table sets forth the net revenues and the directly
attributable cost of revenues and operating expenses of the Optical Storage
products for the three and nine month periods ended March 31, 2003 (in
thousands):

<TABLE>
<CAPTION>

                                         Three Months Ended   Nine Months Ended
                                           March 31, 2003      March 31, 2003
                                           --------------      --------------
<S>                                          <C>                  <C>
Net revenues...............................   $   8,448            $ 37,778

Cost of revenues and operating expenses:
  Cost of revenues.........................        4,924             20,816
  Research and development expenses........        4,754             17,682
  Selling, general and administrative
   expenses................................        1,395              5,147
  Amortization of intangibles..............           --                229
  Restructuring charge.....................        3,855              5,845
                                               ---------          ---------
Net loss...................................    $  (6,480)         $ (11,941)
                                               =========          =========

</TABLE>


Proposed Merger with Zoran Corporation
--------------------------------------

     On May 4, 2003, the Company entered into an Agreement and Plan of
Reorganization with Zoran Corporation ("Zoran") and Zinc Acquisition
Corporation, a wholly-owned subsidiary of Zoran ("Merger Sub").  Under the
terms of the merger agreement, the Company will merge with and into Merger Sub
with Merger Sub continuing as the surviving corporation and a wholly-owned
subsidiary of Zoran.  As a result of the merger, each outstanding share of the
Company's common stock will be exchanged for 0.2323 of a share of Zoran's
common stock and $1.78 in cash.  The merger is intended to be a reorganization
within the meaning of Section 368(a) of the Internal Revenue Code of 1986, as
amended.  The consummation of the merger is subject to the approvals of the
stockholders of the Company and Zoran, expiration of the waiting period under
United States antitrust laws, SEC clearance and other customary closing
conditions.  A Form 8-K filed on May 7, 2003 disclosed this merger and also
included as exhibits, the Agreement and Plan of Reorganization and a joint
press release of the Company and Zoran dated May 5, 2003 describing the merger.
In connection with the merger agreement, the Company entered into Amendment No.
2 to its Rights Agreement, which excluded the proposed merger.


                                      24

<PAGE>

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

This Report on Form 10-Q contains  "forward-looking" statements within the
meaning of Section 27a of the Securities Act of 1933, as amended, and Section
21e of the Securities Act of 1934, as amended.  Such statements include
declarations regarding the intent, belief or current expectations of Oak and
its management.  Such forward-looking statements are not guarantees of future
performance and involve a number of risks and uncertainties.  Actual results
could differ materially from those indicated by such forward-looking
statements.  Among the important factors that could cause actual results to
differ materially from those indicated by such forward-looking statements
include those discussed below under the subheading "Factors That May Affect
Future Results" and elsewhere in this report.  Oak undertakes no obligation to
publicly release the results of any revision to these forward-looking
statements which may be made to reflect events or circumstances after the dates
hereof or to reflect the occurrence of unanticipated events.  Readers should
carefully review the risk factors described in "Factors That May Affect Future
Results" below and any subsequently filed SEC reports.

General
-------

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

     Oak's operations were previously organized along its two market-focused
groups: the Optical Storage Group and the Imaging Group.  With the acquisition
of TeraLogic, Inc., during the quarter ended December 31, 2002, Oak's
operations are now organized along three market focused groups: Optical Storage
Group, Imaging Group, and TeraLogic Group.

     For the results of operations for the three and nine months ended March
31, 2003, the Company reported a net loss of $18.0 million and $46.6 million,
respectively compared to a net loss of $1.7 million and $14.3 million recorded
for the three and nine month periods, respectively, of the prior fiscal year.
The Company continues to experience the effects of decreased revenues caused by
the slowdown in the PC industry as well as a decrease in overall global
economic conditions.

     Oak's quarterly and annual operating results have been, and will continue
to be, affected by a wide variety of factors that could have a material adverse
effect on revenues and profitability during any particular period, including
competitive pressures on selling prices, availability and cost of foundry
capacity and raw materials, fluctuations in yield, loss of any strategic
relationships, its ability to introduce new products in accordance with OEM
design requirements and design cycles, rate of adoption of new technology, rate
of growth of the digital television market, changes in product mix or
distribution channels, demand for semiconductors and end-user products
incorporating semiconductors, technological difficulties and resource
constraints encountered in developing and/or using new products, new product
introductions by its competitors, and market acceptance of product sold by both
Oak and its customers.

     In addition, our operating results are subject to fluctuations in the
markets for our customers' products, particularly the consumer electronics and
personal computer markets, which have been severely impacted by the current
slow down in the semiconductor industry and the overall weak macro-economic
environment.  Although Oak had devoted a substantial portion of its research
and development efforts to developing chips used in DVD systems, CD-RW drives
as well as inkjet and laser imaging devices, the Company expects to shift its
focus to


                                      25

<PAGE>

the development of chips and platforms used in digital television products
while it continues the development of inkjet and laser imaging devices.  Our
optical storage, digital television, and digital imaging products are subject
to the new product risks described in the preceding paragraph, including in
particular our ability to timely introduce these products and the market's
acceptance of them, which could have a materially adverse effect on our
operating results.


Recent Developments
-------------------

Sale of Development Group in Osaka, Japan
-----------------------------------------

     On April 1, 2003, Oak completed the sale of a development group in Osaka,
Japan which focused on the development and design of computers and relevant
equipment, such as CD-R/RW drives and DVD players.  This group became a part of
Oak as a consequence of the acquisition of Accel Technology, K.K. ("Accel")
which was completed on July 5, 2001.  The assets and liabilities of this group
were sold for proceeds of approximately $300,000 resulting in a loss of
approximately $700,000 which is included in the financial statements as part of
restructuring expense as of March 31, 2003. The loss incurred as a result of
the sale was less than the loss which would have been incurred had these
employees been terminated in accordance with Japanese labor laws. The assets of
Accel of approximately $1,063,000 net of unrealized loss of $700,000 is
classified as assets held for sale and is included in prepaid expenses and
other current assets as of March 31, 2003. The liabilities of Accel of
approximately $63,000 is included in accrued expenses as of March 31, 2003 as
they are considered to be liabilities held for sale.

Sale of Optical Storage Assets to Sunplus Technology Co., Ltd.
--------------------------------------------------------------

     On April 3, 2003, Oak completed the sale of certain optical storage assets
to Sunplus Technology Co., Ltd. ("Sunplus"), a Taiwan-based publicly held,
fabless integrated circuit design company focused on the consumer market.  The
sale was made pursuant to an Asset Purchase Agreement, dated as of February 5,
2003 (as amended on April 3, 2003) by and between Oak and Sunplus.  In the
transaction, Oak transferred its optical storage business and certain assets to
Sunplus for approximately $30 million, comprised of $16 million in cash and the
equivalent of $14 million in shares of Sunplus common stock to be issued by
Sunplus.  Sunplus shares are traded on the Taiwan Stock Exchange.  Sunplus has
established an escrow by contributing $14 million in cash in conjunction with
its obligation to issue Sunplus common stock with a fair market value based on
the average closing price for ten trading days ending two business days prior
to the delivery of shares.  The escrow account was established to (i)
compensate Sunplus for any unknown liabilities incurred in conjunction with the
transaction and (ii) serve as a guaranty for Sunplus' obligation to Oak to
issue shares.  If regulatory approval for the issuance of shares is not
obtained by Sunplus within nine months of closing, Oak will receive the cash
held in escrow in lieu of Sunplus common stock.  Under the asset purchase
agreement, Oak has the right to make a minority investment in Sunext Technology
Co., Ltd., a new company created by Sunplus.  In connection with the sale, Oak
and Sunplus also entered into a number of ancillary agreements, including a
license agreement relating to the use by Sunplus of certain Oak patents and a
license by Sunplus granting back to Oak certain rights to continue to use the
Optical Storage technology sold to Sunplus under the Asset Purchase Agreement.

Proposed Merger with Zoran Corporation
--------------------------------------

     On May 4, 2003, Oak entered into an Agreement and Plan of Reorganization
with Zoran Corporation ("Zoran") and Zinc Acquisition Corporation, a wholly-
owned subsidiary of Zoran ("Merger Sub").  Zoran develops and markets
integrated circuits, integrated circuit cores and embedded software used by
original equipment manufacturers in digital video and audio products for
commercial and consumer markets.  Under the terms of the merger agreement, the
Company will merge with and into Merger Sub, with Merger Sub continuing as the
surviving corporation and a wholly-owned subsidiary of Zoran.  As a result of
the merger, each outstanding share of the Company's common stock will be
exchanged for 0.2323 of a share of Zoran's common stock and $1.78 in cash.  The
merger is intended to be a reorganization within the meaning of Section 368(a)
of the Internal Revenue Code of 1986, as amended.  The consummation of the
merger is subject to the approvals of the stockholders of the Company and
Zoran, expiration of the waiting period under United States antitrust laws, SEC
clearance and other customary closing conditions.

     There can be no assurance that the merger will close timely prior to
December 4, 2003, that the companies will be integrated successfully, or
without unanticipated costs or that anticipated synergies or other benefits
will be realized.


                                      26

<PAGE>

     The Results of Operations presented below represent our historical results
only.  All of the projections, trends and forward-looking statements included
herein are based on the Company as a stand-alone entity.  In the event that the
proposed merger is completed, these projections, trends and forward-looking
statements will likely change, and the changes may be significant.  Actual
results following the merger could differ materially from those currently
anticipated as a result of a number of factors, including risks and
uncertainties discussed in both companies' filings with the Securities and
Exchange Commission.

     We will incur significant costs associated with the merger, including
legal, accounting, financial printing and financial advisory fees.  Many of
these fees must be paid regardless of whether the merger is completed.  In
addition, we could be required to pay a termination fee to Zoran upon the
occurrence of certain events.  Our relationships with customers may be
disrupted because of the diversion of management attention while negotiating
the merger and as a result of any perceived uncertainty regarding the outcome
of the merger.  If customers delay decisions to purchase our products due to
this uncertainty, our results of operations would be adversely affected.


Results of Operations

     Net Revenues. Net revenues decreased 39% to $25.9 million for the three
     ------------
months ended March 31, 2003 from $42.1 million in the comparable period of
fiscal 2002.  The year over year decrease in quarterly revenues is a result of
a decline in Optical Storage revenues due to a loss of market share stemming
from the Company's inability to timely deliver new competitive innovative
products that would garner design wins in the market. In addition, the Company
continued to reorganize the Optical Storage group in preparation of
transferring certain Optical Storage assets to Sunplus.  The continued global
slowdown and decline in PC related markets also contributed to the year over
year decline in revenues.  This decline was partially offset by $4.8 million in
revenues for the TeraLogic business acquired on October 25, 2002.

     For the nine months ended March 31, 2003, net revenues decreased 24% to
$84.5 million from $111.7 million in the same period of the prior year.  The
year over year decrease in revenues is generally attributable to the same
reasons stated above.  This decline was partially offset by revenues for the
TeraLogic business acquired on October 25, 2002.

     Net revenues in the Optical Storage business segment were $8.4 million for
the third quarter of fiscal 2003, representing a 72% decrease from the
segment's net revenues of $30.6 million reported in the same period of fiscal
2002.  Net revenues in the Optical Storage business segment decreased 51% to
$37.8 million for the nine months ended March 31, 2003 compared to $76.4
million recorded in the same period of the prior year.  The decrease in
revenues is primarily attributable to a decline in volume of shipments of
controller products and ASP erosion. This decline is the result of several
factors including a loss of market share during transitions to newer
generations of product, absence of a next generation companion AFE chip to go
with the controller, a weaker economy and weaker PC Market coupled with intense
competition between component suppliers, drive manufacturers and PC-OEM's which
have driven in excess of 20% annualized ASP erosion. The Company also had a
major customer in Philips formally announce their withdrawal from the PC-OEM
Optical Storage supplier market during the December 2002 quarter.  In addition,
on April 3, 2003, Oak completed a transaction to sell certain Optical Storage
assets based on the terms of a definitive agreement entered into with Sunplus
on February 5, 2003, a publicly held fabless semiconductor company focused on
the consumer market, based in Taiwan.  Under the terms of the Agreement, Oak
transferred certain Optical Storage assets to Sunplus in return for
approximately $30 million, comprised of $16 million in cash and shares of
Sunplus common stock having a value of $14 million.  In anticipation of the
transaction, Oak experienced a significant decline in Optical Storage revenues
in the March quarter.

     Net revenues for the Imaging business segment were $12.6 million for the
three months ended March 31, 2003, representing a 10% increase over the $11.5
million reported in the same quarter of fiscal 2002.  Net revenues for the
Imaging business segment increased to $37.6 million, or 7% for the nine months
ended March 31, 2003 compared to $35.3 million recorded during the same period
of the prior year.  The slight increase is primarily the result of higher
revenues related to Imaging hardware products during the three and nine month
periods ended March 31, 2003 as compared to the same periods of the prior year.
This increase was offset by a decline in software revenues for the nine-month


                                      27

<PAGE>

period of approximately $1.4 million due to a decline in revenues associated
with developing print drivers for a specific OEM manufacturer, a business which
has been deemphasized by Oak.

     As a result of the acquisition of TeraLogic which was completed during the
quarter ended December 31, 2002, Oak has added a third business segment, the
TeraLogic group.  Revenues for the TeraLogic group for the quarter ended March
31, 2003 was $4.8 million and from the date of acquisition of October 25, 2002
through March 31, 2003 were $9.1 million.  The Company expects that revenues
for the TeraLogic group will grow over time as digital television and HDTV
become more widespread.

     Cost of Revenues.  Cost of revenues includes the cost of wafer
     ----------------
fabrication, assembly, and testing performed by third-party vendors, and direct
and indirect costs associated with the procurement, scheduling and quality
assurance functions performed by the Company.  The Company's total gross margin
increased to 59% for the quarter ended March 31, 2003, as compared to 50%
during the comparable period in the prior year.  For the nine months ended
March 31, 2003, the Company's total gross margin increased to 58% compared to
50% in the same period of the prior year.

     Gross margin for the Optical Storage business segment was 42% for the
third quarter of fiscal 2003 compared to 40% for the comparable quarter of the
prior fiscal year and 43% for the nine months ended March 31, 2003 compared to
37% for the comparable period of the prior fiscal year.  The increase in gross
margins for the quarter and nine month periods ended March 31, 2003 compared to
the same periods of the prior fiscal year was primarily a result of the product
mix in which the Company stopped selling a low margin discrete AFE and at the
same time sold an increased relative mix of high margin combo products. In
addition, the margin improved as a result of a decline in optical storage
products compared to optical storage software and support revenues which have
higher margins.

     Gross margin for the Imaging business segment was 76% for the third
quarter of fiscal year 2003, as compared to the 79% reported in the third
quarter of fiscal 2002.  Gross margin for the Imaging business for the nine
months ended March 31, 2003 was 76% compared to 78% for the same period in the
prior year.  The slight decline in margins for the quarter and nine month
period ended March 31, 2003 compared to the same periods of the prior fiscal
year is due to certain non-recurring NRE projects which carried a lower
relative margin than our typical product licensing sales.  These projects are
expected to be completed prior to June 30, 2003.

     Gross margin for the TeraLogic business segment was 46% for the quarter
ended March 31, 2003 and 49% from the date of acquisition through March 31,
2003.  Oak expects gross margins for the TeraLogic business segment to
fluctuate based on changes in product mix each quarter. For instance, the
TeraLogic group is currently working to bring the next generation of their HDTV
technology, referred to as "Generation 9", into volume production with
Customers in the later half of Calendar 2003. This technology is designed on
0.13 micron line widths and geometries for processing at Taiwan Semiconductor
Manufacturing Corporation ("TSMC"). This is the Company's first design at 0.13
micron and this is also a relatively new manufacturing process at TSMC. As a
result, the Company currently expects early manufacturing yields to be lower
than the Company has experienced in previous geometries and manufacturing
processes. While the Company expects these yields to improve over time, because
of the variables and dependencies involved, it is currently difficult to
predict either the initial yields or the rate of expected improvement. This may
lead to margins which will temporarily fluctuate in future quarters until the
new product is fully ramped into production and the manufacturing process
becomes stable.

     During fiscal 2001 and 2002, the Company provided a full reserve for
certain quantities of inventory primarily related to Optical Storage of $5.6
million and $4.1 million, respectively.  Approximately $4.1 million in fully
reserved gross inventory was physically scrapped during the quarter ended
December 31, 2002 which had no impact to the Company's net loss.  During the
quarter ended March 31, 2003, the Company scrapped approximately $2.8 million
in fully reserved gross inventory which had no impact to net loss for the
period.  In addition, fully reserved gross inventory with an original cost of
approximately $1.0 million was sold during the March 2003 quarter resulting in
$1.1 million of revenues with 100% gross profit primarily related to the
Optical Storage group.  These inventory items had been fully reserved in
previous periods based on the Company's comparison of the quantity and cost of
inventory on hand to management's forecast of customer demand at that time.
Once a reserve is established, it is maintained until the product to which it
relates is sold or otherwise disposed of, even if in subsequent periods we
forecast demand for the product.  At March 31, 2003 there was approximately
$1.2 million of fully reserved inventory which if not sold would be scrapped at
some future date.

     The Company's overall gross margin is subject to change due to various
factors, including, among others, competitive product pricing, yields, product
mix, wafer, assembly and test costs.  The Company expects that average selling
prices for its existing products will continue to decline over time and that
the average selling prices for each new product will decline significantly over
the life of the product.  Given the extremely competitive nature of the optical
storage and consumer market, the Company believes that gross margins for new
products in its optical storage market and consumer market will be lower than


                                      28

<PAGE>

historical levels and, as a result, gross margins in general will decline in
the future.

     Research and Development Expenses.  Research and development costs are
     ---------------------------------
expensed as incurred.  Research and development expenses of $15.8 million for
the quarter ended March 31, 2003 increased $2.6 million, or 20%, from the $13.2
million recorded in the comparable period of the previous fiscal year.
Research and development expenses for the nine months ended March 31, 2003
increased 19% to $46.4 million from the $39.2 million recorded in the same
period of the prior year.  This increase in year over year R&D expense is
attributable to the inclusion of TeraLogic from October 25, 2002 which
accounted for $2.4 million of the increase for the quarter ended March 31, 2003
and $6.8 million of the increase for the nine month period ended March 31,
2003.  The Company will continue to invest substantial resources in research
and development of new products in the Company's target markets: the digital
television, digital imaging and consumer optical storage markets.

     Selling, General and Administrative Expenses.  Selling, general and
     --------------------------------------------
administrative ("SG&A") expenses increased by 27% to $9.4 million for the three
months ended March 31, 2003 from $7.4 million in the comparable period of the
prior year.  SG&A expenses increased 23% to $27.6 million for the nine months
ended March 31, 2003 compared to $22.5 million in the same period of the prior
year.  The increase in SG&A expense for the quarter and nine month period ended
March 31, 2003 compared to the same periods of the prior fiscal year was
primarily attributable to the inclusion of TeraLogic starting October 25, 2002
which accounted for approximately $1.2 million for the quarter ended March 31,
2003 and $2.4 million for the nine month period ended March 31, 2003.
Additional increases during the nine month period ended March 31, 2003 compared
to the same period in the prior year is a result of an increase in legal
expense of  $2.5 million for the nine months ended March 31, 2003 compared to
the same periods of the prior year which is related to an ongoing litigation
which we expect to continue over the next several quarters.

     Amortization of Intangibles.  Amortization of intangible assets was $2.5
     ---------------------------
million for the three months ended March 31, 2003, a decrease of $0.6 million
or 19% from the $3.0 million recorded in the same period of the prior fiscal
year.  For the nine months ended March 31, 2003, amortization of intangible
assets decreased 27% to $7.0 million from the $9.5 million recorded in the same
period of the prior year.  The year over year decrease is a result of the
completion of amortization of certain intangible assets as they became fully
amortized offset by the acquisition of TeraLogic which resulted in the addition
of approximately $30.3 million in intangible assets which will be amortized
over one to five year lives.

     Acquisition related expenses.  For the three months ended March 31, 2003,
     ----------------------------
the Company recorded acquisition related expenses of $1.7 million.  This amount
represents certain acquisition related bonuses paid to former TeraLogic
employees related to the acquisition of TeraLogic during the quarter ended
December 31, 2003.  For the nine-month period ended March 31, 2003, the Company
recorded approximately $9.3 million related to acquisition related charges.
This amount includes approximately $2.3 million of amortization of certain
acquisition related bonuses. Some of these payments were obligations made by
TeraLogic's shareholders during the acquisition and later assumed by Oak to
ensure employee stability prior to and during the acquisition.  In general, all
of these commitments were made to ensure the proper transfer of employee
knowledge and intellectual property during the integration of the two
companies.  As these charges are not part of Oak's normal operating
compensation practices, they are shown separately in the Company's financial
statements.  In addition, approximately $7.0 million of in-process research and
development charges related to the acquisition of TeraLogic were recorded
during the quarter ended December 31, 2002.  The in process research and
development charge represents the estimated fair value of an acquired in-
process research and development project that had not yet reached technological
feasibility and had no alternative future use.  Accordingly, this amount was
immediately expensed upon the acquisition date.  The Company expects that the
technology will be successfully completed by the fourth quarter of fiscal 2003
with approximately $4 million in remaining costs.  At the time of acquisition,
TeraLogic had one material project in process, Generation 9, an integrated
System on a Chip that integrates a previous generation of the technology with a
new Audio DSP Core as well as a MIPS 64 bit processor and certain other video
processing features.  The value of in-process research and development was
determined using the multi-period excess earnings method by estimating the
expected net cash flows from the Generation 9 project once commercially viable,
discounting the net cash flows back to their present value using a discount
rate of 23%.  This rate was based on the industry segment for the technology,
nature of the products to be developed, length of time to complete the project
and overall maturity and history of the development team.  The net cash flows
from the identified project were based on


                                      29

<PAGE>

estimates of revenue, cost of revenue, research and development expenses,
selling general and administrative expenses, and applicable income taxes.
These estimates did not take into account any potential synergies that could be
realized as a result of the acquisition.  Revenues for Generation 9 and the
incremental core technology developed are expected to commence in the fourth
quarter of fiscal 2003 and extend through 2009.  We based our revenue
projections on estimates of market size and growth, expected trends in
technology and the expected timing of new product introductions.

     Deferred Stock Compensation. For the quarter and nine month period ended
     ---------------------------
March 31, 2003, the Company recorded deferred stock compensation charges of
approximately $124,000 and $206,000 respectively.   These charges are
attributable to non-qualified options to purchase approximately 2.3 million
shares of Oak common stock with a term of ten years that were granted to
TeraLogic employees as part of the acquisition.  The fair value of stock
options was determined using the Black-Scholes option pricing model, applying a
weighted average expected life of 5.4 years, a weighted average risk-free rate
of 4.37%, an expected dividend yield of zero percent, a volatility of 92% and a
fair value of $2.04 per share.  The intrinsic value of these unvested options,
totaling approximately $2.1 million, has been recorded as deferred stock
compensation and will be amortized over the vesting period of 50 months on a
straight line basis.

     Restructuring Charge.  During the quarter ended March 31, 2003, the
     --------------------
Company recorded restructuring charges of $4.0 million for reduction in force
of approximately 110 employees due to the continued reorganization of the
Optical Storage group.  This charge included approximately $700,000 of
unrealized loss on the sale of the development group in Osaka, Japan which was
completed on April 1, 2003.  These activities are part of the continued
reorganization of the Optical Storage group which originated during the quarter
ended December 31, 2002.  During the quarter ended December 31, 2002, Company
recorded restructuring expenses of $3.2 million related to the reduction in
force of approximately 20 employees, an adjustment of a loss on lease of a
previously abandoned leased office space, and the impairment of two additional
existing facilities owned and held for sale by the Company.  The impairment
charge of $1.4 million attributable to facilities owned and held for sale by
the Company is a result of a decline in fair market value compared to the net
book value.  The adjustment of a loss on lease of a previously abandoned leased
office space was updated during the quarter ended December 2002 due to a change
in circumstances, specifically the continued slow down of the economy after a
one year period which resulted in a more likely outcome of a significant
reduction of potential sublease rental rates during the remaining lease term of
42 months.   This resulted in a charge of $1.2 million during the second
quarter of fiscal 2003 which is expected to reduce the remaining loss on lease
net of any expected sub-lease income.

     During fiscal 2002, the Company recorded total restructuring charges of
$3.2 million related to the reduction in force of approximately 70 employees
and the additional loss on leasehold as a result of a sub-tenant that
experienced financial difficulties and abandoned the facility with
approximately 5 years remaining.   Of this amount, $2.4 million was recorded
during the nine month period ended March 31, 2002 attributable to the reduction
in force of approximately 30 employees and the planned abandonment of an
existing office space.  The total reduction in headcount as a result of the
fiscal 2002 restructuring charge resulted in cash savings and reduced R&D
expense of approximately $1.0 million per quarter while the charge attributable
to the loss on leasehold reduced lease expense by approximately $200,000 per
quarter.  We expect that the total charge related to the loss on leasehold
including the adjustment made in the second quarter of fiscal 2003 will be
sufficient to reduce the remaining lease expense net of any future sublease
income.

     Other Non-operating Income.  During the third quarter of fiscal 2002, non-
     --------------------------
operating income decreased to $0.5 million from the $1.6 million recorded
during the same quarter of fiscal 2002.  Non-operating income decreased 34% to
$3.4 million for the nine months ended March 31, 2003 from $5.2 million
recorded in the same period of the prior year.  The year over year decrease is
a result of the decrease in interest income as a result of lower interest rates
and a decline in cash and short-term investment balances.  The decrease in
interest income for the nine month period ended March 31, 2003 compared to the
same period in the prior year was offset in the quarter ended December 31, 2002
by the sale of marketable securities which resulted in a gain of $0.7 million.

     Income Taxes.  For the third quarter of fiscal 2003 and for the nine
     ------------
months ended March 31, 2003, tax expense was based on actual taxes incurred.
Management does not yet believe it is more likely than not that sufficient
future taxable income will be generated to realize all of the Company's
deferred tax assets.  Accordingly, a valuation allowance existed against
substantially all of the deferred tax assets as of June 30, 2002 and March 31,


                                      30

<PAGE>

2003.  No income tax benefit was recognized with respect to operating losses
incurred in the third quarter of fiscal 2003 and for the nine months ended
March 31, 2003.


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

     Since its inception, Oak has financed its cash requirements from cash
generated from operations, the sale of equity securities, bank lines of credit
and long-term and short-term debt.  Oak's principal sources of liquidity as of
March 31, 2003 consisted of approximately $67.9 million in cash, cash
equivalents and short-term investments.

     Oak's working capital decreased by $79.9 million to $49.3 million as of
March 31, 2003 from $129.2 million as of June 30, 2002.  The decrease was
primarily attributable to the acquisition of TeraLogic which was completed
during the second quarter of fiscal 2002.  Approximately $45 million was used
in the acquisition of TeraLogic along with an additional $24.4 million used in
operating activities during the nine months ended March 31, 2003.  Oak's short-
term investments were principally invested in investment grade, interest-
bearing securities.

     Oak's cash used in operating activities was $24.4 million for the nine
months ended March 31, 2003 compared to proceeds of  $14.2 million for the same
period in the prior year.  Cash used in operating activities for the nine
months ended March 31, 2003 was primarily a result of a net loss of $46.6
million and a decrease in accounts payable and accrued expenses of $11.0
million offset by depreciation and amortization of $13.9 million, in-process
research and development charge of $7.0 million in changes in other balance
operating assets of $12.3 million.

     Oak's investing activities during the nine months ended March 31, 2003
used cash of $0.4 million compared to $15.4 million during the same period of
the prior year.  Cash used in investing activities during the current period
resulted primarily from net proceeds from short-term investments of $49.8
million offset by purchases of property and equipment of $5.2 million as well
as the purchase of TeraLogic, net of cash acquired, of $45.0 million.

Oak's financing activities during the nine months ended March 31, 2003 provided
cash of $0.2 million compared to the $6.7 million during the same period of the
prior year.  The cash provided by financing activities during the nine months
ended March 31, 2003 was a result of issuances of common stock through the
exercise of employee stock options and the employee stock purchase plan of $1.8
million offset by repurchases of treasury stock of $1.6 million.

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

                  Payment Obligations by Year (in thousands)

<TABLE>
<CAPTION>

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

</TABLE>

     The acquisition of TeraLogic which was completed during the quarter ended
December 31, 2002 did not have a material effect on the obligations as shown
above.

     We believe that our existing cash, cash equivalents, short-term
investments and credit facilities will be sufficient to provide adequate
working capital and to fund operations over the next twelve months. We may also
utilize cash to acquire or invest in complementary businesses or products or to
obtain the right to use complementary technologies. If, however, during the
next twelve to eighteen month period we fail to increase our revenue or are
unable to reduce our expenses below our revenues, then we may be in a position
where we will need to seek additional financing.  However, there can be no
assurance that we will not be required to seek other financing sooner or that
such financing, if required, will be available on terms satisfactory to us.


                                      31

<PAGE>

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

     The discussion and analysis of our financial condition and results of
operations are based on the consolidated financial statements, which have been
prepared in accordance with accounting principles generally accepted in the
United States.  Note 2 of the Notes to Consolidated Financial Statements which
has been included in the Company's 2002 Annual Report on Form 10-K describes
the significant accounting policies essential to the consolidated financial
statements.  The preparation of these financial statements requires estimates
and assumptions that affect the reported amounts and disclosures.

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

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

     We recognize product revenues when persuasive evidence of an arrangement
exists, delivery has occurred, the price is fixed and determinable and
collection is reasonably assured.  The Company ships products based on either
FOB shipping point or FOB customer site.  Product revenue is recognized upon
transfer of title and shipment of product to customers, net of accruals for
estimated sales returns and allowance.  The Company has not had a history of
significant returns.  The Company does not have post shipment obligation or
other acceptance criteria to fulfill after shipment has been completed.  During
fiscal year 2002, approximately 6% of the Company's total revenues were sold
through certain distributors that are subject to agreements allowing for
limited rights of exchange of up to 7% of the total amounts sold in the
previous six-month period.  Accordingly, we do not recognize revenue for
estimated returns from all amounts sold to these distributors until the right
of exchange has expired.

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

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

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

     Restructuring Charges for Severance and Facility Abandonment have been
accrued based on specific plans for cost reduction that are established by
management prior to the end of the quarter.  The severance accrual is tied to a
plan that is generally specific by person or position that will be eliminated.
The facility abandonment reserve is established by estimating how long a


                                      32

<PAGE>

facility may be vacant and under what market based terms it might be released.
Estimates for each given facility generally range from $200,000 to $800,000. As
a result of the TeraLogic acquisition, we now have four facilities, leased by
the Company, which we are attempting to sublease at this time with a resulting
reserve of $4.8 million as of March 31, 2003.  Some portion of these reserves
may prove to be too little, or in excess, which could result in an adjustment
to restructuring reserves in a future quarter.  In general, we expect that
these reserves will be relieved over time as payments are made for rent on
these abandoned facilities.  At this time we do not expect any additional
adjustments to be material to the Company's operating results.

     In general, we are in a loss position for tax purposes, and have
established a valuation allowance against deferred tax assets, as we do not
believe it is likely that we will generate sufficient taxable income in future
periods to realize the benefit of our deferred tax assets.  Predicting future
taxable income is difficult, and requires the use of significant judgment. At
March 31, 2003, all of our deferred tax assets were reserved.  Accruals are
made for specific tax exposures and are generally not material to our operating
results or financial position, nor do we anticipate material changes to these
reserves going forward.


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

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

     We May Not Be Successful In Completing Our Proposed Merger With Zoran
     ---------------------------------------------------------------------
Corporation.  Although we executed a definitive merger agreement with Zoran, it
-----------
is subject to various closing conditions including approval by the stockholders
of both companies and it is possible that the merger may not be completed in
the anticipated timeframe or at all.  If the proposed merger is not completed
or is delayed, our business may suffer for a number of reasons including, but
not limited to:

     o legal, accounting and other costs that we have incurred in conjunction
       with the proposed merger;

     o a potential loss of key management, development or other personnel due
       to uncertainty surrounding the acquisition;

     o a decline in employee morale;

     o damage to customer relationships, including cancellations, reductions or
       delays in orders for our products or services;

     o a loss of key strategic relationships or key business partners; and

     o delays in product development or development of new service
       capabilities.

     Pursuant to terms of the merger agreement, we have not pursued other
corporate opportunities, including raising additional funds and continuing our
operations as a standalone company.  In addition, our inability to complete the
merger with Zoran may lower our value or reduce our ability to merge with other
companies that may have been interested in acquiring our company.  In addition,
we could be required to pay a termination fee to Zoran upon the occurrence of
certain events.

     Under the terms of the merger agreement, our stockholders will receive
0.2323 shares of Zoran common stock and $1.78 per share in cash at the closing
of the merger for each outstanding share of our common stock that they hold.
If we do not complete the merger for any reason, our stock price would decline
to the extent that the price of our stock prior to an announcement that the
merger is terminated reflects an assumption that the merger will be completed.


                                      33

<PAGE>

     Even if the proposed merger is completed, we may fail to realize the
anticipated benefits of the merger.

     Our Recently Announced Merger With Zoran May Subject Our Stock Price To
     -----------------------------------------------------------------------
Downward Adjustments As A Result Of Adverse Developments In Zoran's Business.
----------------------------------------------------------------------------
Since we may terminate the merger agreement only in very limited circumstances
and the exchange ratio is not subject to adjustment, our stock price may be
affected by changes in Zoran's stock price. Accordingly, our stockholders are
subject to the risk of downward adjustments in our stock price as a result of
adverse developments in Zoran's business. Moreover, if for any reason we are
unable to complete the merger with Zoran, the price of our common stock may be
adversely affected.

     Our efforts to complete the proposed merger with Zoran are complex and
time consuming, and may disrupt our business. The attention and effort devoted
to the proposed merger may significantly divert management's attention from our
other important business objectives.  Completion of the proposed merger is not
certain, and this uncertainty may harm our business by disrupting relationships
with employees, customers, suppliers and other strategic relationships.

     As a result of these uncertainties and the efforts related to the proposed
merger with Zoran, our business could be harmed as a result as a result of:

     o the inability to obtain alternative funding sources during the pendancy
       of the merger for purposes of ensuring liquidity;

     o potential loss of key management, development or other personnel;

     o decline in employee morale;

     o difficulties in hiring qualified development and other personnel to fill
       open positions;

     o cancellations, reductions or delays in orders for our products or
       services;

     o the reluctance of new or old customers and vendors to enter into or
       expand relationships or agreements with us; and

     o an inability to pursue or complete acquisitions of other companies that
       may be strategic to our business.

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

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

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

     o Fluctuations in manufacturing costs;

     o The loss or gain of important customers;

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

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

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

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

     o Market acceptance of new products;

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

     o Failure to anticipate changing customer product requirements;

     o The competitiveness of our customers;

     o Cyclical semiconductor industry conditions;

     o Failure to effectively integrate operations of recent acquisitions;

     o Acts of terrorism and international conflicts;

     o Changes in industry standards; and

     o The inability to obtain foundry capacity.

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

     It is difficult for us to forecast the level or source of our revenues.
Historically, our business has depended largely on the success of our Optical
Storage products, including our CD-RW products as well as our Combo
(combination DVD and CD-RW) and DVD RW products.  Following the transfer of the
Optical Storage business, our digital imaging and digital television businesses
will serve as the primary source of revenue.  We anticipate that Optical
Storage revenues will continue to decline.

     Oak Has a Recent History of Operating Losses and May Not Become or Remain
     -------------------------------------------------------------------------
Profitable. Oak has sustained significant losses in recent years and may not
----------
become profitable in the future.  While Oak had net income of $5.9 million in
fiscal 1998, its current loss trend began in calendar year 1998, resulting in
an operating loss of $9.1 million for fiscal 1998, an operating loss of $61.9
million for fiscal 1999, an operating loss of $61.1 million for fiscal 2000, an
operating loss of $19.6 million for fiscal 2001 and an operating loss of $29.9
million for fiscal 2002 (in each case before adjustments for non-operating
income or loss, or income tax expense or benefit).  Oak's operating losses
generally have been due to its dependence on its Optical Storage business,
which historically has accounted for approximately 67% of its business. As a
result, it is not possible to use our historical financial information to
predict our future operating results.  If Oak incurs additional losses or fails
to achieve profitability in the future, this will significantly harm our
business and may affect the trading price of our common stock.

     Oak's Financial Performance Is Highly Dependent On The Timely And
     -----------------------------------------------------------------
Successful Introduction Of New Products.  Our financial performance depends in
---------------------------------------
large part on our ability to successfully develop and market next generation
and new products in a rapidly changing technological environment. If we fail to
successfully identify new product opportunities and timely develop and
introduce new products that achieve market acceptance, we may lose our market
share and our future revenue and earnings may suffer.  Historically, our
financial performance depended largely on the success of our optical storage
products, such as CD-RW controller, Combo (combination DVD and CD-RW) and DVD
RW controller products.  As described earlier, we have transferred certain
assets of our Optical Storage business to Sunplus.  Accordingly, our future
financial performance will increasingly depend on our ability to successfully
develop and market next generation and new products in the digital television,
HDTV and digital imaging markets.

     In the consumer electronics market, our performance is highly dependent
upon the successful development and timely introduction of new products and
solutions for broadband digital television and HDTV.  In the digital office
market, our performance depends on our ability to successfully develop embedded
image processing SOC solutions for the digital office market, in particular,
embedded digital color copier technology and image processing chips a variety
of imaging peripherals, including printers and MFP's.  Among other
technological changes, embedded PDF and color capability are rapidly emerging
as market requirements for printers and other imaging devices.  Some of our


                                      35

<PAGE>

competitors have the capacity to supply these solutions, and some of their
solutions are well received in the marketplace.  We face the challenges of
developing products that will require greater color and image complexity
capability including web-based documents, and to work with higher performing
devices in networked environments.  If we are unable to meet these challenges
with the development of products that can effectively compete in the OEM
software and solutions market, our future results of operations could differ
materially from current expectations.

     We must keep pace with rapid technological changes and evolving industry
     ------------------------------------------------------------------------
standards in the broadband communications and digital imaging markets to remain
-------------------------------------------------------------------------------
competitive.  Our future success will depend on our ability to anticipate and -
-----------
adapt to changes in technology and industry standards and our customers'
changing demands. The consumer electronics market, in particular, is
characterized by rapidly changing technology, evolving industry standards,
frequent new product introductions, short product life cycles and increasing
demand for higher levels of integration.  Our ability to adapt to these changes
and to anticipate future standards, and the rate of adoption and acceptance of
those standards, will be a significant factor in maintaining or improving our
competitive position and prospects for growth. If new industry standards
emerge, our products or our customers' products could become unmarketable or
obsolete, and we could lose market share. We may also have to incur substantial
unanticipated costs to comply with these new standards.   A significant
slowdown in the broadband communications market could materially and adversely
affect our business, financial condition and results of operations. Our success
will also depend on the ability of our customers to develop new products and
enhance existing products for the broadband digital television and HDTV markets
and to introduce and promote those products successfully.  The digital
television and HDTV markets may not continue to develop to the extent or in the
time periods that we anticipate.  If new markets do not develop as we
anticipate, or if our products do not gain widespread acceptance in these
markets, our business, financial condition and results of operations could be
materially and adversely affected.

     If we do not anticipate and adapt to evolving industry standards in
     -------------------------------------------------------------------
broadband digital television and HDTV markets, our products could become
------------------------------------------------------------------------
obsolete and we could lose market share.  Consumer electronic products,
---------------------------------------
particularly in the digital television and HDTV markets, are generally based on
industry standards that are continually evolving.  If new industry standards
emerge, our products or our customers' products could become unmarketable or
obsolete. We may also have to incur substantial unanticipated costs to comply
with these new standards. Our sales and profitability will depend, to a large
extent, on our ability to anticipate changes in technology and industry
standards and to develop and introduce new and enhanced products incorporating
the new standards.  Our ability to adapt to these changes and to anticipate
future standards, and the rate of adoption and acceptance of those standards,
will be a significant factor in maintaining or improving our competitive
position and prospects for growth.  Our inability to anticipate the evolving
standards in the broadband digital television and HDTV markets, or to develop
and introduce new products successfully into this market could materially and
adversely affect our business, financial condition and results of operations.

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


     Oak's Markets Are Intensely Competitive and Experience Rapid Technological
     --------------------------------------------------------------------------
Change.   We face intense competition in the markets in which we compete.  We
------
expect that the level of competition will increase in the future from existing
competitors and from other companies that may enter our existing or future
markets with solutions that may be less costly or provide higher performance or
additional features. Our principal competitors in the broadband digital
television market include Broadcom and ST Microelectronics.  We expect


                                      36

<PAGE>

competition to continue to increase as industry standards become well known and
as other competitors enter our target market.  Our principal competitors in the
digital office market include Adobe Systems, Inc., Peerless Systems
Corporation, Electronics for Imaging, Inc., Oasis Semiconductor, Agilent, TAK
ASIC, and in-house, captive suppliers.  We also expect increased competition
from the merchant market in the future.  Many of these existing competitors as
well as those customers expected to compete in the future have substantially
greater financial, manufacturing, technical, marketing, distribution and other
resources, broader product lines and longer standing relationships with
customers than we do.  In addition, much of our success is dependent on the
success of our OEM customers.  Our OEM customers in both the optical storage
and digital imaging markets compete fiercely with one another for market share
in a market characterized by rapid development cycles, short product life
cycles and ever-increasing consumer demand for greater performance and
functionality at reduced prices.

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

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

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

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

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

     Oak also generally enters into confidentiality agreements with its
employees and consultants and confidentiality and license agreements with its
customers and potential customers.  We generally limit access to and
distribution of the source and object code of our software and other
proprietary information.  With respect to our page description language
software and drivers for the digital office market and in limited circumstances


                                      37

<PAGE>

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

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

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

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

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

     Although patent disputes in the semiconductor industry have often been
settled through cross-licensing arrangements, we may not be able in any or
every instance, to settle an alleged patent infringement claim through a


                                      38

<PAGE>


cross-licensing arrangement.  We have a more limited patent portfolio than many
of our competitors.  If a successful claim is made against Oak or its customers
and a license is not made available to us on commercially reasonable terms or
we are required to pay substantial damages or awards, our business, financial
condition and results of operations would be materially adversely affected.

     Oak Depends on Third Party Foundries And Vendors to Manufacture Products.
     ------------------------------------------------------------------------
Oak contracts with independent foundries to manufacture a majority of its
products and with independent vendors to assemble and test these products. If
we fail to adequately manage our relationships with these foundries and
vendors, our ability to manufacture and sell our products and our results of
operations would be negatively impacted.  We rely on our foundries to allocate
to us a portion of their foundry capacity sufficient to meet our needs to
produce products of acceptable quality and with acceptable manufacturing yield
and to deliver products to us in a timely manner.  These foundries fabricate
products for other companies and some manufacture products of their own design.
If these foundries fail or are unable to satisfy our product, quality and other
requirements, our business, financial condition and results of operation could
suffer.

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

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

     o The loss of any foundry as a supplier;

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

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

     o Delays in shipments of our products resulting in delay;

     o Disruption of operations at any of our manufacturing facilities;

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

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

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

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

     Oak's Failure to Accurately Forecast Demand for Its Products Could
     ------------------------------------------------------------------
Negatively Impact Its Results of Operations.  Under its foundry agreements, Oak
-------------------------------------------
is required to place non-cancelable orders and purchase its products on an
approximately three-month rolling basis.  Our customers, on the other hand,
generally place purchase orders with us less than four weeks prior to delivery
that may be rescheduled or under certain circumstances may be cancelled,
without significant penalty.  This limits our ability to react to fluctuations
in demand for our products.  If we overestimate the product necessary to fill
orders, or fail to foresee a technology change that could render a product
obsolete, we will build excess inventories, which could harm our gross margins
and operating results.  If we underestimate the product necessary to fill
orders, we may not be able to obtain an adequate supply of products which could
harm our revenues.

     Product supply and demand fluctuations common to the semiconductor
industry are historically characterized by periods of manufacturing capacity
shortages immediately followed by periods of overcapacity, which are caused by
the addition of manufacturing capacity in large increments.  The industry has
moved from a period of capacity shortages in the first half of calendar year
2000, to the current condition of excess capacity.  We cannot predict whether


                                      39

<PAGE>

Oak can or will achieve timely, cost-effective access to that capacity when
needed, or if there will be a capacity shortage again in the future.

Oak Derives a Large Portion of Its Revenues from International Sales, Depends
-----------------------------------------------------------------------------
on Foreign Subcontractors and is Subject to the Risks of Doing Business in
--------------------------------------------------------------------------
Foreign Countries.  A large portion of our revenues are derived from
-----------------
international sales.  International sales, principally to Korea, Japan, and
Europe, accounted for approximately 89%, 84% and 75% of our net revenues for
fiscal 2002, 2001 and 2000, respectively.  Oak also depends on foreign
subcontractors for the manufacture of its products.  Most of our foreign sales
and purchases are negotiated in US dollars, although invoicing is occasionally
done in local currency.  As a result, we may be subject to the risks of
currency fluctuations in the foreign countries in which we do business.

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

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

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

     o Tariffs, quotas and other trade barriers and restrictions;

     o Longer payment cycles;

     o Greater difficulty in collecting accounts receivable;

     o Potentially adverse taxes and adverse tax consequences;

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

     o Political, social and economic instability;

     o Potential hostilities;

     o Changes in government, diplomatic or trade relationships; and

     o Fluctuations in foreign currencies

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

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

     We expect that sales to a limited number of customers will continue to
account for a substantial portion of our net revenues for the foreseeable
future.  We do not have long-term purchase agreements with any of our
customers.  Customers generally purchase our products subject to cancelable
short-term purchase orders.  We cannot predict whether our current customers
will continue to place orders, whether existing orders will be canceled, or
whether customers who have ordered products will pay invoices for delivered
products.  Our policy in Taiwan is to secure a letter of credit prior to
product shipment to minimize the risk of non-payment.  We have experienced
significant changes from year to year in the composition of our major customer
base and believe this pattern will continue.   We are continuing our efforts to


                                      40

<PAGE>

increase penetration in existing large customers as well as engage new large
OEM customers. The current weakness in demand being experienced in
semiconductor and PC markets, and our recent entry into the digital television
and HDTV, coupled with the overall poor macroeconomic environment, however,
makes it difficult to forecast future financial performance.  In addition, some
of our customers have chosen, and may continue to choose, to award their design
wins and business on a project-by-project basis to different vendors.  The
current economic recession notwithstanding, the loss of, or a significant
reduction in, purchases or commitments by current major customers which is not
offset by corresponding increases from other current or future customers would
have a material adverse effect on our business, financial condition and results
of operations.  If sales to current customers cease or are reduced, we may be
unable to obtain the orders from new customers necessary to offset any such
losses or reductions.  Moreover, we may not be able to qualify our independent
foundries for potential new customers or do so in a timely manner.

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

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

     Regulation Of Our Customers' Products May Slow The Process Of Introducing
     -------------------------------------------------------------------------
New Products And Could Impair Our Ability To Compete. The Federal
----------------------------------------------------
Communications Commission, or the FCC, has broad jurisdiction over our target
markets in our digital television business.  Various international entities or
organizations may also regulate aspects of our business or the business of our
customers. Although our products are not directly subject to regulation by any
agency, the transmission pipes, as well as much of the equipment into which our
products are incorporated, are subject to direct government regulation.  For
example, before they can be sold in the United States, advanced televisions and
emerging interactive displays must be tested and certified by Underwriters
Laboratories and meet FCC regulations.  Accordingly, the effects of regulation
on our customers or the industries in which our customers operate may in turn
harm our business.  FCC regulatory policies affecting the ability of cable
operators or telephone companies to offer certain services and other terms on
which these companies conduct their business may impede sales of our products.
In addition, our digital television business may also be adversely affected by
the imposition of tariffs, duties and other import restrictions on systems of
suppliers or by the imposition of export restrictions on products that we sell
internationally.  Changes in current laws or regulations or the imposition of
new laws or regulations in the United States or elsewhere could harm our
business.

     Oak Will Depend on Key Personnel to Manage Its Business, and the Loss of
     ------------------------------------------------------------------------
Any Key Personnel Could Seriously Harm Its Business.  Our future performance
---------------------------------------------------
depends, to a significant degree, on the retention and contribution of members



                                      41

<PAGE>

of Oak's senior management as well as other key personnel including highly
skilled engineering and technical employees.  In particular, it is important
for Oak to retain the services of Young K. Sohn, our current chairman and chief
executive officer.  We continue to recruit financial, technical and operational
personnel.  Competition for these people is intense, and we may not be able to
attract and retain qualified replacements or additional technical or
operational personnel.  We may not be successful in finding suitable
replacements for any senior management personnel who may leave Oak.

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

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

     In connection with the merger agreement with Zoran, the Company entered
into Amendment No. 2 to its Rights Agreement, which excluded the proposed
merger.


                                      42


<PAGE>



ITEM 3.   QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

     Most of Oak's foreign sales are negotiated in US dollars; however,
invoicing is often done in local currency.  As a result, Oak may be subject to
the risks of currency fluctuations.  Assets and liabilities which are
denominated in non-functional currencies are re-measured into the functional
currency on a monthly basis and the resulting gain or loss is recorded within
non-operating income in the statement of operations.  Many of Oak's non-
functional currency receivables and payables are hedged through managing net
asset positions, product pricing and other means.  Our strategy is to minimize
its non-functional currency net assets or net liabilities in our foreign
subsidiaries.  Our policy is not to speculate in financial instruments for
profit on the exchange rate price fluctuations, trade in currencies for which
there are not underlying exposures, or enter into trades for any currency to
intentionally increase the underlying exposure.  As of March 31, 2003, Oak did
not have any foreign currency forward exchange contracts outstanding.  Oak uses
financial instruments, including local currency debt arrangements, to offset
the gains or losses of the financial instruments against gains or losses on the
underlying operations cash flows or investments.  If foreign currency rates
fluctuate by 10% from rates at March 31, 2003, the effect on our consolidated
financial statements would not be material.  However, there could be a material
effect on our financial statements in the future.

     Oak's cash equivalents and short-term investments ("debt and equity
investments") are exposed to financial market risk due to fluctuation in
interest rates, which may affect its interest income and the fair values of its
investments.  Oak manages the exposure to financial market risk by performing
ongoing evaluation of its investment portfolio and investing in short-term
investment grade corporate securities and U.S. government and other agencies'
obligations, which mature within the next 24 months.  In addition, Oak does not
use investments for trading or other speculative purposes.  Not withstanding
the foregoing, the Company has previously held marketable equity securities
that it received as part of a divestiture of one of its businesses.  These
securities were sold in December 2002 and no longer represent a market risk to
the Company.  The stock which the Company will receive as part of the Sunplus
transaction will be priced at the time of transfer and will not have
restrictions that prevent resale at the time of receipt. The Company does not
currently intend to expose itself to market risk with respect to the Sunplus
securities.

     Due to the short maturities of its investments, the carrying values
generally approximate the fair value. If market interest rates were to increase
immediately and uniformly by 10% from levels as of March 31, 2003, the decline
in the fair value of the portfolio would not be material.  Further, Oak has the
ability to hold its fixed income investments until maturity and, therefore, we
would not expect to recognize such an adverse impact in income or cash flows.


ITEM 4.    CONTROLS AND PROCEDURES

     Within the 90 days prior to the date of this report, we carried out an
evaluation, under the supervision and with the participation of the Company's
management, including the Company's President and Chief Executive Officer along
with the Chief Financial Officer, of the effectiveness of the design and
operation of our disclosure controls and procedures pursuant to Exchange Act
Rule 13a-14. Based upon that evaluation, the Company's President and Chief
Executive Officer along with the Chief Financial Officer have concluded that
our disclosure controls and procedures are effective in timely alerting them to
material information relating to the Company (including its consolidated
subsidiaries) required to be included in our periodic SEC filings.

     There have been no significant changes in our internal controls or in
other factors that could significantly affect internal controls subsequent to
the date we carried out this evaluation.


                                      43

<PAGE>

PART II - OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

     Oak and various of its directors and former officers are parties to a
consolidated class action lawsuit filed on behalf of all persons who purchased
or acquired Oak common stock (excluding the defendants and parties related to
them) for the period July 27, 1995 through May 22, 1996.  This state court
proceeding, designated IN RE OAK TECHNOLOGY SECURITIES LITIGATION, Master File
No. CV758510 was filed in Santa Clara County Superior Court in Santa Clara,
California.  The plaintiffs alleged violations of California securities laws
and statutory deceit provisions as well as breaches of fiduciary duty and abuse
of control.  The plaintiffs sought unspecified monetary damages.  The court
dismissed all claims except the California Corporations Code Sections
25400/25500 cause of action against Oak and four former officers. On August 5,
2000 the court granted defendant's motion for summary judgment and entered
judgment in favor of Oak and the former officers.  The plaintiffs appealed the
court's decisions. On February 3, 2003, the Sixth District Court of Appeals
affirmed the trail court's dismissal.  Based on its current information, Oak
believes this suit to be without merit and will continue to defend its position
vigorously.  Although it is a remote possibility, the rulings may be overturned
by the California Supreme Court and Oak may incur a loss upon an adverse
conclusion of these claims, an estimate of any such loss cannot be made.

     Additionally, various Oak's directors and former officers are defendants
in three consolidated derivative actions pending in Santa Clara County Superior
Court in Santa Clara, California, entitled IN RE OAK TECHNOLOGY DERIVATIVE
ACTION, Master File No. CV758510.  This lawsuit, which asserts a claim for
breach of fiduciary duty and a claim under California securities law based upon
the officers' and directors' trading in securities of Oak during the period
July 27, 1995 through May 22, 1996, has been stayed pending resolution of the
above described class actions.  The plaintiffs are seeking monetary damages,
equitable relief and an accounting for the defendants' sales of shares of Oak
common stock.  Based on its current information, Oak believes the suits to be
without merit and will defend its position vigorously.  Although it is
reasonably possible Oak may incur a loss upon conclusion of these claims, an
estimate of any such loss cannot be made.

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

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

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

     In a related action to the lawsuit that was commenced by Oak against UMC,
on December 19, 1997, MediaTek, a UMC affiliated, Taiwanese entity, filed a
complaint in the United States District Court, Northern District of California,


                                      44

<PAGE>

against Oak for declaratory judgment of non-infringement, invalidity and
unenforceability of the Oak patent that was the subject of the original ITC
action against UMC, and intentional interference with prospective economic
advantage.  Oak filed its answer on January 8, 1998, denying all the
allegations.  Oak believes UMC's counterclaims and Mediatek's claims to be
without merit.

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

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

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

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

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

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

     On March 26, 2002, Teralogic, inc. received a letter from Mr. Alan R.
Loudermilk, indicating that certain patents held by Hitachi America Limited may
have claims that relate certain aspects of Teralogic's products. On November
24, 2002, Mr. Loudermilk sent a follow up communication to Oak, inviting oak to
take a license under the patents. Oak is currently investigating the merits of
the patents, and their relation to the Teralogic products.  Oak's current
opinion is the patents do not cover the Teralogic products; however, if Oak is
forced to take a license under the Hitachi patents, or is forced to defend
against assertions of patent infringement, it would likely have a material
adverse affect on Oak's financial condition, cash flows and results of
operations.


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>
10.01   1994 Outside Directors' Stock Option Plan - As Amended and Restated
        November 21, 2002

10.02   Agreement and Plan of Reorganization, dated as of May 4, 2003, by and
        among Oak Technology, Inc., Zoran Corporation and Zinc Acquisition
        Corporation (incorporated by reference to the Form 8-K filed with the
        SEC on May 7, 2003)

10.03   The Second Amendment to Rights Agreement between the Company and
        EquiServe Trust Company, N.A., dated May 2, 2003

10.04   Indemnification Agreement between Oak Technology and the Directors of
        the Company dated January 15, 2003.

</TABLE>


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

     On January 6, 2003, the Company filed a report on Form 8-K/A to report
additional information regarding the completion of the acquisition of
TeraLogic, Inc., a Delaware corporation ("TeraLogic").

     On February 13, 2003, the Company filed a report on Form 8-K/A to include
additional financial information regarding the acquisition of TeraLogic, Inc.

     On February 20, 2003, the Company filed a report on Form 8-K to disclose
that on February 5, 2003, Oak Technology, Inc. announced that it had signed a
definitive agreement with Sunplus Technology Co., Ltd. ("Sunplus"), a publicly
held fabless semiconductor company focused on the consumer market, based in
Taiwan.

     On April 18, 2003, the Company filed a report on Form 8-K to report that
on April 3, 2003, Oak Technology, Inc. completed the sale of certain optical
storage assets to Sunplus Technology Co., Ltd.

     On April 22, 2003, the Company filed a report on Form 8-K to disclose the
earnings release issued by the Company for the quarter ended March 31, 2003.

     On May 7, 2003, the Company filed a report on Form 8-K to report that on
May 4, 2003, Oak Technology, Inc. had entered into an Agreement and Plan of
Reorganization with Zoran Corporation and Zinc Acquisition Corporation.


                                      46

<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.



                                                  OAK TECHNOLOGY, INC.
                                                  --------------------
                                                      (Registrant)




Date: May 15, 2003


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




                                      47


<PAGE>

             FORM OF SARBANES-OXLEY SECTION 302(A) CERTIFICATION


I, Young K. Sohn, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Oak Technology, Inc.

2. Based on my knowledge, this quarterly report does not contain any untrue
   statement of a material fact or omit to state a material fact necessary to
   make the statements made, in light of the circumstances under which such
   statements were made, not misleading with respect to the period covered by
   this quarterly report.

3. Based on my knowledge, the financial statements, and other financial
   information included in this quarterly report, fairly present in all
   material respects the financial condition, results of operations and cash
   flows of the registrant as of, and for, the periods presented in this
   quarterly report.

4. The registrant's other certifying officers and I are responsible for
   establishing and maintaining disclosure controls and procedures (as defined
   in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:

   o  designed such disclosure controls and procedures to ensure that material
      information relating to the registrant, including its consolidated
      subsidiaries, is made known to us by others within those entities,
      particularly during the period in which this quarterly report is being
      prepared;

   o  evaluated the effectiveness of the registrant's disclosure controls and
      procedures as of a date within 90 days prior to the filing date of this
      quarterly report (the "Evaluation Date"); and

   o  presented in this quarterly report our conclusions about the
      effectiveness of the disclosure controls and procedures based on our
      evaluation as of the Evaluation Date.

5. The registrant's other certifying officers and I have disclosed, based on
   our most recent evaluation, to the registrant's auditors and the audit
   committee of registrant's board of directors (or persons performing the
   equivalent functions:

   o  all significant deficiencies in the design or operation of internal
      controls which could adversely affect the registrant's ability to record,
      process, summarize and report financial data and have identified for the
      registrant's auditors any material weaknesses in internal controls; and


   o  any fraud, whether or not material, that involves management or other
      employees who have a significant role in the registrant's internal
      controls.

6. The registrant's other certifying officers and I have indicated in this
   quarterly report whether or not there were significant changes in internal
   controls or in other factors that could significantly affect internal
   controls subsequent to the date of our most recent evaluation, including any
   corrective actions with regard to significant deficiencies and material
   weaknesses.


Date:   May 15, 2003

By:     /s/  Young K. Sohn
        ---------------------------

Name:   Young K. Sohn

Title:  Chairman of the Board of Directors, President and
        Chief Executive Officer


                                      48

<PAGE>

             FORM OF SARBANES-OXLEY SECTION 302(A) CERTIFICATION

I, John S. Edmunds, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Oak Technology, Inc.

2. Based on my knowledge, this quarterly report does not contain any untrue
   statement of a material fact or omit to state a material fact necessary to
   make the statements made, in light of the circumstances under which such
   statements were made, not misleading with respect to the period covered by
   this quarterly report.

3. Based on my knowledge, the financial statements, and other financial
   information included in this quarterly report, fairly present in all
   material respects the financial condition, results of operations and cash
   flows of the registrant as of, and for, the periods presented in this
   quarterly report.

4. The registrant's other certifying officers and I are responsible for
   establishing and maintaining disclosure controls and procedures (as defined
   in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:

   o  designed such disclosure controls and procedures to ensure that material
      information relating to the registrant, including its consolidated
      subsidiaries, is made known to us by others within those entities,
      particularly during the period in which this quarterly report is being
      prepared;

   o  evaluated the effectiveness of the registrant's disclosure controls and
      procedures as of a date within 90 days prior to the filing date of this
      quarterly report (the "Evaluation Date"); and

   o  presented in this quarterly report our conclusions about the
      effectiveness of the disclosure controls and procedures based on our
      evaluation as of the Evaluation Date.

5. The registrant's other certifying officers and I have disclosed, based on
   our most recent evaluation, to the registrant's auditors and the audit
   committee of registrant's board of directors (or persons performing the
   equivalent functions:

   o  all significant deficiencies in the design or operation of internal
      controls which could adversely affect the registrant's ability to record,
      process, summarize and report financial data and have identified for the
      registrant's auditors any material weaknesses in internal controls; and


   o  any fraud, whether or not material, that involves management or other
      employees who have a significant role in the registrant's internal
      controls.

6. The registrant's other certifying officers and I have indicated in this
   quarterly report whether or not there were significant changes in internal
   controls or in other factors that could significantly affect internal
   controls subsequent to the date of our most recent evaluation, including any
   corrective actions with regard to significant deficiencies and material
   weaknesses.


Date:   May 15, 2003

By:     /s/  John S. Edmunds
        --------------------------

Name:   John S. Edmunds

Title:  Senior Vice President of Finance and Chief Financial Officer


                                      49

<PAGE>

                   CERTIFICATION OF CHIEF EXECUTIVE OFFICER
          PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO
                SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002


I, Young K. Sohn, certify, pursuant to 18 U.S.C. Section 1350, as adopted
pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that the Quarterly
Report of Oak Technology, Inc. on Form 10-Q for the fiscal quarter ended March
31, 2003 fully complies with the requirements of Section 13(a) or 15(d) of the
Securities Exchange Act of 1934 and that information contained in such
Quarterly Report on Form 10-Q fairly presents in all material respects the
financial condition and results of operations of Oak Technology, Inc.


                                         By:   /s/  Young K. Sohn
                                               ------------------------------

                                         Name:  Young K. Sohn

                                         Title:  Chairman of the Board of
                                                 Directors, President and Chief
                                                 Executive Officer


                                      50

<PAGE>



                   CERTIFICATION OF CHIEF FINANCIAL OFFICER
          PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO
                SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002


I, John S. Edmunds, certify, pursuant to 18 U.S.C. Section 1350, as adopted
pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that the Quarterly
Report of Oak Technology, Inc. on Form 10-Q for the fiscal quarter ended March
31, 2003 fully complies with the requirements of Section 13(a) or 15(d) of the
Securities Exchange Act of 1934 and that information contained in such
Quarterly Report on Form 10-Q fairly presents in all material respects the
financial condition and results of operations of Oak Technology, Inc.




                                     By:    /s/  John S. Edmunds
                                            -------------------------------

                                     Name:  John S. Edmunds

                                     Title: Senior Vice President of Finance
                                            and Chief Financial Officer



                                      51


<PAGE>


                                Exhibit Index


<TABLE>
<CAPTION>

Exhibit
Number                              Exhibit Title
------  -----------------------------------------------------------------------
<S>    <C>
10.01   1994 Outside Directors' Stock Option Plan - As Amended and Restated
        November 21, 2002

10.02   Agreement and Plan of Reorganization, dated as of May 4, 2003, by and
        among Oak Technology, Inc., Zoran Corporation and Zinc Acquisition
        Corporation (incorporated by reference to the Form 8-K filed with the
        SEC on May 7, 2003)

10.03   The Second Amendment to Rights Agreement between the Company and
        EquiServe Trust Company, N.A., dated May 2, 2003

10.04   Indemnification Agreement between Oak Technology and the Directors of
        the Company dated January 15, 2003.

</TABLE>

                                      52