Zoran Corporation Reports Record Fourth Quarter and Year End Revenues

Revenue grows more than 38 percent year-over-year Company increased market share, profit and net cash position during 2002

SANTA CLARA, Calif. (January 30, 2003) -- Zoran Corporation (Nasdaq NM: ZRAN), a leading provider of digital solutions-on-a-chip for applications in the growing consumer electronics markets, today reported results for its fourth quarter and year ended December 31, 2002.

On a generally accepted accounting principles basis (GAAP), revenues for the fourth quarter of 2002 were $40.0 million compared with $35.8 million for the same quarter in 2001 and $44.1 million last quarter. Net income for the fourth quarter was $196 thousand, or $0.01 per diluted share as compared with a net loss of $6.8 million, or $0.26 per share for the same quarter last year, and net income of $4.7 million, or $0.17 per diluted share, for the third quarter of 2002.

On a pro forma basis, the company reported net income for the fourth quarter of $6.9 million, or $0.24 per share on a diluted basis. This compares with pro forma net income of $4.0 million, or $0.14 per diluted share, for the same quarter last year and $7.0 million, or $0.25 per diluted share, for the third quarter of 2002.

Pro forma net income excludes acquisition-related costs such as amortization of goodwill and other purchased intangibles from reported operating expenses. In the fourth quarter, Zoran also recognized non-cash investment impairment charges amounting to $5.4 million net of tax, which are excluded from pro forma results.

On a GAAP basis for 2002, total revenues increased by 38 percent to $149.1 million, up from $107.7 million for 2001. The company reported an increase in net income for 2002 to $5.7 million, or $0.20 per diluted share compared to a net loss in 2001 of $36.1 million, or $1.38 per share.

Pro forma net income for 2002 increased 173 percent to $19.6 million, or $0.68 per diluted share, compared with $7.2 million, or $0.26 per diluted share for 2001.

"2002 was another milestone year for Zoran as we increased market share in our two major markets, DVD and Digital Cameras," said Dr. Levy Gerzberg, Zoran's president and chief executive officer. "During the year, we continued to outpace the fast growing DVD market using our VADDIS family of products with a 123 percent increase in units shipped compared to the overall market growth rate of 61 percent. With recent first customer shipments of our Vaddis 6 DVD System-on-a-Chip (SoC) product, Zoran is once again poised for a tremendous growth year in DVD.

We achieved similarly strong results in the digital camera market with our COACH processor, increasing units shipped over last year by 169 percent compared to the most recent industry data, which shows the overall digital camera market growing at 30 percent during 2002. As we enter 2003, Zoran is well positioned to continue to lead the market through advanced, innovative and integrated solutions for our end markets."

Current Highlights-

• Zoran achieved record sales and unit shipments and grew market share in both its DVD and digital camera businesses.
• Zoran is now shipping Vaddis 5E DVD processor ICs to Samsung Electronics, one of the leading worldwide manufacturers of consumer electronics products, for its 2003 DVD products.
• Zoran's advanced Vaddis DVD multimedia processor is shipping in two new DVD player models from SONICblue's GoVideo® division.
• Zoran's Vaddis DVD multimedia processor IC is shipping in Toshiba's new SD-1800 Slim Chassis DVD-Video player.
• Zoran's Activa 100 DVD recording chip is shipping in sample quantities to major DVD recorder manufacturers.
• Zoran's recently introduced COACH 5 is shipping in multiple new cameras.
• Zoran's Vaddis 6 DVD SoC began shipping in production quantities to OEM customers.
• At CES in Las Vegas, over 50 new products were identified containing Zoran technology and Zoran demonstrated its Zbox Digital Entertainment Technology Platform for OEM customers.
• Zoran customers gather "Innovation 2003 Awards" at CES in Las Vegas, a Time Magazine "Coolest inventions of 2002" recognition, and Home Theater News & Review's "DVD Player of the Year" honors.

Future Outlook
The following statements are based on current expectations. These statements are forward-looking, and actual results may differ materially.

The company is currently expecting its first quarter 2003 revenues to be seasonally down from a strong fourth quarter in the range of 8 to 10 percent, which is less than the normal decline for the first quarter. Product revenues are expected to comprise between 96 and 97 percent of total revenue for the quarter. DVD revenue should comprise between 82 and 83 percent of product revenue with Digital Camera revenue comprising between 14 and 15 percent. Product gross margin will temporarily decline into the 26 to 28 percent range as the company accelerates its plan to transition its customer base out of "decoder only" DVD solutions into its higher margin Vaddis 6 product line with integrated servo front-end technology and resolves a lower than expected manufacturing yield for the 1 mega pixel CMOS sensor product. Overall gross margin for the quarter is expected to be in the range of 29 to 31 percent. Operating expenses, excluding any acquisition related costs, are expected to increase from fourth quarter levels by 1 to 2 percent, and pro forma earnings per share are expected to range between $0.01 and $0.03 on 28.6 million shares. For the full year, the company is expecting revenues to grow 30 to 34 percent from 2002 levels with pro forma earnings per share increasing 17 to 24 percent, to between $0.80 and $0.85 per diluted share.

The company will elaborate on this guidance on its first quarter and 2003 outlook during the earnings conference call.

Earnings Conference Call
Zoran has scheduled a conference call for 5:00 p.m. EST today to discuss fourth quarter and year-end 2002 results. To listen to the call, please call 212-346-0221 approximately five minutes prior to the start of the call. For those who are not available to listen to the live conference call, a replay will be available via telephone from approximately 7:00 p.m. EST on January 30 until 7:00 p.m. EST on February 4. The access number for the replay is 1-800-633-8284; confirmation number 20242555.

Additionally, the conference call will be broadcast live over the Internet and can be accessed by all interested parties through the investor relations section of Zoran's website at www.zoran.com. Please access the website at least fifteen minutes prior to the start of the call to register, download, and install any necessary audio software.

Company Profile
Zoran Corporation, based in Santa Clara, California, is a leading provider of digital solutions-on-a-chip for applications in the growing consumer electronics markets. With two decades of expertise developing and delivering digital signal processing technologies, Zoran has pioneered high-performance digital audio, video, and imaging applications. Zoran's proficiency in integration delivers major benefits for OEM customers, including greater capabilities within each product generation, reduced system costs, and shorter time to market. Zoran-based DVD products and digital cameras have received recognition for excellence and are now in millions of homes worldwide. With headquarters in the U.S. and operations in Canada, China, Hong Kong, Israel, Japan, Korea and Taiwan, Zoran may be contacted on the World Wide Web at www.zoran.com or at 408-919-4111.

Forward Looking Statements
This press release includes a number of forward-looking statements that reflect the Company's current view with respect to future events and financial performance. These forward-looking statements are subject to a variety of risks and uncertainties that could cause actual results to differ materially from those projected in the forward-looking statements including risks associated with: rapidly evolving markets for the Company's products and uncertainty regarding the development of these markets; new product development, the ongoing introduction of new and enhanced products by the Company and its competitors and the transition from older products; intensive competition in markets in which the Company competes; the Company's reliance on independent foundries and contractors for its wafer supplies and product assembly and testing and its ability to ramp up manufacturing capacity to meet changing customer requirements; the effects of changes in revenue and product mix on the Company's gross margins; the Company's historic dependence on sales to a limited number of large customers and fluctuations in customer and product mix among those customers; the dependence on key Company personnel; the reliance on international sales and operations, particularly the Company's operations in Israel; and the effects of general business and changing economic conditions on the markets that the Company serves. Further information regarding these and other risks and uncertainties can be found in the Company's most recently filed 10-Q report for the quarter ended September 30, 2002, annual report on Form 10-K for the year ended December 31, 2001 and other filings that have been made with the SEC.

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