SUNNYVALE, Calif., April 24 /PRNewswire-FirstCall/ -- Zoran Corporation , a leading provider of digital solutions for applications in the growing digital entertainment and digital imaging markets, today reported results for its first quarter ended March 31, 2007.

Revenues for the first quarter were $101.7 million, compared to $96.3 million last quarter and $142.2 million for the first quarter of 2006. Revenues for the first quarter of 2006 included $30.2 million received pursuant to the settlement of litigation.

The Company reported a net loss for the first quarter of $5.9 million, or $0.12 per share, which includes charges of $12.2 million related to the amortization of acquisition-related purchased intangible assets, stock-based compensation expenses of $3.2 million and $3.8 million of legal and accounting expenses in connection with the Company's review of historical stock option granting practices. This compares with a net loss of $11.0 million, or $0.22 per share, for the previous quarter and a net income of $20.7 million, or $0.43 per diluted share, for the same period last year.

Non-GAAP net income for the first quarter was $9.5 million, or $0.19 per diluted share, which excludes charges related to the amortization of acquisition-related purchased intangible assets and stock-based compensation expenses, but includes the aforementioned $3.8 million of legal and accounting expenses. This compares with non-GAAP net income of $4.7 million, or $0.09 per diluted share for the previous quarter, and $14.8 million, or $0.30 per diluted share for the same period last year.

"We are pleased to follow up a highly successful 2006 with these solid results for our first quarter of the new year," said Dr. Levy Gerzberg, Zoran's president and chief executive officer. "Revenue growth was driven by increases in our DTV, DVD and Imaging business while our digital camera business declined slightly, following normal seasonal patterns. Our revenue stream continues to diversify and we ended the quarter with revenues by market as follows: 37 percent digital cameras; 16 percent DTV; 25 percent DVD; 20 percent Imaging; and, 2 percent for all other. We look forward to continued success as we solidify and enhance our position in our core markets for the remainder of the year and beyond."

Recent Highlights o Zoran demonstrated newest set-top box and digital television technologies for manufacturers at CCBN 2007 in China o Zoran powers Xoceco's new family of China cable set-top boxes o Zoran's COACH processor powers over 50 digital camera models on display at the 2007 Photo Marketing Show o Zoran announces COACH 10 digital camera processor with revolutionary image processing, DSLR-grade performance and high definition video recording at PMA 2007 o Zoran announced and demonstrated its APPROACH(R) 5C mobile multimedia processor platform with expanded feature set at 3GSM 2007 o Kodak licenses Zoran's IPS(TM) DDK printer driver software Future Outlook

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

The Company is currently expecting second quarter 2007 revenues to range between $118.0 million and $123.0 million, with gross margins ranging between 51.5 and 52.5 percent. Excluding any acquisition related costs and stock- based compensation expense, operating expenses are expected to be in a range of $52.5 million to $54.0 million. Acquisition-related costs are expected to be approximately $12.2 million with stock-based compensation expense expected to range between $2.8 and $3.2 million. The Company expects to record a net loss for the second quarter in the range of $0.11 to $0.14 per share. Non- GAAP earnings for the quarter, which excludes acquisition related costs and stock-based compensation expense is expected to range between $0.20 and $0.24 per diluted share on approximately 51 million shares.

Zoran will provide more commentary on its first quarter results during the quarterly conference call.

Use of Non-GAAP Financial Information

In addition to reporting financial results in accordance with generally accepted accounting principles, or GAAP, Zoran reports non-GAAP financial information, consisting of non-GAAP net income (loss) that excludes proceeds received as part of litigation settlements and the associated provision for income taxes, amortization of acquisition-related intangible assets and stock- based compensation expense.

The Company believes that its non-GAAP financial information provides useful information to management and investors regarding financial and business trends relating to its financial condition and results of operations because it excludes charges that management considers to be outside of the Company's core operating results. The Company believes that this non-GAAP net income (loss), in combination with the Company's financial results calculated in accordance with GAAP, provides investors with additional perspective and a more meaningful understanding of the Company's ongoing operating performance. In addition, the Company's management uses these non-GAAP measures to review and assess the financial performance of the Company and to plan and forecast performance in future periods. The Company's non-GAAP net income (loss) is not prepared in accordance with GAAP, is not an alternative to GAAP financial information, and may be calculated differently than non-GAAP financial information disclosed by other companies.

Quarterly Conference Call

Zoran Corporation has scheduled a conference call for 2:00 p.m. PT today to discuss first quarter results. To listen to the call, please call 617-847-8706 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 from approximately 4:00 p.m. PT on April 24, 2007, until 4:00 p.m. PT on May 8, 2007. The access number for the replay is 617-801-6888, confirmation number 35651096. 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 http://www.zoran.com/. Please access the website at least fifteen minutes prior to the start of the call to register and to download and install any necessary audio software.

Company Profile

Zoran Corporation, based in Sunnyvale, California, is a leading provider of digital solutions for applications in the growing digital entertainment and digital imaging markets. With two decades of expertise developing and delivering digital signal processing technologies, Zoran has pioneered high- performance digital audio and video, imaging applications, and Connect Share Entertain technologies for the digital home. 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, digital camera, DTV, multimedia mobile phone, and multifunction printer products have received recognition for excellence and are now in hundreds of millions of homes and offices worldwide. With headquarters in the U.S. and operations in Canada, China, England, Germany, India, Israel, Japan, Korea, and Taiwan, Zoran may be contacted on the World Wide Web at http://www.zoran.com/ or at 408-523-6500.

Forward-Looking Statements

This press release includes forward-looking statements, including the chief executive officer quotation and the material presented under "Future Outlook," that reflect the Company's current views 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: potential litigation or regulatory action associated with our review of historical stock option practices and related financial restatements; the rapidly evolving markets for the Company's products and uncertainty regarding the development of these markets; new product development, introductions of new products by the Company and its competitors and transitions away from older products; intense competition in multiple markets; the Company's reliance on third parties for wafer supplies, product assembly and testing, and scalable manufacturing capacity; the effects of changes in revenue and product mix on the Company's gross margins; the Company's dependence on sales to large customers; fluctuations in product mix; dependence on key Company personnel; and reliance on international sales and operations, particularly operations in Israel. Further information regarding these and other risks and uncertainties can be found in the Company's most recently filed Annual Report on Form 10-K and other filings with the SEC.

NOTE: Zoran, the Zoran logo, SupraHD, SupraTV, Vaddis, Quatro, APPROACH and IPS are trademarks of Zoran Corporation in the United States and/or other countries. All other brands or names may be claimed as property of others.

ZORAN CORPORATION CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (in thousands, except per share data) (unaudited) Three Months Ended March 31, 2007 2006 Revenues: Hardware product revenues $87,182 $99,169 Software and other revenues 14,477 12,909 License litigation settlement revenues -- 30,168 Total revenues 101,659 142,246 Costs and expenses: Cost of hardware product revenues 44,198 53,650 Research and development 24,988 24,248 Selling, general and administrative 28,593 24,901 Amortization of intangibles 12,169 12,735 Total costs and expenses 109,948 115,534 Operating income (loss) (8,289) 26,712 Interest & other income, net 4,205 2,786 Income (loss) before income taxes (4,084) 29,498 Provision for income taxes 1,800 8,815 Net income (loss) $(5,884) $20,683 Basic net income (loss) per share $(0.12) $0.45 Diluted net income (loss) per share $(0.12) $0.43 Shares used to compute basic net income (loss) per share 49,442 46,207 Shares used to compute diluted net income (loss) per share 49,442 48,487 ZORAN CORPORATION NON-GAAP ADJUSTMENTS TO NET INCOME (LOSS) (in thousands, except per share data) (unaudited) Three Months Ended March 31, 2007 2006 GAAP net income (loss) $(5,884) $20,683 Adjusting items to GAAP net income (loss): Litigation settlement revenues (net) -- (23,479)(a) Amortization of intangibles 12,169 (b) 12,735 (b) Operating expenses related to stock based compensation expense 3,236 (c) 4,813 (c) Non-GAAP net income $9,521 (d) $14,752 (d) Non-GAAP basic net income per share $0.19 (d) $0.32 (d) Non-GAAP diluted net income per share $0.19 (d) $0.30 (d) Shares used to compute non-GAAP basic net income per share 49,442 46,207 Shares used to compute non-GAAP diluted net income per share 50,667 49,264 (a) This adjustment reflects the proceeds received from the settlement of a license litigation net of associated fees and estimated income taxes. This amount is excluded by management when evaluating our core operating results as it is considered a non-recurring item which is not part of our ordinary, ongoing and customary course of operations. (see (d) below) (b) This adjustment reflects the amortization of intangible assets associated with the acquisitions of Oak Technology, Inc. in August 2003, Emblaze Semiconductor in July 2004 and Oren Semiconductor, Inc. in June 2005. These acquired intangible assets are amortized over their estimated useful lives. Such amortization expense does not impact the Company's cash flows and is excluded by management when evaluating our core operating results. (see (d) below) (c) This adjustment reflects the stock-based compensation expense recorded under SFAS 123R. The adjustment also includes additional stock based compensation expense attributable to options that were remeasured as part of the stock option review and the attributable tax implications under IRS regulation 409(A) that will be incurred by the Company. The Company excludes these items when it evaluates the continuing operational performance of the Company as management believes this GAAP measure is not indicative of its core operating performance. (see (d) below) (d) The Company believes that its non-GAAP financial information provides useful information to management and investors regarding financial and business trends relating to its financial condition and results of operations because it excludes charges that management considers to be outside of the Company's core operating results. The Company believes that this non-GAAP net income (loss), in combination with the Company's financial results calculated in accordance with GAAP, provides investors with additional perspective and a more meaningful understanding of the Company's ongoing operating performance. In addition, the Company's management uses these non-GAAP measures to review and assess the financial performance of the Company and to plan and forecast performance in future periods. The Company's non-GAAP net income (loss) is not prepared in accordance with GAAP, is not an alternative to GAAP financial information, and may be calculated differently than non-GAAP financial information disclosed by other companies. ZORAN CORPORATION CONDENSED CONSOLIDATED BALANCE SHEETS (in thousands) (unaudited) March 31, December 31, 2007 2006 ASSETS Current assets: Cash and short-term investments $295,942 $296,229 Accounts receivable, net 44,624 42,640 Inventory 44,630 45,044 Prepaid expenses & other current assets 9,639 10,726 Total current assets 394,835 394,639 Property & equipment, net 15,179 15,673 Other assets 22,890 22,890 Intangible assets, net 230,079 243,428 Total assets $662,983 $676,630 LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable $27,369 $33,767 Accrued expenses and other liabilities 36,138 46,082 Total current liabilities 63,507 79,849 Long term liabilities 19,840 12,784 Stockholders' equity: Common stock 49 49 Additional paid-in capital 809,732 807,220 Accumulated other comprehensive income 2,796 4,238 Accumulated deficit (232,941) (227,510) Total stockholders' equity 579,636 583,997 Total liabilities and stockholders' equity $662,983 $676,630

CONTACT: Karl Schneider, Chief Financial Officer of Zoran Corporation,
+1-408-523-6500, or ir@zoran.com; or investors, Bonnie McBride,
+1-323-466-0960, or bonnie@mcbridegrp.com, for Zoran Corporation

Web site: http://www.zoran.com/