Zoran Corporation Reports Third Quarter 2005 Results; Company achieves over 23 percent sequential revenue growth

Digital Cameras and DTV businesses achieve record results and grow 49 and 43 percent, respectively

SUNNYVALE, Calif. (October 26, 2005) — Zoran Corporation (Nasdaq NM: ZRAN), a leading provider of digital solutions for applications in the growing digital entertainment and digital imaging markets, today reported results for its third quarter ended September 30, 2005.

Revenues for the third quarter were $117.5 million, compared with $95.1 million last quarter and $119.7 million for the same quarter in 2004. The Company reported net income for the third quarter of $5.0 million, or $0.11 per diluted share, compared with a net loss of $11.1 million, or $0.25 per share, for the previous quarter and a net loss of $2.6 million, or $0.06 per share, for the third quarter of last year. Included in net income for the third quarter were charges of $13.1 million related to the Company's ongoing amortization of certain acquisition related expenses such as the amortization of purchased intangible assets and deferred stock compensation.

Non-GAAP net income for the third quarter was $18.1 million, or $0.39 per diluted share, which excludes the amortization of acquisition-related purchased intangibles and deferred stock compensation expense. This compares to a non-GAAP net income of $4.5 million, or $0.10 per diluted share, for the previous quarter and $10.6 million, or $0.24 per diluted share, for the third quarter of 2004.

"We are pleased to report that Zoran achieved excellent results for the third quarter as we made progress on virtually all of our key objectives," said Dr. Levy Gerzberg, Zoran's president and chief executive officer. "We achieved over 23 percent sequential revenue growth while dramatically improving gross margins and operating profit. Our diversification strategy is definitely working and our business model now holds a more balanced revenue base with 37.6 percent for DVD, 14.0 percent for DTV, 30.0 percent for Mobile and 18.4 percent for Imaging. Design-win momentum, particularly in DTV and digital cameras, not only validates the value and quality of our integrated solutions but indicates a very strong future for Zoran with continued diversification and increasing profitability."

Recent Highlights

• Zoran's COACH processors are shipping to retail in many new digital camera models for the holiday selling season under multiple brand names including Kodak, Konica-Minolta, Olympus, Premier, Pentax, Samsung and others.
• Zoran announced its SupraHD 660 Reference Design for building high quality, cost effective FCC compliant CRT, LCD and Plasma High Definition Televisions, and demonstrated it at the HDTV conference and the SupraHD 660 HDTV processor is shipping in production quantities to flat panel display manufacturers.
• Zoran's SupraTV processor was on display at the International Broadcast Conference in Amsterdam powering new product families of Homecast's free-to-air and Digital Video Broadcast- satellite set top boxes targeted for Europe and the Middle East.
• Zoran's SupraTV processor is powering multiple new families of Grundig entry and premium free-to-air satellite and free-to-air terrestrial set top box products now shipping to European markets, including models with integrated Digital Video.
• Zoran's SupraTV processor is powering new product families of Digital Video Broadcast (DVB) terrestrial LCD televisions from Acer, shipping to global markets.
• Zoran's Vaddis 882 is among the first integrated circuit solutions to receive DivX Ultra Certification.
• Zoran's Quatro 4100, highly integrated, fully programmable processor is running in Samsung's new SPP-2020 and SPP-2040 dye sublimation photo printers for the home market. Both models are now shipping in the United States.
• Zoran won its patent infringement proceeding in the International Trade Commission against MediaTek on all fronts with the ITC declaring that Zoran's patent is valid and infringed by chips and chipsets sold by MediaTek and by a number of MediaTek customers using the infringing chips and chipsets. The ITC also issued an exclusion order barring importation of infringing products into the United States. In a separate proceeding initiated by MediaTek, an administrative law judge in the ITC issued a preliminary determination that none of Zoran's chips infringe any claim of the two patents asserted against Zoran.

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 fourth quarter 2005 revenues to range between $104 million and $106 million with gross margins ranging between 49 and 50 percent. Operating expenses are expected to be in a range of $44 million to $45 million and, including acquisition related costs of $13.0 million, the net loss for the quarter is expected to range between $0.11 and $0.14 per share. Non-GAAP earnings for the quarter, which excludes these acquisition related costs, are expected to range between $0.14 and $0.17 per share.

Zoran will provide more commentary on its third 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 results. Non-GAAP net income (loss) excludes amortization of acquisition-related intangibles, amortization of deferred stock-based compensation and in-process research and development expenses.

Non-GAAP net income (loss) gives an indication of the Company's baseline performance before gains, losses or other charges that are considered by management to be outside of our core operating results. The Company believes that this presentation of non-GAAP results of operations provides useful information to management and investors regarding certain financial and business trends relating to its financial condition and results of operations as they exclude charges specifically related to acquisitions made by the Company which we consider to be outside of our core operating results. The Company believes when GAAP results of operations are viewed in conjunction with non-GAAP results of operations, investors are provided with a more meaningful understanding of the Company's ongoing operating performance. In addition, the Company's management uses these non-GAAP measures for reviewing the financial results of the Company and for planning and forecasting future periods. These measures are not in accordance with or an alternative for GAAP financial statements and may be materially different from non-GAAP measures used by other companies.

Quarterly Conference Call

Zoran Corporation has scheduled a conference call for 5:00 p.m. ET today to discuss third quarter results. To listen to the call, please call 617-847-3007 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 October 26, 2005, until 4:00 p.m. PT on November 1, 2005. The access number for the replay is 617-801-6888, confirmation number 74762207. 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 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 and Share 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 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 www.zoran.com or at 408-523-6500.