Televideo Inc – ‘10-K405’ for 10/31/96

As of:  Wednesday, 1/29/97   ·   For:  10/31/96   ·   Accession #:  891618-97-197   ·   File #:  0-11552

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Annual Report — [x] Reg. S-K Item 405   —   Form 10-K
Filing Table of Contents

Document/Exhibit                   Description                      Pages   Size 

 1: 10-K405     Annual Report -- [x] Reg. S-K Item 405                38    170K 
 2: EX-22       Subsidiaries                                           1      5K 
 3: EX-24.1     Consent of Grant Thornton LLP                          1      6K 
 4: EX-27       Financial Data Schedule                                1      6K 

10-K405   —   Annual Report — [x] Reg. S-K Item 405
Document Table of Contents

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 UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

 FORM 10-K

[X]   ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES           
EXCHANGE ACT OF 1934 [FEE REQUIRED]                                 

 FOR THE FISCAL YEAR ENDED: OCTOBER 31, 1996

OR

[ ]   TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES       
EXCHANGE ACT OF 1934 [NO FEE REQUIRED]                              

FOR THE TRANSITION PERIOD FROM _____ TO _____ 

 COMMISSION FILE NUMBER: 0-11552

 TELEVIDEO SYSTEMS, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)

        DELAWARE                                                94-2383795
(STATE OR OTHER JURISDICTION OF                                  (IRS EMPLOYER  
INCORPORATION OR ORGANIZATION)                               IDENTIFICATION NO.)

 2345 HARRIS WAY, SAN JOSE, CALIFORNIA 95131
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)

REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE:             (408) 954-8333  

SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:           NONE      

SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:                     

 COMMON STOCK, $0.01 PAR VALUE
(TITLE OF CLASS)

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__  

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    THE APPROXIMATE AGGREGATE MARKET VALUE OF REGISTRANT'S COMMON STOCK HELD
BY NON-AFFILIATES ON JANUARY 21, 1997 (BASED UPON THE CLOSING SALES PRICE OF    
SUCH STOCK AS REPORTED IN THE NASDAQ NATIONAL MARKET AS OF SUCH DATE) WAS       
$19,155,126.80.                                                                 

  AS OF JANUARY 21, 1997, 45,404,745 SHARES OF REGISTRANT'S COMMON STOCK
WERE OUTSTANDING.                                                               

DOCUMENTS INCORPORATED BY REFERENCE                                             

PARTS OF THE DEFINITIVE PROXY STATEMENT FOR REGISTRANT'S 1997 ANNUAL
MEETING OF STOCKHOLDERS (TO BE HELD MARCH 24, 1997) ARE INCORPORATED BY         
REFERENCE INTO PART III OF THIS REPORT ON FORM 10-K.                            

 INDICATE BY CHECK MARK IF DISCLOSURE OF DELINQUENT FILERS PURSUANT TO
ITEM 405 OF REGULATION S-K IS NOT CONTAINED HEREIN, AND WILL NOT BE             
CONTAINED, TO THE BEST OF REGISTRANT'S KNOWLEDGE, IN DEFINITIVE PROXY OR        
INFORMATION STATEMENTS INCORPORATED BY REFERENCE IN PART III OF THIS FORM       
10-K OR ANY AMENDMENT TO THIS FORM 10-K.  [X]                                   

(Remainder of this page was intentionally left blank)   

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INTRODUCTORY STATEMENT

This Report on Form 10-K of TeleVideo Systems, Inc. incorporates by 
reference, pursuant to Rule 12b-23 under the general rules and regulations of   
the Securities Exchange Act of 1934, as amended, certain information contained  
in the definitive Proxy Statement to be filed for the Annual Meeting of         
Stockholders to be held on March 24, 1997 (herein the "Proxy Statement").       
References in this Form 10-K to "TeleVideo," the "Registrant" or the "Company"  
refer to TeleVideo Systems, Inc. and its subsidiaries unless the context        
indicates otherwise. This report contains registered and unregistered trademarks
of other companies.                                                             

PART I

ITEM 1.  BUSINESS                                                               

THE COMPANY                                                                     

Founded in 1975, TeleVideo is a market leader providing innovative  
high-end monitor and terminal display products; graphics boards, sound boards   
and multilingual multimedia upgrade kits. The Company markets its products      
worldwide through distributors, mass merchants, retail stores, value-added      
resellers ("VARs"), systems integrators and original equipment manufacturers    
("OEMs").                                                                       

TeleVideo operates in one industry segment.                         

PRODUCTS                                                                        

Computer Monitors                                                               

In November 1996, TeleVideo launched the SuperView Pro Series and   
SuperView Series monitors. These monitors provide a choice for a broad range of 
uses from home applications to business and sophisticated CAD/CAM applications. 

     The high quality SuperView Pro Series monitors include the SVP350 21-inch
monitor (19.9" viewable area) and the SVP250 17-inch monitor (15.7" viewable    
area). The monitors provide features such as high resolutions and wide range of 
scanning rates. The SVP350 delivers 1600 x 1200 maximum resolution at 89Hz. The 
SVP250 features 1600 x 1200 maximum resolution at an exceptional 77Hz refresh   
rate and a fine Aperture Grille of .25 mm. Both monitors use the Aperture Grille
technology which deliver flicker free images and create sharp, crystal-clear    
images for graphic designers and engineers for rendering intricate images as in 
CAD/CAM design work.                                                            

  The SuperView Series offers affordable, high-capability monitors for a
full range of applications, such as conventional business use, home office,     
games, entertainment and education. The SV200 17-inch monitor (15.7" viewable   
area) delivers a flicker free setting of 1024 x 768 at 86Hz plus a finer .26 dot
pitch than you'd expect in this class. The SV100 15" (13.8" viewable area) has a
flicker free setting of 1024 x 768 resolution at 85Hz and a fine .28 dot pitch. 
Both SuperView Series monitors feature Shadow Mask technology which produces    
sharp and crisp images needed for rendering intricate images as in CAD/CAM      
design work.                                                                    

The monitor products retail from $400 to $2,000.                    

Video Display Terminals                                                         

  TeleVideo designs, manufactures, markets and supports a broad range of
industry standard, high performance character-based Windows, Point-of-Sale,     
ASCII, ANSI and PC TERM video display terminals.                                

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The product line includes a high-end 14- or 9-inch AlphaWindow terminal, a      
midrange 14-inch ASCII terminal, a midrange 14-inch ASCII, ANSI, PC TERM        
terminal and a low-end 14-inch ASCII terminal.                                  

The terminals feature high quality, low flicker, high contrast, high
resolution and non-glare screens. All have strong, lightweight injection molded 
plastic enclosures to serve the general purpose terminal market.                

The TeleVideo 9096 14-inch color terminal is a high-performance and 
low-cost ASCII, ANSI, PC terminal designed to meet productivity goals into the  
21st century. It features an IBM-compatible keyboard interface for wedge type   
bar code scanners, wand readers, credit card readers, and specialized keyboards 
for point-of-sale, bank teller, and similar applications. The TeleVideo 9096    
supports standard ANSI color command and MicroColor code color substitution for 
visual attributes for legacy software with 64 colors available for both         
foreground and background.                                                      

The TeleVideo 9085 is a high-resolution, color AlphaWindow display  
terminal which provides 64 colors for both foreground and background selections 
in each of the eight windows. The 9085 has a power management screen saver which
protects the environment and promotes energy conservation.                      

     The TeleVideo 9070 is a 9-inch AlphaWindow terminal with up to 256K bytes
of battery-backed RAM available for local storage of transactions. This allows  
for continuous point-of-sales station operation during peak platform usage or   
when the platform is down. The 9070 provides a fast input response through the  
PS/2 style mouse, which, the Company believes, is a major benefit when selecting
and sizing windows or utilizing the cut and paste features.                     

  The TeleVideo 9-inch model 9060 high-performance display terminal is a
multi-session, multi-personality terminal with ASCII, ANSI and PC TERM operating
modes. It can function as an independent terminal in single or dual host        
computer environments. It can also connect to light pen, bar code scanner and   
magnetic strip readers for point-of-sale, financial and similar applications.   

      The TeleVideo 995 is a monochrome AlphaWindow terminal. With the TeleVideo
995, the user gets AlphaWindowing capability at a non-windowing price for new or
existing software applications. The windows capability provides increased       
productivity for applications running on UNIX. Moreover, the 995 also has a     
power management screen saver which protects the environment and promotes energy
conservation.                                                                   

     The TeleVideo 995-65 14-inch terminal is specifically designed to address
the needs of customers who require a powerful, yet versatile solution which can 
emulate a wide range of industry-standard terminals. It features multi-session, 
multi-personality emulation of over 34 terminals, and is capable of operating as
an independent terminal in single or dual-host computer environments.           

   The TeleVideo 990 is a general purpose terminal with ASCII, ANSI and PC
TERM operating modes. For maximum versatility and flexibility, the terminal     
provides a choice of ASCII, AT or DEC style keyboards. Moreover, the 990's      
mini-DIN keyboard connector permits connection to low-cost industry standard    
wedge type devices. This allows the user to interface to a bar code scanner,    
wand reader, credit card reader, electronics scale or a variety of specialized  
keyboards for point-of-sale or point-of-transaction processing.                 

The video display terminal products retail from $200 to $450. These 
products collectively accounted for approximately 34%, 44% and 66% of the total 
revenue in fiscal 1996, 1995 and 1994, respectively.                            

Multimedia Products                                                             

TeleVideo is a developer of video graphics cards, sound boards and  
multilingual multimedia kit products for the personal computer market. The sales
volume of multimedia products increased substantially during fiscal 1996 and    
accounted for approximately 48% ($10,000,000) of the total annual sales revenue.

The TeleSOUND 3D is a plug-and-play 16-bit sound board for PC audio 
systems which, the Company believes, delivers true CD-quality stereophonic      
sound. Based on an OPL3 FM synthesis device, the                                

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TeleSOUND 3D is compatible with existing multimedia sound standards including   
the Sound Blaster Pro, Ad Lib, Windows Sound System, MPU-40, and Windows 3.1 and
Windows 95. All kits are MPC compliant.                                         

     The TeleWAVE Q32/3D sound board features surround sound, 32 polyphony, 16
MIDI channels, 4 operator 22 voice FM music synthesizer, a General MIDI and 100 
MIPs DSP wavetable power all in one board. The Company believes that it provides
professional music studio quality stereophonic sound of real musical            
instruments. Using advanced DSP technology, the TeleWAVE Q32/3D allows users to 
turn their PC into a professional PC audio system with 128 general MIDI musical 
instrument sounds.                                                              

    The TeleGRAPHICS SX64+ is the next generation ultra fast GUI accelerator
board utilizing 64-bit graphics acceleration chipset technology. This technology
allows complete graphics acceleration support for 4/8/16/24/32 bits per pixel   
modes. It supports high resolution of up to 1600x1200 at color depth of 256 and 
800x600 with 16.7 million colors, as well as true color acceleration of up to   
32-bits per pixel.                                                              

The TeleGRAPHICS 3D is a high performance plug-and-play 3D graphics 
accelerator board designed for high resolution true color and multimedia        
capabilities on PC hardware and software platforms. It features an ultra-fast   
PCI host interface and integrated SVGA for boot-up compatibility. 3D performance
is approximately 20 fps and resolution is 640x480 at 75Hz.                      

  The TeleMEDIA Carnaval Oro is an upgrade kit developed for the Spanish
speaking market. The kit includes a 16-bit plug-and-play sound card that is     
wavetable upgradeable; an internal IDE CD-ROM drive; amplified 10 watt stereo   
speakers; compilation of software titles chosen for their educational and play  
values.                                                                         

      TeleVideo also bundles CD-ROM drives with TeleVideo sound boards and other
multimedia products to meet the needs and requirements of OEMs, distributors,   
resellers and systems integrators. CD-ROM bundles are configured according to   
customer needs and requirements.                                                

    Multimedia products retail from $25 to $400. These products collectively
accounted for approximately 48% and 23% of the total revenues in fiscal 1996 and
1995, respectively.                                                             

Computer Enhancement Products                                                   

The Company, through its OMTI product line, manufactures and markets
multi-function data storage products for various bus architectures. These       
products generally retail for $80 to $270, and collectively accounted for       
approximately 6%, 9% and 19% of total revenues in fiscal 1996, 1995 and 1994,   
respectively.                                                                   

PRODUCT DEVELOPMENT                                                             

 Markets that TeleVideo serve are characterized by rapid technological
change. TeleVideo has an ongoing program to develop new products. The Company's 
reseach and development staff consists of 7 employees as of January 21, 1997.   
During fiscal 1996, TeleVideo spent approximately $1.1 million on               
company-sponsored research and development. Company-sponsored research and      
development expenses for fiscal 1995 and 1994 were approximately $1.8 million   
and approximately $1.6 million, respectively. The Company did not engage in any 
customer-sponsored research and development during such years.                  

Because of the fast pace of technological advances, particularly for
multimedia products, the Company must be prepared to design, develop and        
manufacture new and more powerful low-cost products in a relatively short time. 
TeleVideo believes it has had mixed success to date in accomplishing these goals
simultaneously. Like other companies in the computer industry, it will continue 
to experience delays in completing new product design and tooling. There is no  
assurance that the Company will be able to design and manufacture new products  
that respond to the rapid changes in the market place.                          

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CUSTOMERS, MARKETING AND DISTRIBUTION                                           

    North American sales are handled from TeleVideo sales offices located in
San Jose and Newport Beach, California and Hoffman Estates, Illinois. Products  
are sold through distributors, mass merchants, retail stores, value-added       
resellers ("VARs"), systems integrators and OEMs. The Company also sells        
directly to end users in North America.                                         

  Products sold in Europe, the Pacific Rim, Africa and Latin America are
handled by the Company's San Jose, California office through distributors, OEMs 
and international representatives.                                              

TeleVideo distributors generally do not have exclusive geographic   
territories. Distributor contracts can be terminated by either party without    
cause upon 30 days or 60 days' written notice. TeleVideo's distributors         
typically handle a variety of computer-related products, including products     
competitive with those of TeleVideo. The typical distribution arrangement       
requires the distributor to purchase TeleVideo products with certain limited    
stock rotation rights. Distributors may also exercise price protection rights   
should the Company's product price be reduced.                                  

      TeleVideo, through its headquarters' marketing and supporting staff, plans
to continue to work closely with its distributors, mass merchants, retail       
stores, value-added resellers ("VARs"), systems integrators and original        
equipment manufacturers ("OEMs"). TeleVideo staff also provide the customers    
with training, sales and promotional materials, cooperative advertising         
programs, and sales leads. The Company spent approximately 2.4% and 4.6% of its 
revenues on advertising in fiscal 1996 and fiscal 1995, respectively.           

 TeleVideo's customers typically purchase the Company's products on an
as-needed basis. Therefore, the Company will continue to manufacture its        
products based on sales forecasts and upon customer orders. As a result of this 
strategy, the Company believes that backlog is not material to its business     
taken as a whole. The Company's order backlog as of October 31, 1996 was        
approximately $2.8 million, as compared with approximately $3.0 million at      
October 31, 1995, and approximately $2.3 million at October 31, 1994.           
TeleVideo's order backlog are orders with a specified delivery schedule within  
twelve months. Because of the possibility of customer changes in delivery       
schedules or cancellation of orders, which is not uncommon in the computer      
industry, the Company's backlog as of any particular date may not be indicative 
of actual net sales for any succeeding period. See "Management's Discussion and 
Analysis of Financial Condition and Results of Operations."                     

 TeleVideo's largest customer accounted for approximately 10.23% ($2.2
million) of net sales in fiscal 1996. The Company believes that loss of this    
customer would not have an adverse effect on the net sales of the Company.      

    TeleVideo's product sales are primarily made for cash, due net 30, 45 or
60 days, or in the case of some foreign sales, payment by letter of credit is   
required.                                                                       

INTERNATIONAL SALES                                                             

 International sales of TeleVideo's products constituted approximately
$3.41 million (15.8%) of net sales for fiscal 1996, approximately $4.13 million 
(24%) of net sales for fiscal 1995 and approximately $3.63 million (27%) of net 
sales for fiscal 1994.                                                          

  TeleVideo's international sales are subject to certain risks common to
non-United States operations, including but not limited to governmental         
regulations, import restrictions and export control regulations, changes in     
demand resulting from fluctuations in exchange rates, as well as risks such as  
tariff regulations. TeleVideo's international sales are U.S. dollar-denominated 
and, therefore, are not directly subject to international currency fluctuations.
The strength of the dollar in relation to certain international currencies may, 
however, adversely affect the Company's sales to international customers.       

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FOREIGN JOINT VENTURE ACTIVITY                                                  

Commonwealth of Independent States                                  

     TeleVideo continues to pursue business opportunities in the former Soviet
Union, now referred to as the Commonwealth of Independent States. These may or  
may not involve sale or production of the Company's products, and TeleVideo may 
invest cash in these ventures.                                                  

Three H                                                             

  Three H Partners (owned equally by TeleVideo and a Russian entity) was
formed in fiscal 1991 and the initial investment was $16,000. In July 1996, the 
Company further invested $60,000 in the joint venture.                          

In February 1993, the Company loaned the Three H joint venture $1.0 
million as working capital for the purpose of conducting short term commodities 
trading. The loan was unsecured and bore interest at 20% per annum. In fiscal   
1994, a total amount of $800,000 was repaid to the Company. The remaining       
balance of $200,000 was received in fiscal 1996.                                

InterTerminal                                                       

      In April 1994, the Company acquired a 51% ownership of the "InterTerminal"
joint venture in exchange for a $5,100 cash investment and a commitment to fund 
a $3.65 million loan, 20% interest rate, interest free for one year, to the     
venture. The main purpose of the joint venture was the construction of a truck  
terminal (approximately 100,000 square feet) approximately 25 miles outside of  
Moscow, and the construction was complete in early 1995. TeleVideo sold its 51% 
ownership in May 1995. The $3.65 million loan was repaid to the Company in      
fiscal 1995. An additional amount of $1,369,500 was received and recognized as a
gain in fiscal 1996.                                                            

TeleVideo-RUS                                                       

     In January 1996, TeleVideo set up a company called "TeleVideo-RUS" in the
Commonwealth of Independent States with an initial investment of $150,000. The  
main purpose of this company is to act as a liaison between TeleVideo and the   
authorities in the CIS. One of the projects that the Company is anticipating    
will be the construction of truck terminals similar to the "InterTerminal" joint
venture. There is no assurance, however, that any additional projects will be   
undertaken or that any of the ventures will prove to be profitable.             

Risks of Operations in the Commonwealth of Independent States       

There are a number of risks involved in TeleVideo's participation in
foreign joint ventures located in the Commonwealth of Independent States. These 
risks include the ability to execute and enforce the agreements, the future     
regulations governing the repatriation of funds, the political and economic     
instability and the dependence on future events which can influence the success 
or failure of the ventures and, thus, may affect the recoverability of the      
amounts invested by TeleVideo. Management of the Company is aware of the        
attendant risks relating to these ventures and continually monitors the         
conditions in the CIS and the activities of the joint ventures. Management      
further believes the investments to be secure and thus no reserves were required
as of October 31, 1996. However, there can be no assurance that conditions in   
the CIS will not deteriorate and place the Company's investments in jeopardy.   

Kabil Electronics Company, Ltd.                                     

  The Company owned a 35% interest in Kabil Electronics Company, Ltd. of
South Korea and the total investments were approximately $3.3 million. Since    
Kabil continued to sustain losses from operations, the Company wrote off its    
investments in fiscal 1990 and fiscal 1993. In December 1994, the Company       
accepted an offer to sell its 35% interest in Kabil to the majority owners for  
$1.5 million, less expenses, which was paid in installments over the 1995 and   
1996 fiscal years. Approximately $555,000 was received in fiscal 1995. An       

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additional $866,652 was received in January of 1996 and had been accrued as     
income for the year ended October 31, 1995.                                     

COMPETITION                                                                     

     TeleVideo believes that brand recognition, product quality, availability,
extensive standard product features, service and price are significant          
competitive factors in the Company's markets. In addition to the factors listed 
above, the principal considerations for distributors and resellers in           
determining which products to offer include profit margins, immediate delivery, 
product support and credit terms. TeleVideo has continued and in the future will
likely continue to face significant competition, with respect to these factors, 
particularly from the large international manufacturers. Most of these companies
have significantly greater financial, marketing and technological resources than
the Company, and may be able to command better terms with their suppliers due to
higher purchasing volumes. Therefore, there is no assurance that the Company    
will be able to successfully compete in the future.                             

PRODUCTION                                                                      

TeleVideo does not have any long term contracts with overseas       
manufacturers. The Company subcontracts all of the manufacture of its terminal, 
monitor and multimedia products to manufacturers in Hong Kong, Taiwan, The      
People's Republic of China and South Korea. The testing, inspection and some    
minor assembling work are done at its California headquarters.                  

     Although for the most part, the Company generally uses standard parts and
components for its products, certain components are presently available and     
secured only from a single source. The Company's largest suppliers accounted for
approximately 23.7% (approximately $4.3 million), 18.2% (approximately $3.3     
million), 13.8% (approximately $2.5 million) and 13.2% (approximately $2.4      
million), respectively, of net purchases in fiscal 1996. Loss of one of these   
suppliers might have an adverse effect on the product supply of the Company. The
Company believes, however, that in most cases, alternative sources of supply    
could be arranged as and when needed by the Company. To date, TeleVideo has not 
experienced any material difficulties or delays in production of its terminal   
and multimedia products.                                                        

PRODUCT SERVICE AND WARRANTY                                                    

     TeleVideo's products are serviced worldwide primarily by distributors and
OEMs.                                                                           

    The Company provides end-user customers with a one-year factory warranty
on terminal products and a three-year factory warranty on monitor and multimedia
products.                                                                       

PROPRIETARY RIGHTS                                                              

  The Company regards certain aspects of its products as proprietary and
relies upon a combination of trademark and copyright laws, trade secrets,       
confidentiality procedures and contractual provisions to protect its proprietary
rights. The Company has registered trademarks in the United States and in over  
20 foreign countries for "TeleVideo" and the TeleVideo logo.                    

The continuing development of the Company's products and business is
dependent, primarily, on the knowledge and skills of certain of its employees.  
To protect its rights to its proprietary information, the Company requires all  
employees and consultants to enter into confidentiality agreements that prohibit
the disclosure of confidential information to persons unaffiliated with the     
Company. There can be no assurance, however, that these agreements will provide 
meaningful protection for the Company's technology or other confidential        
information in the event of any unauthorized use or disclosure. There also can  
be no assurance that third parties will not independently develop products      
similar to or duplicative of products of the Company.                           

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The Company believes that due to the rapid pace of technological change in its  
industry, the Company's success is likely to depend more upon continued         
innovation, technical expertise, marketing skill and customer support than on   
legal protection of the Company's proprietary rights.                           

GOVERNMENT REGULATIONS                                                          

    Most of the Company's products are subject to regulations adopted by the
Federal Communications Commission ("FCC"), which establishes radio frequency    
emanation standards for computing equipments. TeleVideo believes that all of the
Company's products that are subject to such regulations comply with these       
regulations. Although there can be no assurance, the Company has no reason to   
believe that new products will not also be approved. Failure to comply with the 
FCC specifications could preclude the Company from selling noncomplying systems 
in the United States until appropriate modifications are made. To date, the     
Company has not encountered any FCC compliance problems.                        

EMPLOYEES                                                                       

   As of January 21, 1997, the Company's full-time employees totaled 58, a
decrease of approximately 16% of the total number of employees (69) reported at 
the end of fiscal 1995. Of the total number of employees, 25 were engaged in    
product research, engineering, development and manufacturing; 21 in marketing   
and sales; and 12 in general management and administration. The decrease in the 
number of employees from the 1995 fiscal year end was the result of the         
reorganization of the sales and marketing departments for the multimedia        
products. As a result, a higher sales volume was achieved with a smaller work   
force. The Company believes that its future success will depend, in part, on its
ability to continue to attract and retain highly skilled technical, marketing   
and management personnel.                                                       

 None of the Company's employees is subject to a collective bargaining
agreement or represented by a union, and the Company has never experienced a    
work stoppage. The Company believes that its employee relations are good.       

ITEM 2.  PROPERTIES                                                             

   The Company's headquarters, research and development and administrative
operations are housed in a 69,630 square foot building located on 2.5 acres in  
San Jose, California, which is owned by the Company. The Company's operations   
use approximately 80% of the building. Management believes these facilities will
be adequate for its anticipated growth for the foreseeable future.              

    The Company leases a domestic sales office in Hoffman Estates, Illinois.
The lease is on a yearly basis which will expire on August 31, 1997, and has a  
monthly rental rate of $716.23. Management believes that, prior to its          
expiration, the Company would be able to secure extension to the lease if such  
extension is deemed necessary in the future. The Company also leases a domestic 
sales office in Newport Beach, California. The lease is on a monthly basis and  
has a monthly rental rate of $281.                                              

ITEM 3.  LEGAL AND OTHER PROCEEDINGS                                            

Tax Audits                                                          

 As of October 31, 1996, the only issues pending are the Massachusetts
State Tax audit and the California Franchise Tax exposure resulting from the    
previous Federal Income Tax audits. The Company believes that a resolution of   
one or both of these audits could occur in fiscal 1997 and its maximum exposure,
collectively, will not exceed $600,000. The Company has accrued this full amount
at October 31, 1996.                                                            

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Other Legal Proceedings                                             

 The Company has been named, along with dozens of other manufacturers,
designers, and distributors of computer equipment, as a defendant in several    
lawsuits regarding product liability in connection with the alleged defective   
design of computer terminal keyboards and the size of the computer monitor      
screens. The first issue alleges that the various plaintiffs have suffered some 
form of severe wrist injury from the use of these keyboards. The second issue   
alleges that there was false advertising which claimed that the video screens   
were 17 inches in size, when in reality they were only 15 inches. The Company's 
attorneys have prepared a defense for these cases and the Company's insurance   
carriers are informed of the plaintiffs' claims. The Company intends to         
vigorously defend against the allegations of these suits. Management believes   
that the ultimate outcome of these lawsuits will not have a material adverse    
effect on the Company's financial position.                                     

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

     No matters were submitted to a vote of security holders during the fourth
quarter of fiscal 1996.                                                         

 PART II

ITEM 5.  MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER      
MATTERS.                                                                        

   The Company's Common Stock is traded in the over-the-counter market and
prices are quoted on the Nasdaq National Market under the symbol "TELV." The    
following table sets forth for the periods indicated the high and low last sales
prices for the Common Stock as reported by Nasdaq. The prices quoted below      
reflect inter-dealer prices, without retail mark-ups, mark-downs or commissions 
and may not necessarily represent actual transactions.                          

                                                                [Download Table]


                                                High         Low 
                                                ----         --- 
                                                                 
Fiscal 1995:                                                     

      First Quarter                           $0.3750     $0.3750
      Second Quarter                           0.9375      0.8125
      Third Quarter                            0.7188      0.6250
      Fourth Quarter                           0.9375      0.8125

Fiscal 1996:                                                     

      First Quarter                           $0.7500     $0.6563
      Second Quarter                           0.6250      0.5000
      Third Quarter                            0.5000      0.4688
      Fourth Quarter                           0.4375      0.4063

There were 2,743 holders of record of the Company's Common Stock at 
January 21, 1997.                                                               

   On January 21, 1997, the closing price of the Company's Common Stock in
the over-the-counter market, as reported on the Nasdaq National Market, was     
$0.4219 per share.                                                              

      The Company has never paid cash dividends on its Common Stock and does not
anticipate paying cash dividends in the foreseeable future. The Company         
presently intends to retain any earnings for use in its business.               

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ITEM 6.  SELECTED FINANCIAL DATA                                                

    The following selected financial data reflects the continuing operations
of TeleVideo. The data below has been derived from the Company's audited        
consolidated financial statements for the years presented.                      

 (IN THOUSANDS, EXCEPT PER SHARE DATA)

                                                        [Enlarge/Download Table]


                                                                Year Ended October 31,                            
                                       -------------------------------------------------------------------------- 
                                       1996              1995              1994           1993               1992 
                                       ----              ----              ----           ----               ---- 
                                                                                                                  
STATEMENT OF OPERATIONS DATA:                                                                                     

Net sales ......................... $ 21,576           $16,914          $ 13,232        $ 15,251           $20,298
   Income (loss) from continuing                                                                                  
     operations ...................   (2,917)(3)           415(2)           (907)         (9,618)(1)           466

Net income (loss) .................   (2,917)(3)           415(2)           (907)         (9,618)(1)           466
   Income (loss) from continuing                                                                                  
     operations (per share) .......    (0.06)             0.01             (0.02)          (0.22)             0.01
   Net income (loss) (per share) ..    (0.06)             0.01             (0.02)          (0.22)             0.01

BALANCE SHEET DATA:                                                                                               

   Cash and cash equivalents        $  4,496           $ 5,145          $  2,131         $ 3,148           $ 6,081
   Working capital ................   15,239            13,035             7,246           8,479             8,780
   Total assets ...................   23,090            24,600            24,045          26,479            38,077
   Stockholders' equity ...........   18,544            21,345            20,832          21,738            31,346

See "Management's Discussion and Analysis of Financial Condition and
Results of Operations" and Note 2 of Notes to Consolidated Financial Statements 
for a discussion of operating results, liquidity needs and acquisitions and     
dispositions during the periods.                                                

     (1)   Including a charge of $9,531,000 to write down the cost of property
to estimated fair market value.                         

(2)   Includes net gains (loss) from the following (in thousands):  

                                                                [Download Table]
                                                                
(A) Sale of building                                    $ 1,350 
(B) Disposition of Russian joint venture interest         1,910 
(C) Sale of interest in Kabil Electronics                 1,422 
(D) Disposal of SMS product line                           (346)
                                                        ------- 
                                                        $ 4,336 
                                                        ======= 


(3)   Includes net gain from the sale of InterTerminal joint venture
interest of $1,370,000.                                 

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ITEM 7.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND        
RESULTS OF OPERATIONS                                                           

 This Report contains forward-looking statements within the meaning of
Section 27A of the Securities Act of 1933 and Section 21E of the Securities     
Exchange Act of 1934. The forward-looking statements contained herein are based 
on current expectations, and actual results may differ materially. Factors that 
might cause such differences include, but are not limited to, those discussed   
under "Factors that may Affect Future Results," below.                          

GENERAL                                                                         

   The Company completely phased-out its personal computer product line in
fiscal year 1993 and focused its resources and energy on the terminal and       
multimedia product lines. Also, in November 1996, the Company announced its     
entry into the computer monitors market. Efforts continued to expand in the     
development of new multimedia products and upgrade kits in fiscal 1996. Results 
in fiscal 1996 were additionally impacted by a continued shift in product mix,  
with the Company's multimedia products becoming an increasingly significant     
portion of product sales.                                                       

      The Company has reduced its marketing and sales force from 27 employees at
October 31, 1995 to 21 employees at October 31, 1996, primarily the result of   
its continuing effort to reduce operating costs and to improve operating        
efficiency. In order to lower the production costs, the Company has continued to
negotiate with its suppliers and has also shifted its production process from   
in-house to overseas manufacturing.                                             

RESULTS OF OPERATIONS                                                           

Fiscal 1996 Compared to Fiscal 1995                                 

Net sales for fiscal 1996 were approximately $21.58 million, or an  
increase of approximately 27.6% from the approximately $16.91 million in net    
sales reported in fiscal 1995. The increase in net sales in fiscal 1996 was     
principally generated from the sale of the multimedia products (approximately   
$10.35 million) which accounted for approximately 48% of the total sales revenue
in fiscal 1996, compared to approximately 23% and 0.2% of total sales revenue in
fiscal 1995 and 1994, respectively.                                             

    Cost of sales increased from approximately $14.77 million in fiscal 1995
to approximately $20.63 million in fiscal 1996, and increased as a percentage of
sales from approximately 87.3% to approximately 95.6% during the same period.   
The percentage increase in cost of sales and the corresponding decrease in gross
margins in fiscal 1996 (a decrease from approximately 12.7% to 4.4%) were       
primarily the results of the lower profit margin and intensive price competition
on multimedia products, a trend that the Company expects to continue, coupled   
with the increase in the inventory reserve on multimedia inventory noted below. 

    Inventory reserves were increased in the aggregate by $50,000 for fiscal
1996. The increase resulted from the Company scrapping approximately $868,000 of
fully reserved inventory during the year (which reduced the inventory reserve on
a dollar for dollar basis, resulting in no net impact on cost of sales), and at 
the same time, recording an additional reserve of $918,000 in the fourth quarter
of fiscal 1996 to cover existing inventory on hand at year end. The additional  
reserve increased cost of goods sold by a like amount.                          

Manufacturing expenses increased from $1,098,000 in fiscal 1995 to  
$1,151,000 in fiscal 1996, an increase of $53,000 (approximately 4.8%) from the 
prior year. The increase was primarily due to the increase in the actual        
compensation expense from $667,000 in fiscal 1995 to $789,000 in fiscal 1996, an
increase of $122,000 (approximately 18.3%) from the prior year while the        
workforce for manufacturing, assembling and inspecting remained at the same     
level of 18 employees for both years. This increase was offset by miscellaneous 
reductions in other expense categories.                                         

     Marketing expenses decreased as a percentage of sales in fiscal 1996 from
approximately 18.8% in fiscal 1995 to 11.3% in fiscal 1996, while actual        
marketing expenses decreased from $3.2 million in fiscal 1995 to $2.4 million in
fiscal 1996, a decrease of 23.8% from the prior year. The decrease in marketing 
expenses                                                                        

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was due primarily to decreased expenditures resulting from the decrease         
in employee staffing levels and purchased services and advertising expenses. The
number of sales and marketing employees decreased from 27 in fiscal 1995 to 21  
in fiscal 1996, while actual compensation expense decreased from $1.84 million  
in fiscal 1995 to $1.44 million in fiscal 1996. Total advertising expense       
decreased from $0.79 million in fiscal 1995 to $0.52 million in fiscal 1996.    

     Research and development expenses decreased as a percentage of sales from
approximately 10.8% in fiscal 1995 to 5.1% in fiscal 1996, while actual research
and development expenses decreased from $1.8 million in fiscal 1995 to $1.1     
million in fiscal 1996, a decrease of 39.8% from the fiscal 1995 levels. The    
decrease in actual research and development expenses in fiscal 1996 compared to 
the same period in the prior year was primarily a result of the decrease in     
employee staffing levels from 14 in fiscal 1995 to 7 in fiscal 1996 while actual
compensation expense decreased from $1.2 million in fiscal 1995 to $0.8 million 
in fiscal 1996.                                                                 

  General and administrative expenses decreased as a percentage of sales
from approximately 11.1% in fiscal 1995 to 9.6% in fiscal 1996, while actual    
expenses increased from $1.9 million in fiscal 1995 to $2.1 million in fiscal   
1996, an increase of 9.9% from fiscal 1995 levels. The higher expense level in  
fiscal 1996 was primarily due to the increase in the reserve for accounts and   
notes receivable of approximately $760,000 in the fourth quarter of fiscal 1996.

    The loss from operations reported in fiscal 1996 decreased approximately
2.2%, from $4.7 million in fiscal 1995 to $4.6 million in fiscal 1996. This     
decrease was primarily due to the decrease in operating expenses but was        
partially offset by the increase in cost of sales of multimedia products and the
decrease in the net sales of the terminal and other computer enhancement        
products which historically provide higher profit margins.                      

  The Company recognized a net gain from the sale of InterTerminal joint
venture interest of $1,370,000 in fiscal 1996 which offset the loss from        
operations.                                                                     

   Interest income earned in fiscal 1996 decreased from $810,000 in fiscal
1995 to $697,000 in fiscal 1996, a 14.0% decrease from the prior year. Such     
decrease was primarily due to the lower cash levels and the retirement of       
various notes receivables principally with respect to joint venture activities  
in the Commonwealth of Independent States.                                      

Net loss for the fiscal year of 1996 was approximately $2.9 million,
compared with a net gain of $0.4 million in fiscal 1995. The loss in fiscal 1996
was a result of the various factors noted above.                                

      As a result of the foregoing, net loss per share in fiscal 1996 was $0.06,
based on 45,328,368 weighted average shares outstanding, compared to a net      
income per share in fiscal 1995 of $0.01, based on 44,878,339 weighted average  
shares outstanding.                                                             

No income tax expense or credit was provided for in fiscal 1996. The
Company has approximately $86 million in federal net operating loss and credit  
carryovers and approximately $26 million in state net operating loss carryovers 
to offset future federal and state corporate income tax liabilities. No net     
deferred tax asset has been recognized by the Company for any future tax benefit
to be provided from the loss carryforwards since realization of any such benefit
is not assured.                                                                 

    Inflation had no significant impact on the Company's business or results
of operations.                                                                  

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Fiscal 1995 Compared to Fiscal 1994                                 

Net sales for fiscal 1995 were approximately $16.91 million, or an  
increase of approximately 27.8% from the approximately $13.23 million in net    
sales reported in fiscal 1994. The increase in net sales in fiscal 1995 was     
principally generated from the sale of the multimedia products (approximately   
$3.92 million) which accounted for approximately 23% of the total sales revenue 
in fiscal 1995 compared to approximately 0.2% of total sales revenue in fiscal  
1994.                                                                           

      Cost of sales increased from approximately $9.52 million in fiscal 1994 to
approximately $14.77 million in fiscal 1995, and increased as a percentage of   
sales from approximately 72% to approximately 87% during the same period. The   
percentage increase in cost of sales and the corresponding decrease in gross    
margins in fiscal 1995 (a decrease from approximately 28% to 13%) were primarily
the results of the lower profit margin and intensive price competition on       
multimedia products, coupled with the increase in the inventory reserve on      
multimedia inventory noted below.                                               

 Inventory reserves were decreased in aggregate by $149,000 for fiscal
1995. However, the Company scrapped approximately $759,000 of fully reserved    
inventory during the year which reduced the inventory reserve on a dollar for   
dollar basis, resulting in no net impact on cost of sales. The Company did      
record an additional reserve of $610,000 in the fourth quarter of fiscal 1995 to
cover existing inventory on hand at year end which directly increased cost of   
goods sold by a like amount.                                                    

Manufacturing expenses increased from $902,000 in fiscal 1994 to    
$1,098,000 in fiscal 1995, an increase of $196,000 (approximately 22%) from the 
prior year. The increase was primarily due to the increase in the number of     
employees from 12 in fiscal 1994 to 18 in fiscal 1995 for the manufacturing,    
assembling and inspecting of the multimedia products. The actual compensation   
expense increased from $499,000 in fiscal 1994 to $667,000 in fiscal 1995, an   
increase of $168,000 (approximately 34%) from the prior year.                   

     Marketing expenses increased as a percentage of sales in fiscal 1995 from
approximately 17.1% in fiscal 1994 to 18.8% in fiscal 1995, while actual        
marketing expenses increased from $2.3 million in fiscal 1994 to $3.2 million in
fiscal 1995, an increase of 40.4% from the prior year. The increase in marketing
expenses was due primarily to increased expenditures resulting from the increase
in employee staffing levels and purchased services and advertising expenses on  
multimedia products. The number of sales and marketing employees increased from 
21 in fiscal 1994 to 27 in fiscal 1995, while actual compensation expense       
increased from $1.42 million in fiscal 1994 to $1.84 million in fiscal 1995.    
Total advertising expense increased from $0.30 million in fiscal 1994 to $0.79  
million in fiscal 1995.                                                         

     Research and development expenses decreased as a percentage of sales from
approximately 12.4% in fiscal 1994 to 10.8% in fiscal 1995, while actual        
research and development expenses increased from $1.6 million in fiscal 1994 to 
$1.8 million in fiscal 1995, an increase of 11.3% from the fiscal 1994 levels.  
The increase in actual research and development expenses in fiscal 1995 compared
to the same period in the prior year from $1.1 million in fiscal 1994 to $1.2   
million in fiscal 1995 was primarily a result of the increase in employee       
staffing levels.                                                                

  General and administrative expenses decreased as a percentage of sales
from approximately 12.7% in fiscal 1994 to 11.1% in fiscal 1995, while actual   
expenses increased from $1.7 million in fiscal 1994 to $1.9 million in fiscal   
1995, an increase of 11.7% from fiscal 1994 levels. The higher expense level in 
fiscal 1995 was primarily due to the increase in the reserve for accounts and   
notes receivable of approximately $300,000.                                     

    The loss from operations reported in fiscal 1995 increased approximately
153.7%, from $1.9 million in fiscal 1994 to $4.7 million in fiscal 1995. This   
increase was primarily due to the high production, research and development, and
marketing costs on the multimedia products, the decrease in terminal product    
line sales and the elimination of the SMS product line which historically       
provide higher profit margins.                                                  

   On December 12, 1994, the Company sold its real property located at 550
East Brokaw Road, San Jose, California which consists of approximately 19.8     
acres of real property containing a building of 292,800 square feet for $11     
million. After netting certain expenses of sales, the Company received $5.4     
million in cash                                                                 

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upon close of escrow. The remaining $5.0 million is in the form                 
of a promissory note which shall be due and payable in twenty-four months at an 
interest rate of 9.5% per annum. Interest is paid on a monthly basis and        
approximately $475,000 in cash is generated as interest annually. Since the     
Company had written down the net book value of this real property to $9.4       
million at October 31, 1993, a gain of $1.35 million was recognized in fiscal   
1995.                                                                           

  The Company recognized the following significant net gains (losses) in
fiscal 1995 which offset the loss from operations:                              

                                                                [Download Table]


                                                   $(000's)

                                                           
(1)   Sale of Brokaw Building                      $ 1,350 
(2)   Sale of Ordynka Joint Venture Interest         2,313 
(3)   Sale of Kabil Investment                       1,422 
(4)   Write-off of Tatiana and PharmaPlant                 
      Investments                                     (403)
(5)   Disposal of SMS Product Line                    (346)
                                                   ------- 
                                                   $ 4,336 
                                                   ======= 

   Interest income earned in fiscal 1995 increased from $602,000 in fiscal
1994 to $810,000 in fiscal 1995, a 34.6% increase from the prior year. Such     
increase was due to the interest earned on various notes receivables principally
with respect to joint venture activity in the Commonwealth of Independent States
and the sale of the Brokaw building, and the higher cash levels and higher short
term interest rates.                                                            

 As a result of the foregoing, net income per share in fiscal 1995 was
$0.01, based on 44,878,339 weighted average shares outstanding, compared to a   
net loss per share in fiscal 1994 of $0.02 based on 44,623,755 weighted average 
shares outstanding.                                                             

LIQUIDITY AND CAPITAL RESOURCES                                                 

   Cash and cash equivalents totaled approximately $4.5 million at October
31, 1996, down $649,000 (approximately 12.6%) from fiscal 1995 year-end levels  
of $5.1 million. The decrease in the cash and cash equivalents resulted         
primarily from the net cash used in operating activities of $1.9 million while  
partially offset by the net cash provided by investing activities of $1.2       
million.                                                                        

 Approximately $2.5 million in certificates of deposit were pledged as
collateral for comparable amounts of stand-by and sight letters of credit under 
the letter of credit agreements as of the end of fiscal 1996. At October 31,    
1996, the Company had approximately $2.1 million in outstanding letters of      
credit which were secured by the pledged deposits under this agreement.         

      Net accounts receivable of $4.39 million at the end of fiscal 1996 were up
approximately 22.3% from the 1995 year-end level of $3.59 million due primarily 
to increased sales volume. Days sales outstanding in accounts receivable        
increased from 88 days in fiscal 1995 to 89 days in fiscal 1996.                

    Net inventories of approximately $5.83 million at the end of fiscal 1996
were up approximately 1.7% from the 1995 year-end level of $5.74 million due    
primarily to increased product purchases to meet forecasted demand at the end of
fiscal 1996.                                                                    

      Working capital at the end of fiscal 1996 was approximately $15.2 million,
up approximately 16.9% from the fiscal 1995 year-end level of approximately     
$13.0 million.                                                                  

    The Company sold its 51% ownership in the InterTerminal joint venture in
May 1995. Approximately $1.4 million in cash was received and recognized as a   
gain in fiscal 1996.                                                            

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At the current consumption rate, the Company's cash balance of      
approximately $4.5 million at October 31, 1996 (which includes $2.5 million     
pledged as security for stand-by and sight letters of credit) was anticipated to
be adequate to fund the Company's fiscal 1997 operations at projected levels.   

  The Company also generated, subsequent to year end, cash of $5,000,000
from the repayment of its note receivable resulting from the sale of its former 
headquarters which became due in full in December of 1996. See "Subsequent      
Events" for further information on significant cash inflows received by the     
Company subsequent to October 31, 1996.                                         

FACTORS THAT MAY AFFECT FUTURE RESULTS                                          

The terminal, monitor and multimedia product markets are intensely  
competitive. The principal elements of competition are pricing, product quality 
and reliability, price/performance characteristics, compatibility, marketing and
distribution capability, service and support, and reputation of the             
manufacturer. TeleVideo competes with a large number of manufacturers, most of  
which have significantly greater financial, marketing and technological         
resources than TeleVideo. There can be no assurance that the Company will be    
able to continue to compete effectively.                                        

    The Company markets its products worldwide. In addition, a large portion
of the Company's part and component manufacturing, along with key suppliers, are
located outside the United States. Accordingly, the Company's future results    
could be adversely affected by a variety of factors, including without          
limitation, fluctuation in foreign currency exchange rates, changes in a        
specific country's or region's political or economic conditions, trade          
protection measures, import or export licensing requirements, unexpected changes
in regulatory requirements and natural disasters.                               

The computer market, particularly the multimedia product market, is 
characterized by rapid technological change and product obsolescence, often     
resulting in short product life cycles and rapid price declines. The Company's  
success will continue to depend primarily on its ability to continue to reduce  
costs through manufacturing efficiencies and price negotiation with suppliers,  
the continued market acceptance of its existing products and its ability to     
develop and introduce new products. There can be no assurance that TeleVideo    
will successfully develop new products or that the new products it develops will
be introduced in a timely manner and receive substantial market acceptance.     
There can also be no assurance that product transitions will be managed in such 
a way to minimize inventory levels and product obsolescence of discontinued     
products. The Company's operating results could be adversely affected if        
TeleVideo is unable to manage all aspects of product transitions successfully.  

  The Company generally utilizes standard parts and components available
from multiple suppliers. However, certain parts and components used in the      
Company's products are available from a single source. If, contrary to its      
expectations, the Company is unable to obtain sufficient quantities of any      
single-sourced components, the Company will experience delays in product        
shipments.                                                                      

     The Company offers its products through various channels of distribution.
Changes in the financial condition of, or in the Company's relationship with,   
its distributors could cause actual operating results to vary from those        
expected . Also, the Company's customers generally order products on an         
as-needed basis. Therefore, virtually all product shipments in a given fiscal   
quarter result from orders received in that quarter. The Company anticipates    
that the rate of new orders will vary significantly from month to month. The    
Company's manufacturing plans and expenditure levels are based primarily on     
sales forecasts. Consequently, if anticipated sales and shipments in any quarter
do not occur when expected, expenditure and inventory levels could be           
disproportionately high and the Company's operating results for that quarter,   
and potentially future quarters, would be adversely affected.                   

The market price of TeleVideo's common stock could be subject to    
fluctuations in response to quarter to quarter variations in operating results, 
changes in analysts' earnings estimates, market conditions in the computer      
technology industry, as well as general economic conditions and other factors   
external to the Company.                                                        

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SUBSEQUENT EVENTS                                                               

 In November 1996, the Company invested $150,000 in exchange for a 20%
ownership in TLK, Inc. for the China Power Plant projects in Lin Zhang, Quin    
Yuan and Henan Provinces in China. There is no assurance that the venture will  
prove to be profitable.                                                         

   In December 1996, the Company received $5,000,000 in cash from its note
receivable resulting from the sale of its former headquarters in December 1994. 

      In December 1996, the Company received $100,000 from AdMOS for the partial
payment of the $284,000 outstanding loans.                                      

(The remainder of this page was left blank intentionally.)

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ITEM 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.                           

                                                                [Download Table]


                                                                        PAGE NO.
                                                                         IN 10-K
                                                                         -------
                                                                                
Report of Independent Certified Public Accountants.......................  19   

Consolidated Balance Sheets - October 31, 1996 and                              
1995 ....................................................................  20   

Consolidated Statements of Operations for the Years                             
Ended October 31, 1996, 1995 and 1994....................................  21   

Consolidated Statement of Stockholders' Equity for                              
the Years Ended October 31, 1996, 1995 and 1994..........................  22   

Consolidated Statements of Cash Flows for the Years                             
Ended October 31, 1996, 1995 and 1994....................................  23   

Notes to Consolidated Financial Statements ..............................  24   

(Remainder of page left blank intentionally)

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REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS

Board of Directors                                                              
TeleVideo Systems, Inc.                                                         

We have audited the accompanying consolidated balance sheets of TeleVideo       
Systems, Inc. and Subsidiaries as of October 31, 1996 and 1995, and the related 
consolidated statements of operations, stockholders' equity, and cash flows for 
each of the three years in the period ended October 31, 1996. These financial   
statements are the responsibility of the Company's management. Our              
responsibility is to express an opinion on these financial statements based on  
our audits.                                                                     

We conducted our audits in accordance with generally accepted auditing          
standards. Those standards require that we plan and perform the audit to obtain 
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting 
the amounts and disclosures in the financial statements. An audit also includes 
assessing the accounting principles used and significant estimates made by      
management, as well as evaluating the overall financial statement presentation. 
We believe that our audits provide a reasonable basis for our opinion.          

In our opinion, the financial statements referred to above present fairly, in   
all material respects, the consolidated financial position of TeleVideo Systems,
Inc. and Subsidiaries as of October 31, 1996 and 1995, and the consolidated     
results of their operations and their consolidated cash flows for each of the   
three years in the period ended October 31, 1996, in conformity with generally  
accepted accounting principles.                                                 

/s/ GRANT THORNTON LLP                                                          
----------------------                                                          
GRANT THORNTON LLP                                                              

San Jose, California                                                            
December 20, 1996                                                               

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 TELEVIDEO SYSTEMS, INC.

 CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

                                                        [Enlarge/Download Table]


                                                                                 October 31,      
                                                                         ------------------------ 
                                               ASSETS                      1996            1995   
                                                                         --------        -------- 
                                                                                                  
CURRENT ASSETS:                                                                                   
   Cash and cash equivalents (including restricted cash of                                        
     $2,500 in 1996 and $3,500 in 1995)                                  $  4,496        $  5,145 
   Marketable securities                                                       --              40 
   Accounts receivable, less allowance of $888 in 1996 and $478 in 1995     4,394           3,593 
   Receivables from related parties,                                                              
       net of allowance of $391 in 1996 and $363 in 1995                       --           1,441 
   Inventories                                                              5,834           5,735 
   Prepayments and other                                                       62             336 
   Note receivable from sale of building                                    5,000              -- 
                                                                         --------        -------- 
         Total current assets                                              19,786          16,290 
                                                                         --------        -------- 

PROPERTY, PLANT AND EQUIPMENT:                                                                    
   Land                                                                       890             890 
   Building                                                                 1,035           1,035 
   Production equipment                                                     1,263           1,181 
   Office furniture and equipment                                           1,753           1,757 
   Building improvements                                                    1,105           1,098 
                                                                         --------        -------- 
                                                                            6,046           5,961 
   Less accumulated depreciation and amortization                           2,968           2,705 
                                                                         --------        -------- 
         Property, plant and equipment, net                                 3,078           3,256 

NOTE RECEIVABLE FROM SALE OF BUILDING                                          --           5,000 

INVESTMENTS IN AFFILIATES                                                     226              54 
                                                                         --------        -------- 
         Total assets                                                    $ 23,090        $ 24,600 
                                                                         ========        ======== 

                      LIABILITIES AND STOCKHOLDERS' EQUITY                                        
CURRENT LIABILITIES:                                                                              
   Accounts payable                                                      $  3,080        $  1,662 
   Accrued liabilities                                                        855             982 
   Income taxes                                                               611             611 
                                                                         --------        -------- 
         Total current liabilities                                          4,546           3,255 
                                                                         --------        -------- 

STOCKHOLDERS' EQUITY:                                                                             
   Common stock, $.01 par value;                                                                  
     Authorized--75,000,000 shares                                                                
     Outstanding--45,402,245 shares in 1996 and 45,148,120                                        
       shares in 1995                                                         454             451 
   Additional paid-in capital                                              95,634          95,560 
   Unrealized loss on marketable securities                                    --             (39)
   Accumulated deficit                                                    (77,544)        (74,627)
                                                                         --------        -------- 
         Total stockholders' equity                                        18,544          21,345 
                                                                         --------        -------- 
         Total liabilities and stockholders' equity                      $ 23,090        $ 24,600 
                                                                         ========        ======== 

The accompanying notes are an integral part of these financial statements.

                                                                              20

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 TELEVIDEO SYSTEMS, INC.

 CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

                                                                [Download Table]


                                             Year Ended October 31,          
                                    ---------------------------------------- 
                                      1996            1995            1994   
                                    --------        --------        -------- 
                                                                             
NET SALES                           $ 21,576        $ 16,914        $ 13,232 

COST OF SALES                         20,627          14,773           9,517 
                                    --------        --------        -------- 

GROSS PROFIT                             949           2,141           3,715 

OPERATING EXPENSES:                                                          
   Marketing                           2,428           3,185           2,268 
   Research and development            1,097           1,821           1,636 
   General and administration          2,062           1,876           1,680 
                                    --------        --------        -------- 

         Total operating expenses      5,587           6,882           5,584 
                                    --------        --------        -------- 

         Loss from operations         (4,638)         (4,741)         (1,869)

GAIN ON SALE OF BUILDING                  --           1,350              -- 

GAIN ON SALES OF INVESTMENTS IN                                              
   UNCONSOLIDATED AFFILIATES           1,369           3,329              -- 

LOSS FROM SALE OF SMS PRODUCT LINE        --            (346)             -- 

EQUITY IN LOSS OF AFFILIATE              (33)             --              -- 

INTEREST AND OTHER INCOME, net           385             823             962 
                                    --------        --------        -------- 

         Net income (loss)          $ (2,917)       $    415        $   (907)
                                    ========        ========        ======== 

Net income (loss) per share         $  (0.06)       $   0.01        $  (0.02)
                                    ========        ========        ======== 

Average shares outstanding            45,328          44,878          44,624 
                                    ========        ========        ======== 

The accompanying notes are an integral part of these financial statements.

                                                                              21

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 TELEVIDEO SYSTEMS, INC.

CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
(IN THOUSANDS)

 THREE YEARS ENDED
 OCTOBER 31, 1996, OCTOBER 31, 1995 AND OCTOBER 31, 1994

                                                        [Enlarge/Download Table]


                                                 Common Stock      Additional                 Earnings/     Total     
                                               ------------------    Paid in     Other     (Accumulated  Stockholders'
                                               Shares      Amount    Capital   Adjustment     Deficit)      Equity    
                                               ------      ------    -------   ----------     --------     --------   
                                                                                                                      
Balance - October 31, 1993                     44,598       $446     $95,418      $  9        $(74,135)    $ 21,738   

   Equity adjustment from foreign                                                                                     
     currency translation                          --         --          --        (9)             --           (9)  

   Exercise of employee stock options              43         --          10        --              --           10   

   Net loss                                        --         --          --        --            (907)        (907)  
                                               ------       ----     -------      ----        --------     --------   

Balance - October 31, 1994                     44,641        446      95,428        --         (75,042)      20,832   

   Unrealized loss from marketable securities      --         --          --       (39)             --          (39)  

   Exercise of employee stock options             507          5         132        --              --          137   

   Net income                                      --         --          --        --             415          415   
                                               ------       ----     -------      ----        --------     --------   

Balance - October 31, 1995                     45,148        451      95,560       (39)        (74,627)      21,345   

   Unrealized loss from marketable securities      --         --          --        39              --           39   

   Exercise of employee stock options             254          3          74        --              --           77   

   Net loss                                        --         --          --        --          (2,917)      (2,917)  
                                               ------       ----     -------      ----        --------     --------   
Balance - October 31, 1996                     45,402       $454     $95,634      $ --        $(77,544)    $ 18,544   
                                               ======       ====     =======      ====        ========     ========   

The accompanying notes are an integral part of this financial statement.

                                                                              22

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 TELEVIDEO SYSTEMS, INC.

 CONSOLIDATED STATEMENTS OF CASH FLOWS

(IN THOUSANDS)

                                                        [Enlarge/Download Table]

                                                                            Year Ended October 31,      
                                                                       ------------------------------   
                                                                       1996         1995         1994   
                                                                       ----         ----         ----   
                                                                                                        
INCREASE (DECREASE) IN CASH:                                                                            
CASH FLOWS FROM OPERATING ACTIVITIES:                                                                   
    Net Income (Loss)                                               $  (2,917)   $     415     $   (907)
       Charges (credits) to operations not affecting cash:                                              
          Provision for bad debts                                         410          383           14 
          Provision for excess and obsolete inventories                    50          610          366 
          Net loss (gain) on sales of property and investment              44       (1,350)           - 
          Depreciation and amortization                                   275          320          506 
          Interest income accrued                                           -          (77)           - 
          Accrued profit on sale of foreign investment                      -         (866)           - 
          Loss on write off of foreign investments and loans               95          403            - 
       Changes in operating assets and liabilities:                                                     
          Accounts receivable                                          (1,211)      (1,810)         478 
          Inventories                                                    (149)        (588)      (2,224)
          Prepayment and other                                            274         (128)        (121)
          Accounts payable                                              1,418          299          638 
          Accrued liabilities and royalties                              (126)        (257)        (622)
          Current and deferred income taxes                                 -            -       (1,544)
                                                                    ---------    ---------     -------- 
              Net cash used in operating activities                    (1,837)      (2,646)      (3,416)
                                                                    ---------    ---------     -------- 
CASH FLOWS FROM INVESTING ACTIVITIES:                                                                   

    Additions to property, plant and equipment                            (98)      (3,286)         (91)
    Reduction (investment) in marketable securities                        35          (11)       3,487 
    Loans to affiliate and other                                            -         (184)      (3,142)
    Reduction (increase) in investments                                  (205)         187          173 
    Payments received on notes receivable from affiliate and other        513        3,321        1,971 
    Proceeds from sales of property and investment                        866        5,496            - 
                                                                    ---------    ---------     -------- 
                 Net cash provided by investing activities              1,111        5,523        2,398 
                                                                    ---------    ---------     -------- 
CASH FLOWS FROM FINANCING ACTIVITIES:                                                                   

    Proceeds from issuance of common stock                                 77          137           10 
    Equity adjustment from foreign currency translation                     -            -           (9)
                                                                    ---------    ---------     ---------
              Net cash provided by financing activities                    77          137            1 
                                                                    ---------    ---------     -------- 
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS                         (649)       3,014       (1,017)

CASH AND CASH EQUIVALENTS AT THE BEGINNING                                                              
    OF THE YEAR                                                         5,145        2,131        3,148 
                                                                    ---------    ---------     -------- 

CASH AND CASH EQUIVALENTS AT THE END OF THE YEAR                    $   4,496    $   5,145     $  2,131 
                                                                    =========    =========     ======== 

Supplemental disclosure of cash flow information:                                                       
Cash paid during the year for:                                                                          

       Income taxes                                                 $       -    $       -     $  1,544 

The accompanying notes are an integral part of these financial statements.

                                                                              23

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 TELEVIDEO SYSTEMS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

 OCTOBER 31, 1996, 1995 AND 1994

1.  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:                                 

Principles of Consolidation                                             

 The consolidated financial statements include the accounts of the Company
and certain of its majority owned subsidiaries, after elimination of    
  intercompany accounts and transactions. The Company's investments in joint
   ventures in the Commonwealth of Independent States, some of which represent
 a majority interest in the joint venture, are not consolidated due to the
    lack of reliable financial information from the entity. Such investments are
carried at cost. (See "Joint Ventures.")                                

Revenue Recognition                                                     

The Company recognizes revenue when products are shipped. The Company   
performs periodic evaluations of its customers' financial condition and 
generally, no collateral is required under normal sales terms. TeleVideo
maintains a reserve for potential credit losses and adjusts the reserve 
periodically to reflect both actual and potential credit losses. Product
  warranties are based on the ongoing assessment of actual warranty expenses
incurred. Reserves for product warranties were $169,000, $169,000 and   
$173,000 as of October 31, 1996, 1995 and 1994, respectively.           

Net Income (Loss) Per Share                                             

Net income (loss) per share is based on the weighted average number of  
   common shares and dilutive common share equivalents outstanding during each
period.                                                                 

Cash and Cash Equivalents                                               

    The Company considers all highly liquid investments with original maturities
of three months or less to be cash equivalents.                         

Use of Estimates                                                        

In preparing financial statements in conformity with generally accepted 
accounting principles, management is required to make estimates and     
  assumptions that affect the reported amounts of assets and liabilities and
the disclosure of contingent assets and liabilities at the date of the  
   financial statements, as well as revenues and expenses during the reporting
period. Actual results could differ from those estimates.               

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Inventories                                                             

    Inventories are stated at the lower of cost or market. Cost is computed on a
    currently adjusted standard basis (which approximates average cost) for both
finished goods and work-in-process and includes material, labor and     
    manufacturing overhead costs. The cost of purchased parts is determined on a
first-in, first-out basis. Amounts shown are net of reserves for        
obsolescence of $663,000 and $613,000 in 1996 and 1995, respectively:   

                                                                [Download Table]

                                                 October 31,      
                                            --------------------- 
                                               1996         1995  
                                            ---------    ---------
                                                                  
Purchased parts and subassemblies           $   4,040    $   3,390
Work-in-process                                   422        1,170
Finished goods                                  1,372        1,175
                                            ---------    ---------

                                            $   5,834    $   5,735
                                            =========    =========

Property, Plant and Equipment                                           

  Depreciation and amortization are provided over the estimated useful lives
of the assets using both straight-line and accelerated methods.         

                                                                [Download Table]
                                                    
Building                                  40 years  
Production equipment                      1-10 years
Office furniture                          1-10 years

2.  ACQUISITIONS AND DIVESTITURES:                                              

Kabil Electronics Company, Ltd.                                         

    The Company owned a 35% interest in Kabil Electronics Company, Ltd. of South
    Korea and the total investments were approximately $3.3 million. Since Kabil
continued to sustain losses from operations, the Company wrote off its  
 investments in fiscal 1990 and fiscal 1993. In December 1994, the Company
  accepted an offer to sell its 35% interest in Kabil to the majority owners
for $1.5 million, less expenses, which was paid in installments over the
 1995 and 1996 fiscal years. Approximately $555,000 was received in fiscal
 1995. An additional $866,652 was received in January of 1996 and had been
accrued as income for the year ended October 31, 1995.                  

AdMOS Technologies Inc.                                                 

During fiscal 1991, the Company acquired through its wholly owned       
    subsidiary, Silicon Logic, Inc., a 20% equity interest in a chip engineering
   firm (AdMOS Technologies Inc.) in exchange for certain assets and a nominal
    cash payment, the total value of which was $145,000. The acquisition of this
interest had been accounted for on the cost method. This investment was 
written off in fiscal 1992 due to the continued economic difficulties   
experienced by AdMOS.                                                   

    In fiscal 1991 and 1992, the Company loaned AdMOS a total of $470,000, which
  has been partially repaid. The outstanding balance at October 31, 1996 was
  $104,000. The repayment of a portion of this loan is personally guaranteed
   by the President and controlling shareholders of AdMOS. Due to the economic
difficulties AdMOS is currently experiencing, the principal and interest
balances due on this note have been fully reserved.                     

  In February 1995, the Company further loaned AdMOS $384,000 at an interest
  rate of 10% per annum. Approximately $104,000 was repaid to the Company in
August 1995. In November 1995, the Company                              

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received another $100,000 from AdMOS. The Company has fully reserved the
unpaid balance of $180,000 plus accrued interest as of October 31, 1996.

Russian Joint Ventures                                                  

In fiscal 1994, 1995 and 1996, the Company acquired interests in various
  joint ventures, primarily in the Commonwealth of Independent States. These
investments are accounted for on the cost method.                       

Three H                                                                 

Three H Partners (owned equally by TeleVideo and a Russian entity) was  
   formed in fiscal 1991 and the initial investment was $16,000. In July 1996,
the Company further invested $60,000 in the joint venture.              

   In February 1993, the Company loaned the Three H joint venture $1.0 million
as working capital for the purpose of conducting short term commodities 
trading. The loan was unsecured and bore interest at 20% per annum. In  
fiscal 1994, a total amount of $800,000 was repaid to the Company. The  
remaining balance of $200,000 was received in fiscal 1996.              

InterTerminal                                                           

  In April 1994, the Company acquired a 51% ownership of the "InterTerminal"
  joint venture in exchange for a $5,100 cash investment and a commitment to
    fund a $3.65 million loan, 20% interest rate, interest free for one year, to
    the venture. The main purpose of the joint venture was the construction of a
 truck terminal (approximately 100,000 square feet) approximately 25 miles
outside of Moscow, and the construction was complete in early 1995.     
TeleVideo sold its 51% ownership in May 1995. The $3.65 million loan was
   repaid to the Company in fiscal 1995. An additional $1,369,500 was received
and recognized as a gain in fiscal 1996.                                

TeleVideo-RUS                                                           

 In January 1996, TeleVideo set up a company called "TeleVideo-RUS" in the
  Commonwealth of Independent States with an initial investment of $150,000.
 The main purpose of this company is to act as a liaison between TeleVideo
and the authorities in the CIS. One of the projects that the Company is 
anticipating will be the construction of truck terminals similar to the 
"InterTerminal" joint venture.                                          

Risks of Operations in the Commonwealth of Independent States           

    There are a number of risks involved in TeleVideo's participation in foreign
joint ventures located in the Commonwealth of Independent States. These 
   risks include the ability to execute and enforce the agreements, the future
   regulations governing the repatriation of funds, the political and economic
instability and the dependence on future events which can influence the 
   success or failure of the ventures and, thus, may affect the recoverability
   of the amounts invested by TeleVideo. Management of the Company is aware of
   the attendant risks relating to these ventures and continually monitors the
  conditions in the CIS and the activities of the joint ventures. Management
further believes the investments to be secure and thus no reserves are  
required as of October 31, 1996. However, there can be no assurance that
conditions in the CIS will not deteriorate and place the Company's      
investment in jeopardy.                                                 

3.  LETTER OF CREDIT AGREEMENT:                                                 

  The Company has two letter of credit agreements with the banks whereby the
   banks will issue up to a total of $2.5 million of standby and sight letters
    of credit. These agreements are contingent upon the Company maintaining cash
deposits at the banks as collateral in a total amount no less than the  
outstanding borrowings. At October 31, 1996, the Company had letters of 
   credit outstanding of approximately $2.1 million which were secured by cash
deposits of $2.5 million. These deposits earn interest at the rate of   
approximately 5.205% per annum.                                         

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4.  RELATED PARTY TRANSACTIONS:                                                 

During 1996, 1995, and 1994 the Company has had transactions with its   
affiliates as follows (in thousands):                                           

                                                                [Download Table]

                                             1996         1995         1994  
                                          ---------    ---------    ---------
                                                                             
Note receivable at October 31:                                               
    AdMOS  (1)                            $     104    $     104    $     200
    AdMOS  (1)                                  180          280            -
    Kabil                                         -          866            -
    Three H Joint Venture                         -          200          200
    InterTerminal                                 -          213        3,284

Interest receivable at October 31:                                           

    AdMOS  (1)                                   65           55           42
    AdMOS  (1)                                   42           24            -
    Three H Joint Venture                         -           62           22

(1) Amounts are fully reserved.                                              

5.  CAPITAL STOCK:                                                              

Preferred Stock                                                         

    The Company has authorized 3,000,000 shares of preferred stock. No preferred
stock has been issued to date.                                          

Stock Option Plans                                                      

The Company has granted options to employees and directors to purchase  
 shares of the Company's common stock at fair value under a qualified 1981
  Incentive Stock Option Plan and at not less than 85% of fair value under a
non-qualified 1981 Supplemental Stock Option Plan. These options may be 
   exercised ratably over periods of five years, generally commencing one year
 from the date of employment. The options typically expire five years from
the date of grant.                                                      

Information with respect to these plans is as follows:                  

                                                                [Download Table]

                                 1981 Incentive Stock   
                                     Option Plan        
                             ---------------------------
                                                  Option
                              Outstanding         Prices
                             --------------      -------
                                                        
Balance at October 31, 1994        420,000       $ 0.22 

    Exercised                     (379,125)        0.22 
    Terminated or canceled         (19,250)        0.22 
                             --------------             

Balance at October 31, 1995         21,625        $0.22 

    Exercised                       (9,000)        0.22 
    Terminated or canceled               -            - 
                             -------------              

Balance at October 31, 1996         12,625        $0.22 
                             =============              

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                                                                [Download Table]

                                              1981 Supplemental Plan    
                                          ------------------------------
                                                               Option   
                                           Outstanding         Prices   
                                          -------------    -------------
                                                                        
Balance at October 31, 1994                     205,000    $0.19 - $0.22

    Exercised                                    (5,000)            0.22
    Terminated or canceled                      (50,000)            0.19
                                          -------------                 

Balance at October 31, 1995                     150,000            $0.22

    Exercised                                         -                 
    Terminated or canceled                            -                 
                                          -------------                 
Balance at October 31, 1996                     150,000            $0.22
                                          =============                 

On November 22, 1991, all options granted and outstanding under both the
   1981 incentive and supplemental plans with a grant price in excess of $0.22
were repriced at $0.22 per share, the fair market value of the shares at
that date.                                                              

   At October 31, 1996, options to purchase 12,625 shares of common stock were
  exercisable under the 1981 Incentive Stock Option Plan at a price of $0.22
    per share. At October 31, 1996, options to purchase 150,000 shares of common
 stock were exercisable under the 1981 Supplemental Stock Option Plan at a
price of $0.22 per share.                                               

 Both the Incentive Stock Option Plan and the Supplemental Plan expired on
October 28, 1991. Pursuant to the provisions of the plans, no further   
options may be granted after the October 28, 1991 expiration date.      

The Company may also grant options to employees and outside directors to
  purchase up to 4,000,000 shares and 600,000 shares of the Company's common
stock at fair value under a 1991 Incentive Stock Option Plan and a 1992 
Outside Directors' Stock Option Plan, respectively. These options may be
exercised ratably over periods of five years, generally commencing six  
  months from the date of grant. The options typically expire ten years from
    the date of grant. No options have been granted under the Outside Directors'
Plan.                                                                   

Information in respect to the 1991 Incentive Stock Option Plan is as    
follows:                                                                

                                                                [Download Table]


                                     1991 Incentive Stock Option Plan        
                             ------------------------------------------------
                                Available                           Option   
                                for Grant       Outstanding         Prices   
                             -------------     -------------    -------------
                                                                             
Balance at October 31, 1994      2,903,500         1,096,500    $0.25 - $0.72

    Granted                     (1,823,500)        1,823,500     0.28 -  1.53
    Exercised                            -          (123,000)    0.25 -  0.72
    Terminated or canceled         133,875          (133,875)    0.25 -  0.72
                             -------------     -------------                 

Balance at October 31, 1995      1,213,875         2,663,125    $0.25 - $1.53

    Granted                       (829,000)          829,000     0.38 -  0.75
    Exercised                            -          (245,125)    0.25 -  0.72
    Terminated or canceled       1,916,000        (1,916,000)    0.28 -  1.53
                             -------------     -------------                 

Balance at October 31, 1996      2,300,875         1,331,000    $0.25 - $1.03
                             =============     =============                 

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    At October 31, 1996, options to purchase 329,750 shares of common stock were
exercisable under the 1991 Incentive Stock Option Plan at prices ranging
from $0.25 to $1.03 per share.                                          

6.  INCOME TAXES:                                                               

    At October 31, 1996, the Company had tax loss carryforwards of approximately
  $86 million for federal income tax and approximately $26 million for state
income tax reporting purposes, respectively. The net operating loss     
carryforwards expire through fiscal 2011. The Tax Reform Act of 1986    
   contains provisions which may limit the net operating loss carryforwards to
be used in any given year upon occurrence of certain events, including  
significant changes in ownership interests.                             

The Company adopted, effective November 1, 1993, Statement of Financial 
  Accounting Standards (SFAS) No. 109, "Accounting for Income Taxes," issued
    in February 1992. Under the liability method specified by SFAS 109, deferred
 tax assets and liabilities are determined based on the difference between
   the financial statement and tax bases of assets and liabilities as measured
by the enacted tax rates which will be in effect when these differences 
reverse. Deferred tax expense is the result of changes in deferred tax  
assets and liabilities.                                                 

 No deferred tax asset or benefit was recorded at October 31, 1996, as all
amounts have been fully reserved. The components are as follows: (in    
  thousands). The valuation allowance has increased by $6,780 and $3,170 for
the 1996 and 1995 fiscal years.                                         

                                                                [Download Table]

                                           1996             1995   
                                           ----             ----   

                                                                   
Net operating loss                      $  34,500        $  27,900 
Other                                       1,150              970 
                                        ---------        --------- 
                                           35,650           28,870 

Less valuation allowance                  (35,650)         (28,870)
                                        ----------       --------- 

       Net benefit                      $       -        $       - 
                                        =========        ========= 

The following is a reconciliation of expected tax expense (benefit) to  
actual for each of the three years ended October 31 (in thousands):     

                                                        [Enlarge/Download Table]

                                                                   1996        1995         1994   
                                                                ---------   ---------   ---------- 

                                                                                                   
Book income (loss)                                              $  (2,917)  $     415   $     (907)
                                                                ---------   ---------   ---------- 

Expected tax expense (benefit)                                     (1,160)        167         (308)

Adjustments to reconcile expected to actual expense (benefit):                                     

       Effect of change in valuation allowance (net)                1,160        (167)         308 
                                                                ---------   ---------   ---------- 

    Actual tax expense (benefit)                                $       -   $       -   $        - 
                                                                =========   =========   ========== 

    The Company has been in various stages of federal and state income and sales
   tax audits for the past several years. The federal income tax audit for the
   taxable years of 1982 through 1985 were finalized in fiscal 1994. The total
   tax liability, plus interest and penalty, aggregated $1.53 million, and the
    total payment was made by the Company in November 1993. The California Sales
 and Use Tax audit for the period of April 1990 through June 1994 was also
 finalized. In fiscal 1995, tax payments including penalty and interest of
  approximately $270,000 were made, all of which had been previously accrued
by the Company in prior years.                                          

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   As of October 31, 1996, the only issues pending are the Massachusetts State
Tax audit and the California Franchise Tax exposure resulting from the  
aforementioned Federal Income Tax audits. The Company believes that a   
    resolution of one or both of these audits could occur in fiscal 1997 and its
maximum exposure, collectively will not exceed $600,000. The Company has
accrued this full amount at October 31, 1996.                           

7.  LITIGATION AND OTHER:                                                       

The Company has been named, along with dozens of other manufacturers,   
designers, and distributors of computer equipments, as a defendant in   
   several lawsuits regarding product liability in connection with the alleged
    defective design of computer terminal keyboards and the size of the computer
 monitor screens. The first issue alleges that the various plaintiffs have
 suffered some form of severe wrist injury from the use of said keyboards.
    The second issue alleges that there was false advertising which claimed that
   the video screens were 17 inches in size, when in reality they were only 15
   inches. The Company's attorneys have prepared a defense for these cases and
    the Company's insurance carriers are informed of the plaintiff's claims. The
    Company intends to vigorously defend against the allegations of these suits.
Management believes that the ultimate outcome of these lawsuits will not
have a material adverse effect on the Company's financial position.     

8.  SEGMENT INFORMATION:                                                        

   The Company, which operates in a single industry segment, designs, produces
and markets video display terminals, computer monitors and multimedia   
products designed for office and home automation both domestically and  
   internationally. The Company had export sales primarily to Europe, Asia and
Latin America of approximately $3.41 million, $4.13 million and $3.63   
million during fiscal 1996, 1995, and 1994, respectively. For the fiscal
  year ended October 31, 1996, one customer accounted for 10.23% and another
    customer accounted for 8.80% of net sales. For the fiscal year ended October
    31, 1995, one customer accounted for 6.6% and another customer accounted for
   6.0% of net sales. For the fiscal year ended October 31, 1994, one customer
  accounted for 18.5% and another customer accounted for 10.1% of net sales.

9.  SIGNIFICANT FOURTH QUARTER ADJUSTMENTS:                                     

The Company recorded the following significant adjustments in the fourth
quarter of fiscal 1996: (in thousands)                                  

                                                                [Download Table]

                                           Effect on Net Income
                                            Increase (Decrease)
                                            -------------------

                                                               
Reserve for bad debt allowance                  $    (760)     
Reserve for obsolete and excess inventory            (918)     
                                                ---------      
                                                $  (1,678)     

  The above adjustments affected the fourth quarter results of operations as
follows: increased cost of goods sold by $918,000, increased general and
administrative expenses by $760,000, for a total increase in loss from  
operations of $1,678,000.                                               

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10. NOTE RECEIVABLE:                                                            

The $5.0 million note receivable from the sale of the Company's former  
 headquarters was collateralized by a first deed of trust on the building.
The interest was payable monthly at 9.5% per annum and the principal was
paid in full on December 12, 1996.                                      

11. ACCRUED LIABILITIES:                                                        

   Accrued liabilities consist of the following at October 31:  (In thousands)

                                                                [Download Table]

                                                    1996         1995   
                                                  ---------    ---------

                                                                        
Employee compensation and benefits                $     288    $     338
Warranty                                                169          169
Legal reserve                                           200          200
Accrued sales and use tax                                11            -
Professional fees                                        81           91
Other                                                   106          184
                                                  ---------    ---------

                                                  $     855    $     982
                                                  =========    =========

12. VALUATION AND QUALIFYING ACCOUNTS:                                          

The Company's reserves for doubtful accounts and inventory obsolescence 
consist of the following:  (In thousands)                               

                                                        [Enlarge/Download Table]

                                                     Charged                             
                                       Balance at  (Credited)                  Balance at
                                        Beginning  to Costs &                   End of   
                                        of Period    Expense     Deductions     Period   
                                       ----------  ----------    ----------    ----------
                                                                                         
YEAR ENDED OCTOBER 31, 1994                                                              
   Reserve for doubtful accounts       $   725      $     14   $    (209)(1)  $  530     
   Reserve for inventory obsolescence  $ 2,560      $    366   $  (2,164)(2)  $  762     

YEAR ENDED OCTOBER 31, 1995:                                                             
   Reserve for doubtful accounts       $   530      $    383   $     (72)(1)  $  841     
   Reserve for inventory obsolescence  $   762      $    610   $    (759)(2)  $  613     

YEAR ENDED OCTOBER 31, 1996:                                                             
   Reserve for doubtful accounts       $   841      $    760   $    (321)(1)  $1,280     
   Reserve for inventory obsolescence  $   613      $    918   $    (868)(2)  $  663     

 (1)  Deductions represent write-offs of fully reserved receivables.
(2)  Reductions due to sales or scrap of fully reserved inventory.

                                                                              31

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13. SUBSEQUENT EVENTS:                                                          

       In November 1996, the Company invested $150,000 in exchange for a 20%
ownership in TLK, Inc. for the China Power Plant projects in Lin Zhang, Quin    
Yuan and Henan Provinces in China. The Company expects to have a return on      
investment within the next twelve months.                                       

    In December 1996, the Company received $100,000 from AdMOS for the
partial payment of the $284,000 outstanding loans.                              

ITEM 9: CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND         
FINANCIAL DISCLOSURE.                                           

NONE.                                                                           

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                                                                              32

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PART III

ITEM 10.      DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.               

DIRECTORS AND EXECUTIVE OFFICERS                                                

       The Directors and executive officers of the Company as of January 21,
1997, are as follows:                                                           

                                                                [Download Table]

      Name             Age                  Title                      
--------------------  ------  ---------------------------------------- 
                                                                       
 K. Philip Hwang        60    Chairman of the Board and                
                              Chief Executive Officer                  

 K. David Kim           63    Vice President, Business Development, and
                              Chief Financial Officer                  

 Kristine Kim           32    Vice President of Sales                  

 Anthony Thia           30    Vice President of Marketing              

 Robert E. Larson       58    Director                                 

 Stephen S. Kahng       47    Director                                 

         Dr. K. Philip Hwang is the founder of the Company and has been Chairman
of the Board and Chief Executive Officer since October 1976. From August 8, 1990
to April 6, 1991, he served as the Acting Chief Financial Officer. Since 1991,  
Dr. Hwang has also served as Chairman of AdMOS (Advanced MOS Systems), an       
engineering firm specializing in ASIC chip design. ADMOS is a private           
corporation in which TeleVideo holds a 20% interest.                            

       Mr. David Kim rejoined the Company in January 1991 as Vice President,
Business Development, and since April 6, 1991, he has served as the Company's   
Chief Financial Officer. Mr. Kim was with the Company from 1981 to 1987 as      
Director of Terminal Manufacturing Operations and in 1988, he was appointed as  
Vice President, International Operations. From July 1988 to January 1991, Mr.   
Kim was Executive Vice President of Kabil Electronics Co., Ltd., a TeleVideo OEM
of CRT terminals and personal computers in Seoul, Korea.                        

        Ms. Kristine Kim has been serving TeleVideo since January 1988 and has
successfully managed various Sales and Marketing Departments. She was promoted  
to Vice President of Sales and was elected as a member of the Board in February 
1996. In May 1992, she achieved her MBA degree in International Corporate       
Management and Professional Export Management at Golden Gate University of      
California. Ms. Kim also has a BA degree in Economics and International         
Relations from UC Davis.                                                        

Mr. Anthony Thia joined TeleVideo as VP of Marketing in       
August 1996. Prior to coming to TeleVideo, Mr. Thia was the Director of         
Marketing at ASI (Asia Source Inc), a national PC distributor headquartered in  
California, from 1994 to 1996. From 1990 to 1994, Mr. Thia was the Sales and    
Marketing Manager at ASI. Mr. Thia holds a B.S. in Computer Science             
from Iowa State University.                                                     

     Dr. Robert E. Larson joined the Company as a member of the Board of
Directors effective December 1, 1989. Since September 1983, he has served as    
General Partner of Woodside Fund, a venture capital fund, and since September   
1985, he has been a member of the Board of Directors of Skye Investment         
Advisers, a registered investment advisor firm. Since 1973, Dr. Larson has been 
a Consulting Professor in the Engineering-Economic Systems Department at        
Stanford University.                                                            

                                                                              33

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     Mr. Stephen S. Kahng joined the Company as a member of the Board of
Directors effective November 28, 1994. Since November 1993, Mr. Kahng has been  
the President and Chief Executive Officer of Power Computing Corporation which  
manufactures Power PC-based workstations. From December 1991 to November 1993,  
he served as the President of Up To Date Technology, Inc. which is a system     
design consulting company to the personal computer industry. Prior thereto, from
September 1987 until December 1991, Mr. Kahng was the Senior Vice President and 
General Manager of Chips and Technologies, Inc. which was a supplier of ASICs to
the personal computer industry.                                                 

       There are no family relationships among any of the Company's officers
and directors.                                                                  

The following items included in the Company's Definitive Proxy
Statement dated February 17, 1997 to be used in connection with the Company's   
Annual Meeting of Stockholders to be held on March 24, 1997 are incorporated    
herein by reference:                                                            

                                                        [Enlarge/Download Table]

                                                                            Pages in    
                                                                         Proxy Statement
                                                                         ---------------
                                                                                        
ITEM 11. EXECUTIVE COMPENSATION                                                 8       

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT         5       

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS                        10       

                                                                              34

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 PART IV
 -------

ITEM 14.      EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K.  

(a)      The following documents are filed as part of this Report.              

1.       Financial Statements.                                

        The Consolidated Financial Statements, Notes thereto and the Report of
Grant Thornton LLP, Independent Public Accountants, thereon are included in Part
II of this Report on Form 10-K.                                                 

2.       Financial Statement Schedules.                       

       All schedules have been omitted since the required information is not
present in amounts sufficient to require submission of the schedule, or because 
the information required is included in the accompanying Consolidated Financial 
Statements.                                                                     

3.       Exhibits.  See Exhibit Index, below.                 

(b)      Reports on Form 8-K.       NONE                                        

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                                                                              35

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 EXHIBIT INDEX

                                                        [Enlarge/Download Table]

EXHIBIT                                                                                                           
NUMBER                                                                                                    FOOTNOTE
------                                                                                                    --------

                                                                                                                  
    3.1  Restated Certificate of Incorporation of the Company.............................................   (1)  

    3.2  Bylaws of the Company............................................................................   (1)  

   10.1  TeleVideo Systems, Inc. 1991 Incentive Stock Option Plan.........................................   (2)  

   10.2  Form of Stock Option Agreement for TeleVideo Systems, Inc. 1991 Incentive Stock Option Plan......   (2)  

   10.3  Televideo Systems, Inc. 1992 Outside Directors' Stock Option Plan................................   (2)  

   10.4  Management Bonus Plan effective fiscal 1984......................................................   (3)  

   10.5  Form Distributor and Licensing Agreement.........................................................   (2)  

   10.6  Form Original Equipment Manufacturer Agreement...................................................   (2)  

   10.8  Three H Promissory Notes.........................................................................   (4)  

   10.9  InterTerminal Agreements and Promissory Notes...................................................    (5)  

   22.0  Subsidiaries                                                                                             

   24.1  Consent of Grant Thornton LLP, Independent Certified Public Accountants                                  

   27.0  Financial Data Schedule                                                                                  

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

FOOTNOTES TO EXHIBIT INDEX                                                      

(1)      Incorporated by reference from the corresponding exhibit description in
    the Company's annual report on Form 10-K for the fiscal year ended
October 31, 1987, filed January 29, 1988.                     

(2)      Incorporated by reference from the corresponding exhibit description in
    the Company's annual report on Form 10-K for the fiscal year ended
October 31, 1991, filed January 27, 1992.                     

(3)      Incorporated by reference from the corresponding exhibit description in
       the Company's annual reports on Form 10-K, filed January 29, 1985 and
January 28, 1986, respectively.                               

(4)      Incorporated by reference from the corresponding exhibit description in
    the Company's annual report on Form 10-K for the fiscal year ended
October 31, 1993, filed February 10, 1994.                    

(5)      Incorporated by reference from the corresponding exhibit description in
    the Company's annual report on Form 10-K for the fiscal year ended
October 31, 1994, filed February 10, 1995.                    

                                                                              36

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SIGNATURES

       Pursuant to the requirements of Section 13 or 15(d) 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.                       

                                                 TELEVIDEO SYSTEMS, INC.
                                                ----------------------
                                                (REGISTRANT)

DATE:  JANUARY 21, 1997                        BY:       /s/ JOYCE YAU          
                                                ----------------------
                                                   JOYCE YAU
                                                   TREASURER

      Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the     
Registrant and in the capacities on the dates indicated.                        

                                                                [Download Table]

              SIGNATURE                      TITLE                DATE      
              ---------                      -----                ----      
                                                                            
/S/    K. PHILIP HWANG           CHAIRMAN OF THE BOARD AND  JANUARY 21, 1997
-------------------------        CHIEF EXECUTIVE OFFICER                    
       K. Philip Hwang                                                      

/S/    K. DAVID KIM              VICE PRESIDENT, BUSINESS   JANUARY 21, 1997
-------------------------        DEVELOPMENT, AND CHIEF                     
       K. David Kim              FINANCIAL OFFICER                          

/S/    KRISTINE KIM              VICE PRESIDENT OF SALES    JANUARY 21, 1997
-------------------------------                                             
       Kristine Kim                                                         

/S/    ROBERT E. LARSON          DIRECTOR                   JANUARY 21, 1997
-------------------------------                                             
       Robert E. Larson                                                     

/S/    STEPHEN S. KAHNG          DIRECTOR                   JANUARY 21, 1997
-------------------------------                                             
       Stephen S. Kahng                                                     

                                                                              37

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 TELEVIDEO SYSTEMS, INC.

EXHIBITS

TO

 REPORT ON FORM 10-K

 FOR

FISCAL YEAR ENDED OCTOBER 31, 1996

                                                                          38

Dates Referenced Herein   and   Documents Incorporated by Reference

				Referenced-On Page
This ‘10-K405’ Filing		Date		First		Last			Other Filings
		8/31/97		9
		3/24/97		2		34			DEF 14A,  PRE 14A
		2/17/97		34
Filed on:		1/29/97
		1/21/97		2		37
		12/20/96		19
		12/12/96		31
For Period End:		10/31/96		1		38
		10/31/95		6		31			10-K
		2/10/95		36
		12/12/94		14
		11/28/94		34
		10/31/94		6		36
		2/10/94		36
		11/1/93		29
		10/31/93		15		36
		1/27/92		36
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