<PAGE>
                              AVID TECHNOLOGY, INC.
                          Metropolitan Technology Park
                                  One Park West
                               Tewksbury, MA 01876




                                    March 26, 1998





OFIS Filer Support
SEC Operations Center
6432 General Green Way
Alexandria, VA 22312-2413


            Re:   Avid Technology, Inc.
                  File No. 0-21174
                  Annual Report on Form 10-K


Ladies and Gentlemen:

      Pursuant  to  regulations  of  the  Securities  and  Exchange  Commission,
submitted  herewith  for  filing  on  behalf  of Avid  Technology,  Inc.  is the
Company's  Annual  Report on Form 10-K for the fiscal  year ended  December  31,
1997.

      This filing is being effected by direct  transmission to the  Commission's
EDGAR System.


                                 Very truly yours,


                                 /s/ Frederic G. Hammond


                                 Frederic G. Hammond
                                 General Counsel


<PAGE>

- --------------------------------------------------------------------------------
                        SECURITIES AND EXCHANGE COMMISSION
                              WASHINGTON, D.C. 20549
                                     FORM 10-K
(MARK ONE)
   [X]           ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D)
             OF THE SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
                    FOR THE FISCAL YEAR ENDED DECEMBER 31, 1997
                                        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 0-21174

                               AVID TECHNOLOGY, INC.

              (Exact name of registrant as specified in its charter)

               DELAWARE                               04-2977748
         (State or other jurisdiction of              (I.R.S. Employer
         incorporation or organization)               Identification No.)

METROPOLITAN TECHNOLOGY PARK, ONE PARK WEST, TEWKSBURY, MA        01876
(Address of principal executive offices)                     (Zip Code)
                                  (978) 640-6789
               (Registrant's telephone number, including area code)


            SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT:
                                       None
            SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT:
                            Common Stock $.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 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

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. [ ]

The  aggregate  market value of the voting stock held by  non-affiliates  of the
registrant  was  approximately  $858,533,865  based on the closing  price of the
Common Stock on the NASDAQ National Market on March 18, 1998.

The number of shares  outstanding of the  registrant's  Common Stock as of March
18, 1998, was 23,269,527.

                        DOCUMENTS INCORPORATED BY REFERENCE
                  DOCUMENT DESCRIPTION                        10-K PART
      Portions of the Registrant's Proxy Statement for the Annual
         Meeting of Stockholders to be held May 19, 1998...      III
- -------------------------------------------------------------------------------

<PAGE>



                                     PART I


ITEM 1.    BUSINESS

Avid develops,  markets,  sells and supports a wide range of disk-based  systems
for creating and manipulating digital media content.  Avid's digital,  nonlinear
video and film editing systems are designed to improve the productivity of video
and film editors by enabling them to edit moving pictures and sound in a faster,
easier, more creative,  and more  cost-effective  manner than traditional analog
tape-based  systems.  Avid also develops and sells digital  editing  systems and
newsroom  computer  systems for creating  content in the digital news production
market for delivering  news content to air. Avid also develops and sells digital
audio  systems for the  professional  audio  market.  Avid's  products  are used
worldwide in production and post-production  facilities;  film studios; network,
affiliate,  independent,  and  cable  television  stations;  recording  studios;
advertising  agencies;  government and educational  institutions;  and corporate
video departments.

In January 1995, Avid effected a merger with  Digidesign,  Inc.  ("Digidesign").
Digidesign is a leading  provider of  computer-based,  digital audio  production
systems  for the  professional  music,  film,  broadcast,  multimedia,  and home
recording markets.  In March 1995, Avid acquired through merger Elastic Reality,
Inc.  ("Elastic  Reality"),  and Parallax  Software Limited and 3 Space Software
Limited (together  "Parallax  Software").  Elastic Reality and Parallax Software
now form Avid's graphics and effects group. This group develops a range of image
manipulation products that allow users in the video and film post-production and
broadcast  markets to create  graphics  and  special  effects for use in feature
films, television programs and advertising, and news programs.

The text of this document may include forward-looking statements. Actual results
may differ materially from those described herein,  depending on such factors as
are described  herein,  including under "Certain  Factors That May Affect Future
Results."

DIGITAL MEDIA CONTENT MARKETS

Digital media are media elements,  whether video or audio or graphics,  in which
the image, sound or picture is recorded and stored as digital values, as opposed
to analog  signals.  For  example,  a letter  prepared on a computer  using word
processing software is the digital media representation of a typewritten letter.
The word-processed  letter example also illustrates some of the  characteristics
of digital  media,  such as flexible  editing,  the ability to create  different
versions,  simple production of multiple  identical copies, and easy integration
with  other   digital  media  types,   such  as  charts  and   graphics.   These
characteristics  generally  provide  digital  formats with advantages over their
analog equivalents. However, creating and manipulating digital content typically
requires new digital  content  creation tools;  for example,  the typewriter has
given way to dedicated word processors and, more recently,  to desktop computers
running word processing software.

Digital  formats and tools have largely  displaced  analog  formats and tools in
many  markets,  such  as  word  processing,  electronic  spreadsheets,   desktop
publishing,  graphics,  and electronic and  mechanical  design.  Because of more
challenging  technical and cost hurdles in handling digital forms of film, video
and audio signals,  markets that rely on these media types have begun to migrate
to digital formats and tools only in recent years.

As technical  advances in digital  media content  creation  tools have made this
migration  possible,  users have become able to create more complex content that
may incorporate several elements of digital media. For example, many video games
now include live action video, detailed 3D graphics, and high quality audio, all
created,  manipulated,  and played back in digital form.  Feature films, such as
Titanic or Jurassic Park,  integrate  sophisticated  computer-generated  special
effects into traditional live action shots.

The Company participates  currently in three principal end-user markets in which
there are well-established analog, or tape-based, content creation processes and
which are transitioning to digital, or disk-based, content creation tools. These
three  markets are (i) video and film  editing and  effects;  (ii)  digital news
production; and (iii) professional audio.

Avid's video and film editing and effects market consists of professional  users
and users in the corporate office, government,  education, and consumer markets.
Professional  users  produce  video and film  material,  such as feature  films,
commercial spots, entertainment and documentary programming,  industrial videos,
and music videos.  These users are typically employed in independent  production
or  post-production  companies,  which are firms  that rent out  production  and
post-production  equipment and  professionals  on a project basis.  Professional
users are also found in television  facilities,  film studios, and certain large
corporations that perform digital media production and post production in-house.
Users in corporations  and various other  institutions use digital media content
tools to  distribute  information  enriched  by the  addition  of digital  media
content to their customers and employees.  Educational  users and home consumers
use  content  creation  tools to enrich  school and home  presentations.  Avid's
digital news production  market is comprised of over-the-air and cable broadcast
companies that originate news  programming.  This market  includes  national and
international broadcasters,  such as the British Broadcasting Corporation (BBC),
the Cable News Network (CNN),  and the National  Broadcasting  Company (NBC), as
well as network affiliates, local independent television stations, and local and
regional cable operators who produce news programming.

Avid's  professional  audio market is comprised of professional  music recording
studios, project studios, radio broadcasters,  and home studios. Music recording
and project studios operate in the same manner as the independent video and film
production  and post  production  firms,  as described  above.  This market also
includes audio production and post-production in video and film.

STRATEGY

Avid's  mission  is to be the  leading  provider  of  powerful  digital  content
creation  tools used to entertain and inform the world.  The Company's  strategy
consists of four key elements:

      Maintain Existing Markets:
      The Company  continues to focus its  activities  on markets  where digital
      media content  creation takes place. The Company has addressed its initial
      efforts to the professional video and film editing markets, including film
      and television  studios and  independent  production  and  post-production
      firms.  The  Company  extended  its target  markets to the music and audio
      production  and  post-production   markets,  through  the  acquisition  of
      Digidesign in 1995, and the broadcast news production market,  through the
      introduction of Avid-developed  digital news editing solutions and through
      the  acquisition in 1994 of SofTECH and the newsroom  systems  division of
      Basys Automation Systems, Inc. ("Basys"),  both of which offered broadcast
      newsroom  computer  systems.  In March 1995, Avid expanded its position in
      the feature film and video production and post-production  markets through
      the acquisitions of Elastic Reality and Parallax  Software,  developers of
      special effects software.

      Expand Presence in Existing Markets:
      The Company believes that it has established unit and revenue market share
      leadership  positions in the  professional  video and film digital editing
      markets,  the digital  audio  market,  and the  markets  for digital  news
      editing and  broadcast  newsroom  computer  systems.  The Company plans to
      strengthen  these  positions  by  enhancing  its  existing  products,   by
      developing  and  introducing  new products that satisfy a broader range of
      customer  needs in these  markets,  through  internal  development,  joint
      development with third parties or acquisition,  and by providing excellent
      customer service, support, and training.

      Target New Markets:
      The Company believes that many business  communications  needs,  including
      employee and customer training,  new product introduction,  and management
      communications,  can be enriched by  integrating  digital media  elements,
      including  video and audio.  As a result,  the  Company  intends to target
      users in corporations,  educational and government institutions, and small
      businesses   who,  if  offered   digital  media  content   creation  tools
      appropriate to their skill levels,  price constraints,  and other business
      requirements,  could  use  digital  media  presentations  in  their  daily
      operations   to   improve   the  power   and   scope  of  their   business
      communications.

      The company  believes that it is the market leader in off-line editing for
      television  and that  expansion  opportunity  exists in television  online
      editing,  which is the final  piece of the  post-production  process  that
      today is still  mainly  tape-based.  The  Company  believes  that  because
      digital solutions address the needs of this editing process,  tape will be
      replaced by digital solutions.

      Drive and Support Open Industry Standards:
      The  Company  designs  its  products  so that  they  are  based on and can
      co-exist with major industry-wide standards, including computer platforms,
      operating systems,  networking  protocols,  data compression,  and digital
      media  handling  formats.  In  addition,  in response to growing  customer
      demand for open standards  that enable the seamless  integration of analog
      and digital media tools from different vendors, the Company has undertaken
      an initiative to establish the Open Media Framework  Interchange  ("OMFI")
      as an industry  standard media file  interchange  format to facilitate the
      transfer of various media types, such as video,  audio,  animation,  film,
      and graphics,  among various  systems and  applications  used in the media
      production  processes.  The Company has published the OMFI file format and
      is seeking to promulgate it as an industry  standard.  Hundreds of vendors
      and end users  endorse  the OMFI  standard  and more than 40  vendors  are
      supporting the OMFI standard in their products.

PRODUCTS

The following lists the Company's products within the three principal markets in
which they are sold.  A  description  follows of the major  products and product
families in each of these categories.

Video and Film Editing and Effects

Media Composer:
The Media Composer system is Avid's original product offering and still accounts
for a significant  portion of its revenues.  The Company believes that the Media
Composer  product line holds a greater unit market share than any other  digital
non-linear  editing  system in  professional  video editing  markets.  The Media
Composer  product line now includes  four models (the Media  Composer  Off-line,
1000,  9000 and Media  Station),  which provide various levels of capability and
functionality.  The Media Composer is a disk-based  digital,  nonlinear  editing
system designed  primarily for use by professional  film and video editors.  The
Media Composer  system  converts  visual and audio source  material on tape to a
digital format and stores the converted material on a range of hard disk storage
devices. Once digitized,  the stored media can be previewed,  edited, and played
back.  The Media  Composer  family of  products  is used to create  high-quality
productions  such as television  shows and  commercials,  feature  films,  music
videos, corporate videos, and other non-broadcast finished videos.

Film Composer:
The Film Composer  system is a 24 frames per second  ("fps")  editing system for
projects  that  originate  and finish on film.  Film footage can be converted to
video signals for editing,  but because video runs at 30 fps and film at 24 fps,
a standard  30 fps video  editing  system will not yield an accurate 24 fps film
cut list from which to cut a master.  The Film Composer  includes  software that
determines  which frames on the videotape are actual frames from the film source
material and allows the creation of a frame accurate cut list. The Film Composer
software  also  includes  special  features to meet the  specific  needs of film
editors.  The Company  believes that Film  Composer  holds a greater unit market
share than any other digital  non-linear  editing  system in  professional  film
editing markets.

Avid Xpress for Macintosh:
Avid Xpress for  Macintosh  (formerly  known as  MCXpress  for  Macintosh)  is a
digital,   nonlinear  video  editing  system  designed  to  meet  the  needs  of
professional media entrepreneurs  involved with video and multimedia  production
for a variety  of  distribution  mediums  including  videotape,  CD-ROM  and the
Internet. Avid Xpress for Macintosh has a streamlined user interface and editing
model targeted for this category of user.  This attribute  allows existing Media
Composer  users to easily  migrate to Avid Xpress systems and provides media and
project interchange between the products.

MCXpress for Windows NT:
MCXpress for Windows NT is a digital,  nonlinear  video editing system  designed
for the same market as Avid Xpress for  Macintosh,  but is targeted to users who
prefer Windows NT-based  computers.  MCXpress for Windows NT offers professional
picture  quality  and editing  features,  support for  multiple  media  delivery
options,  AVI output,  integration  with  third-party  Windows  applications,  a
built-in titling tool, and a plug-in effects architecture.

Avid Cinema:
Avid Cinema is a desktop  editing  product  designed  for people who have had no
previous  video  editing  experience.  Avid Cinema is targeted at users in home,
school, and corporate environments.  A simple interface guides users through the
process of making their own,  near-VHS-quality movies to save to videotape,  put
in a slide presentation,  or post on a web page. These movies can include video,
transition effects,  narration,  titles and music. Avid Cinema currently employs
Apple's  QuickTime  technology  and  allows  users to save  QuickTime  files for
various distribution formats.

Media Illusion:
Media  Illusion is Avid's  digital  compositing,  layering  and special  effects
software   solution   running  on  Silicon  Graphics   computers.   It  provides
comprehensive  nonlinear compositing based on an intuitive,  interactive process
tree, that enables powerful and efficient  effects  creation.  Media Illusion is
used by professionals in both video and film post-production.

Matador:
Matador is a two-dimensional  ("2D")  post-production  paint software  solution.
Matador provides the user with painting, image treatment, rotoscoping, tracking,
and multi-layered 2D animation in a single,  resolution  independent system. The
Company  believes  that Matador holds a greater unit market share than any other
paint software in professional film and video special effects markets.

Elastic Reality:
Elastic Reality is a software solution that provides tools for performing 2D and
3D hierarchical animation,  character animation,  warping and morphing of shapes
and images, color correction and matte making, and compositing.  Elastic Reality
is based on Avid's proprietary  "shape-to-shape" morphing interface. The Company
believes  that Elastic  Reality holds a greater unit market share than any other
morphing and warping  software in  professional  film and video special  effects
markets.

Storage Systems:
Avid  offers  a family  of media  storage  solutions  for use with its  systems.
Storage  systems  are used to add media  editing or playback  capacity,  improve
image quality,  support workgroup media sharing, and protect media from loss due
to hardware failure.  Avid purchases disk, tape and optical drives,  and storage
enclosure sub-systems from third-party manufacturers,  integrates them, enhances
their  performance,  tests and  certifies  them for use with Avid  systems,  and
packages them in various configurations. These storage systems range in capacity
from nine gigabytes to well over one terabyte (1,000 gigabytes).

Digital News Production

NewsCutter:
NewsCutter is a disk-based  digital,  nonlinear video editing system designed to
meet the demands of television news  production.  NewsCutter  enables  broadcast
news editors to edit news,  features,  and news series.  The user  interface for
NewsCutter  has been designed for fast,  easy editing to meet the  time-critical
demands of daily news deadlines.  Based on the same core technology as the Media
Composer  system,  the  NewsCutter  system offers a range of editing and effects
features,  including dissolves,  wipes and graphics,  and character  generation.
NewsCutter  can operate as a standalone  editing system or as a client sharing a
central library of audio and video media on a server.

AirPlay MP:
AirPlay MP is a disk-based  random  access  insertion  and playback  system that
provides  television  broadcasters  and  cable  operators  with the  ability  to
transmit  high-quality  short form video to air  directly  from disk,  including
short form news, promos, station IDs, and commercials.  Television news programs
typically  have  numerous   short  form  segments,   many  of  which  have  been
pre-recorded  and edited.  Operators  traditionally  have had to manage multiple
tape  decks to play  back such  segments  in the  desired  sequence  during  the
program.  For news applications,  AirPlay MP is designed to reduce on-air errors
by  simplifying  the process of inserting the correct story at the correct time.
For commercial  playback,  AirPlay MP is used to air spots  automatically in the
slots sold to  advertisers.  Because of the random access  capability of AirPlay
MP, spot placements can be changed  quickly and easily.  AirPlay MP shares media
compatibility  with both  NewsCutter  and Media  Composer  so that news  stories
prepared on NewsCutter and commercial  and  promotional  spots prepared on Media
Composer can be played back on AirPlay without resorting to tape.

Avid MediaServer:
The Avid  MediaServer  is a workgroup  video  production  server  that  provides
simultaneous access to a central computer-based library of video and audio media
files.  Based on the  Silicon  Graphics  family  of  servers,  Avid  MediaServer
supports  multiple  editing and/or playback  workstations.  The Avid MediaServer
system is designed to allow television  broadcasters to capture  electronic news
feeds, edit stories, and play them to air all in a computer-based environment.

AvidNews:
Avid  entered  the  newsroom   computer  systems  ("NRCS")  market  through  the
acquisition  in 1994 of the newsroom  division of Basys and of SofTECH  Systems,
both of which  developed and sold NRCS  products.  These  products have now been
consolidated into a single offering, AvidNews. Newsroom computer systems are the
management  information  systems for television  newsrooms.  AvidNews provides a
computer  based  process  of news  production:  story  assignment  and  resource
scheduling,  story research,  story creation and collaboration.  Journalists use
the system to access  wire  stories,  schedule,  script,  edit text  portions of
stories,  and send and receive mail and  messages.  Producers  use the system to
assign journalists and crews to stories and to review work-in-progress.

Professional Audio

Pro Tools:
Pro Tools is a multi-track random access digital audio workstation  developed by
Digidesign  for  the  professional  music,  audio  post-production,   and  radio
production  markets.  Pro  Tools  features  include  audio  recording,  advanced
waveform editing,  mixing,  signal processing,  and automation.  Pro Tools is an
open architecture in which more than 100 Digidesign Development Partners provide
additional  solutions that expand the  functionality  of  Digidesign's  systems,
enhancing their appeal to customers.  Pro Tools software is compatible  across a
range of Digidesign hardware platforms,  from high-end Pro Tools 24 down through
Pro-Tools  III and  Audiomedia  III. Pro Tools  PowerMix  software  runs without
Digidesign   hardware  on  Power-PC   Macintosh   computers   using  host  audio
capabilities.  The Company  believes  that Pro Tools holds a greater unit market
share than any other digital audio  workstation  product in  professional  audio
markets.

AudioVision:
AudioVision  is  a  high   performance   digital  audio   workstation   designed
specifically  to meet  the  needs  of the  audio  post-production  professional
working with film and video.  AudioVision is compatible with projects 
originating on Avid's Media Composer and Film Composer systems.  Typical
applications include sound editing for  feature film and television programming,
ADR (automatic dialogue replacement),  and commercial spot  production.
AudioVision  allows the user to record,  edit  and  process  sound  in  sync
with  Avid-format  digital  video.  AudioVision  includes project management and
database tools, integrated DSP and the ability to edit audio and video together.
The system offers a high level of interchange with other Avid systems, including
Pro Tools.

SALES AND SERVICE

Avid sells its  products  through a  combination  of indirect  and direct  sales
channels.  Since late 1996, the Company has increasingly emphasized its indirect
channel, including independent distributors, value-added re-sellers ("VARs") and
dealers,  as the primary means of  distribution,  providing  for broader  market
coverage and clearer  delineation  from Avid's  direct sales  channel and direct
sales  management.   Avid's  direct  sales  organization  currently  focuses  on
approximately 115 strategic  accounts which are large volume  purchasers,  which
require  significant  pre-sales and post-sales  customer services and which have
the  potential  to  work  with  Avid  in   developing   new  product  or  market
opportunities.

As a result of the  shifting of  emphasis to the  indirect  sales  channel,  the
Company has  increased  its support of top  customers  while the  proportion  of
revenues generated through its indirect channels has been increased.

The  Company  maintains  sales  offices  in 32  cities in 16  countries  and has
relationships  with more than 500 distributors,  VARs and dealers throughout the
world.

Pro Tools 24 and other Digidesign-developed  products are sold generally through
dealers and  distributors.  Because this channel tends to focus on music-related
products,  there is,  currently,  little overlap between this channel and Avid's
video, film and broadcast market sales channels.

Avid currently  provides direct  customer  support  through  regional  telephone
support  centers and field service  representatives  in major  markets.  Support
offerings  include up to 24-hour,  seven day per week options for both telephone
support and on-site representation,  hardware replacement and software upgrades.
In addition, customer support is provided by VARs and distributors.

Customer  training  is  provided  directly  by Avid and  through a network of 45
authorized third-party Avid training centers in 14 countries.

MANUFACTURING AND SUPPLIERS

Avid's   manufacturing   operations   consist   primarily   of  the  testing  of
subassemblies  and components  purchased from third parties,  the duplication of
software and the  configuration,  assembly and testing of board sets,  software,
related hardware  components,  and complete systems.  Avid relies on independent
contractors   to   manufacture    components   and   subassemblies   to   Avid's
specifications.  Avid's  systems  undergo  testing and quality  assurance at the
final assembly stage.

The Company is dependent  upon sole source  suppliers for certain key components
used  in its  products.  Products  purchased  by the  Company  or its  VARs  and
distributors  from sole source  vendors  include  computers  from Apple and SGI;
video compression chips  manufactured by C-Cube  Microsystems;  a small computer
systems interface ("SCSI") accelerator board from ATTO Technology;  a 3D digital
video effects  board from  Pinnacle  Systems;  application  specific  integrated
circuits  ("ASICS") from AMI, Atmel,  and LSI Logic;  digital signal  processing
integrated circuit from Motorola; and a fibre channel adapter from Adaptec, Inc.
The Company purchases these sole source  components  pursuant to purchase orders
placed from time to time. The Company also  manufactures  certain circuit boards
under  license  from  Truevision,  Inc.  The  Company  generally  does not carry
significant  inventories of these source components and has no guaranteed supply
arrangements.  These  purchasing  arrangements can result in delays in obtaining
products from time to time. No assurance can be given that sole source suppliers
will devote the  resources  necessary  to support the  enhancement  or continued
availability  of such  components  or that any such  supplier will not encounter
financial  difficulties.  While the Company believes that alternative sources of
supply for its sole source  components  could be  developed,  its  business  and
results of  operations  could be  materially  adversely  affected  if it were to
encounter an interruption in its sources of supply.

Avid has manufacturing facilities in Tewksbury, Massachusetts;  Dublin, Ireland;
and Palo Alto and Menlo Park, California.

RESEARCH AND DEVELOPMENT

Avid's  research  and  development  efforts  currently  are  focused  on 1)  the
development or enhancement of digital media content  creation tools that operate
on Windows-based  computers,  Apple computers,  and Unix-based computers; 2) the
development of hardware and software  enhancements and additions to its existing
video,  film and audio editing systems,  and digital news gathering and newsroom
computer  systems that lower Avid's costs;  3) the  development  of hardware and
software  enhancements  and  additions  to its  existing  video,  film and audio
editing  systems,  and digital news gathering and newsroom  computer  systems to
meet  additional  needs of the  professional  production,  post-production,  and
broadcast  news  markets;  4) the  development  of AvidNews,  a next  generation
newsroom  computer system  intended to integrate  standard  text-based  newsroom
computer system functionality with nonlinear video and audio  functionality;  5)
the  development of DV-native  editing and playback  solutions for the broadcast
news markets; and 6) the development of new media storage solutions. The Company
undertakes research and development activities in Tewksbury, Massachusetts, Palo
Alto, California, and London, England.

COMPETITION

The  markets for Avid's  products  are highly  competitive  and subject to rapid
change.  Competition  is fragmented  with a large number of suppliers  providing
different types of products to different markets.

In the video and film production and  post-production  markets,  Avid encounters
competition  primarily from vendors that offer similar digital editing  products
based  on  standard  computer  platforms,   including  Discreet  Logic  and  its
subsidiary,  D/VISION,  Fast America,  ImMix (a  subsidiary of Scitex  America),
Lightworks  USA (a subsidiary of Tektronix),  Media 100 (formerly  known as Data
Translation,  Inc.),  Quantel  (a  subsidiary  of Carlton  Communications  PLC),
Softimage  (a  subsidiary   of   Microsoft)   and  Panasonic  (a  subsidiary  of
Matsushita).

Avid also competes with vendors, such as Sony,  Matsushita and Tektronix,  that
generally have offered analog-based products. Avid expects that competition from
these  vendors  will  increase  to the  extent  that such  vendors  develop  and
introduce  digital  media  products,  as well as new  versions  of their  analog
products.

In the broadcast news market, Avid competes primarily with vendors such as Sony,
Panasonic,  Tektronix (including primarily its subsidiaries  Lightworks USA, The
Grass  Valley  Group  and  NewStar),  Quantel,  Associated  Press,  and  BTS  (a
subsidiary of Philips).  Avid expects that  competition  from these vendors will
increase to the extent such vendors continue to develop and introduce digital or
new analog-based products. The Company also competes in certain segments of this
market with other providers of digital media  products,  including Media 100 and
ImMix.

In the music  production  and  post-production  markets,  the  Company  competes
primarily with traditional  analog tape-based  system suppliers,  including AMS,
Fritz  Studer,  Otari,  Sony,  Tascam,  and Yamaha;  digital  tape-based  system
suppliers,   including  Alesis,  Tascam,  and  other  disk-based  digital  audio
production  system  suppliers,  including Sonic  Solutions,  Soundscape,  Sadie,
Yamaha,  Fairlight,  and  Ensoniq.  In  addition,  companies  such  as  Creative
Technology  currently provide low cost (under $500) digital audio playback cards
targeted  primarily  at the  personal  computer  game  market.  There  can be no
assurance  that  these  companies  will  not  introduce  products  that are more
directly competitive with the Company's products.

In the market for graphics and special effects products, Avid competes primarily
with Adobe, Alias Research (a subsidiary of Silicon Graphics),  Chyron, Discreet
Logic, Quantel, and Softimage.

The Company may face  competition  in any or all of these  markets in the future
from computer manufacturers,  such as Digital Equipment,  Hewlett-Packard,  IBM,
and Silicon  Graphics,  as well as from  software  vendors,  such as  Microsoft,
Oracle,  and Sybase.  All of these companies have announced their  intentions to
enter some or all of the Company's  target markets,  including  specifically the
broadcast news and special effects market.  In addition,  certain  developers of
shrink-wrapped  digital media software  products,  such as Adobe and Macromedia,
either  offer or have  announced  video and  audio  editing  products  which may
compete with certain of the Company's products.

The  primary   competitive   factors  in  all  of  the  Company's   markets  are
price/performance,  functionality,  product  quality,  reputation,  product line
breadth,  access to distribution  channels,  customer service and support, brand
name awareness, and ease of use.

EMPLOYEES

The Company employed 1,599 people as of December 31, 1997.



I
TEM 2.   PROPERTIES

The  Company's  principal  administrative,  sales and  marketing,  research  and
development,   support,  and  manufacturing  facilities  are  located  in  three
buildings  adjacent  to one  another in an office  park  located  in  Tewksbury,
Massachusetts. The Company's leases on such buildings expire in June 2010.

The Company also leases a facility in Dublin,  Ireland for the  manufacture  and
distribution  of its  products  and  in  Palo  Alto,  California,  which  houses
Digidesign headquarters and certain other research and development operations.

In September  1995,  the  Company's  United  Kingdom  subsidiary  entered into a
15-year lease in London, England.

The  Company  also  maintains  sales and  marketing  support  offices  in leased
facilities in various other locations throughout the world.

See  Note K -  "Commitment  and  Contingencies"  in the  Notes  to  Consolidated
Financial Statements for information  concerning the Company's obligations under
all operating leases as of December 31, 1997.

In addition, the Company anticipates no difficulty in retaining occupancy of any
of its  manufacturing,  office or sales and marketing support facilities through
lease renewals prior to expiration or through  month-to-month  occupancy,  or in
replacing them with equivalent facilities.





<PAGE>



ITEM 3.   LEGAL PROCEEDINGS

DATA TRANSLATION, INC.

On June 7, 1995, the Company filed a patent infringement complaint in the United
States   District  Court  for  the  District  of   Massachusetts   against  Data
Translation,  Inc.,  a Marlboro,  Massachusetts-based  company.  Avid is seeking
judgment against Data Translation that, among other things, Data Translation has
willfully  infringed  Avid's  patent  number  5,045,940,  entitled  "Video/Audio
Transmission System and Method." Avid is also seeking an award of treble damages
together  with  prejudgment  interest  and costs,  Avid's  costs and  reasonable
attorneys'  fees,  and an injunction to prohibit  further  infringement  by Data
Translation.  The litigation has been dismissed without prejudice (with leave to
refile) pending a decision by the U.S. Patent and Trademark  Office on a reissue
patent application based on the issued patent.

CLASS ACTION SHAREHOLDER LITIGATION

In December 1995, six purported  shareholder  class action complaints were filed
in the United States District Court for the District of Massachusetts naming the
Company  and  certain of its  underwriters  and past and  present  officers  and
directors as  defendants.  On July 31, 1996,  the six actions were  consolidated
into two lawsuits:  one brought under the 1934 Securities Exchange Act (the "`34
Act suit") and one under the 1933 Securities Act (the "`33 Act suit"). Principal
allegations  contained in the two complaints  include claims that the defendants
violated federal  securities laws and state common law by allegedly making false
and  misleading  statements  and  by  allegedly  failing  to  disclose  material
information that was required to be disclosed,  purportedly causing the value of
the Company's stock to be artificially inflated. The `34 Act suit was brought on
behalf of all persons who bought the  Company's  stock between July 26, 1995 and
December 20, 1995.  The `33 Act suit was brought on behalf of persons who bought
the Company's  stock  pursuant to its September 21, 1995 public  offering.  Both
complaints  seek  unspecified  damages  for  the  decline  of the  value  of the
Company's stock during the applicable  period.  A motion to dismiss both the `34
Act suit and the `33 Act suit was filed on October 18, 1996.  After briefing and
argument on the motions,  the Court issued its decision on August 14, 1997. With
respect  to the `33 Act  suit,  the  Court  dismissed  the  claims  against  the
underwriters, dismissed the claims brought against the Company under ss.12(2) of
the `33 Act, and dismissed the plaintiffs'  claims relating to the Company's all
digital newsroom (in both the `33 Act and `34 Act cases) on the grounds that the
plaintiffs  had  failed  to allege a  material  misrepresentation  or  omission.
Finding that it was required to draw all  reasonable  inferences in favor of the
plaintiffs,  the Court declined to dismiss the plaintiffs'  remaining  claims in
the `33 Act case and the `34 Act claims  relating to matters  other than the all
digital  newsroom.  On September 26, 1997, the plaintiffs filed a motion seeking
to have the Court reconsider its dismissal of the underwriters  from the `33 Act
suit, which the underwriters  have opposed.  The plaintiffs also sought leave to
amend both the `33 Act and the `34 Act  Complaints to add claims  concerning the
all digital newsroom,  which the Company opposed.  In February 1998, the Company
and the  Plaintiffs  entered into a Stipulation  of Settlement in both suits and
the judge issued an order granting  preliminary  approval to the  settlement.  A
Final  Settlement  Approval  hearing is scheduled for May 28, 1998.  The Company
believes  the  potential  settlement  will not  have a  material  effect  on the
Company's consolidated financial position or results of operations. In the event
the  settlement is not finally  approved,  the Company  believes that it and the
other defendants have meritorious defenses to the remaining  allegations made by
the plaintiffs and intends to contest these lawsuits vigorously. Nonetheless, in
the  event  the  settlement  is not  approved,  an  adverse  resolution  of this
litigation  could have a material  adverse effect on the Company's  consolidated
financial  position  or  results  of  operations  in the  period  in  which  the
litigation is resolved.  In such event,  a reasonable  estimate of the Company's
potential loss for damages cannot be made at this time.

COMBINED LOGIC COMPANY

On March 11, 1996,  the Company was named as defendant in a patent  infringement
suit filed in the United States District Court for the Western District of Texas
by Combined Logic Company,  a California  partnership  located in Beverly Hills,
California.  On May 16,  1996,  the suit was  transferred  to the United  States
District  Court for the Southern  District of New York on motion by the Company.
The complaint  alleges  infringement  by Avid of U.S.  patent number  4,258,385,
issued in 1981,  and seeks  injunctive  relief,  treble  damages and costs,  and
attorneys'  fees. The Company  believes that it has meritorious  defenses to the
complaint and intends to contest it vigorously.  However,  an adverse resolution
of this  litigation  could have an adverse effect on the Company's  consolidated
financial  position  or  results  of  operations  in the  period  in  which  the
litigation  is  resolved.  No costs have been  accrued  for this  possible  loss
contingency.

OTHER

The Company also receives  inquiries from time to time with regard to additional
possible patent infringement  claims.  These inquiries are generally referred to
counsel  and  are in  various  stages  of  discussion.  If any  infringement  is
determined to exist, the Company may seek licenses or settlements.  In addition,
from time to time as a normal incidence of the nature of the Company's business,
various claims,  charges, and litigation have been asserted or commenced against
the Company  arising  from or related to  contractual  or employee  relations or
product  performance.  Management  does not  believe  these  claims  will have a
material  adverse  effect on the financial  position or results of operations of
the Company.



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

No matters were submitted to a vote of the Company's security holders during the
last quarter of the fiscal year ended December 31, 1997.





<PAGE>


                         EXECUTIVE OFFICERS OF THE COMPANY

Set forth below is (i) the name and age of each present executive officer of the
Company; (ii) the position(s) presently held by each person named; and (iii) the
principal occupation held by each person named for at least the past five years.


EXECUTIVE OFFICER             AGE                     POSITION(S)

William J. Miller              52               Chairman of the Board, President
                                                and Chief Executive Officer

William L. Flaherty            50               Senior Vice President of
                                                Finance, Chief Financial Officer
                                                and Treasurer

David R. Froker                42               Senior Vice President and
                                                General Manager of  Digidesign

C. Edward Hazen                47               Senior Vice President and
                                                General Manager of Office and
                                                Consumer Products

Clifford A. Jenks              46               Executive Vice President and
                                                General Manager of Editing
                                                and Effects

Rose G. O'Donnell              54               Senior Vice President of
                                                Technical Strategies

David E. Olson                 48               Senior Vice President and
                                                General Manager, Digital News
                                                Production

Judith M. Oppenheim            56               Senior Vice President of Human
                                                Resources and Corporate Services

Eric C. Peters                 47               Senior Vice President and Chief
                                                Technology Officer

Jean Proulx                    55               Senior Vice President and
                                                General Manager of Professional
                                                Products

James T. Wandrey               43               Vice President and Corporate
                                                Controller

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

WILLIAM  J.  MILLER.  Mr.  Miller joined the Company  in April 1996 and has been
Chairman, Chief Executive Officer and President since September 1996. From April
1996 to  September 1996,  Mr. Miller was Chairman and Chief  Executive  Officer.
Prior  to  that  time,  Mr.  Miller  was  Chief  Executive  Officer  of  Quantum
Corporation (1992-1995).

WILLIAM L. FLAHERTY.  Mr.  Flaherty joined the Company in September 1996 and has
been Senior Vice President of Finance and Chief Financial  Officer since January
1997 and Treasurer  since  December  1997. He was Vice  President of Finance and
Chief  Financial  Officer from September 1996 to January 1997.  Prior to joining
Avid,  Mr.  Flaherty  was Senior Vice  President,  Finance  and Chief  Financial
Officer  (February  - September  1996),  and Vice  President,  Finance and Chief
Financial Officer (1993 - February 1996), of Gibson Greetings Inc., and was Vice
President and Treasurer of FMR Corp., the parent company of Fidelity Investments
Group (1989-1992).

DAVID R. FROKER.  Mr. Froker has been Senior Vice President and General  Manager
of Digidesign  since January 1997. Mr. Froker was General  Manager of Digidesign
from March  1996 to January  1997.  Prior to that time,  he was Vice  President,
Business  Development  of  Digidesign,  Inc.  (1994-1995).  He was Product Group
Manager at Amdahl (1988-1993).

C. EDWARD HAZEN. Mr. Hazen has been Senior Vice President and General Manager of
Office and Consumer  Products  since December 1997. He was Senior Vice President
of Business  Development  and Corporate  Treasurer from January 1997 to December
1997. He was Vice President,  Finance and Treasurer from January 1996 to January
1997, Vice President,  Chief Financial  Officer and Treasurer From November 1995
to January 1996,  and Vice  President  and Treasurer  from March 1993 to January
1996.  Mr.  Hazen was a  Managing  Director  of  Robertson,  Stephens  & Company
(1987-1993).

CLIFFORD A. JENKS.  Mr. Jenks has been  Executive  Vice  President  and  General
Manager of Editing and Effects since December 1997. He was Senior Vice President
of Worldwide Sales and Marketing from January 1997 to December 1997. He was Vice
President Worldwide Sales and Marketing from October 1996 to January  1997.  Mr.
Jenks was Chief Operating Officer of Zenith Data  Systems (1992-1996),  and Vice
President Sales and Marketing Operations of Apple Computer, Inc. (1989-1992).

ROSE G. O'DONNELL.  Ms. O'Donnell has been Senior Vice  President  of  Technical
Strategies   since  April  1997.  Ms. O'Donnell  was Senior  Vice  President  of
Engineering from January 1997 to April 1997. She was Vice President, Engineering
from November 1994 to January  1997.  Ms. O'Donnell  was General  Manager of the
Technology Division of Hewlett-Packard (1989-1994).

DAVID E. OLSON.  Mr. Olson has been Senior Vice President  and General  Manager,
Digital News Production since November 1997. Mr. Olson was Senior Vice President
of Worldwide Operations of the Company and Chief Operating Officer of Digidesign
from January 1997  to  November  1997.  He  was  Vice   President  of  Worldwide
Operations for Avid  from  June  1996  to  January  1997.  Mr.  Olson  was  Vice
President of Operations at Digidesign, Inc. from August 1991 to June 1996.

JUDITH  M.  OPPENHEIM.  Ms. Oppenheim has been  Senior Vice  President  of Human
Resources and Corporate Services since January 1997.  She was Vice  President of
Human Resources from  November 1992 to  January  1997.  Ms.  Oppenheim  was Vice
President, Human Resources at The Forum Corporation (1989- 1992).

ERIC C. PETERS.  Mr. Peters has been Senior Vice President and Chief Technology
Officer since January 1997.  He  was  Vice   President,   Technology  and  Chief
Technology Officer from August 1988 to January 1997.

JEAN PROULX.  Ms. Proulx has been Senior Vice  President and General  Manager of
Professional  Products  since  December  1997.  She was Senior Vice President of
Engineering  from May 1997 to December  1997. She was Vice President of Emerging
Business at IBM from October 1995 to May 1997, was the Vice President of Network
Software  Business Unit at Digital  Equipment  Corporation  from January 1994 to
October 1995, and was Director of the modern Macintosh  Operating Group at Apple
Computer from August 1992 to November 1993.

JAMES T. WANDREY. Mr. Wandrey has been a Vice President and Corporate Controller
since April 1997. He was Product Group Finance Director for Alcatel Telecom from
February 1997 to April 1997 and Corporate  Controller at Alcatel Network Systems
from January 1995 to February 1997,  both of these are units of Alcatel  Alsthom
S.A. Mr. Wandrey was a Division Controller at Hewlett Packard Company from April
1992 to February 1995.

There are no family relationships among the named officers.






<PAGE>



                                      PART II


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

The  Company's  Common Stock is listed on the Nasdaq  National  Market under the
symbol  AVID.  The table below shows the high and low sales prices of the Common
Stock for each  calendar  quarter the fiscal  years ended  December 31, 1997 and
1996.

<TABLE>
<CAPTION>
  1997                      HIGH           LOW
  ----                      ----           ---
<S>                       <C>             <C>   
First Quarter             $14.000         $9.000
Second Quarter             28.125         12.375
Third Quarter              38.000         22.000
Fourth Quarter             33.000         23.000
</TABLE>





<TABLE>
<CAPTION>
  1996                      HIGH           LOW
  ----                      ----           ---
<S>                       <C>            <C>    
First Quarter             $23.125        $16.250
Second Quarter             26.000         17.875
Third Quarter              20.625         12.375
Fourth Quarter             16.375         10.125
</TABLE>



The  approximate  number of holders of record of the  Company's  Common Stock at
March 18, 1998,  was 580.  This number does not include  shareholders  for whom
shares were held in a "nominee" or "street" name.

The Company has never  declared or paid cash  dividends on its capital stock and
currently  intends to retain all available funds for use in the operation of its
business. The Company therefore does not anticipate paying any cash dividends in
the foreseeable future.




<PAGE>



ITEM 6.   SELECTED FINANCIAL DATA

The following table sets forth selected  condensed  consolidated  financial data
for Avid  Technology,  Inc.  In  January  1995,  Avid  Technology,  Inc.  (Avid)
completed a merger with Digidesign,  Inc. (Digidesign) that was accounted for as
a pooling of interests.  All financial data presented  herein have been restated
to include the combined  financial  results of Avid and Digidesign as though the
merger had occurred retroactively.  Prior to the merger,  Digidesign had a March
31 fiscal year end. Effective with the merger,  Digidesign's fiscal year end was
changed  from March 31 to  December  31 to conform  with  Avid's  year end.  The
results of Digidesign's  operations for the twelve-month  periods ended December
31, 1994 and March 31, 1994 are included in the Company's 1994 and 1993 results,
respectively.  Accordingly, Digidesign's operations for the three months January
through March 1994 are included in the  Company's  results for both of the years
ended December 31, 1993 and December 31, 1994. Revenues, net income, and diluted
earnings per share for Digidesign for the three months ended March 31, 1994 were
$8,510,000,  $1,078,000 and $0.14  respectively.  Net income for this period has
been reported as an adjustment to consolidated 1994 retained earnings.  In March
1995, the Company acquired  Elastic Reality,  Inc., a developer of digital image
manipulation  software,  and  Parallax  Software  Limited  and 3 Space  Software
Limited,  together developers of paint and compositing  software.  The Company's
previous  years'  financial   statements  have  not  been  restated  to  include
operations of Parallax  Software  Limited,  3 Space Software Limited and Elastic
Reality, Inc. as they were not material to the Company's consolidated operations
and financial  condition.  Costs  associated  with these mergers,  approximately
$5,456,000,  were  charged to  operations  in 1995.  In  addition,  the  Company
acquired  certain other  businesses  which were accounted for as purchases;  the
results of such  acquisitions  have been  included  in the  Company's  financial
statements since the respective dates of acquisition.  The selected consolidated
financial  data  below  should  be read in  conjunction  with the  "Management's
Discussion and Analysis of Financial  Condition and Results of  Operations"  and
the consolidated  financial  statements and notes thereto included  elsewhere in
this filing.

CONSOLIDATED STATEMENTS OF OPERATIONS DATA:
In thousands (except per share data)

<TABLE>
<CAPTION>
                                               For the year ended
                                                  December 31,
                                ------------------------------------------------
                                 1997     1996      1995      1994      1993
                                ------------------------------------------------
<S>                             <C>       <C>       <C>       <C>       <C>     
Net revenues                    $471,338  $429,009  $406,650  $233,633  $134,366
Cost of revenues                 221,553   238,808   198,841   108,057    60,939
                                ------------------------------------------------
  Gross profit                   249,785   190,201   207,809   125,576    73,427
                                ------------------------------------------------
Operating expenses:
  Research and development        73,470    69,405    53,841    28,223    16,396
  Marketing and selling          120,394   127,006   107,780    61,366    38,960
  General and administrative      25,808    24,203    18,085    12,575     7,801
  Nonrecurring costs                        28,950     5,456               3,750
                                ------------------------------------------------
    Total operating expenses     219,672   249,564   185,162   102,164    66,907
                                ------------------------------------------------
Operating income (loss)           30,113   (59,363)   22,647    23,412     6,520
Other income and expense, net      8,125     3,416     1,380     1,675     1,791
                                ------------------------------------------------
Income (loss) before income
  taxes                           38,238   (55,947)   24,027    25,087     8,311
Provision for (benefit from)
  income taxes                    11,854   (17,903)    8,588     7,294     2,209
                                ------------------------------------------------
Net income (loss)                $26,384  $(38,044)  $15,439   $17,793    $6,102
                                ================================================
Net income (loss) per common
  share - basic                    $1.14    $(1.80)    $0.81     $1.10     $0.45
                                ================================================
Net income (loss) per common
  share - diluted                  $1.08    $(1.80)    $0.77     $0.99     $0.40
                                ================================================
Weighted average common shares          
  outstanding - basic             23,065    21,163    19,010    16,238    13,539
                                ================================================
Weighted average common shares          
  outstanding - diluted           24,325    21,163    20,165    17,921    15,216
                                ================================================
</TABLE>


Earnings per share data have been restated for all periods  presented to reflect
the adoption of SFAS No. 128 as of December 31, 1997.


CONSOLIDATED BALANCE SHEET DATA:
In thousands

<TABLE>
<CAPTION>
                                               As of December 31,
                                ------------------------------------------------
                                  1997      1996      1995      1994     1993
                                ------------------------------------------------
<S>                               <C>       <C>       <C>       <C>      <C>    
Working capital                   $186,474  $145,320  $162,260  $86,513  $91,473
Total assets                       356,805   300,979   331,604  182,174  132,355
Long-term debt, less current
  portion                              403     1,186     2,945    2,369      545
Total stockholders' equity         241,794   213,415   247,966  127,887  106,732
</TABLE>




<PAGE>



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

OVERVIEW

The text of this document may include forward-looking statements. Actual results
may differ materially from those described herein,  depending on such factors as
are described  herein,  including under "Certain  Factors That May Affect Future
Results."

Avid  develops and provides  digital  film,  video and audio editing and special
effects  software  and  hardware   technologies  to  create  media  content  for
information  and  entertainment  applications.  Integrated  with  the  Company's
digital storage and networking solutions,  Avid's products are used worldwide in
film  studios;  video  production  and  post-production   facilities;   network,
independent  and  cable  television  stations;  recording  studios;  advertising
agencies;  government and  educational  institutions;  corporate  communications
departments; and by individual home users.

RESULTS OF OPERATIONS

The following  table sets forth  certain  items from the Company's  consolidated
statements  of  operations  as a  percentage  of net  revenues  for the  periods
indicated:

<TABLE>
<CAPTION>

                                              For the year ended December 31,
                                             --------------------------------
                                               1997       1996       1995
                                             --------------------------------
      <S>                                      <C>        <C>        <C> 
      Net revenues                             100.0%     100.0%     100.0%
      Cost of revenues                          47.0%      55.7%      48.9%
                                             ---------- ----------  ----------
        Gross profit                            53.0%      44.3%      51.1%
                                             ---------- ----------  ----------
      Operating Expenses:
        Research and development                15.6%      16.2%      13.2%
        Marketing and selling                   25.5%      29.6%      26.5%
        General and administrative               5.5%       5.6%       4.4%
        Nonrecurring costs                                  6.7%       1.4%
                                             ---------- ----------  ----------
          Total operating expenses              46.6%      58.1%      45.5%
                                             ---------- ----------  ----------
      Operating income (loss)                    6.4%    (13.8)%       5.6%
      Other income and expense, net              1.7%       0.8%       0.3%
                                             ---------- ----------  ----------
      Income (loss) before income taxes          8.1%    (13.0)%       5.9%
      Provision  for  (benefit  from) income     
      taxes                                      2.5%     (4.1)%       2.1%
                                             ---------- ----------  ----------
      Net income (loss)                          5.6%     (8.9)%       3.8%
                                             ========== ==========  ==========
</TABLE>


Net Revenues

The Company's net revenues have been derived mainly from the sales of disk-based
digital,  nonlinear media editing systems and related peripherals,  licensing of
related  software,  and sales of software  maintenance  contracts.  Net revenues
increased by $42.3 million  (9.9%) to $471.3  million in the year ended December
31, 1997 from $429.0  million in 1996.  Net revenues for the year ended December
31, 1996 of $429.0 million increased by $22.3 million (5.5%) from $406.7 million
in 1995.  The increase  during 1997 in net revenues was  primarily the result of
growth in unit  sales of  MCXpress  products  for  Macintosh  and NT  platforms,
storage systems,  and digital audio products.  The increase in net revenues from
1995 to 1996 was primarily  the result of worldwide  growth in unit sales of the
Media  Composer  product line and of digital audio  products.  During 1997,  the
Company began shipments of new versions of MCXpress and Avid Xpress, AudioVision
4.0, Pro Tools 24, AvidNews and Mediashare F/C. To date,  product returns of all
products have been immaterial.

During 1997,  the Company  continued to shift an  increasing  proportion  of its
sales through indirect channels such as distributors and resellers. Net revenues
derived through  indirect  channels were greater than 60% of net revenue for the
year ended  December 31,  1997,  compared to greater than 40% of net revenue for
1996.

International  sales (sales to customers  outside North  America)  accounted for
approximately 48.6% of the Company's 1997 net revenues compared to approximately
49.5% for 1996 and 46.7% for 1995. International sales increased by 4.9% in 1997
compared  to 1996  and by 11.7%  in 1996  compared  to  1995.  The  increase  in
international  sales in 1997 was attributable  primarily to higher unit sales of
the storage,  MCXpress,  and Pro Tools  products in Europe.  Revenue growth from
1996 to 1997 was impacted  adversely due to the strengthening of the U.S. dollar
against  various  currencies.  The increase in  international  sales in 1996 was
attributable  primarily  to higher  unit sales of Media  Composer  and Pro Tools
product lines in Europe.

Gross Profit

Cost of revenues consists  primarily of costs associated with the acquisition of
components;   the  assembly,   test,  and  distribution  of  finished  products;
provisions for inventory  obsolescence;  warehousing;  shipping;  and post-sales
customer support costs.  The resulting gross profit  fluctuates based on factors
such as the mix of  products  sold,  the  cost  and  proportion  of  third-party
hardware included in the systems sold by the Company, the distribution  channels
through which  products are sold, the timing of new product  introductions,  the
offering of product upgrades, price discounts and other sales promotion programs
and sales of aftermarket  hardware products.  Gross margin increased to 53.0% in
1997 compared to 44.3% in 1996 and 51.1% in 1995.  The increase  during 1997 was
primarily due to lower material costs and  manufacturing  efficiencies,  reduced
discounts and other sales promotion  programs,  and a favorable product mix. The
decrease in 1996  compared to 1995  largely  reflects  the effects of  upgrading
Media  Composer  systems  for use on  PCI-based  computers  and an  increase  in
manufacturing  overhead associated with higher facility,  information system and
customer  support  costs  allocated  to  costs of  revenues.  In  addition,  the
Company's  decrease in gross margin in 1996 resulted from  increased  provisions
for inventory  obsolescence,  the fourth quarter non-cash charge of $5.6 million
related  principally to spare parts which were no longer required to support the
Company's business, and the recognition of approximately $6.2 million of revenue
from the sale of certain  server-based  broadcast  products at a relatively  low
gross margin.  The Company  currently  expects  gross margins  during 1998 to be
slightly above 1997 levels.

Research and Development

Research and development  expenses  increased by $4.1 million (5.9%) in the year
ended December 31, 1997 compared to 1996 and increased by $15.6 million  (28.9%)
in the year ended December 31, 1996 compared to 1995. The increased expenditures
in 1997 were  primarily due to provisions  resulting  from the Company's  profit
sharing plan and additions to the Company's engineering staffs for the continued
development of new and existing  products.  Offsetting  these  increases was the
allocation in 1997 of product  marketing  costs to sales and marketing  expenses
rather  than to research  and  development  expenses,  as that  allocation  more
appropriately  reflected the activities of that function. The increase from 1995
to 1996 was  primarily  due to the  continued  development  of new and  existing
products.  The 1995 expenses are net of $2.9 million of payments received during
1995 under  certain  development  agreements  with third  parties.  Research and
development  expenses decreased as a percentage of net revenues to 15.6% in 1997
from 16.2% in 1996 due to the allocation of product marketing costs to sales and
marketing and the increase in net revenues, offset by increased expenditures due
to continued development of new and existing products.  The increase to 16.2% in
1996 from 13.2% in 1995 was due to significant resources required to develop and
maintain various existing products. The Company capitalized software development
costs, net of write-offs,  of approximately $0.1 million,  $1.5 million and $3.6
million in 1997, 1996 and 1995 respectively. This represents 0.1%, 2.1% and 6.2%
of total research and development costs during 1997, 1996 and 1995 respectively.
These costs are amortized  into cost of revenues over the estimated  life of the
related  products,  generally 12 to 24 months.  Amortization,  net of write-offs
totaled  approximately $0.9 million, $2.9 million and $1.2 million in 1997, 1996
and  1995,   respectively.   The  capitalized  software  development  costs  are
associated  primarily  with  enhancements  to Media  Composer  software and also
development of software to be used in other products.

Marketing and Selling

Marketing  and selling  expenses  decreased by $6.6  million  (5.2%) in the year
ended December 31, 1997 compared to 1996 and increased by $19.2 million  (17.8%)
in the year ended  December 31, 1996 compared to 1995. The decrease in sales and
marketing in 1997 was  primarily due to the effect of the  restructuring  of the
Company's sales and marketing  operations  during the first quarter of 1997. The
Company has shifted its primary distribution  emphasis from a direct sales force
to indirect sales channels,  which reduced certain costs including  direct sales
compensation and office overhead  expenses in 1997. The reduction in these costs
was partially  offset by the  allocation in 1997 of product  marketing  costs to
sales and  marketing  rather than to research and  development.  The increase in
sales and  marketing in 1996  compared to 1995 was primarily due to expansion of
the  Company's  field sales  operations  and the opening of field sales  offices
domestically and internationally  during the latter part of 1995.  Marketing and
selling expenses decreased as a percentage of net revenues to 25.5% in 1997 from
29.6% in 1996,  and from 26.5% in 1995.  This decrease in 1997 was primarily due
to the increase in net revenues in 1997 compared to 1996.

General and Administrative

General and  administrative  expenses  increased $1.6 million (6.6%) in the year
ended  December 31, 1997 compared to 1996 and increased by $6.1 million  (33.8%)
in the year ended  December 31, 1996 compared to 1995.  This increase in general
and  administrative  expenses  for 1997  compared to 1996 was  primarily  due to
provisions  resulting  from the Company's  profit  sharing plan. The increase in
general and  administrative  expenses in 1996 compared to 1995 was primarily due
to increased  staffing and associated  costs  necessary to support the Company's
growth as well as increased legal expenses  associated  with various  litigation
matters to which the Company is a party and  certain  severance  and  recruiting
costs. General and administrative  expenses as a percentage of net revenues were
5.5% in 1997 compared to 5.6% in 1996 and increased from 4.4% in 1995.

Nonrecurring Costs

During the first quarter of 1996, the Company  recorded charges for nonrecurring
costs consisting of $7.0 million for  restructuring  charges related to February
1996 staffing  reductions of approximately  70 employees  primarily in the U.S.,
the  Company's   concurrent   decision  to  discontinue   certain  products  and
development   projects  and  $13.2  million  for  product  transition  costs  in
connection  with the  transition  from NuBus to PCI bus technology in certain of
its product lines.  Included in the $7.0 million for restructuring  charges were
approximately  $5.0  million  of cash  payments  and $2.0  million  of  non-cash
charges.  During the third  quarter of 1996,  the Company  recorded  charges for
costs of $8.8 million,  associated  primarily with the Company's decision not to
release the Avid Media Spectrum product line.  Approximately $7.2 million of the
$8.8 million  nonrecurring  charge related to non-cash items associated with the
write-off  of assets.  The  Company  has  completed  the  related  restructuring
actions.  In the first quarter of 1995, the Company acquired  Digidesign,  Inc.,
Parallax Software Limited, 3 Space Software Limited and Elastic Reality, Inc. In
connection  with  these  acquisitions,  the  Company  recorded  merger  costs of
approximately $5.5 million, of which $3.9 million represented direct transaction
expenses and $1.6 million consisted of various restructuring charges.

Other Income and Expense, Net

Interest and other  income,  net consists of interest  income,  other income and
interest  expense.  Interest  and other  income,  net for 1997 which consisted
primarily of interest income,  increased $4.7 million from 1996 which, in turn,
increased $2.0 million from 1995. For the years ended December 31, 1997 and
December 31, 1996, interest and other income, net increased primarily due to
higher cash and investment  balances.  In addition,  1996 other income increased
from the 1995 amount due to the spin-out of certain  technologies which resulted
in equity  income,  a gain on sale of a product  line,  and  royalties  received
during the year.

Provision for (Benefit from) Income Taxes

The Company's effective tax rate was 31%, 32%, and 36%, respectively,  for 1997,
1996 and  1995.  The 1997  effective  tax  rate of 31.0% is  different  from the
Federal  statutory  rate  of  35.0%  due  primarily  to  the  Company's  foreign
subsidiaries,  which are taxed in the  aggregate  at a lower rate,  and the U.S.
Federal  Research Tax Credit.  The 1996 effective tax rate is different from the
Federal  statutory  rate of 35.0%  primarily  due to the impact of the Company's
foreign  subsidiaries.  The 1995  effective  tax rate of 36% is greater than the
Federal  statutory rate primarily due to  non-deductible  merger costs. The 1995
provision  included  taxes of $8.7 million at an effective  rate of 32% on $27.5
million of earnings  before merger  charges.  The 1995 provision also included a
tax benefit of $640,000 on merger costs of $5.5  million,  of which $1.6 million
were tax deductible.

LIQUIDITY AND CAPITAL RESOURCES

The Company has funded its  operations  to date  through both private and public
sales of equity securities as well as through cash flows from operations.  As of
December 31, 1997, the Company's  principal sources of liquidity  included cash,
cash  equivalents,  and  marketable  securities  totaling  approximately  $187.0
million.

The Company's  operating  activities  generated  cash of $111.2  million in 1997
compared to generating cash of $40.9 million in 1996. Cash was generated  during
the twelve months ended December 31, 1997 primarily from net income,  as well as
increases  in accrued  expenses  and income  taxes  payable  and  reductions  in
inventory.  In 1997,  the  increase in accrued  expenses  was  primarily  due to
provisions  for profit  sharing while the  reduction in inventory  resulted from
improved stock turns.

The Company  purchased  $15.7 million of property and equipment and other assets
during 1997,  compared to $28.2 million in 1996.  These purchases were primarily
of hardware and software for the Company's  information systems and equipment to
support research and development activities.

In 1995, the Company  entered into an unsecured line of credit  agreement with a
group of banks which provided revolving credit. The original  expiration date of
June 30,  1996 has  been  extended  to June 30,  1998.  Under  the  terms of the
agreement,  as amended in June 1997,  the Company may borrow up to  $35,000,000.
The  Company  must pay an annual  commitment  fee of .25% of the  average  daily
unused portion of the facility,  payable  quarterly in arrears.  The Company has
two loan options available under the agreement: the Base Rate Loan and the LIBOR
Rate Loan. The interest rates to be paid on the outstanding  borrowings for each
loan  annually  are equal to the Base Rate or LIBOR  plus  1.25%,  respectively.
Additionally,  the Company is required to maintain certain  financial ratios and
is bound by covenants over the life of the agreement, including a restriction on
the payment of dividends.  The Company has in certain periods prior to 1997 been
in default of certain financial covenants.  On these occasions the defaults have
been waived by the banks.  There can be no  assurance  that the Company will not
default in future periods or that, if in default, it will be able to obtain such
waivers.  The Company had no borrowings  against the line and was not in default
of any  financial  covenants  as of December  31,  1997.  The  Company  believes
existing  cash  and  marketable  securities,   internally  generated  funds  and
available  borrowings  under its bank credit line will be sufficient to meet the
Company's cash requirements,  including capital  expenditures,  at least through
the end of 1998. In the event the Company  requires  additional  financing,  the
Company believes that it would be able to obtain such financing;  however, there
can be no assurance that it would be successful in doing so, or that it could do
so on terms favorable to the Company.

On October 23, 1997 and February 5, 1998,  the Company  announced that the Board
of  Directors  authorized  the  repurchase  of up to 1.0 million and 1.5 million
shares, respectively,  of the Company's common stock. Purchases have and will be
made in the open market or in  privately  negotiated  transactions.  The Company
plans to use any repurchased shares for its employee stock plans. As of December
31, 1997, the Company had repurchased a total of 1.0 million shares at a cost of
$28.8 million, which completed the program announced in October.

NEW ACCOUNTING PRONOUNCEMENTS

In June 1997,  Statement of Financial  Accounting  Standards No. 130, "Reporting
Comprehensive  Income"  ("SFAS 130"),  was issued which  requires  businesses to
disclose  comprehensive  income and its components in general purpose  financial
statements, with reclassification of prior period financial statements. SFAS 130
is  effective  for fiscal  periods  beginning  after  December  15, 1997 and its
adoption is not expected to have a material impact on the Company's disclosures.

In June 1997, Statement of Financial Accounting Standards No. 131,  "Disclosures
about  Segments of an Enterprise  and Related  Information"  ("SFAS  131"),  was
issued  which  redefines  how  operating  segments are  determined  and requires
disclosures of certain  financial and descriptive  information about a company's
operating  segments.  SFAS 131 is effective for fiscal periods  beginning  after
December  15, 1997 and its  adoption may require  additional  disclosure  of the
Company's historical financial data.

In October 1997,  Statement of Position  97-2,  "Software  Revenue  Recognition"
("SOP 97-2"),  was issued which provides guidance on applying generally accepted
accounting principles in recognizing revenue on software transactions.  SOP 97-2
is effective  for  transactions  entered into in fiscal  years  beginning  after
December  15,  1997.  The Company  will adopt the  guidelines  of SOP 97-2 as of
January 1, 1998 and its  adoption is not  expected to have a material  impact on
the Company's financial results.




<PAGE>


CERTAIN FACTORS THAT MAY AFFECT FUTURE RESULTS

A number of uncertainties exist that could affect the Company's future operating
results, including, without limitation, the following:

The Company's gross margin has fluctuated,  and may continue to fluctuate, based
on  factors  such as the mix of  products  sold,  cost  and  the  proportion  of
third-party   hardware  included  in  the  systems  sold  by  the  Company,  the
distribution channels through which products are sold, the timing of new product
introductions,  the offering of product and platform  upgrades,  price discounts
and other sales promotion programs,  the volume of sales of aftermarket hardware
products,  the costs of swapping or fixing products  released to the market with
errors or flaws, provisions for inventory obsolescence,  allocations of overhead
costs to  manufacturing  and customer  support costs to cost of goods,  sales of
third-party  computer hardware to its distributors,  and competitive pressure on
selling  prices  of  products.  The  Company's  systems  and  software  products
typically have higher gross margins than storage  devices and product  upgrades.
Gross  profit  varies  from  product  to  product  depending  primarily  on  the
proportion  and cost of  third-party  hardware  included  in each  product.  The
Company,  from time to time, adds functionality and features to its systems.  If
such  additions  are  accomplished  through  the use of  more,  or more  costly,
third-party  hardware,  and if the Company  does not  increase the price of such
systems to offset these  increased  costs,  the Company's  gross margins on such
systems would be adversely affected.

The Company has shifted an increasing  proportion of its sales through  indirect
channels  such as  distributors  and  resellers.  The majority of the  Company's
product  sales to the  broadcast  industry,  however,  continues to be sold on a
direct basis.  The Company  believes the overall shift to indirect  channels has
resulted in an increase in the number of software and circuit  board "kits" sold
through indirect channels in comparison with turnkey systems consisting of CPUs,
monitors,  and peripheral devices,  including  accompanying software and circuit
boards,  sold by the  Company  through  its  direct  sales  force to  customers.
Resellers  and  distributors  typically  purchase  software  and "kits" from the
Company  and other  turnkey  components  from other  vendor  sources in order to
produce  complete  systems  for  resale.  Therefore,  to the extent the  Company
increases its sales through indirect channels, its revenue per unit sale will be
less  than it would  have  been had the same  sale  been  made  directly  by the
Company.  In the event the Company is unable to increase  the volume of sales in
order to offset  this  decrease  in revenue per sale or is unable to continue to
reduce  its  costs  associated  with  such  sales,  profits  could be  adversely
affected.

In 1995,  the  Company  shipped  server-based,  all-digital  broadcast  newsroom
systems to a limited number of beta sites.  These systems  incorporate a variety
of the Company's products, as well as a significant amount of hardware purchased
from third parties,  including computers  purchased from Silicon Graphics,  Inc.
("SGI").  Because some of the  technology and products in these systems were new
and untested in live broadcast  environments  at the time that such systems were
originally  installed,  the Company  provided  greater than normal  discounts to
these  initial  customers.  In  addition,  because  some of the  technology  and
products in these systems were new and untested in live  broadcast  environments
at the time that  such  systems  were  originally  installed,  the  Company  has
incurred  unexpected  delays and greater than expected  costs in completing  and
supporting  these  initial  installations  to  customers'  satisfaction.  As  of
December 31, 1997,  all revenues and costs related to the initial  installations
have been recognized.  The Company has recognized  approximately $7.7 million in
revenues from these initial  installations  and  approximately  $10.1 million of
related costs.  The Company had provided a reserve for estimated costs in excess
of  anticipated  revenues.  In 1996 and 1997, the Company  installed  additional
server-based,  all-digital  broadcast  newsroom systems at other customer sites.
Some of these  systems  have  been  accepted  by  customers,  and the  resulting
revenues and associated  costs were  recognized by the Company.  Others of these
systems have not yet been accepted by customers.  The Company believes that such
installations,  when and if fully recognized as revenue on customer  acceptance,
will be profitable. However, the Company is unable to determine whether and when
the systems will be accepted.  In any event, the Company believes that,  because
of the high proportion of third-party hardware,  including computers and storage
devices, included in such systems, the gross margins on such sales will be lower
than the gross margins generally on the Company's other systems.

The Company's  operating  expense levels are based, in part, on its expectations
of future revenues.  In recent quarters more than 40% of the Company's  revenues
for the quarter have been  recorded in the third month of the quarter.  Further,
in many cases,  quarterly  operating expense levels cannot be reduced rapidly in
the event that  quarterly  revenue  levels fail to meet  internal  expectations.
Therefore,  if quarterly revenue levels fail to meet internal  expectations upon
which  expense  levels are  based,  the  Company's  operating  results  would be
adversely  affected and there can be no assurance that the Company would be able
to operate profitably. Reductions of certain operating expenses, if incurred, in
the face of lower than expected revenues could involve material one-time charges
associated with  reductions in headcount,  trimming  product lines,  eliminating
facilities and offices, and writing off certain assets.

The Company has  significant  deferred  tax assets in the  accompanying  balance
sheets.  The deferred  tax assets  reflect the net tax effects of tax credit and
operating  loss  carryforwards  and temporary  differences  between the carrying
amounts of assets and  liabilities  for  financial  reporting  purposes  and the
amounts  used for income tax  purposes.  Although  realization  is not  assured,
management  believes  it is more likely  than not that all of the  deferred  tax
asset  will be  realized.  The  amount  of the  deferred  tax  asset  considered
realizable,  however,  could be reduced in the near term if  estimates of future
taxable income are reduced.

The  Company  has  expanded  its  product  line to  address  the  digital  media
production needs of the television broadcast news market and the emerging market
for  multimedia  production  tools,  including  the corporate  user market.  The
Company has limited  experience  in serving these  markets,  and there can be no
assurance  that the Company will be able to develop such products  successfully,
that such  products will achieve  widespread  customer  acceptance,  or that the
Company will be able to develop distribution and support channels to serve these
markets.  A significant  portion of the  Company's  future growth will depend on
customer acceptance in these and other new markets. Any failure of such products
to achieve  market  acceptance,  additional  costs and expenses  incurred by the
Company  to improve  market  acceptance  of such  products  and to  develop  new
distribution  and support  channels,  or the withdrawal  from the market of such
products or of the Company from such new markets  could have a material  adverse
effect on the Company's business and results of operations.

The Company has from time to time developed new products,  or upgraded  existing
products  that  incorporate  advances  in  enabling  technologies.  The  Company
believes  that  further  advances  will  occur  in such  enabling  technologies,
including   microprocessors,    computers,    operating   systems,    networking
technologies, bus architectures, storage devices, and digital media formats. The
Company  may be  required,  based on market  demand or the  decision  of certain
suppliers,  to end the  manufacturing  of  certain  products  based  on  earlier
generations  of  technology,  to upgrade  existing  products  or  develop  other
products that incorporate  these further  advances.  In particular,  the Company
believes that it will be necessary to develop additional  products which operate
using Intel  Architecture  ("IA")-based  computers  and the Windows NT operating
system.  There can be no assurance that  customers  will not defer  purchases of
existing  Apple-based  products  in  anticipation  of the release of IA-based or
NT-based products,  that the Company will be successful in developing additional
IA-based,  NT-based  or  other  new  products  or that  they  will  gain  market
acceptance,  if  developed.  Any  deferral by customers of purchases of existing
Apple-based  products or any failure by the Company to develop such new products
in a timely  way or to gain  market  acceptance  for them  could have a material
adverse effect on the Company's business and results of operations.

The  Company's  products  operate  primarily  only  on  Apple  computers.  Apple
continues to suffer business and financial  difficulties.  In  consideration  of
these  difficulties,  there can be no assurance  that  customers  will not delay
purchases of Apple-based  products,  or purchase  competitors' products based on
non-Apple  computers,  that  Apple will  continue  to  develop  and  manufacture
products  suitable for the  Company's  existing  and future  markets or that the
Company  will be able to  secure an  adequate  supply  of Apple  computers,  the
occurrence of any of which could have a material adverse effect on the Company's
business and results of operations.

The  Company is also  dependent  on a number of other  suppliers  as sole source
vendors of certain other key  components  of its products and systems.  Products
purchased by the Company from sole source vendors  include  computers from Apple
and SGI; video compression chips  manufactured by C-Cube  Microsystems;  a small
computer systems interface ("SCSI") accelerator board from ATTO Technology; a 3D
digital  video  effects  board  from  Pinnacle  Systems;   application  specific
integrated  circuits ("ASICS") from Lucent,  AMI, Atmel, and LSI Logic;  digital
signal processing integrated circuit from Motorola;  and a fibre channel adapter
card from Adaptec.  The Company purchases these sole source components  pursuant
to purchase  orders  placed from time to time.  The  Company  also  manufactures
certain circuit boards under license from Truevision, Inc. The Company generally
does not carry  significant  inventories of these sole source components and has
no guaranteed  supply  arrangements.  No assurance can be given that sole source
suppliers  will devote the  resources  necessary to support the  enhancement  or
continued  availability  of such  components  or that any such supplier will not
encounter technical,  operating or financial difficulties that might imperil the
Company's supply of such sole source components. While the Company believes that
alternative sources of supply for sole source components could be developed,  or
systems redesigned to permit the use of alternative components, its business and
results of operations  would be  materially  affected if it were to encounter an
untimely or extended interruption in its sources of supply.

The markets for digital  media  editing  and  production  systems are  intensely
competitive and subject to rapid change. The Company  encounters  competition in
the  video  and  film  editing  and  effects,   digital  news  production,   and
professional  audio  markets.  Many  current and  potential  competitors  of the
Company have substantially greater financial, technical, distribution,  support,
and  marketing  resources  than the  Company.  Such  competitors  may use  these
resources  to lower  their  product  costs  and thus be able to lower  prices to
levels  at which  the  Company  could  not  operate  profitably.  Further,  such
competitors may be able to develop  products  comparable or superior to those of
the  Company or adapt more  quickly  than the  Company  to new  technologies  or
evolving customer requirements.  Accordingly, there can be no assurance that the
Company will be able to compete effectively in its target markets or that future
competition will not adversely affect its business and results of operations.

A significant portion of the Company's business is conducted in currencies other
than the U.S. dollar.  Changes in the value of major foreign currencies relative
to the  value of the U.S.  dollar,  therefore,  could  adversely  affect  future
revenues and  operating  results.  The Company  attempts to reduce the impact of
currency  fluctuations on results through the use of forward exchange  contracts
that hedge foreign currency-denominated  intercompany net receivables or payable
balances.  The Company  has  generally  not hedged  transactions  with  external
parties, although it periodically re-evaluates its hedging practices.

The Company is  involved  in various  legal  proceedings,  including  patent and
securities litigation;  an adverse resolution of any such proceedings could have
a material  adverse effect on the Company's  business and results of operations.
See  Note  K  to  Consolidated   Financial   Statements,   and  ITEM  3,  "Legal
Proceedings."  This  litigation  has also been  described  in  previously  filed
reports on Form 10-Q and 10-K.

The Company recognizes that it must ensure that its products and operations will
not be adversely impacted by year 2000 software failures (the "Year 2000 issue")
which can arise in time-sensitive software applications which utilize a field of
two digits to define the  applicable  year. In such  applications,  a date using
"00" as the year may be  recognized  as the year 1900 rather than the year 2000.
In general,  the Company  expects to resolve  Year 2000 issues  through  planned
replacement  or  upgrades.  In  addition,  the Company  expects  that any costs
incurred  to  modify  its  internal  systems  will  not  be  material.  Although
management  does not expect  Year 2000  issues to have a material  impact on its
business or future results of  operations,  there can be no assurance that there
will  not  be  interruptions  of  operations  or  other  limitations  of  system
functionality or that the Company will not incur significant costs to avoid such
interruptions or limitations.



I
TEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK

Not applicable.


<PAGE>
















                               AVID TECHNOLOGY, INC.

                            ANNUAL REPORT ON FORM 10-K

                           YEAR ENDED DECEMBER 31, 1997


                                      ITEM 8

           FINANCIAL STATEMENTS AND SUPPLEMENTARY FINANCIAL INFORMATION




<PAGE>


                               AVID TECHNOLOGY, INC.

                    INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
                         AND FINANCIAL STATEMENT SCHEDULE


CONSOLIDATED FINANCIAL STATEMENTS INCLUDED IN ITEM 8:

Report of Independent Accountants................................     24

Consolidated Statements of Operations for the years ended December
  31, 1997, 1996 and 1995........................................     25

Consolidated Balance Sheets as of December 31, 1997 and 1996.....     26

Consolidated Statements of Stockholders' Equity for the years ended
  December 31, 1997, 1996 and 1995...............................     27

Consolidated Statements of Cash Flows for the years ended December
  31, 1997, 1996 and 1995........................................     28

Notes to Consolidated Financial Statements.......................     29

Consolidated Financial Statement Schedule for the years ended
  December 31, 1997, 1996 and 1995 included in Item 14(d):

Schedule II -...................Valuation and Qualifying Accounts    F-1

Schedules  other than that listed  above have been  omitted  since the  required
information  is not  present or not  present in  amounts  sufficient  to require
submission of the schedule,  or because the information  required is included in
the consolidated financial statements or the notes thereto.



<PAGE>



                         REPORT OF INDEPENDENT ACCOUNTANTS


The Board of Directors and Stockholders
Avid Technology, Inc.:

We have audited the consolidated  balance sheets of Avid Technology,  Inc. as of
December  31,  1997  and  1996,  and  the  related  consolidated  statements  of
operations,  stockholders'  equity and cash flows for each of the three years in
the period  ended  December 31, 1997.  We also audited the  financial  statement
schedule of Avid Technology,  Inc. listed in Item 14(d) of this Form 10-K. These
financial  statements and financial statement schedule are the responsibility of
the Company's  management.  Our responsibility is to express an opinion on these
financial statements and financial statement schedule 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 Avid Technology,
Inc.  as of  December  31, 1997 and 1996,  and the  consolidated  results of its
operations  and its cash flows for each of the three  years in the period  ended
December 31, 1997, in conformity with generally accepted accounting  principles.
In addition, in our opinion, the financial statement schedule referred to above,
when considered in relation to the basic financial  statements taken as a whole,
presents  fairly,  in all  material  respects,  the  information  required to be
included therein.





                                        /s/ Coopers & Lybrand L.L.P.
                                        
                                         COOPERS & LYBRAND L.L.P.


Boston, Massachusetts
February 4, 1998















<PAGE>


AVID TECHNOLOGY, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share data)

<TABLE>
<CAPTION>
                                           For the Year Ended December 31,
                                          -----------------------------------
                                           1997          1996          1995
                                          -------       -------       -------
<S>                                       <C>           <C>           <C>     
Net revenues                              $471,338      $429,009      $406,650
Cost of revenues                           221,553       238,808       198,841
                                           -------       -------       -------
   Gross profit                            249,785       190,201       207,809

Operating expenses:
   Research and development                 73,470        69,405        53,841
   Marketing and selling                   120,394       127,006       107,780
   General and administrative               25,808        24,203        18,085
   Nonrecurring costs                                     28,950         5,456
                                           -------       -------       -------
       Total operating expenses            219,672       249,564       185,162
                                           -------       -------       -------

Operating income (loss)                     30,113       (59,363)       22,647

Interest and other income                    8,291         3,786         2,216
Interest expense                              (166)         (370)         (836)
                                           --------      -------       -------
Income (loss) before income taxes           38,238       (55,947)       24,027

Provision for (benefit from) income taxes   11,854       (17,903)        8,588
                                           --------      -------       -------
Net income (loss)                          $26,384      $(38,044)      $15,439
                                           ========      =======       =======
Net income (loss) per common share -
  basic                                     $1.14        $(1.80)        $0.81
                                           ========      ========      =======
Net income (loss) per common share -      
  diluted                                    $1.08        $(1.80)        $0.77
                                           ========      ========      =======

Weighted average common shares             
outstanding - basic                         23,065        21,163        19,010
                                           ========      =======       =======
Weighted average common shares             
outstanding - diluted                       24,325        21,163        20,165
                                           ========      =======       =======

</TABLE>


The accompanying notes are an integral part of the consolidated financial
statements.


<PAGE>

AVID TECHNOLOGY, INC.
CONSOLIDATED BALANCE SHEETS
(In thousands, except share data)

<TABLE>
<CAPTION>
                                                           December 31,
                                                 -----------------------------
                                                    1997              1996
                                                 ------------      -----------
<S>                                                 <C>               <C>
ASSETS
Current assets:
   Cash and cash equivalents                        $108,308          $75,795
   Marketable securities                              78,654           17,248
   Accounts receivable, net of allowances of
     $7,529 and $7,519 in 1997 and 1996,
     respectively                                     79,773           86,187
   Inventories                                         9,842           28,359
   Deferred tax assets                                17,160           15,852
   Prepaid expenses                                    4,645            6,310
   Other current assets                                2,700            1,947
                                                 ------------      -----------
       Total current assets                          301,082          231,698

   Marketable securities                                                  997
   Property and equipment, net                        38,917           49,246
   Long-term deferred tax assets                      14,820           15,538
   Other assets                                        1,986            3,500
                                                 ------------      -----------
       Total assets                                 $356,805         $300,979
                                                 ============      ===========

LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
   Accounts payable                                  $22,166          $25,332
   Current portion of long-term debt                     783            1,726
   Accrued compensation and benefits                  23,737            9,085
   Accrued expenses                                   30,249           21,844
   Income taxes payable                               11,210            3,258
   Deferred revenues                                  26,463           25,133
                                                 ------------      -----------
       Total current liabilities                     114,608           86,378
                                                 ------------      -----------

Long-term debt, less current portion                     403            1,186

Commitments and contingencies (Note K)

Stockholders' equity:
  Preferred stock, $.01 par value, 1,000,000
    shares authorized; no shares issued or
    outstanding                                             -               -
  Common stock, $.01 par value, 50,000,000
    shares authorized;24,156,938 and 21,338,369
    shares issued and 23,199,636 and                                       
    21,338,369 shares outstanding at December 
    31, 1997 and 1996, respectively                      242              213
  Additional paid-in capital                         252,307          212,474
  Retained earnings                                   27,286            1,451
  Treasury stock, at cost, 957,302
    and 0 shares at December 31, 1997                         
    and 1996, respectively                           (27,548)
  Deferred compensation                               (8,034)
  Cumulative translation adjustment                   (2,472)           (724)
   Net unrealized gains on marketable securities          13               1
                                                 ------------      -----------
    Total stockholders' equity                       241,794         213,415
                                                 ------------      -----------
    Total liabilities and stockholders' equity      $356,805        $300,979
                                                 ============      ===========
</TABLE>


The accompanying  notes are an integral  part of the consolidated financial
statements.

<PAGE>

Consolidated Statements of Stockholders' Equity
(in thousands, except share data)

<TABLE>
<CAPTION>

                                                                                                              Net
                                                                                                           Unrealized
                                                                                                              Gains       
                                                Additional                                     Cumulative  (Losses) on      Total
                                Common Stock     Paid-in    Retained   Treasury   Deferred    Translation  Marketable  Stockholders'
                              Shares     Amount  Capital    Earnings    Stock    Compensation  Adjustment  Securities      Equity
                              ------------------------------------------------------------------------------------------------------
<S>                           <C>          <C>      <C>       <C>       <C>          <C>           <C>         <C>         <C>
Balances at December
  31, 1994                    16,545,344   $166   $107,585    $20,920                              $(578)      $(206)      $127,887
Exercise of stock options
  and related tax benefits       741,313      7     11,899                                                                   11,906
Sale of common stock under
  Employee Stock Purchase
  Plan                            50,744      1      1,203                                                                    1,204
Stock issued in connnection
  with acquisitions            1,522,744     14         85      3,136                                                         3,235
Sale of common stock in a
  public offering, net of
  issuance costs of $560       2,075,000     21     88,146                                                                   88,167
Translation adjustment                                                                              (122)                      (122)
Net unrealized gains on  
  marketable securities                                                                                          250            250
Net income                                                     15,439                                                        15,439
                              ------------------------------------------------------------------------------------------------------
Balances at December
  31, 1995                    20,935,145    209    208,918     39,495                               (700)         44        247,966
Exercise of stock options        260,055      3      1,185                                                                    1,188
Sale of common stock under
  Employee Stock Purchase
  Plan                           143,169      1      2,371                                                                    2,372
Translation adjustment                                                                               (24)                       (24)
Net unrealized losses on
  marketable securities                                                                                          (43)           (43)
Net loss                                                      (38,044)                                                      (38,044)
                              ------------------------------------------------------------------------------------------------------
Balances at December
  31, 1996                    21,338,369    213    212,474      1,451                               (724)          1        213,415
Sale of common stock           1,552,632     16     14,712                                                                   14,728
Acquisition of 1,000,000
  shares of common stock                                                $(28,776)                                           (28,776)
Exercise of (758,298)stock
  options and related tax
  benefits                       715,600      8     14,006       (549)     1,228                                             14,693
Sale of common stock under
  Employee Stock Purchase
  Plan                           204,137      2      1,989                                                                    1,991
Restricted stock issuance        347,200      3      9,152                           $(9,152)                                     3
Restricted stock grants
  cancelled and compensation
  expense                         (1,000)              (26)                            1,118                                  1,092
Translation adjustment                                                                            (1,748)                    (1,748)
Net unrealized gains on
  marketable securities                                                                                           12             12
Net income                                                     26,384                                                        26,384
                              ------------------------------------------------------------------------------------------------------
Balances at December 31,
  1997                        24,156,938   $242   $252,307    $27,286   $(27,548)    $(8,034)    $(2,472)        $13       $241,794
                              ======================================================================================================

</TABLE>

 
The accompanying  notes are an integral  part of the consolidated financial
statements.



<PAGE>


AVID TECHNOLOGY, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS (in thousands)

<TABLE>
<CAPTION>
                                                     For the Year Ended
                                                         December 31,
                                                  1997       1996       1995
                                                 ------------------------------
<S>                                                <C>       <C>        <C>   
CASH FLOWS FROM OPERATING ACTIVITIES:
   Net income (loss)                               $26,384   $(38,044)  $15,439
   Adjustments to reconcile  net income (loss)
     to net cash provided by (used in)
     operating activities:
        Depreciation and amortization               25,380     29,641    19,539
        Compensation from stock grants and
        options                                      2,119
        Provision for accounts receivable
        allowances                                   3,304      6,627     3,006
        Deferred income taxes                         (617)   (18,384)   (8,158)
        Tax benefit of stock option exercises        3,658                6,023
        Provision for product transition
          costs and nonrecurring inventory
          write-offs, non-cash portion                         18,750
        Provision for other nonrecurring
        costs, non-cash portion                                 7,048
        Loss (gain) on disposal of equipment           222      1,410       (80)
        Changes in operating assets and
          liabilities, net of acquisitions:
          Accounts receivable                       (2,215)    13,836   (51,877)
          Inventories                               22,514     14,479   (31,648)
          Prepaid expenses and other
            current assets                             663        147     1,271
          Accounts payable                          (2,940)    (3,819)   11,559
          Income taxes payable                       7,556     (3,206)    1,747
          Accrued expenses                          23,047      9,107     7,062
          Deferred revenues                          2,119      3,356     6,825
                                                 ---------   --------   --------
    NET CASH PROVIDED BY (USED IN) OPERATING
      ACTIVITIES                                   111,194     40,948   (19,292)

CASH FLOWS FROM INVESTING ACTIVITIES:
  Capitalized software development costs              (107)    (2,295)   (3,570)
  Purchases of property, equipment and
    other assets, net                              (15,685)   (28,219)  (42,410)
  Purchases of marketable securities              (147,960)   (29,430)  (68,911)
  Proceeds from sales of marketable
    securities                                      87,564     58,786    50,152
  Proceeds from disposals of equipment               2,227      1,550       423
                                                 ---------   --------   --------
    NET CASH PROVIDED BY (USED IN) INVESTING
      ACTIVITIES                                   (73,961)       392   (64,316)

CASH FLOWS FROM FINANCING ACTIVITIES:
  Payments of long-term debt                        (1,726)    (2,000)   (2,148)
  Proceeds from issuance of common stock            26,729      3,560    95,353
  Purchase of common stock for treasury            (28,776)
                                                   --------   --------  --------
    NET CASH PROVIDED BY (USED IN) FINANCING
      ACTIVITIES                                    (3,773)     1,560    93,205

Effects of exchange rate changes on cash and
  cash equivalents                                    (947)        48        (5)
                                                   --------   --------  --------
Net increase in cash and cash equivalents           32,513     42,948     9,592
Cash and cash equivalents at beginning of year      75,795     32,847    23,255
                                                   --------    -------  --------
Cash and cash equivalents at end of year          $108,308    $75,795   $32,847
                                                   ========   ========  ========

SUPPLEMENTAL DISCLOSURE OF NON-CASH TRANSACTIONS:

   Acquisition of equipment under capital
     lease obligations                                           $186
   Acquisition of equipment under capital
     lease obligations                                                   $2,719
   Issuance of common stock in connection
     with acquisitions                                                      $99

</TABLE>


The accompanying  notes are an integral  part of the consolidated financial
statements.



<PAGE>


                               AVID TECHNOLOGY, INC.

                    NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

A.    ORGANIZATION AND OPERATIONS

Avid Technology,  Inc. ("Avid" or "the Company") develops,  markets,  sells, and
supports  a wide range of  disk-based  systems  for  creating  and  manipulating
digital media content. Avid's digital,  nonlinear video and film editing systems
are designed to improve the  productivity  of video and film editors by enabling
them to edit moving pictures and sound in a faster,  easier, more creative,  and
more cost-effective manner than traditional analog tape-based systems. Avid also
develops and sells digital  editing  systems and newsroom  computer  systems for
creating  content  in the  digital  production  market and for  delivering  news
content to air as well as  digital  audio  systems  for the  professional  audio
market.  Avid's  products are used worldwide in production  and  post-production
facilities; film studios; network,  affiliate,  independent and cable television
stations;  recording studios;  advertising agencies;  government and educational
institutions;  and corporate video  departments.  The Company's  digital editing
systems have accounted for the majority of the Company's revenues to date.

As described in Note O, in January 1995, Avid effected a merger with Digidesign,
Inc. (Digidesign).  Digidesign designs, assembles,  markets, and supports random
access  digital  audio  production  software  and  related  application-specific
hardware  components,  some of which are used in Avid  products.  The merger has
been  accounted  for as a pooling of interests and the  historical  consolidated
financial  statements  of Avid  Technology,  Inc.  for all periods  prior to the
acquisition  presented  herein  have been  restated  to  include  the  financial
position, results of operations and cash flows of Digidesign.

B.    SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

A summary of the Company's significant accounting policies follows:

Basis of Presentation

The consolidated  financial  statements  include the accounts of the Company and
its wholly owned subsidiaries.  Intercompany balances and transactions have been
eliminated.  Certain amounts in the prior years' financial  statements have been
reclassified to conform to the current year presentation.

The Company's  preparation of financial  statements in conformity with generally
accepted  accounting  principles  requires  management  to  make  estimates  and
assumptions  that  affect  the  reported  amount of assets and  liabilities  and
disclosure of contingent  assets and  liabilities  at the dates of the financial
statements and the reported amounts of revenues and expenses during the reported
periods.  The most significant  estimates included in these financial statements
include accounts receivable and sales allowances, inventory valuation and income
tax valuation allowances. Actual results could differ from those estimates.

Translation of Foreign Currencies

The  functional  currency of the  Company's  foreign  subsidiaries  is the local
currency,  except for the Irish  manufacturing  branch and Avid Technology Sales
Ltd. in Ireland, whose functional currencies are the U.S. dollar. The assets and
liabilities of the subsidiaries  whose functional  currencies are other than the
U.S.  dollar are translated  into U.S.  dollars at the current  exchange rate in
effect at the balance sheet date.  Income and expense items are translated using
the average exchange rate during the period.  Cumulative translation adjustments
are reflected as a separate component of stockholders' equity.  Foreign currency
transaction gains and losses are included in results of operations.

The Company enters into foreign exchange  forward  contracts to hedge the effect
of certain asset and liability positions of its foreign subsidiaries.  Gains and
losses  associated  with  currency rate changes on the contracts are recorded in
results of  operations,  offsetting  losses and gains on the related  assets and
liabilities.  The cash flows related to the gains and losses of foreign currency
forward contracts are classified in the statements of cash flows as part of cash
flows from operations.

The market risk  exposure  from  forward  contracts  is assessed in light of the
underlying  currency  exposures  and is  limited  by the  term of the  Company's
contracts,  generally one month. Credit risk from forward contracts is minimized
through the placement of contracts with multiple financial institutions. Forward
contracts are revalued monthly by comparing contract rates to month-end exchange
rates.

Cash and Cash Equivalents

The Company  considers  all highly  liquid debt  instruments  purchased  with an
original  maturity  of  three  months  or  fewer  to be cash  equivalents.  Cash
equivalents  consist  primarily of taxable and  tax-exempt  money market  funds,
bankers'   acceptances,   short-term   time  deposits,   short-term   government
obligations, and commercial paper.

Marketable Securities

Marketable  securities  consist  primarily  of state  and  municipal  bonds  and
commercial  paper.  Certain of these  marketable  securities  with maturities in
excess  of one  year are  classified  as  long-term  investments  in  marketable
securities.  The Company has  classified  its debt  securities as "available for
sale," and reports them at fair value, with unrealized gains and losses excluded
from earnings and reported as an adjustment to stockholders' equity.

Inventories

Inventories,  principally purchased components,  are stated at the lower of cost
(determined on a first-in,  first-out  basis) or market value.  Inventory in the
digital media market,  including  the Company's  inventory,  is subject to rapid
technological  change  or  obsolescence;   therefore   utilization  of  existing
inventory may differ from the Company's estimates.

Property and Equipment

Property  and  equipment  is  recorded  at  cost  and   depreciated   using  the
straight-line  method over the  estimated  useful  life of the asset.  Leasehold
improvements  are  amortized  over  the  shorter  of  the  useful  life  of  the
improvement or the remaining term of the lease. Expenditures for maintenance and
repairs are  expensed as  incurred.  Upon  retirement  or other  disposition  of
assets,  the cost and related  accumulated  depreciation are eliminated from the
accounts and the  resulting  gain or loss is reflected in income.  A significant
portion  of the  property  and  equipment  is  subject  to  rapid  technological
obsolescence;  as a result,  the  depreciation  and  amortization  periods could
ultimately shorten to reflect the change in future technology.

Revenue Recognition

Revenue is recognized upon product shipment, provided that no significant vendor
obligations   remain   outstanding  and  the  resulting   receivable  is  deemed
collectible  by  management.  In  instances  where  product is shipped  with the
commitment to provide a future upgrade or extended  installation  services,  the
Company will defer the revenue related to the upgrade or installation  services.
In addition, the Company may offer rebates on certain products from time to time
which are  accounted  for as  offsets to  revenues  upon  shipment.  Maintenance
revenue  is  recognized  ratably  over  the term of the  maintenance  agreement.
Service  revenue,  principally  training,  is  recognized  as the  services  are
provided.  Included  in  accounts  receivable  allowances  are sales  allowances
provided for expected returns and credits and an allowance for bad debts.

Warranty Expense

The Company  provides a warranty  reserve at the time of sale for the  estimated
costs to repair or replace defective hardware products.

Research and Development Costs

Research  and  development  costs are  expensed as incurred  except for costs of
internally   developed  or  externally   purchased  software  that  qualify  for
capitalization.  Capitalized costs are amortized using the straight-line  method
upon general release, over the expected life of the related products,  generally
12 to 24 months. The straight-line method generally results in approximately the
same amount of expense as that  calculated  using the ratio that current  period
gross product revenues bear to total  anticipated  gross product  revenues.  The
Company evaluates the net realizable value of capitalized software on an ongoing
basis,  relying on a number of business and economic  factors which could result
in shorter amortization periods.

Computation of Net Income (Loss) Per Common Share

Net income per  common  share is  presented  for both basic  earnings  per share
("Basic EPS") and diluted earnings per share ("Diluted EPS"). Basic EPS is based
upon the weighted average number of common shares outstanding during the period.
Diluted  EPS is based  upon the  weighted  average  number of common  and common
equivalent shares outstanding during the period.  Common stock equivalent shares
are included in the Diluted EPS calculation  where the effect of their inclusion
would be dilutive.  Net loss per common share, both basic and dilutive, is based
upon the weighted average number of common shares outstanding during the period.
Common  equivalent  shares result from the assumed exercise of outstanding stock
options,  the proceeds of which are then assumed to have been used to repurchase
outstanding common stock using the treasury stock method.

Recent Accounting Pronouncements

In June 1997,  Statement of Financial  Accounting  Standards No. 130, "Reporting
Comprehensive  Income"  ("SFAS 130"),  was issued which  requires  businesses to
disclose  comprehensive  income and its components in general purpose  financial
statements, with reclassification of prior period financial statements. SFAS 130
is  effective  for fiscal  periods  beginning  after  December  15, 1997 and its
adoption is not expected to have a material impact on the Company's disclosures.

In June 1997, Statement of Financial Accounting Standards No. 131,  "Disclosures
about  Segments of an Enterprise  and Related  Information"  ("SFAS  131"),  was
issued  which  redefines  how  operating  segments are  determined  and requires
disclosures of certain  financial and descriptive  information about a company's
operating  segments.  SFAS 131 is effective for fiscal periods  beginning  after
December  15, 1997 and its  adoption may require  additional  disclosure  of the
Company's historical financial data.

In October 1997,  Statement of Position  97-2,  "Software  Revenue  Recognition"
("SOP 97-2"),  was issued which provides guidance on applying generally accepted
accounting principles in recognizing revenue on software transactions.  SOP 97-2
is effective  for  transactions  entered into in fiscal  years  beginning  after
December  15,  1997.  The Company  will adopt the  guidelines  of SOP 97-2 as of
January 1, 1998 and its  adoption is not  expected to have a material  impact on
the Company's financial results.

C.    MARKETABLE SECURITIES

Gross realized and unrealized  gains and losses for the years ended December 31,
1997 and 1996 were immaterial.


             1997                                  Amortized         Fair
             ----                                     Cost           Value
                                                   ----------      ---------
Federal, State, and Municipal Obligations           $78,641        $78,654
                                                   ==========      =========

             1996
             ----

Federal, State, and Municipal Obligations           $11,465        $11,463
Commercial paper                                      6,779          6,782
                                                   ----------      ---------
                                                    $18,244        $18,245
                                                   ==========      =========

All marketable securities held at December 31, 1997 mature within 1 year.

D.    INVENTORIES

Inventories consist of the following (in thousands):

                                                  December 31,
                                           ---------------------------
                                             1997             1996
                                           ----------       ----------
       Raw materials                          $5,488          $19,182
       Work in process                           674              870
       Finished goods                          3,680            8,307
                                           ----------       ----------
                                              $9,842          $28,359
                                           ==========       ==========

E.    CAPITALIZED SOFTWARE DEVELOPMENT COSTS

Capitalized purchased and internally developed software costs, included in other
assets at December 31, 1997 and 1996, consist of the following (in thousands):

                                                           DECEMBER 31,
                                                       1997            1996
                                                      ------          ------
     Capitalized software development costs           $6,424          $6,322
     Less accumulated amortization                     5,483           4,595
                                                      ------          ------
                                                        $941          $1,727
                                                      ======          ======

Computer  software  costs  capitalized  during 1997,  1996, and 1995 amounted to
approximately $107,000, $2,295,000, and $3,570,000,  respectively.  Amortization
of computer  software  costs during those  periods was  approximately  $893,000,
$3,185,000,   and  $1,220,000,   respectively.   During  1996  as  part  of  the
nonrecurring costs,  described in Note N, capitalized software costs of $829,000
and accumulated amortization of $334,000 were written off.

F.    PROPERTY AND EQUIPMENT

Property and equipment consists of the following (in thousands):

                                       Depreciable           December 31,
                                          Life            1997          1996
                                       -----------       -------      -------
   Computer and video equipment        3 to 5 years      $75,042      $68,171
   Office equipment                    3 to 5 years        4,652        4,233
   Furniture and fixtures              3 to 5 years        6,820        6,915
   Leasehold improvements              3 to 10 years      13,105       12,962
                                                         -------      -------
                                                          99,619       92,281
  Less accumulated depreciation and               
    amortization                                          60,702       43,035
                                                         -------      -------
                                                         $38,917      $49,246
                                                         =======      =======

As of December 31, 1997 and 1996, property and equipment included  approximately
$6,607,000 of equipment under capital leases.

G.    LONG TERM DEBT

Capital Leases

During  November  1994 and January  1995,  the Company  entered  into  equipment
financing   arrangements  with  a  bank  for  aggregate   borrowings  of  up  to
$10,000,000, at various interest rates (ranging from 4.6% to 8.1%) determined at
the borrowing date. This equipment  financing  arrangement expired in March 1996
and  was  not  renewed.  As of  December  31,  1997  and  1996,  $1,186,000  and
$2,912,000,   respectively   was  outstanding  as  capital  leases  under  these
arrangements. Borrowings are collateralized by certain assets of the Company.

As of December 31, 1997, future minimum lease payments under capital leases were
as follows (in thousands):

                                           YEAR         AMOUNT
                                          ------       --------
                                           1998          $831
                                           1999           412
                                                       -------
      Total minimum lease payments                      1,243
      Less amounts representing interest                   57
                                                       -------
      Present  value  of  minimum  lease    
        payments                                        1,186
      Less current  portion of long-term      
        debt                                              783
                                                       -------
      Long-term   portion   of   capital     
        lease obligations                                $403
                                                       =======

Total cash  payments for  interest in 1997,  1996,  and 1995 were  approximately
$136,000, $311,000, and $741,000, respectively.

Line of Credit

The Company has an unsecured line of credit with a group of banks which provides
for up to $35.0 million in revolving  credit.  The line of credit  agreement was
amended  on June 27,  1997 to  expire on June 30,  1998.  Under the terms of the
agreement,  the Company must pay an annual commitment fee of 1/4% of the average
daily unused portion of the facility,  payable quarterly in arrears. The Company
has two loan options  available under the agreement:  the Base Rate Loan and the
LIBOR Rate Loan. The interest rates to be paid on the outstanding borrowings for
each loan annually are equal to the Base Rate or LIBOR plus 1.25%, respectively.
Additionally,  the Company is required to maintain certain  financial ratios and
is bound by covenants over the life of the agreement, including a restriction on
the payment of dividends. The Company had no borrowings against this facility as
of December 31, 1997.

Three of the Company's European subsidiaries have unsecured overdraft facilities
that permit aggregate borrowings of Italian Lire 300,000,000, Irish Punt 150,000
and German Mark 800,000.  No borrowings were outstanding  under these facilities
as of December 31, 1997.

H.    INCOME TAXES

Income (loss) before income taxes and the components of the income tax provision
(benefit) for the years ended  December 31, 1997,  1996, and 1995 are as follows
(in thousands):


<TABLE>
<CAPTION>
                                              1997       1996        1995
                                              ---------  ---------   ---------
<S>                                           <C>        <C>         <C>    
Income (loss) before income taxes:
  United States                               $22,017   $(61,242)    $5,582
  Foreign                                      16,221      5,295     18,445
                                             --------   --------   --------
  Total income (loss) before
    income taxes                              $38,238   $(55,947)   $24,027
                                             ========   ========   ========

Provisions for (benefit from) income taxes:
    Current tax expense:
      Federal                                  $2,353    $(3,235)    $7,433
      Foreign                                   4,667      3,189      5,487
      State                                        75        (16)     1,094
                                             --------   --------   --------
      Total current                             7,095        (62)    14,014

      Deferred tax benefit:
      Federal                                   4,937    (15,820)    (4,968)
      Foreign                                  (1,237)                  (32)
      State                                     1,059     (2,021)      (426)
                                             --------   --------   --------
      Total deferred                            4,759    (17,841)    (5,426)
                                             --------   --------   --------
      Total income tax  provision
       (benefit)                              $11,854   $(17,903)    $8,588
                                             ========   ========   ========

</TABLE>


Net cash  payments or (refunds)  for income taxes in 1997,  1996,  and 1995 were
approximately  $(1,104,103),  $4,911,000,  and $7,927,000 respectively.  The net
refund in 1997 was the result of the 1996 loss,  which was carried back to 1993,
1994, and 1995 for federal tax purposes.

The  cumulative  amount  of  undistributed  earnings  of  subsidiaries  which is
intended to be permanently  reinvested and for which U.S.  income taxes have not
been provided totaled $34,806,000 at December 31, 1997.


Deferred tax assets are comprised of the following (in thousands):

                                                        December 31,
                                                 ---------------------------
                                                    1997           1996
                                                 ------------   ------------
   Allowances for accounts receivable              $1,583         $1,406
   Difference in accounting for:
     Revenue                                        3,922          2,440
     Costs and expenses                             9,372          6,764
     Inventories                                    2,738          4,650
     Purchased technology                              43            324
   Deferred intercompany profit                        23            589
   Tax credit and net  operating  loss             
     carryforwards                                 14,820         15,538
   Other                                             (521)          (321)
                                                  --------       --------
   Net deferred tax assets                        $31,980        $31,390
                                                  ========       ========

For U.S.  Federal  Income Tax purposes at December 31, 1997, the Company has tax
credit carryforwards of approximately  $7,291,000 which will expire between 1998
and 2012 and a net operating  loss  carryforward  of  approximately  $18,105,000
which will expire in 2011.  Deferred  tax assets  reflect the net tax effects of
the tax credits and  operating  loss  carryforwards  and  temporary  differences
between the carrying  amounts of assets and liabilities for financial  reporting
purposes and the amounts used for income tax purposes.  Although  realization is
not  assured,  management  believes  it is more  likely than not that all of the
deferred tax assets will be realized;  accordingly,  no valuation  allowance has
been recorded for net deferred tax assets.  The amount of the deferred tax asset
considered  realizable,  however, could be reduced in the near term if estimates
of future taxable income are reduced.

A  reconciliation  of  the  Company's  income  tax  provision  (benefit)  to the
statutory federal tax rate follows:

                                                1997       1996        1995
                                              ---------  ----------  ----------
             Statutory rate                     35%        (35%)        35%
             Nondeductible merger costs                                  6
             Tax credits                        (4)         (1)         (3)
             Foreign operations                 (3)          4          (2)
             State taxes, net of federal       
             benefit                             2          (2)          2
             Municipal bond interest                                    (2)
             Foreign sales corporation          (1)                     (1)
             Other                               2           2           1
                                              --------   --------    --------
                                                31%        (32%)        36%
                                              ========   ========    ========

Consolidated  results of operations include results of manufacturing  operations
in Ireland.  Income  from the sale of  products  manufactured  or  developed  in
Ireland is subject to a 10% Irish tax rate through the year 2010.  The favorable
Irish tax rate  resulted in tax benefits of  approximately  $900,000 in 1997 and
$1,300,000 in 1995.  The 1996 Irish tax benefit was immaterial to the results of
operations.  The 1997 basic and  dilutive  per share tax  benefit  was $0.04 and
$0.04, respectively. The 1995 basic and dilutive per share tax benefit was $0.07
and $0.06, respectively.

I.    CAPITAL STOCK

Preferred Stock

The Company is authorized to issue up to one million shares of Preferred  Stock,
$.01 par value per share.  Each such series of  Preferred  Stock shall have such
rights,  preferences,  privileges  and  restrictions,  including  voting rights,
dividend  rights,  conversion  rights,  redemption  privileges,  and liquidation
preferences, as shall be determined by the Board of Directors.

In February 1996, the Board of Directors approved a Shareholder Rights Plan. The
rights were distributed in March 1996 as a dividend at the rate of one right for
each share of Common  Stock  outstanding.  No value has been  assigned  to these
rights.  The rights may be exercised to purchase  shares of a new series of $.01
par value junior participating preferred stock or to purchase a number of shares
of the Company's Common Stock which equals the exercise price of the right, $115
divided by one-half of the then-current market price, upon occurrence of certain
events, including the purchase of 20% or more of the Company's Common Stock by a
person or group of  affiliated  or  associated  persons.  The  rights  expire on
February 28, 2006,  and may be redeemed by the Company for $.01 each at any time
prior to the tenth  day  following  a change in  control  and in  certain  other
circumstances.

Common Stock

During June and July 1997, the Company  granted 347,200 shares of $.01 par value
restricted common stock to certain employees under the 1997 Stock Incentive Plan
approved by the  shareholders on June 4, 1997. These shares vest annually in 20%
increments beginning May 1, 1998. Accelerated vesting may occur if certain stock
price  performance goals established by the Board of Directors are met. Unvested
restricted shares are subject to forfeiture in the event that an employee ceases
to be employed by the Company.  The Company  initially  recorded,  as a separate
component  of  stockholders'  equity,  deferred  compensation  of  approximately
$9,100,000 with respect to this  restricted  stock.  This deferred  compensation
represents the excess of fair value of the restricted  shares at the date of the
award over the purchase price and is recorded as compensation expense ratably as
the shares vest. As of December 31, 1997,  approximately $1,092,000 was recorded
as compensation expense.

On October 23, 1997 and February 5, 1998,  the Company  announced that the Board
of  Directors  authorized  the  repurchase  of up to 1.0 million and 1.5 million
shares, respectively,  of the Company's common stock. Purchases have and will be
made in the open market or in  privately  negotiated  transactions.  The Company
plans to use any repurchased shares for its employee stock plans. As of December
31, 1997, the Company had repurchased a total of 1.0 million shares at a cost of
$28,776,000, which completed the program announced in October.

Effective with the merger between Avid and Digidesign, as of January 1, 1995 all
issued and outstanding shares of Digidesign Common Stock were converted into the
right to receive Avid Common Stock at an exchange ratio of 0.79.

In  September  1995,  the Company  issued  2,000,000  shares of its Common Stock
through a public  offering.  The Company  issued an additional  75,000 shares in
October  1995 as the  underwriters  exercised a portion of their  over-allotment
option.  Proceeds  to the  Company  totaled  approximately  $88,167,000,  net of
expenses and underwriters' commissions associated with the offering.

J.    EMPLOYEE BENEFIT PLANS

PROFIT SHARING PLANS

1991 Profit Sharing Plan

The Company  has a profit  sharing  plan under  section  401(k) of the  Internal
Revenue Code covering  substantially all U.S. employees.  The 401(k) plan allows
employees  to  make  contributions  up  to  a  specified   percentage  of  their
compensation.  The Company may, upon resolution by the Board of Directors,  make
discretionary contributions to the plan. No discretionary contributions had been
made as of December  31,  1995.  Effective  January 1, 1996,  the Company  began
contributing  33% of up to the first 6% of an employee's  salary  contributed to
the plan by the  employee.  The  Company's  contributions  to this plan  totaled
$988,000 and $946,000 in 1997 and 1996, respectively.

In addition,  the Company has various retirement plans covering certain European
employees.   Certain  of  the  plans  require  the  Company  to  match  employee
contributions up to a specified  percentage as defined by the plans. The Company
made  contributions  of  approximately  $489,000, $400,000 and $302,000 in 1997,
1996, and 1995, respectively.

1997 Profit Sharing Plan

In January 1997,  the Board of Directors  approved the 1997 Profit  Sharing Plan
(the  "1997  Plan").   The  1997  Plan,   effective   January  1,  1997,  covers
substantially all employees of the Company and its  participating  subsidiaries,
other than those employees  covered by other incentive  plans. The Plan provides
that the Company  contribute a varying percentage of salary (0% to 10%) based on
the Company's  achievement  of targeted  return on invested  capital in 1997, as
defined by the Plan.

1998 Profit Sharing Plan

In December 1997,  the Board of Directors  approved the 1998 Profit Sharing Plan
(the "1998 Plan"). The 1998 Plan, effective January 1, 1998 covers substantially
all  employees  of the Company and its  participating  subsidiaries,  other than
those  employees  covered by other incentive  plans.  The Plan provides that the
Company  contribute  a  varying  percentage  of  salary  based on the  Company's
achievement  of targeted  return on invested  capital in 1998, as defined by the
Plan.

1998 Variable Compensation Plan

In December 1997, the Board of Directors  approved the 1998 Executive and Senior
Management  Variable  Compensation  Plan (the "1998  Variable  Plan").  The 1998
Variable Plan,  effective January 1, 1998, covers executive  officers and senior
management.  The plan provides that the Company  contribute a varying percentage
of salary  based on the  Company's  achievement  of targeted  return on invested
capital in 1998, as defined by the Plan.

STOCK PLANS

1989 Stock Option Plan

The 1989  Stock  Option  Plan (the  "1989  Plan")  allows  for the  issuance  of
incentive  and  non-qualified  stock  options to purchase the  Company's  Common
Stock.  Incentive  stock options may not be granted at less than the fair market
value of the Company's Common Stock at the date of grant and are exercisable for
a term not to exceed ten years. For holders of 10% or more of the total combined
voting power of all classes of the Company's  stock,  options may not be granted
at less than 110% of the fair  market  value of the Common  Stock at the date of
grant,  and the  option  term may not  exceed 5 years.  In  connection  with the
establishment  of the 1993 Stock  Incentive  Plan,  the 1989 Plan was amended to
provide that, subject to certain exceptions,  no further options or awards could
be issued thereunder.

1991 Stock Option Plan

Digidesign  had an employee  stock option plan whereby an aggregate of 1,500,000
shares  of  common  stock  were  reserved  for  issuance.   Effective  upon  the
acquisition by Avid, the stock option  agreements were assigned to Avid and Avid
registered the 670,884 shares,  equivalent to the number of options outstanding,
taking into effect the  exchange  ratio of 0.79 shares of Avid Common  Stock for
each share of Digidesign Common Stock. Under the plan, options may be granted to
employees, directors,  consultants, and advisors to the Company. Incentive stock
options  may be  granted  at  prices  not  lower  than  fair  market  value,  as
established by the Board of Directors on the date of grant.  Non-qualified stock
options may be granted at not less than 85% of fair market value, as established
by the Board of Directors on the date of grant. Avid has not granted any options
under this plan.  The options expire in a maximum of ten years and may be either
incentive  stock  options or  non-qualified  stock  options,  determined  at the
discretion  of the Board of  Directors.  Options  are  immediately  exercisable,
subject to a right of repurchase which generally lapses as to 25% of the subject
shares on the first anniversary of the vesting  commencement  date, and as to an
additional 2.083% for each succeeding full month of continuous employment.

1993 Stock Incentive Plan

Under the 1993  Stock  Incentive  Plan (the "1993  Plan"),  a maximum of 800,000
shares of Common Stock may be issued upon exercise of incentive stock options or
non-qualified  stock options,  or in connection with awards of restricted  stock
grants,  stock  appreciation  rights  or  performance  shares.  The terms of the
incentive  stock options granted under this plan are  substantially  the same as
for those granted under the 1989 Plan. The options generally vest ratably over a
four-year period.

1993 Director Stock Option Plan

The 1993 Director Stock Option Plan (the "Director  Plan"), as amended April 12,
1996,  provides  for the grant of options to purchase up to a maximum of 220,000
shares of Common Stock of the Company to non-employee  directors of the Company,
at an exercise  price equal to the fair market value of the stock on the date of
grant.  Certain options vest immediately whereas other options vest ratably over
a four-year period from the date of grant.

1994 Stock Option Plan

The 1994 Stock  Option Plan,  as amended on February  12,  1996,  allows for the
issuance of incentive and  non-qualified  options to purchase up to a maximum of
2,400,000 shares of the Company's Common Stock. The terms of the options granted
under this plan are  essentially  the same as for those  granted  under the 1989
Plan.

1997 Stock Incentive Plan

The 1997 Stock Incentive Plan covers  employees,  consultants,  and directors of
the Company,  and allows for the issuance of incentive and  non-qualified  stock
options and restricted  stock grants to purchase the Company's  Common Stock. An
aggregate  of 1,000,000  shares of Common Stock are reserved for issuance  under
the plan including up to 500,000 shares of restricted  stock which may be issued
pursuant  to the plan.  The terms of the  options  granted  under  this plan are
essentially  the same as for those  granted  under the 1989  Plan.  The  options
generally vest ratably over a four-year period.

1997 Stock Option Plan

In December  1997,  the Board of Directors  approved the 1997 Stock Option Plan.
This plan, which covers employees and consultants, other than executive officers
and directors,  allows for the issuance of non-qualified  options to purchase up
to 1,000,000  shares of the  Company's  common  stock.  The terms of the options
granted under this plan are  essentially the same as for those granted under the
1989 Plan. The options generally vest over a four-year period.

Employee Stock Purchase Plan

On July 31, 1996,  the 1993 Employee  Stock  Purchase  Plan (the "1993  Purchase
Plan")  expired and was replaced with the 1996 Employee Stock Purchase Plan (the
"1996  Purchase  Plan").  The 1996  Purchase Plan  authorizes  the issuance of a
maximum of 200,000  shares of Common Stock in  semi-annual  offerings at a price
equal  to the  lower of 85% of the  closing  price  on the  applicable  offering
commencement  date  or 85% of  the  closing  price  on the  applicable  offering
termination date. In December 1997, the Board of Directors approved an amendment
to the Plan.  The  amendment,  which is subject to  shareholder  approval,  adds
500,000  shares of common stock to the number of shares  authorized to be issued
under the Plan.

As disclosed in Note I, the Company has  announced  programs to repurchase up to
2.5 million shares of common stock for use in its employee stock purchase plans.

Stock Based Compensation Plans

The Company has eight stock-based compensation plans, which are described above.
In October 1995, the Financial  Accounting  Standards Board issued  Statement of
Financial   Accounting   Standards   No.  123,   "Accounting   for   Stock-Based
Compensation", which is effective for periods beginning after December 15, 1995.
SFAS No. 123 requires that companies either recognize  compensation  expense for
grants of stock,  stock  options,  and other  equity  instruments  based on fair
value, or provide pro forma  disclosures of net income and earnings per share in
the notes to the financial statements.  The Company adopted SFAS No. 123 in 1996
and elected the disclosure-only  alternative provisions.  The Company has chosen
to continue to account for  stock-based  compensation  granted to employees  and
directors using the intrinsic value method  prescribed in Accounting  Principles
Board Opinion No. 25,  "Accounting  for Stock issued to Employees",  and related
interpretations.  Accordingly,  compensation  cost for stock options  granted to
employees and directors is measured as the excess,  if any, of the fair value of
the  Company's  stock at the date of the grant over the amount that must be paid
to acquire  the  stock.  Had  compensation  cost for the  Company's  stock-based
compensation  plans been  determined  based on the fair value at the grant dates
for the awards  under these plans  consistent  with the  methodology  prescribed
under SFAS No. 123, the Company's net income (loss) and earnings per share would
have been reduced to the pro forma amounts indicated below:



<TABLE>
<CAPTION>

                                     1997                                  1996                                  1995
                     --------------------------------------------------------------------------------------------------------------
                      Net     Earnings      Earnings        Net      Earnings       Earnings       Net      Earnings    Earnings
                     Income   per share     per share      Income    per share      per share     Income    per share   per share
                     (Loss)     Basic       Dilutive       (Loss)      Basic        Dilutive      (Loss)      Basic     Dilutive
                     -----------------------------------   -----------------------------------   -----------------------------------
<S>                  <C>          <C>        <C>           <C>          <C>         <C>           <C>        <C>        <C>
As
Reported             $26,384      $1.14      $1.08         $(38,044)    $(1.80)     $(1.80)       $15,439    $0.81      $0.77
                     =======      =====      =====         =========    ======      ======        =======    =====      =====
Pro
Forma                $18,855      $0.82      $0.76         $(46,400)    $(2.19)     $(2.19)       $10,889    $0.57      $0.52
                     =======      =====      =====         =========    ======      ======        =======    =====      =====
</TABLE>


The fair value of each option granted  during 1997,  1996, and 1995 is estimated
on the date of grant using the Black-Scholes  option-pricing model utilizing the
following weighted-average  assumptions:  (1) zero-coupon U.S. government issues
with  interest  rates  of  6.47%,  6.05%  and  6.26%,  for  1997,  1996 and 1995
respectively,  (2)  expected  option  life from date of vesting of 17 months (3)
expected  stock  volatility of 61.2% for 1997 and 58.31% for 1996 and 1995,  and
(4) expected dividend yield of 0.0%.

The fair value of awards under the Employee  Stock Purchase Plans periods during
1997,  1996,  and  1995 is  estimated  on the  date of the  purchase  using  the
Black-Scholes  option-pricing  model  utilizing the following  weighted  average
assumptions:  (1) expected option life of 6 months,  (2) expected  volatility of
61.2% for 1997 and 58.31% for 1996 and 1995, and (3) expected  dividend yield of
0.0%.  The  risk-free  interest rate used in  determining  the fair value of the
plans was determined to be the rate on a zero-coupon  six month U.S.  Government
issue on the first day of the offering  period for each of the six plan periods.
These  interest  rates ranged from 4.97% to 6.21% for all years  presented.  The
amount of  compensation  expense,  net of income  taxes  related to the Employee
Stock Purchase  plans,  included in the pro forma net income (loss) and earnings
per share detailed in the table above, is approximately $499,000,  $626,000, and
$837,000 for 1997, 1996, and 1995, respectively.

The effects of applying  SFAS No. 123 for the purposes of pro forma  disclosures
may not be  indicative  of the  effects on  reported  net income  (loss) and net
income (loss) per share for future years, as the pro forma  disclosures  include
the effects of only those awards granted after January 1, 1995.

Information  with respect to options  granted under all stock option plans is as
follows:

<TABLE>
<CAPTION>

                                           1997                       1996                         1995
                                   ---------------------     ------------------------     ----------------------
                                               Wtd Avg.                     Wtd Avg.                   Wtd Avg.
                                                Price                        Price                      Price
                                 Shares        Per Share      Shares        Per Share     Shares      Per Share
                                 -----------------------     ------------------------     ----------------------
<S>                              <C>           <C>            <C>             <C>          <C>           <C>
Options outstanding at
beginning of year January 1,     3,547,356     $16.18         2,986,595       $21.59       2,956,569     

Granted, at fair value           1,243,950     $14.77         2,273,398       $17.01       1,105,040     $33.60
Exercised                         (758,298)    $13.23          (260,055)       $4.56        (741,313)     $8.03
Cancelled                         (459,481)    $17.17        (1,452,582)      $30.55        (333,701)    $26.26
                                 ----------                   ----------                   ----------
Options outstanding at
end of year December 31,         3,573,527     $16.09         3,547,356       $16.18       2,986,595     $21.59
                                 ==========    ======         ==========      ======       ==========    ======

Options exercisable at
December 31,                     1,338,726     $16.04         1,237,924       $13.71         999,602     $12.76
                                 ==========    ======         ==========      ======       ==========    ======

Options available for future
grant at December 31,              674,296                      866,759                      821,801            
                                 ==========                   ==========                   ==========
Weighted average fair value
of options granted during
the year                             $7.46                        $6.93                       $15.59            
                                 ==========                   ==========                   ==========

</TABLE>


The following table summarizes  information  about stock options  outstanding at
December 31, 1997:

<TABLE>
<CAPTION>


                            Options Outstanding                                              Options Exercisable
   -----------------------------------------------------------------------           ----------------------------------
                                     Weighted-Average
                                       Remaining         Weighted-Average                              Weighted-Average
   Range of               Number      Contractual            Exercise                   Number             Exercise
Exercise Prices         Outstanding      Life                 Price                   Exercisable            Price
- ------------------      -----------   --------------      ----------------            -----------       ----------------
<S>                       <C>               <C>                 <C>                     <C>                   <C>
$ 0.0100 to $13.0000      1,220,057         7.82                $10.4889                354,883               $ 8.3389
$13.1875 to $15.3125        271,419         8.74                $14.2218                 77,918               $14.2806
$15.6250 to $16.5000        978,908         8.19                $16.4563                398,770               $16.4632
$16.6875 to $19.6250        504,340         7.66                $18.8271                278,099               $18.4287
$19.7500 to $46.7500        598,803         8.20                $25.4678                229,056               $24.9226
                          ---------                                                   ----------
$ 0.0100 to $46.7500      3,573,527         8.03                $16.0938              1,338,726               $16.0379
                          =========         ====                ========              ==========              ========

</TABLE>


On February 12, 1996, the Board of Directors  authorized  that all options under
the 1994 Stock  Option  Plan at an exercise  price  greater or equal to $28.48 
would be eligible to be exchanged for options with an exercise  price at the
then fair market value of $16.50 per share and a first vest date of February 21,
1997. This  cancellation and reissuance of stock options affected  approximately
860,000 options.

K.   COMMITMENTS AND CONTINGENCIES

Lease Commitments

The Company leases its office space and certain  equipment under  non-cancelable
operating   leases.   The  future   minimum   lease   commitments   under  these
non-cancelable leases at December 31, 1997 are as follows (in thousands):

                         1998                       $11,682
                         1999                        10,516
                         2000                         9,722
                         2001                         5,823
                         2002                         5,475
                         Thereafter                  33,472
                                                ------------
                         Total                      $76,690
                                                ============

The Company's two leases for corporate office space in Tewksbury, Massachusetts,
and the lease for the Company's  Burbank,  California  sales and support office,
expiring June 2010 and January 2007,  respectively,  contain  renewal options to
extend the respective terms of each lease for an additional 60 months.

The accompanying  consolidated  results of operations  reflect rent expense on a
straight-line  basis  over the term of the  leases.  Total  rent  expense  under
operating leases was approximately  $13,321,762,  $11,425,000 and $6,818,000 for
the years ended December 31, 1997, 1996 and 1995, respectively.

The  total  of  future  minimum  rentals  to be  received  under  non-cancelable
subleases related to the above leases is $2.1 million.

Purchase Commitments

As  of  December  31,  1997,   the  Company  has  entered  into  two  short-term
non-cancelable  purchase  commitments for certain  components used in its normal
operations.  The  purchase  commitments  covered by these  agreements  aggregate
approximately $5,958,000.

The Company currently buys certain key components used in its products from sole
source suppliers.  These components are purchased through purchase orders placed
from time to time. The Company generally does not carry significant  inventories
of these sole source  components and has no guaranteed  supply  arrangements for
them. These purchasing  arrangements can result in delays in obtaining  products
from time to time. While the Company believes that alternative sources of supply
for its sole source  components could be developed,  its business and results of
operations  could be  adversely  affected  if it were to  encounter  an extended
interruption in its source of supply.

Accounts Sold with Recourse

The Company from time to time sells systems to unrelated financial  institutions
which  lease  such   systems  to  end-user   customers.   In  certain  of  these
transactions,  the  Company  accepts  varying  amounts  of  recourse  from  such
unrelated  third-party  lessors.  At December 31, 1997 and 1996, the third-party
lessors'   uncollected  balance  of  lease  receivables  with  recourse  totaled
approximately  $57,977,000  and  $22,565,000,  respectively  with  approximately
$15,428,000  and  $7,964,000,  respectively  of  associated  recourse  to  Avid.
Included in the Company's  accrued  expenses are provisions for estimated losses
under  such  recourse  agreements.  To date,  the  Company  has  experienced  no
significant write-offs or returns under such recourse agreements.

Research and Development Contracts

During 1995, the Company  entered into research and  development  contracts with
third parties under which it received  $4,300,000 to be used in the  development
of certain specified products.  The Company granted to such third parties, among
other  things,  discounted  pricing  on the  products  developed.  Approximately
$2,900,000 was recorded as a reduction of the related  development  costs during
1995. At December 31, 1995,  $1,400,000 was included in accrued  expenses due to
the status of related  product  development  and other  terms of the  underlying
contracts.  During 1996,  that  accrued  amount was  substantially  utilized for
related contract obligations.

Contingencies

On June 7, 1995, the Company filed a patent infringement complaint in the United
States   District  Court  for  the  District  of   Massachusetts   against  Data
Translation,  Inc.,  a Marlboro,  Massachusetts-based  company.  Avid is seeking
judgment against Data Translation that, among other things, Data Translation has
willfully  infringed  Avid's  patent  number  5,045,940,  entitled  "Video/Audio
Transmission System and Method." Avid is also seeking an award of treble damages
together  with  prejudgment  interest  and costs,  Avid's  costs and  reasonable
attorneys'  fees,  and an injunction to prohibit  further  infringement  by Data
Translation.  The litigation has been dismissed without prejudice (with leave to
refile) pending a decision by the U.S. Patent and Trademark  Office on a reissue
patent application based on the issued patent.

In December 1995, six purported  shareholder  class action complaints were filed
in the United States District Court for the District of Massachusetts naming the
Company  and  certain  of  its   underwriters  and  officers  and  directors  as
defendants.  On July  31,  1996,  the six  actions  were  consolidated  into two
lawsuits:  one  brought  under the 1934  Securities  Exchange  Act (the "`34 Act
suit") and one under the 1933  Securities  Act (the "`33 Act  suit").  Principal
allegations  contained in the two complaints  include claims that the defendants
violated federal  securities laws and state common law by allegedly making false
and  misleading  statements  and  by  allegedly  failing  to  disclose  material
information that was required to be disclosed,  purportedly causing the value of
the Company's stock to be artificially inflated. The `34 Act suit was brought on
behalf of all persons who bought the  Company's  stock between July 26, 1995 and
December 20, 1995.  The `33 Act suit was brought on behalf of persons who bought
the Company's  stock  pursuant to its September 21, 1995 public  offering.  Both
complaints  seek  unspecified  damages  for  the  decline  of the  value  of the
Company's stock during the applicable  period.  A motion to dismiss both the `34
Act suit and the `33 Act suit was filed on October 18, 1996.  After briefing and
argument on the motions,  the Court issued its decision on August 14, 1997. With
respect  to the `33 Act  suit,  the  Court  dismissed  the  claims  against  the
underwriters, dismissed the claims brought against the Company under ss.12(2) of
the `33 Act, and dismissed the plaintiffs'  claims relating to the Company's all
digital newsroom (in both the `33 Act and `34 Act cases) on the grounds that the
plaintiffs  had  failed  to allege a  material  misrepresentation  or  omission.
Finding that it was required to draw all  reasonable  inferences in favor of the
plaintiffs,  the Court declined to dismiss the plaintiffs'  remaining  claims in
the `33 Act case and the `34 Act claims  relating to matters  other than the all
digital  newsroom.  On September 26, 1997, the plaintiffs filed a motion seeking
to have the Court reconsider its dismissal of the underwriters  from the `33 Act
suit, which the underwriters  have opposed.  The plaintiffs also sought leave to
amend  their `33 Act  Complaint  to add new claims  concerning  the all  digital
newsroom,  which the  Company  opposed.  In February  1998,  the Company and the
Plaintiffs  entered into a Stipulation of Settlement in both suits and the judge
issued  an  order  granting  preliminary  approval  to the  settlement.  A Final
Settlement  Approval hearing is scheduled for May 28, 1998. The Company believes
the  potential  settlement  will not have a  material  effect  on the  Company's
consolidated  financial  position  or  results of  operations.  In the event the
settlement is not finally  approved,  the Company believes that it and the other
defendants have  meritorious  defenses to the remaining  allegations made by the
plaintiffs and intends to contest these lawsuits vigorously. Nonetheless, in the
event the settlement is not approved,  an adverse  resolution of this litigation
could have a material  adverse  effect on the Company's  consolidated  financial
position  or results of  operations  in the  period in which the  litigation  is
resolved.  In such event, a reasonable  estimate of the Company's potential loss
for damages cannot be made at this time.

On March 11, 1996,  the Company was named as defendant in a patent  infringement
suit filed in the United States District Court for the Western District of Texas
by Combined Logic Company,  a California  partnership  located in Beverly Hills,
California.  On May 16,  1996,  the suit was  transferred  to the United  States
District  Court for the Southern  District of New York on motion by the Company.
The complaint  alleges  infringement  by Avid of U.S.  patent number  4,258,385,
issued in 1981,  and seeks  injunctive  relief,  treble  damages and costs,  and
attorneys'  fees. The Company  believes that it has meritorious  defenses to the
complaint and intends to contest it vigorously.  However,  an adverse resolution
of this  litigation  could  have a  material  adverse  effect  on the  Company's
consolidated  financial position or results of operations in the period in which
the  litigation  is resolved.  No costs have been accrued for this possible loss
contingency.

The Company also receives  inquiries from time to time with regard to additional
possible patent infringement  claims.  These inquiries are generally referred to
counsel  and  are in  various  stages  of  discussion.  If any  infringement  is
determined to exist, the Company may seek licenses or settlements.  In addition,
from time to time as a normal incidence of the nature of the Company's business,
various claims,  charges, and litigation have been asserted or commenced against
the Company  arising  from or related to  contractual  or employee  relations or
product  performance.  Management  does not  believe  these  claims  will have a
material  adverse  effect on the financial  position or results of operations of
the Company.

The Company has entered into employment  agreements with certain officers of the
Company that  provide for  severance  pay and  benefits,  including  accelerated
vesting of options.  Under the terms of the agreements,  these officers  receive
100% of such  severance  benefits  if they are  involuntarily  terminated.  Such
agreements  are  effective  for two years  and are  automatically  extended  for
successive one year periods after the second anniversary, unless 30 days advance
written  notice is given by either  party.  The  Company has also  entered  into
change in control employment agreements with certain officers of the Company. As
defined in the agreements,  a change in control includes, but is not limited to:
a third  person or entity  becoming the  beneficial  owner of 30% or more of the
Company's common stock, the shareholders  approving any plan or proposal for the
liquidation or dissolution of the Company,  or within a twenty-four month period
a  majority  of the  members  of the  Company's  Board of  Directors  ceasing to
continue as members of the board unless their successors are each approved by at
least two-thirds of the Company's directors.  If at any time within two years of
the change in control, the officer's employment is terminated by the Company for
any reason other than cause or by the officer for good reason, as such terms are
defined in the  agreement,  then the  employee is  entitled  to receive  certain
severance  payments  plus an  amount  equal to  compensation  earned  under  the
management incentive  compensation plan during the previous two years as well as
accelerated vesting of options.

L.    FINANCIAL INSTRUMENTS

Concentration of Credit Risk

Financial instruments which potentially subject the Company to concentrations of
credit risk consist of temporary cash  investments  and trade  receivables.  The
Company places its excess cash in marketable investment grade securities.  There
are no  significant  concentrations  in any one issuer of debt  securities.  The
Company  places  its cash,  cash  equivalents  and  investments  with  financial
institutions  with high  credit  standing.  Concentrations  of credit  risk with
respect to trade  receivables  are limited due to the large  number of customers
comprising the Company's  customer bases, and their dispersion  across different
regions.  The Company also  maintains  reserves for potential  credit losses and
such losses have been within management's expectations.

Forward Exchange Contracts

As of December 31, 1997 and 1996, the Company had approximately  $22,138,000 and
$24,738,000,  respectively,  of foreign exchange forward contracts  outstanding,
denominated in various  European and Asian  currencies,  the Canadian dollar and
the Australian dollar, as a hedge against its committed exposures. The following
table  summarizes the December 31, 1997 currencies and  approximate  U.S. dollar
amounts  involved;  the Company is the seller with respect to each contract with
the exception of the Irish pound contract (in thousands):


                                                             Approximate
                                   Local Currency            U.S. Dollar
                                       Amount                Equivalent
                                  ------------------      ------------------
            Australian Dollar          1,200                     $787
            Singapore Dollar           1,900                    1,132
            Canadian Dollar            2,600                    1,809
            German Mark               10,600                    5,953
            Italian Lire           4,500,000                    2,566
            Irish Pound                  900                    1,302
            French Franc              26,000                    4,361
            Japanese Yen             548,000                    4,228
                                                              --------
                                                              $22,138
                                                              ========

The forward exchange contracts generally have maturities of one month. Net gains
(losses) of  approximately  $3,226,000,  $968,000 and $(687,000)  resulting from
forward exchange  contracts were included in results of operations in 1997, 1996
and 1995,  respectively.  The fair values of these forward exchange contracts as
of December 31, 1997 and 1996 approximate the contract amounts.

M.    GEOGRAPHICAL INFORMATION

A summary of the Company's  operations by geographical  area for the years ended
December 31, 1997, 1996 and 1995 follows (in thousands):


<TABLE>
<CAPTION>

                                                      1997               1996           1995
                                                    ---------          --------       ---------
<S>                                                 <C>                <C>            <C>
Net revenues:
North America                                      $328,547           $283,959        $283,474
Asia Pacific and Latin America                       39,165             36,424          23,365
Europe                                              165,785            153,311         131,014
Eliminations of transfers from North
America to other areas                              (62,159)           (44,685)        (31,203)
                                                   ---------          ---------       ---------
Total net revenues                                 $471,338           $429,009        $406,650
                                                   =========          =========       =========

Operating income (loss):
North America                                       $14,862           $(63,451)(1)     $11,111
Asia Pacific and Latin America                          278               (191)(1)       1,480
Europe                                               15,182              4,991 (1)      16,732
Eliminations                                           (209)              (712)         (6,676)(2)
                                                  ---------            ---------      ---------
Total operating income (loss)                       $30,113           $(59,363)        $22,647
                                                  =========            =========      =========
Identifiable assets:
North America                                      $126,286           $158,846        $196,143
Asia Pacific and Latin America                       12,242             15,965          20,408
Europe                                               48,958             49,385          61,412
Eliminations                                        (17,643)           (17,257)        (26,851)
                                                  ---------            ---------      ---------
Total identifiable assets                          $169,843           $206,939        $251,112
Corporate assets                                    186,962             94,040          80,492
                                                  ---------            ---------      ---------
Total assets at December 31,                       $356,805           $300,979        $331,604
                                                  =========            =========      =========
<FN>
(1)  Includes  nonrecurring  costs,  as  described  in Note  N, of  $24,248,000,
$632,000, and $4,070,000 recorded in North America, Asia Pacific, Latin America,
and Europe, respectively, in 1996.

(2) Includes expenses of $5,456,000 related to merger costs.
</FN>
</TABLE>


Sales  outside  North  America  included  in  North  American   operations  were
approximately  $22,086,000,  $22,477,000 and $35,680,000 in 1997, 1996 and 1995,
respectively.

Transfers  between  geographic  areas  are  accounted  for at prices  which,  in
general, provide a profit after coverage of all manufacturing costs.

Identifiable assets are those assets of the Company that are identified with the
operations in each geographic  area.  Corporate  assets are principally cash and
marketable securities.

N.    NONRECURRING COSTS

In the first  quarter of 1996,  the Company  recorded a  nonrecurring  charge of
$20,150,000.   Included  in  this   charge  was   $7,000,000   associated   with
restructuring,  consisting of approximately $5,000,000 of costs related to staff
reductions of approximately 70 employees,  primarily in the U.S., and associated
write-offs  of  fixed  assets,   and  $2,000,000  related  to  the  decision  to
discontinue  development  of certain  products  and  projects.  Included in this
$7,000,000  were  approximately   $4,976,000  of  cash  payments  consisting  of
$3,617,000 of salaries and related severance costs and $1,359,000 of other staff
reduction and discontinued development costs. The non-cash charges of $2,024,000
recorded during 1996 consists primarily of $1,459,000 for the write-off of fixed
assets.  Also included in this  $20,150,000  nonrecurring  charge is $13,150,000
related to product transition costs associated with the transition from NuBus to
PCI bus technology in some of the Company's  product  lines.  As of December 31,
1996, the Company had completed the related restructuring and product transition
actions.

In  September  1996,  the Company  recorded a  nonrecurring  charge of
$8,800,000,  associated primarily with the Company's decision not to release the
Avid Media  Spectrum  product  line.  This charge  includes  costs to  write-off
inventory, fixed assets, capitalized software and various other costs associated
with the canceled product line.  Approximately  $7,200,000 of the charge relates
to non-cash items  associated  with the write-off of assets.  As of December 31,
1997, the Company had completed the related restructuring.

As described in Note O, in connection  with the 1995  acquisitions,  the Company
incurred merger costs of approximately $5,456,000. Of this amount, approximately
$3,900,000  represented a provision for direct transaction  expenses,  primarily
professional fees, and $1,600,000 consisted of various restructuring charges.

O.    ACQUISITIONS

In March  1995,  the  Company  acquired  Parallax  Software  Limited and 3 Space
Software  Limited,  developers of paint and  compositing  software,  and Elastic
Reality,  Inc., a developer of special  effects  software.  These  transactions,
which were  accounted  for as poolings of interest,  were  effected  through the
exchange of  approximately  1.5 million shares of the Company's Common Stock for
all of the issued and  outstanding  shares of these  entities.  The December 31,
1995,  accompanying  statement  of  stockholders'  equity  includes  a  retained
earnings adjustment for December 31, 1994 for retained earnings of the companies
as the Company's  previous years'  financial  statements were not restated.  The
operations of Parallax  Software  Limited,  3 Space Software Limited and Elastic
Reality, Inc. were not material to the Company's consolidated operations.

In January 1995, the Company completed a merger with Digidesign.  The merger was
accounted for as a pooling of interests and was effected through the exchange of
approximately  6 million  shares of the  Company's  Common  Stock for all of the
issued and outstanding  shares of Digidesign based on a merger exchange ratio of
 .79 shares of Avid Common Stock for each share of Digidesign  Common Stock.  The
historical  consolidated  financial  statements  for  all  years  prior  to  the
acquisition  were restated in the consolidated  financial  statements to include
the financial position, results of operations and cash flows of Digidesign.

P.    NET INCOME (LOSS) PER SHARE

The Company  computes  basic and diluted  earnings per share in accordance  with
Financial  Accounting Standards No. 128, "Earnings per Share," which the Company
adopted as of December 31, 1997.  The following  table  reconciles the numerator
and denominator of the basic and diluted earnings per share  computations  shown
on the Consolidated Statements of Operations:


<TABLE>
<CAPTION>
                                            For the Years Ended December 31,
                                           ----------------------------------
(In thousands, except per share data)        1997         1996         1995
                                             ----         ----         ----
<S>                                          <C>          <C>          <C>    
Basic EPS
Numerator:
Net income (loss)                            $26,384      $(38,044)    $15,439

Denominator:
Common shares outstanding                     23,065        21,163      19,010

Basic EPS                                      $1.14        $(1.80)      $0.81
                                             =======      ========     ========

Diluted EPS
Numerator:
Net income (loss)                            $26,384      $(38,044)    $15,439

Denominator:
Common shares outstanding                     23,065        21,163      19,010
Common stock equivalents                       1,260                     1,155
                                             -------      --------     --------
                                              24,325        21,163      20,165

Diluted EPS                                    $1.08        $(1.80)      $0.77
                                             =======      ========     ========
</TABLE>


Options to  purchase  319,541  and 403,280  shares of common  stock  outstanding
during the years ended December 31, 1997 and 1995,  respectively,  were excluded
from the  year-to-date  calculation  of diluted net income per share because the
exercise  prices of those  options  exceeded the average  market price of common
stock during those periods. Options to purchase 3,547,356 shares of common stock
outstanding  during the year ended  December  31,  1996 were  excluded  from the
year-to-date  calculation  of diluted  net loss per share as the effect of their
inclusion would have been anti-dilutive.

Earnings per share data have been restated for all periods presented to reflect
the adoption of SFAS No. 128.

Q.    QUARTERLY RESULTS (UNAUDITED)

The following information has been derived from unaudited consolidated financial
statements  that,  in the opinion of  management,  include all normal  recurring
adjustments necessary for a fair presentation of such information.

In thousands, except per share data:

<TABLE>
<CAPTION>
                                                                          Quarters Ended
                                   ------------------------------------------------------------------------------------------
                                                      1997                                          1996
                                   --------------------------------------------  --------------------------------------------
                                   Dec.        Sept.      Jun.        Mar.        Dec.         Sept.      Jun.        Mar.
                                    31          30         30          31          31           30         30          31
                                   --------------------------------------------  --------------------------------------------
<S>                                <C>         <C>        <C>         <C>         <C>          <C>        <C>         <C>
Net revenues                       $123,735    $116,510   $122,884    $108,209    $113,211     $114,664   $109,095    $92,039
Cost of revenues                     54,062      51,606     59,700      56,185      66,266(1)    60,670     59,416     52,456
                                   --------------------------------------------  --------------------------------------------
Gross profit                         69,673      64,904     63,184      52,024      46,945       53,994     49,679     39,583
                                   --------------------------------------------  --------------------------------------------
Operating expenses:
Research & development               20,160      18,598     18,296      16,416      17,583       17,569     16,637     17,616
Marketing & selling                  31,301      30,109     30,687      28,297      32,182       31,303     33,088     30,433
General & administrative              6,977       6,734      6,294       5,803       5,857        6,767      6,081      5,498
Nonrecurring costs                                                                                8,800                20,150
                                   --------------------------------------------  --------------------------------------------
Total operating expenses             58,438      55,441     55,277      50,516      55,622       64,439     55,806     73,697
                                   --------------------------------------------  --------------------------------------------
Operating income (loss)              11,235       9,463      7,907       1,508      (8,677)     (10,445)    (6,127)   (34,114)
Other income, net                     2,244       2,596      2,045       1,240       1,596          523        710        587
                                   --------------------------------------------  --------------------------------------------
Income (loss) before
income taxes                         13,479      12,059      9,952       2,748      (7,081)      (9,922)    (5,417)   (33,527)
Provision for (benefit from)
income taxes                          4,178       3,231      3,483         962      (2,250)      (3,164)    (1,760)   (10,729)
                                   --------------------------------------------  --------------------------------------------
Net income (loss)                    $9,301      $8,828     $6,469      $1,786     $(4,831)     $(6,758)   $(3,657)  $(22,798)
                                   ============================================  =============================================
Net income (loss)
per share - basic                     $0.39       $0.37      $0.28       $0.08      $(0.23)      $(0.32)    $(0.17)    $(1.08)
                                   ============================================  =============================================
Net income (loss)
per share - diluted                   $0.37       $0.34      $0.27       $0.08      $(0.23)      $(0.32)    $(0.17)    $(1.08)
                                   ============================================  =============================================
Weighted average
common shares
outstanding - basic                  23,601      23,912     23,164      21,550      21,306       21,224     21,104     21,019
                                   ============================================  =============================================
Weighted average
common shares
outstanding - diluted                25,231      25,747     24,075      21,750      21,306       21,224     21,104     21,019
                                   ============================================  =============================================

High common stock price             $33.000     $38.000    $28.125     $14.000     $16.375      $20.625    $26.000    $23.125
Low common stock price              $23.000     $22.000    $12.375      $9.000     $10.125      $12.375    $17.875    $16.250

<FN>
(1) Includes a non-cash  charge of $5.6  million  related  principally  to spare
parts which are no longer required to support the Company's business.
</FN>
</TABLE>


Earnings per share data have been restated for all periods presented to reflect
the adoption of SFAS No. 128.

The Company's  quarterly  operating results fluctuate as a result of a number of
factors including,  without limitation, the timing of new product introductions,
marketing  expenditures,  promotional programs,  and periodic discounting due to
competitive factors. The Company's operating results may fluctuate in the future
as a result of these and other  factors,  including  the  Company's  success  in
developing and introducing  new products,  its products and customer mix and the
level  of  competition  which  it  experiences.  The  Company  operates  with  a
relatively  small  backlog.  Quarterly  sales and  operating  results  therefore
generally depend on the volume and timing of orders received during the quarter.
The  Company's  expense  levels  are  based in part on its  forecasts  of future
revenues.  If revenues are below  expectations,  the Company's operating results
may be  adversely  affected.  Accordingly,  there can be no  assurance  that the
Company will be profitable in any particular quarter.



I
TEM 9.   CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE

Not applicable.


<PAGE>


                                     PART III


ITEM 10.  DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

The  response to this item is  contained  in part under the  caption  "EXECUTIVE
OFFICERS OF THE COMPANY" in Part I hereof, and the remainder is contained in the
Company's  Proxy  Statement for the Annual Meeting of Shareholders to be held on
May 19,  1998 (the "1998  Proxy  Statement")  under the  captions  "Election  of
Directors" and "Section 16(a) Beneficial Ownership Reporting  Compliance" and is
incorporated herein by reference.


ITEM 11.  EXECUTIVE COMPENSATION

The  response to this item is contained in the  Company's  1998 Proxy  Statement
under the  captions  "Election  of  Directors  -  Directors'  Compensation"  and
"Executive Compensation" and is incorporated herein by reference.



ITEM 12.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The  response to this item is contained in the  Company's  1998 Proxy  Statement
under  the  caption  "Security   Ownership  of  Certain  Beneficial  Owners  and
Management" and is incorporated herein by reference.



ITEM 13.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

Not applicable.



                                      PART IV


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

(a) 1.      FINANCIAL STATEMENTS

The following  consolidated  financial  statements  are  included in Item 8:

 -    Report of Independent  Accountants
 -    Consolidated Statements of Operations for the years ended December 31,
      1997, 1996 and 1995
 -    Consolidated  Balance  Sheets  as of  December  31,  1997  and  1996
 -    Consolidated Statements of Stockholders' Equity for the years ended
      December 31, 1997, 1996 and 1995
 -    Consolidated  Statements  of Cash Flows for the years ended  December  31,
      1997, 1996 and 1995
 -    Notes to Consolidated Financial Statements

(a) 2.      FINANCIAL STATEMENT SCHEDULE

The  following  consolidated  financial  statement  schedule is included in Item
14(d):

         Schedule II   -    Valuation and Qualifying Accounts

Schedules  other than that listed  above have been  omitted  since the  required
information  is not  present,  or not present in amounts  sufficient  to require
submission of the schedule,  or because the information  required is included in
the consolidated financial statements or the notes thereto.

a) 3.      LISTING OF EXHIBITS

EXHIBIT NO.                               DESCRIPTION

3.1     Certificate  of Amendment of the Third Amended and Restated  Certificate
        of  Incorporation  of the Registrant  (incorporated  by reference to the
        Registrant's  Quarterly Report on Form 10-Q as filed with the Commission
        on May 15, 1995, File No. 0-21174).

3.2     Third  Amended  and  Restated   Certificate  of   Incorporation  of  the
        Registrant  (incorporated by reference to the Registrant's  Registration
        Statement on Form S-8 as filed with the Commission on June 9, 1993, File
        No. 33-64126).

3.3     Amended  and  Restated  By-Laws  of  the  Registrant   (incorporated  by
        reference  to the  Registrant's  Registration  Statement  on Form S-1 as
        declared  effective  by the  Commission  on  March  11,  1993,  File No.
        33-57796).

3.4     Certificate of Designations  establishing Series A Junior  Participating
        Preferred Stock (the  "Certificate of  Designations")  (incorporated  by
        reference to the  Registrant's  Current Report on Form 8-K as filed with
        the Commission on March 8, 1996).

3.5     Certificate   of  Correction   to  the   Certificate   of   Designations
        (incorporated  by reference to the  Registrant's  Current Report on Form
        8-K as filed with the Commission on March 8, 1996).

4.1     Specimen   Certificate   representing  the  Registrant's   Common  Stock
        (incorporated by reference to the Registrant's Registration Statement on
        Form S-1 as declared effective by the Commission on March 11, 1993, File
        No. 33-57796).

4.2     Rights Agreement,  dated as of February 29, 1996, between the Registrant
        and The First National Bank of Boston, as Rights Agent  (incorporated by
        reference to the  Registrant's  Current Report on Form 8-K as filed with
        the Commission on March 8, 1996, File No. 0-21174).

10.1    Lease dated  September 29, 1995 between Allied Dunbar  Insurance PLC and
        Avid Technology  Limited  (incorporated by reference to the Registrant's
        Quarterly  Report on Form 10-Q as filed with the  Commission on November
        14, 1995, File No. 0-21174).

10.2    Lease dated  August 30,  1995  between  Syntex  (U.S.A.)  Inc.  and Avid
        Technology,   Inc.   (incorporated  by  reference  to  the  Registrant's
        Quarterly  Report on Form 10-Q as filed with the  Commission on November
        14, 1995, File No. 0-21174).

10.3    Lease between MGI Andover Street,  Inc. and Avid Technology,  Inc. dated
        March 21, 1995 (incorporated by reference to the Registrant's  Quarterly
        Report on Form 10-Q as filed with the  Commission on May 15, 1995,  File
        No. 0-21174).

10.4    Amended and Restated lease dated as of June 7, 1996 between MGI One Park
        West, Inc. and Avid Technology,  Inc.  (incorporated by reference to the
        Registrant's  Quarterly Report on Form 10-Q as filed with the Commission
        on August 14, 1996, File No. 0-21174).

10.5    Amended and Restated  Revolving  Credit Agreement among Avid Technology,
        Inc., The First National Bank of Boston, as agent, NationsBank of Texas,
        N.A.,  BayBank  and  ABN  AMRO  Bank  N.V.  dated  as of  July  1,  1995
        (incorporated by reference to the Registrant's  Quarterly Report on Form
        10-Q as filed with the Commission on August 9, 1995, File No. 0-21174).

10.6    First  Amendment  dated  September  30,  1995 to  Amended  and  Restated
        Revolving Credit Agreement by and among Avid Technology, Inc., The First
        National Bank of Boston, as agent,  NationsBank of Texas,  N.A., BayBank
        and ABN AMRO Bank N.V.  (incorporated  by reference to the  Registrant's
        Quarterly  Report on Form 10-Q as filed with the  Commission on November
        14 , 1995, File No. 0-21174).

10.7    Second  Amendment  dated as of February 28, 1996 to Amended and Restated
        Revolving  Credit  Agreement  among  Avid  Technology,  Inc.,  The First
        National Bank of Boston, as agent,  NationsBank of Texas,  N.A., BayBank
        and ABN  AMRO  Bank  N.V.  dated as of June 30,  1996  (incorporated  by
        reference  to the  Registrant's  Quarterly  Report on Form 10-Q as filed
        with the Commission on August 14, 1996, File No. 0-21174).

10.8    Third  Amendment  dated  as of May  8,  1996  to  Amended  and  Restated
        Revolving  Credit  Agreement  among  Avid  Technology,  Inc.,  The First
        National Bank of Boston, as agent,  NationsBank of Texas,  N.A., BayBank
        and ABN  AMRO  Bank  N.V.  dated as of June 30,  1996  (incorporated  by
        reference  to the  Registrant's  Quarterly  Report on Form 10-Q as filed
        with the Commission on August 14, 1996, File No. 0-21174).

10.9    Fourth  Amendment  dated as of June 28,  1996 to  Amended  and  Restated
        Revolving  Credit  Agreement  among  Avid  Technology,  Inc.,  The First
        National Bank of Boston, as agent,  NationsBank of Texas,  N.A., BayBank
        and ABN  AMRO  Bank  N.V.  dated as of June 30,  1996  (incorporated  by
        reference  to the  Registrant's  Quarterly  Report on Form 10-Q as filed
        with the Commission on August 14, 1996, File No. 0-21174).

10.10   Fifth  Amendment  dated  as of July  1,  1996 to  Amended  and  Restated
        Revolving  Credit  Agreement  among  Avid  Technology,  Inc.,  The First
        National Bank of Boston, as agent,  NationsBank of Texas,  N.A., BayBank
        and ABN  AMRO  Bank  N.V.  dated as of June 30,  1996  (incorporated  by
        reference  to the  Registrant's  Quarterly  Report on Form 10-Q as filed
        with the Commission on August 14, 1996, File No. 0-21174).

10.11   Sixth  Amendment  dated  as of June 27,  1997 to  Amended  and  Restated
        Revolving  Credit Agreement and Assignment (the "Sixth  Amendment"),  by
        and  among  AVID   TECHNOLOGY,   INC.,  a  Delaware   corporation   (the
        "Borrower"), BANKBOSTON, N.A. (formerly known as The First National Bank
        of Boston) and the other  lending  institutions  listed on Schedule 1 to
        the Credit  Agreement,  amending  certain  provisions of the Amended and
        Restated   Revolving   Credit  Agreement  dated  as  of  June  30,  1995
        (incorporated by reference to the Registrant's  Quarterly Report on Form
        10-Q as filed with the Commission on August 12, 1997, File No. 0-21174).

*#10.12 Seventh Amendment dated as of October 1, 1997 to  Amended  and  Restated
        Revolving Credit Agreement (the "Seventh  Amendment"), by and among AVID
        TECHNOLOGY,INC., a Delaware corporation (the "Borrower"), BANKBOSTON,
        N.A. (formerly known as The First National Bank of Boston) and the other
        lending institutions listed on Schedule 1 to the Credit Agreement,
        amending certain provisions of the Amended and Restated  Revolving
        Credit Agreement dated as of June 30, 1995.

10.13   Form  of  Distribution  Agreement  (incorporated  by  reference  to  the
        Registrant's Registration Statement on Form S-1 as declared effective by
        the Commission on March 11, 1993, File No. 33-57796).

10.14   Form of Purchase and License Agreement (incorporated by reference to the
        Registrant's Registration Statement on Form S-1 as declared effective by
        the Commission on March 11, 1993, File No. 33-57796).

10.15   Form of Software Only License  Agreement  (incorporated  by reference to
        the  Registrant's   Registration  Statement  on  Form  S-1  as  declared
        effective by the Commission on March 11, 1993, File No. 33-57796).

#10.16  1989 Stock Option Plan  (incorporated  by reference to the  Registrant's
        Registration  Statement  on  Form  S-1  as  declared  effective  by  the
        Commission on March 11, 1993, File No. 33-57796).

#10.17  1993 Stock Incentive Plan (incorporated by reference to the Registrant's
        Registration  Statement  on  Form  S-1  as  declared  effective  by  the
        Commission on March 11, 1993, File No. 33-57796).

#10.18  1993 Director Stock Option Plan, as amended  (incorporated  by reference
        to the  Registrant's  Proxy  Statement as filed with the  Commission  on
        April 27, 1995, File No. 0-21174).

#10.19  1993 Executive Compensation Agreement  (incorporated by reference to the
        Registrant's Registration Statement on Form S-1 as declared effective by
        the Commission on March 11, 1993, File No. 33-57796).

#10.20  1993  Employee  Stock  Purchase Plan  (incorporated  by reference to the
        Registrant's  Registration  Statement  on Form  S-8 as  filed  with  the
        Commission on June 9, 1993, File No. 33-64130).

#10.21  1994 Stock Option  Plan,  as amended  (incorporated  by reference to the
        Registrant's  Registration  Statement  on Form  S-8 as  filed  with  the
        Commission on October 27, 1995, File No. 33-98692).

#10.22  Digidesign,  Inc. 1991 Stock Option Plan  (incorporated  by reference to
        Registrant's  Quarterly Report on Form 10-Q as filed with the Commission
        on May 15, 1995, File No. 0-21174).

#10.23  1995 Executive Variable  Compensation Program (incorporated by reference
        to the  Registrant's  Quarterly  Report on Form  10-Q as filed  with the
        Commission on May 15, 1995, File No. 0-21174).

*#10.24 1998 Executive and Senior Management Variable Compensation Plan.

#10.25  1997 Stock Option Plan.

*#10.26 1996 Employee Stock Purchase Plan, as amended.

#10.27  1998 Non-Qualified Deferred Compensation Plan (incorporated by reference
        to the Registrant's Registration Statement on Form S-8 as filed with the
        Commission on December 18, 1997, File No. 33-42569).

*#10.28 1998 Profit Sharing Plan.

*#10.29 Employment Agreement between the Company and William J. Miller.

*#10.30 Change-in-Control Agreement between the Company and William J. Miller.

*#10.31 Employment Agreement between the Company and William L. Flaherty.

*#10.32 Change-in-Control Agreement between the Company and William L. Flaherty.

#10.33  Employment agreement between the Company and Clifford Jenks(incorporated
        by reference to the Registrant's quarterly  Report on Form 10-Q as filed
        with the Commission on November 14, 1996, File No. 0-21174).

*21     Subsidiaries of the Registrant.

*23.1   Consent of Coopers & Lybrand L.L.P., Independent Accountants.

- ------------------
*documents filed herewith
#Management contract or compensatory plan identified pursuant to Item 14 (a) 3.

(b)   REPORTS ON FORM 8-K

For the fiscal  quarter  ended  December 31, 1997,  the Company filed no Current
Reports on Form 8-K.



<PAGE>



                                    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.

AVID TECHNOLOGY, INC.
(Registrant)

By:   /s/ William J. Miller                  By:   /s/ William L. Flaherty
      ----------------------                       -----------------------
      William J. Miller                            William L. Flaherty        
      Chairman of the Board,                       Senior Vice President of   
      President and Chief                          Finance, Chief Financial   
      Executive Officer                            Officer and Treasurer     
      (Principal Executive Officer)                (Principal Financial Officer)

Date: March 26, 1998                         Date: March 26, 1998
      --------------------                         --------------------

By:   /s/ James T. Wandrey
      -----------------------
      James T. Wandrey
      Vice President and
      Corporate Controller
      (Principal Accounting Officer)

Date: March 26, 1998
      --------------------

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 and on the dates indicated.


      NAME                           TITLE                           DATE

/s/Charles T. Brumback              Director                     March 16, 1998
- ----------------------                                           --------------
 Charles T. Brumback

/s/William E. Foster                Director                     March 16, 1998
- ----------------------                                           --------------
 William E. Foster

/s/Peter C. Gotcher                 Director                     March 16, 1998
- ----------------------                                           --------------
 Peter C. Gotcher

/s/Robert M. Halperin               Director                     March 16, 1998
- ----------------------                                           --------------
 Robert M. Halperin

/s/Nancy Hawthorne                  Director                     March 13, 1998
- ----------------------                                           --------------
 Nancy Hawthorne

/s/Roger J. Heinen, Jr.             Director                     March 16, 1998
- ----------------------                                           --------------
 Roger J. Heinen, Jr.

/s/William S. Kaiser                Director                     March 13, 1998
- ----------------------                                           --------------
 William S. Kaiser

/s/Lucille S. Salhany               Director                     March 16, 1998
- ----------------------                                           --------------
 Lucille S. Salhany

/s/William J. Warner                Director                     March 19, 1998
- ----------------------                                           --------------
 William J. Warner




<PAGE>



















                               AVID TECHNOLOGY, INC.

                            ANNUAL REPORT ON FORM 10-K

                           YEAR ENDED DECEMBER 31, 1997


                                    ITEM 14(d)

                           FINANCIAL STATEMENT SCHEDULE




<PAGE>




                               AVID TECHNOLOGY, INC.

           SCHEDULE II - SUPPLEMENTAL VALUATION AND QUALIFYING ACCOUNTS

                   Years ended December 31, 1997, 1996 and 1995


<TABLE>
<CAPTION>
                                                             Additions
                                                      ----------------------
                                          Balance      Charged      Charged                        Balance
                                            at           to            to                             at
                                         beginning    costs and      other                          end of
        Description                      of period    expenses      accounts      Deductions        period
- -------------------------------          ----------   ----------    ---------     -----------      ---------
<S>                                      <C>          <C>           <C>            <C>               <C>
Allowance for doubtful accounts

     December 31, 1997                   $6,959,243   $2,032,489    $(413,862)     $(1,479,977)(a)   $7,097,893

     December 31, 1996                    6,011,617    5,599,130      792,927       (5,444,431)(a)    6,959,243

     December 31, 1995                    2,307,817    4,304,775      179,578         (780,553)(a)    6,011,617

Sales returns and allowances
 
     December 31, 1997                     $559,600                  $152,272(b)     $(281,162)(a)     $430,710

     December 31, 1996                      460,595                   283,478(b)      (184,473)(a)      559,600
  
     December 31, 1995                      846,936                    35,837(b)      (422,178)(a)      460,595

Inventory valuation allowance

     December 31, 1997                   $8,372,460   $5,136,384     $166,187      $(4,747,190)(a)   $8,927,840

     December 31, 1996                    9,780,463   22,925,413                   (24,333,416)(a)    8,372,460

     December 31, 1995                    5,462,514   10,089,567      972,371       (6,743,989)(a)    9,780,463

<FN>

(a)  Amount represents write-offs net of recoveries.
(b)  Sales returns provisions are charged directly against revenue.
</FN>

</TABLE>



<PAGE>




                                 INDEX TO EXHIBITS


  
EXHIBIT NO.               DESCRIPTION                                   PAGE

3.1     Certificate  of Amendment of the Third Amended and Restated  Certificate
        of  Incorporation  of the Registrant  (incorporated  by reference to the
        Registrant's  Quarterly Report on Form 10-Q as filed with the Commission
        on May 15, 1995, File No. 0-21174).

3.2     Third  Amended  and  Restated   Certificate  of   Incorporation  of  the
        Registrant  (incorporated by reference to the Registrant's  Registration
        Statement on Form S-8 as filed with the Commission on June 9, 1993, File
        No. 33-64126).

3.3     Amended  and  Restated  By-Laws  of  the  Registrant   (incorporated  by
        reference  to the  Registrant's  Registration  Statement  on Form S-1 as
        declared  effective  by the  Commission  on  March  11,  1993,  File No.
        33-57796).

3.4     Certificate of Designations  establishing Series A Junior  Participating
        Preferred Stock (the  "Certificate of  Designations")  (incorporated  by
        reference to the  Registrant's  Current Report on Form 8-K as filed with
        the Commission on March 8, 1996).

3.5     Certificate   of  Correction   to  the   Certificate   of   Designations
        (incorporated  by reference to the  Registrant's  Current Report on Form
        8-K as filed with the Commission on March 8, 1996).

4.1     Specimen   Certificate   representing  the  Registrant's   Common  Stock
        (incorporated by reference to the Registrant's Registration Statement on
        Form S-1 as declared effective by the Commission on March 11, 1993, File
        No. 33-57796).

4.2     Rights Agreement,  dated as of February 29, 1996, between the Registrant
        and The First National Bank of Boston, as Rights Agent  (incorporated by
        reference to the  Registrant's  Current Report on Form 8-K as filed with
        the Commission on March 8, 1996, File No. 0-21174).

10.1    Lease dated  September 29, 1995 between Allied Dunbar  Insurance PLC and
        Avid Technology  Limited  (incorporated by reference to the Registrant's
        Quarterly  Report on Form 10-Q as filed with the  Commission on November
        14, 1995, File No. 0-21174).

10.2    Lease dated  August 30,  1995  between  Syntex  (U.S.A.)  Inc.  and Avid
        Technology,   Inc.   (incorporated  by  reference  to  the  Registrant's
        Quarterly  Report on Form 10-Q as filed with the  Commission on November
        14, 1995, File No. 0-21174).

10.3    Lease between MGI Andover Street,  Inc. and Avid Technology,  Inc. dated
        March 21, 1995 (incorporated by reference to the Registrant's  Quarterly
        Report on Form 10-Q as filed with the  Commission on May 15, 1995,  File
        No. 0-21174).

10.4    Amended and Restated lease dated as of June 7, 1996 between MGI One Park
        West, Inc. and Avid Technology,  Inc.  (incorporated by reference to the
        Registrant's  Quarterly Report on Form 10-Q as filed with the Commission
        on August 14, 1996, File No. 0-21174).

10.5    Amended and Restated  Revolving  Credit Agreement among Avid Technology,
        Inc., The First National Bank of Boston, as agent, NationsBank of Texas,
        N.A.,  BayBank  and  ABN  AMRO  Bank  N.V.  dated  as of  July  1,  1995
        (incorporated by reference to the Registrant's  Quarterly Report on Form
        10-Q as filed with the Commission on August 9, 1995, File No. 0-21174).

10.6    First  Amendment  dated  September  30,  1995 to  Amended  and  Restated
        Revolving Credit Agreement by and among Avid Technology, Inc., The First
        National Bank of Boston, as agent,  NationsBank of Texas,  N.A., BayBank
        and ABN AMRO Bank N.V.  (incorporated  by reference to the  Registrant's
        Quarterly  Report on Form 10-Q as filed with the  Commission on November
        14, 1995, File No. 0-21174).

10.7    Second  Amendment  dated as of February 28, 1996 to Amended and Restated
        Revolving  Credit  Agreement  among  Avid  Technology,  Inc.,  The First
        National Bank of Boston, as agent,  NationsBank of Texas,  N.A., BayBank
        and ABN  AMRO  Bank  N.V.  dated as of June 30,  1996  (incorporated  by
        reference  to the  Registrant's  Quarterly  Report on Form 10-Q as filed
        with the Commission on August 14, 1996, File No. 0-21174).

10.8    Third  Amendment  dated  as of May  8,  1996  to  Amended  and  Restated
        Revolving  Credit  Agreement  among  Avid  Technology,  Inc.,  The First
        National Bank of Boston, as agent,  NationsBank of Texas,  N.A., BayBank
        and ABN  AMRO  Bank  N.V.  dated as of June 30,  1996  (incorporated  by
        reference  to the  Registrant's  Quarterly  Report on Form 10-Q as filed
        with the Commission on August 14, 1996, File No. 0-21174).

10.9    Fourth  Amendment  dated as of June 28,  1996 to  Amended  and  Restated
        Revolving  Credit  Agreement  among  Avid  Technology,  Inc.,  The First
        National Bank of Boston, as agent,  NationsBank of Texas,  N.A., BayBank
        and ABN  AMRO  Bank  N.V.  dated as of June 30,  1996  (incorporated  by
        reference  to the  Registrant's  Quarterly  Report on Form 10-Q as filed
        with the Commission on August 14, 1996, File No. 0-21174).

10.10   Fifth  Amendment  dated  as of July  1,  1996 to  Amended  and  Restated
        Revolving  Credit  Agreement  among  Avid  Technology,  Inc.,  The First
        National Bank of Boston, as agent,  NationsBank of Texas,  N.A., BayBank
        and ABN  AMRO  Bank  N.V.  dated as of June 30,  1996  (incorporated  by
        reference  to the  Registrant's  Quarterly  Report on Form 10-Q as filed
        with the Commission on August 14, 1996, File No. 0-21174).

10.11   Sixth  Amendment  dated  as of June 27,  1997 to  Amended  and  Restated
        Revolving  Credit Agreement and Assignment (the "Sixth  Amendment"),  by
        and  among  AVID   TECHNOLOGY,   INC.,  a  Delaware   corporation   (the
        "Borrower"), BANKBOSTON, N.A. (formerly known as The First National Bank
        of Boston) and the other  lending  institutions  listed on Schedule 1 to
        the Credit  Agreement,  amending  certain  provisions of the Amended and
        Restated   Revolving   Credit  Agreement  dated  as  of  June  30,  1995
        (incorporated by reference to the Registrant's  Quarterly Report on Form
        10-Q as filed with the Commission on August 12, 1997, File No. 0-21174).

*#10.12 Seventh  Amendment  dated as of October 1, 1997 to Amended and  Restated
        Revolving Credit Agreement (the "Seventh Amendment"),  by and among AVID
        TECHNOLOGY,INC.,  a Delaware  corporation (the "Borrower"),  BANKBOSTON,
        N.A. (formerly known as The First National Bank of Boston) and the other
        lending  institutions  listed on  Schedule  1 to the  Credit  Agreement,
        amending certain provisions of the Amended and Restated Revolving Credit
        Agreement dated as of June 30, 1995.

10.13   Form  of  Distribution  Agreement  (incorporated  by  reference  to  the
        Registrant's Registration Statement on Form S-1 as declared effective by
        the Commission on March 11, 1993, File No. 33-57796).

10.14   Form of Purchase and License Agreement (incorporated by reference to the
        Registrant's Registration Statement on Form S-1 as declared effective by
        the Commission on March 11, 1993, File No. 33-57796).

10.15   Form of Software Only License  Agreement  (incorporated  by reference to
        the  Registrant's   Registration  Statement  on  Form  S-1  as  declared
        effective by the Commission on March 11, 1993, File No. 33-57796).

#10.16  1989 Stock Option Plan  (incorporated  by reference to the  Registrant's
        Registration  Statement  on  Form  S-1  as  declared  effective  by  the
        Commission on March 11, 1993, File No. 33-57796).

#10.17  1993 Stock Incentive Plan (incorporated by reference to the Registrant's
        Registration  Statement  on  Form  S-1  as  declared  effective  by  the
        Commission on March 11, 1993, File No. 33-57796).

#10.18  1993 Director Stock Option Plan, as amended  (incorporated  by reference
        to the  Registrant's  Proxy  Statement as filed with the  Commission  on
        April 27, 1995, File No. 0-21174).

#10.19  1993 Executive Compensation Agreement  (incorporated by reference to the
        Registrant's Registration Statement on Form S-1 as declared effective by
        the Commission on March 11, 1993, File No. 33-57796).

#10.20  1993  Employee  Stock  Purchase Plan  (incorporated  by reference to the
        Registrant's  Registration  Statement  on Form  S-8 as  filed  with  the
        Commission on June 9, 1993, File No. 33-64130).

#10.21  1994 Stock Option  Plan,  as amended  (incorporated  by reference to the
        Registrant's  Registration  Statement  on Form  S-8 as  filed  with  the
        Commission on October 27, 1995, File No. 33-98692).

#10.22  Digidesign,  Inc. 1991 Stock Option Plan  (incorporated  by reference to
        Registrant's  Quarterly Report on Form 10-Q as filed with the Commission
        on May 15, 1995, File No. 0-21174).

#10.23  1995 Executive Variable  Compensation Program (incorporated by reference
        to the  Registrant's  Quarterly  Report on Form  10-Q as filed  with the
        Commission on May 15, 1995, File No. 0-21174).

*#10.24 1998 Executive and Senior Management Variable Compensation Plan.

*#10.25 1997 Stock Option Plan.

#10.26  1996 Employee Stock Purchase Plan, as amended.

#10.27  1998 Non-Qualified Deferred Compensation Plan (incorporated by reference
        to the Registrant's Registration Statement on Form S-8 as filed with the
        Commission on December 18, 1997, File No. 33-42569).

*#10.28 1998 Profit Sharing Plan.

*#10.29 Employment Agreement between the Company and William J. Miller.

*#10.30 Change-in-Control Agreement between the Company and William J. Miller.

*#10.31 Employment Agreement between the Company and William L. Flaherty.

*#10.32 Change-in-Control Agreement between the Company and William L. Flaherty.

#10.33  Employment agreement between the Company and Clifford Jenks(incorporated
        by reference to the Registrant's quarterly  Report on Form 10-Q as filed
        with the Commission on November 14, 1996, File No. 0-21174).

*21     Subsidiaries of the Registrant.

*23.1   Consent of Coopers & Lybrand L.L.P., Independent Accountants.

- ------------------
*documents filed herewith
#Management contract or compensatory plan identified pursuant to Item 14 (a) 3.






                                                                   Exhibit 10.12





                                SEVENTH AMENDMENT
                             TO AMENDED AND RESTATED
                           REVOLVING CREDIT AGREEMENT
- ------------------------------------------------------------------------------
Seventh  Amendment  dated as of October 1, 1997 to  Amended  and  Restated
Revolving  Credit  Agreement  (the  "Seventh  Amendment"),  by  and  among  AVID
TECHNOLOGY,  INC., a Delaware  corporation (the  "Borrower"),  BANKBOSTON,  N.A.
(FORMERLY  KNOWN AS THE FIRST  NATIONAL  BANK OF BOSTON)  and the other  lending
institutions  listed on  SCHEDULE  1 to the  Credit  Agreement  (as  hereinafter
defined)  (the  "Banks") and  BANKBOSTON,  N.A., as agent for the Banks (in such
capacity, the "Agent"),  amending certain provisions of the Amended and Restated
Revolving  Credit  Agreement dated as of June 30, 1995 (as amended and in effect
from time to time, the "Credit Agreement") by and among the Borrower,  the Banks
and the Agent.  Terms not  otherwise  defined  herein  which are  defined in the
Credit Agreement shall have the same respective meanings herein as therein.

WHEREAS,  the  Borrower,  the Banks and the  Agent  have  agreed to modify
certain terms and conditions of the Credit  Agreement as specifically  set forth
in this Seventh Amendment;

NOW, THEREFORE, in consideration of the premises and the mutual agreements
contained herein and for other good and valuable consideration,  the receipt
 and
sufficiency of which are hereby acknowledged, the parties hereto hereby agree as
follows:

SS.1.   AMENDMENT  TO SS.7 OF  THE  CREDIT  AGREEMENT.  Section  7.3  of the
Credit  Agreement  is hereby  amended by  deleting  the text of ss.7.3(g) in its
entirety and restating it as follows:

      (g) an  Investment  by the  Borrower  in  Pluto  Technologies,  Inc.
      ("Pluto") in an aggregate amount of not more than $1,100,000 pursuant to a
      joint development and marketing  agreement between the Borrower and Pluto;
      PROVIDED,  that no  Default  or  Event  of  Default  has  occurred  and is
      continuing  or  would  exist  immediately  after  giving  effect  to  such
      Investment.

SS.2.   CONDITIONS  TO  EFFECTIVENESS.  This Seventh  Amendment  shall not
become  effective  until the Agent  receives  a  counterpart  of this  Seventh
Amendment executed by the Borrower, the Banks and the Agent.

SS.3.  REPRESENTATIONS AND WARRANTIES. The Borrower hereby repeats, on and
as of the date hereof,  each of the representations and warranties made by it in
ss.5 of the  Credit  Agreement,  PROVIDED,  that all  references  therein to the
Credit  Agreement  shall refer to such Credit  Agreement as amended  hereby.  In
addition,  the Borrower  hereby  represents  and warrants that the execution and
delivery by the Borrower of this Seventh  Amendment and the  performance  by the
Borrower of all of its agreements and obligations  under the Credit Agreement as
amended hereby are within the corporate  authority of the Borrower and have been
duly authorized by all necessary corporate action on the part of the Borrower.

SS.4.  RATIFICATION,  ETC. Except as expressly amended hereby,  the Credit
Agreement and all  documents,  instruments  and agreements  related  thereto are
hereby  ratified and confirmed in all respects and shall  continue in full force
and effect.  The Credit  Agreement and this Seventh  Amendment shall be read and
construed as a single  agreement.  All references in the Credit Agreement or any
related agreement or instrument to the Credit Agreement shall hereafter refer to
the Credit Agreement as amended hereby.

SS.5.   NO WAIVER.  Nothing  contained  herein  shall  constitute a waiver
of, impair or otherwise  affect any  Obligations,  any other obligation of the
Borrower or any rights of the Agent or the Banks consequent thereon.

SS.6.   COUNTERPARTS.  This  Seventh  Amendment  may be executed in one or
more  counterparts,  each of which  shall be  deemed  an  original  but  which
together shall constitute one and the same instrument.

SS.7.   GOVERNING  LAW. THIS SEVENTH  AMENDMENT  SHALL BE GOVERNED BY, AND
CONSTRUED IN ACCORDANCE  WITH, THE LAWS OF THE  COMMONWEALTH OF  MASSACHUSETTS
(WITHOUT REFERENCE TO CONFLICT OF LAWS).

      IN  WITNESS  WHEREOF,  the  parties  hereto  have  executed  this  Seventh
Amendment as a document under seal as of the date first above written.

                                    AVID TECHNOLOGY, INC.



                                    By:   /s/ C. Edward Hazen
                                         ---------------------------
                                    Title: Treasurer


                                    BANKBOSTON, N.A.,
                                       individually and as Agent



                                    By:   /s/John B. Desmond
                                        ----------------------------
                                    Title: Vice President



                                    ABN AMRO BANK N.V.


                                    By:   /s/ Brian M. Horgan
                                         -------------------------
                                    Title: Vice President

                                   





                                                                  Exhibit 10.24

                              Avid Technology, Inc.
                      1998 Executive and Senior Management
                     Variable Compensation Plan Description


PARTICIPATION

Senior Consulting Engineers,  Directors, Vice Presidents, and Executive Officers
in salary grades determined by the Board of Directors participate in this Plan.

GOALS AND MEASUREMENT

ROIC is the Plan goal and is calculated as shown below:

                             OPERATING INCOME
        ROIC =  ------------------------------------------------
                Total Non-Cash Assets MINUS Interest-Bearing Debt

OPERATING INCOME (the numerator) is defined as profit from operations. Operating
Income offers the advantage  over Net Income (which was used as the numerator in
the 1997 ROIC  calculation)  of  factoring  out the effects of tax rate,  income
earned on cash balances not  currently  used in the  Company's  operations,  and
interest  expense on any  interest-bearing  debt. It therefore  focuses on those
operational areas influenced by the vast majority of participants in this Plan.

INVESTED  CAPITAL  (the  denominator)  is defined as total  assets less cash and
debt.  It therefore  encompasses  all the places where the Company truly employs
funds in its operations. In the 1997 Plan, Invested Capital was defined somewhat
differently  as  Stockholders'  Equity less cash.  This revised 1998  definition

again focuses on operating performance.

In 1998, executive variable  compensation will be based on a relative comparison
of Avid's actual 1998 ROIC  performance  with the ROIC performance of its chosen
peer group, the S&P High Tech Composite, for the four-quarter period ended on or
nearest to September  30, 1997.  The  benchmark in 1998 is the peer group rather
than Avid's annual budget.

The Plan will begin paying out if Avid's ROIC equals a percentile  of peer group
performance  set by the Board.  100% award payout will occur at a percentile  of
peer group  performance  set by the Board  rather than at  attainment  of Avid's
annual budget as in prior years.

In order to pay out more than 100% of  target,  1998  operating  income  must be
higher than that of 1997 by a factor determined by the Board of Directors.

TARGET AWARDS

The target  variable  compensation  award is the award a Plan  participant  will
receive if Avid  achieves  the median ROIC  performance  of its peer group.  The
target award can be expressed  as either a dollar  amount or as a percentage  of
base salary.

PRORATED AWARDS

Individual awards will be prorated under the following circumstances:

      1) Any salary changes throughout the year will be prorated.

      2) If a participant  is hired after  January 1, the variable  compensation
      award will be  prorated  for that  portion of the fiscal  year  worked for
      Avid. For example,  if the  participant  is hired July 1, 1998,  s/he will
      receive 50% of the calculated variable compensation award.

      3) If a  participant  is  promoted  after  January 1 to a position  with a
      higher variable  compensation  award,  the 1998 award will be prorated for
      that portion of the fiscal year each award level was in effect.

      4) If a participant  becomes  disabled and  qualifies  for benefits  under
      Avid's long-term disability plan, the variable  compensation award will be
      prorated for that portion of the fiscal year s/he was paid though the Avid
      payroll as an employee.

      5) If a participant is laid off by Avid, the variable  compensation  award
      will be prorated  through the effective  employment  termination  date. In
      this case, the payout may not exceed 100% of the prorated target award.

      6)  If  a  participant  dies  while  in  Avid  employment,   the  variable
      compensation  award will be  prorated  as of the date of death and paid to
      the surviving spouse, or if none, to the estate.

PLAN PAYOUT

The Plan payout will be determined after audited  financial results for 1998 are
determined and released,  near the end of January 1999.  Plan payout is expected
to occur in February.  Employees  must be employed by Avid at the time of actual
Plan payout to receive their incentive compensation award, unless eligible for a
prorated award as described above.

CHANGES TO THE PLAN

The Company reserves the right at its sole discretion to modify,  amend, revoke,
or suspend the Plan at any time

This is a Plan summary and is not intended to be and shall not be interpreted as
an employment contract.






                                                                   Exhibit 10.25

                               AVID TECHNOLOGY, INC.

                             1997 STOCK OPTION PLAN


1.    PURPOSE

      The  purpose  of  this  1997  Stock  Option  Plan  (the  "Plan")  of  Avid
Technology,  Inc., a Delaware  corporation  (the  "Company"),  is to advance the
interests of the Company's  stockholders  by enhancing the Company's  ability to
attract,  retain  and  motivate  persons  who  make  (or are  expected  to make)
important  contributions  to the Company by  providing  such persons with equity
ownership  opportunities  and thereby  better  aligning  the  interests  of such
persons  with those of the  Company's  stockholders.  Except  where the  context
otherwise  requires,  the term  "Company"  shall  include  any present or future
subsidiary corporations of Avid Technology, Inc. as defined in Section 424(f) of
the Internal Revenue Code of 1986, as amended,  and any regulations  promulgated
thereunder.

2.    ELIGIBILITY

      All of the Company's  employees,  other than those who are also  executive
officers or directors,  and the Company's  consultants and advisors are eligible
to be granted  options  (each,  an "Option")  under the Plan. Any person who has
been granted an Option under the Plan shall be deemed a "Participant".

3.    ADMINISTRATION, DELEGATION

      (a) ADMINISTRATION BY BOARD OF DIRECTORS. The Plan will be administered
 by
the Board of  Directors  of the  Company  (the  "Board").  The Board  shall have
authority to grant  Options and to adopt,  amend and repeal such  administrative
rules, guidelines and practices relating to the Plan as it shall deem advisable.
The Board  may  correct  any  defect,  supply  any  omission  or  reconcile  any
inconsistency in the Plan or any Option in the manner and to the extent it shall
deem  expedient to carry the Plan into effect and it shall be the sole and final
judge  of such  expediency.  All  decisions  by the  Board  shall be made in the
Board's sole  discretion and shall be final and binding on all persons having or
claiming any interest in the Plan or in any Option. No director or person acting
pursuant to the authority  delegated by the Board shall be liable for any action
or determination relating to or under the Plan made in good faith.

      (b)  DELEGATION  TO  EXECUTIVE  OFFICERS.   To  the  extent  permitted  by
applicable law, the Board may delegate to one or more executive  officers of the
Company the power to make Options and exercise  such other powers under the Plan
as the Board may determine, provided that the Board shall fix the maximum number
of shares  subject  to  Options  and the  maximum  number of shares  for any one
Participant to be made by such executive officers.

      (c) APPOINTMENT OF COMMITTEES.  To the extent permitted by applicable law,
the Board may  delegate  any or all of its powers  under the Plan to one or more
committees or subcommittees of the Board (a "Committee").  All references in the
Plan to the  "Board"  shall  mean the Board or a  Committee  of the Board or the
executive  officer  referred  to in Section  3(b) to the extent that the Board's
powers or  authority  under the Plan have been  delegated  to such  Committee or
executive officer.

4.    STOCK AVAILABLE FOR OPTIONS

      (a) NUMBER OF SHARES.  Subject to adjustment  under Section 4(c),  Options
may be made under the Plan for up to 1,000,000 shares of Common Stock,  $.01 par
value per share, of the Company (the "Common  Stock").  If any Option expires or
is terminated, surrendered or canceled without having been fully exercised or is
forfeited in whole or in part or results in any Common  Stock not being  issued,
the unused  Common Stock covered by such Option shall again be available for the
grant of Options  under the Plan,  subject,  however,  in the case of  Incentive
Stock Options (as  hereinafter  defined),  to any limitation  required under the
Code. Shares issued under the Plan may consist in whole or in part of authorized
but unissued shares or treasury shares.

      (b) PER-PARTICIPANT  LIMIT.  Subject to adjustment under Section 4(c), for
Options  granted  after the  Common  Stock is  registered  under the  Securities
Exchange Act of 1934 (the  "Exchange  Act"),  the maximum  number of shares with
respect  to which an Option may be  granted  to any  Participant  under the Plan
shall be 300,000 per calendar year. The Per-Participant  limit described in this
Section 4(b) shall be construed and applied  consistently with Section 162(m) of
the Code.

      (c)  ADJUSTMENT  TO COMMON STOCK.  In the event of any stock split,  stock
dividend, recapitalization,  reorganization, merger, consolidation, combination,
exchange  of  shares,   liquidation,   spin-off  or  other  similar   change  in
capitalization  or event,  or any  distribution to holders of Common Stock other
than a normal cash  dividend,  (i) the number and class of securities  available
under this Plan,  and (ii) the number and class of security and  exercise  price
per share subject to each outstanding Option, shall be appropriately adjusted by
the Company (or substituted Options may be granted, if applicable) to the extent
the  Board  shall  determine,  in  good  faith,  that  such  an  adjustment  (or
substitution)  is necessary  and  appropriate.  If this Section 4(c) applies and
Section  6(e)(1) also applies to any event,  Section 6(e)(1) shall be applicable
to such event, and this Section 4(c) shall not be applicable.

5.    STOCK OPTIONS

      (a)  GENERAL.  The Board may grant  Options to purchase  Common  Stock and
determine the number of shares of Common Stock to be covered by each Option, the
exercise price of each Option and the conditions and  limitations  applicable to
the exercise of each Option, including conditions relating to applicable federal
or state  securities  laws, as it considers  necessary or  advisable.  An Option
which is not intended to be an Incentive Stock Option (as  hereinafter  defined)
shall be designated a "Nonstatutory Stock Option".

      (b) INCENTIVE STOCK OPTIONS; STOCKHOLDER APPROVAL REQUIRED. An Option that
the Board intends to be an "incentive stock option" as defined in Section 422 of
the  Code  (an  "Incentive  Stock  Option")  shall be  subject  to and  shall be
construed  consistently  with  the  requirements  of  Section  422 of the  Code.
Notwithstanding  that an Option may be  designated  by the Board as an Incentive
Stock  Option,  no Option  granted  under the Plan shall be an  Incentive  Stock
Option  unless the Plan is  approved  by the  Company's  stockholders  within 12
months of the date upon which the Board adopts the Plan.  The Company shall have
no liability  to a  Participant,  or any other party,  if an Option (or any part
thereof)  which is intended to be an Incentive  Stock Option is not an Incentive
Stock Option.

      (c) EXERCISE  PRICE.  The Board shall  establish the exercise price at the
time each Option is granted and specify it in the applicable option agreement.

      (d) DURATION OF OPTIONS.  Each Option shall be  exercisable  at such times
and  subject  to such  terms and  conditions  as the Board  may  specify  in the
applicable option agreement.

      (e) EXERCISE OF OPTION.  Options may be exercised  only by delivery to the
Company of a written  notice of exercise  signed by the proper  person  together
with  payment in full as  specified in Section 5(f) for the number of shares for
which the Option is exercised.

      (f) PAYMENT UPON EXERCISE.  Common Stock purchased upon the exercise of an
Option granted under the Plan shall be paid for as follows:

     (1)  in cash or by check, payable to the order of the Company;

     (2)  except as the Board may otherwise provide in an Option, delivery of an
          irrevocable and unconditional undertaking by a credit worthy broker to
          deliver  promptly to the Company  sufficient funds to pay the exercise
          price,  or  delivery  by the  Participant  to the Company of a copy of
          irrevocable and  unconditional  instructions to a credit worthy broker
          to deliver  promptly to the Company cash or a check  sufficient to pay
          the exercise price;

     (3)  to the extent  permitted by the Board and  explicitly  provided in the
          Option  (i) by  delivery  of  shares  of  Common  Stock  owned  by the
          Participant  valued at their fair market  value as  determined  by the
          Board in good faith  ("Fair  Market  Value"),  which  Common Stock was
          owned by the  Participant  at least six months prior to such delivery,
          (ii)  by  delivery  of a  promissory  note of the  Participant  to the
          Company on terms  determined by the Board, or (iii) by payment of such
          other lawful consideration as the Board may determine; or

     (4)  any combination of the above permitted forms of payment.

6.    GENERAL PROVISIONS APPLICABLE TO OPTIONS

      (a)  TRANSFERABILITY  OF  OPTIONS.  Except  as  the  Board  may  otherwise
determine  or  provide  in an  Option,  Options  shall  not be  sold,  assigned,
transferred,  pledged  or  otherwise  encumbered  by the person to whom they are
granted,  either  voluntarily or by operation of law, except by will or the laws
of descent and distribution,  and, during the life of the Participant,  shall be
exercisable only by the Participant.  References to a Participant, to the extent
relevant in the context, shall include references to authorized transferees.

      (b)  DOCUMENTATION.  Each Option  under the Plan shall be  evidenced  by a
written  instrument in such form as the Board shall  determine.  Each Option may
contain terms and conditions in addition to those set forth in the Plan.

      (c) BOARD DISCRETION.  Except as otherwise provided by the Plan, each type
of Option  may be made alone in  addition  or in  relation  to any other type of
Option.  The terms of each type of Option need not be  identical,  and the Board
need not treat Participants uniformly.

      (d)  TERMINATION  OF STATUS.  The Board shall  determine  the effect on an
Option of the  disability,  death,  retirement,  authorized  leave of absence or
other change in the  employment or other status of a Participant  and the extent
to which, and the period during which, the Participant,  the Participant's legal
representative,  conservator,  guardian or Designated  Beneficiary  may exercise
rights under the Option.

      (e)   ACQUISITION EVENTS

     (1)  CONSEQUENCES  OF  ACQUISITION   EVENTS.  Upon  the  occurrence  of  an
          Acquisition  Event (as defined below), or the execution by the Company
          of any agreement with respect to an Acquisition Event, the Board shall
          take any one or more of the  following  actions  with  respect to then
          outstanding  Options:  (i) provide that  outstanding  Options shall be
          assumed, or equivalent Options shall be substituted,  by the acquiring
          or succeeding corporation (or an affiliate thereof), provided that any
          such Options substituted for Incentive Stock Options shall satisfy, in
          the  determination of the Board, the requirements of Section 424(a) of
          the Code; (ii) upon written notice to the  Participants,  provide that
          all then unexercised  Options will become  exercisable in full as of a
          specified  date (the  "Acceleration  Date")  prior to the  Acquisition
          Event and will terminate immediately prior to the consummation of such
          Acquisition Event,  except to the extent exercised by the Participants
          between the Acceleration Date and the consummation of such Acquisition
          Event; and (iii) in the event of an Acquisition  Event under the terms
          of which  holders  of Common  Stock  will  receive  upon  consummation
          thereof a cash  payment  for each  share of Common  Stock  surrendered
          pursuant to such Acquisition Event (the "Acquisition Price"),  provide
          that all outstanding Options shall terminate upon consummation of such
          Acquisition  Event and each  Participant  shall  receive,  in exchange
          therefor, a cash payment equal to the amount (if any) by which (A) the
          Acquisition  Price  multiplied by the number of shares of Common Stock
          subject to such outstanding Options (whether or not then exercisable),
          exceeds  (B)  the  aggregate  exercise  price  of  such  Options.   An
          "Acquisition  Event" shall mean: (a) any merger or consolidation which
          results  in  the  voting   securities   of  the  Company   outstanding
          immediately prior thereto continuing to represent (either by remaining
          outstanding  or by  being  converted  into  voting  securities  of the
          surviving  or acquiring  entity) less than 50% of the combined  voting
          power of the voting  securities  of the Company or such  surviving  or
          acquiring  entity   outstanding   immediately  after  such  merger  or
          consolidation;  (b) any sale of all or substantially all of the assets
          of the Company;  (c) the complete  liquidation of the Company;  or (d)
          the  acquisition of  "beneficial  ownership" (as defined in Rule 13d-3
          under the Exchange Act) of securities of the Company  representing 50%
          or more of the combined voting power of the Company's then outstanding
          securities  (other  than  through  a  merger  or  consolidation  or an
          acquisition of securities  directly from the Company) by any "person",
          as such term is used in Sections  13(d) and 14(d) of the  Exchange Act
          other  than  the  Company,  any  trustee  or other  fiduciary  holding
          securities  under  an  employee  benefit  plan of the  Company  or any
          corporation  owned directly or indirectly by the  stockholders  of the
          Company in  substantially  the same  proportion as their  ownership of
          stock of the Company.

     (2)  ASSUMPTION OF OPTIONS UPON CERTAIN EVENTS. The Board may grant Options
          under  the Plan in  substitution  for  options  held by  employees  of
          another corporation who become employees of the Company as a result of
          a  merger  or  consolidation  of the  employing  corporation  with the
          Company or the  acquisition by the Company of property or stock of the
          employing corporation. The substitute Options shall be granted on such
          terms  and  conditions  as  the  Board  considers  appropriate  in the
          circumstances.


      (f)  WITHHOLDING.  Each  Participant  shall  pay to the  Company,  or make
provision satisfactory to the Board for payment of, any taxes required by law to
be withheld in  connection  with Options to such  Participant  no later than the
date of the event creating the tax liability.  The Board may allow  Participants
to satisfy such tax  obligations  in whole or in part in shares of Common Stock,
including shares retained from the Option creating the tax obligation, valued at
their Fair Market Value. The Company may, to the extent permitted by law, deduct
any such  tax  obligations  from any  payment  of any  kind  otherwise  due to a
Participant.

      (g)  AMENDMENT OF OPTION.  The Board may amend,  modify or  terminate  any
outstanding Option,  including but not limited to, substituting therefor another
Option  of the  same or a  different  type,  changing  the date of  exercise  or
realization,  and converting an Incentive  Stock Option to a Nonstatutory  Stock
Option, provided that the Participant's consent to such action shall be required
unless the Board  determines  that the action,  taking into  account any related
action, would not materially and adversely affect the Participant.

      (h) CONDITIONS ON DELIVERY OF STOCK.  The Company will not be obligated to
deliver any shares of Common Stock pursuant to the Plan until (i) all conditions
of the Option have been met or removed to the satisfaction of the Company,  (ii)
in the opinion of the Company's  counsel,  all other legal matters in connection
with the issuance and delivery of such shares have been satisfied, including any
applicable  securities  laws and any  applicable  stock exchange or stock market
rules and  regulations,  and (iii) the Participant has executed and delivered to
the Company  such  representations  or  agreements  as the Company may  consider
appropriate  to  satisfy  the  requirements  of any  applicable  laws,  rules or
regulations.

      (i) ACCELERATION. The Board may at any time provide that any Options shall
become immediately exercisable in full or in part.

7.    MISCELLANEOUS

      (a) NO RIGHT TO EMPLOYMENT OR OTHER STATUS. No person shall have any claim
or right to be  granted  an  Option,  and the  grant of an  Option  shall not be
construed as giving a Participant the right to continued employment or any other
relationship with the Company.  The Company expressly  reserves the right at any
time to dismiss or otherwise  terminate its relationship with a Participant free
from any liability or claim under the Plan, except as expressly  provided in the
applicable Option.

      (b) NO RIGHTS AS STOCKHOLDER.  Subject to the provisions of the applicable
Option,  no  Participant  or Designated  Beneficiary  shall have any rights as a
stockholder  with respect to any shares of Common Stock to be  distributed  with
respect to an Option until becoming the record holder of such shares.

      (c) EFFECTIVE  DATE AND TERM OF PLAN.  The Plan shall become  effective on
the date on which it is  adopted by the Board,  but no Option  designated  as an
Incentive  Stock Option shall be an Incentive  stock Option unless and until the
Plan has been  approved by the  Company's  stockholders  within 12 months of the
date upon which the Board adopts the Plan. No Options shall be granted under the
Plan  after  the  completion  of ten  years  from the date on which the Plan was
adopted by the Board but  Options  previously  granted  may  remain  exercisable
beyond that date.

      (d) AMENDMENT OF PLAN. The Board may amend,  suspend or terminate the Plan
or any portion thereof at any time.

      (e)  GOVERNING  LAW.  The  provisions  of the  Plan and all  Options  made
hereunder  shall be governed by and  interpreted in accordance  with the laws of
the State of Delaware, without regard to any applicable conflicts of law.



                                                                   Exhibit 10.26

                              AVID TECHNOLOGY, INC.

                        1996 EMPLOYEE STOCK PURCHASE PLAN

                                February 12, 1996



      The  purpose  of  this  Plan  is to  provide  eligible  employees  of Avid
Technology,   Inc.  (the  "Company")  and  certain  of  its  subsidiaries   with
opportunities to purchase shares of the Company's  common stock,  $.01 par value
(the  "Common  Stock"),  commencing  on August 1,  1996.  Two  Hundred  Thousand
(200,000)  shares of Common Stock in the  aggregate  have been approved for this
purpose.

      1. ADMINISTRATION. The Plan will be administered by the Company's Board of
Directors  (the  "Board")  or  by  a  Committee  appointed  by  the  Board  (the
"Committee").  The  Board or the  Committee  has  authority  to make  rules  and
regulations  for the  administration  of the  Plan  and its  interpretation  and
decisions with regard thereto shall be final and conclusive.

      2.  ELIGIBILITY.  Participation  in the Plan will neither be permitted nor
denied contrary to the  requirements of Section 423 of the Internal Revenue Code
of 1986, as amended (the "Code"), and regulations  promulgated  thereunder.  All
employees  of the  Company,  including  Directors  who  are  employees,  and all
employees of any  subsidiary of the Company (as defined in Section 424(f) of the
Code)  designated by the Board or the Committee from
 time to time (a "Designated
Subsidiary"), are eligible to participate in any one or more of the offerings of
Options  (as  defined in  Section 9) to  purchase  Common  Stock  under the Plan
provided that:

            (a) they are  regularly  employed  by the  Company  or a  Designated
      Subsidiary  for more than 20 hours a week and for more than five months in
      a calendar year; and

            (b)  they  have  been  employed  by  the  Company  or  a  Designated
      Subsidiary for at least three months prior to enrolling in the Plan; and

            (c) they are employees of the Company or a Designated  Subsidiary on
      the first day of the applicable Plan Period (as defined below).

      No  employee  may  be  granted  an  option  hereunder  if  such  employee,
immediately  after the option is granted,  owns 5% or more of the total combined
voting  power or  value  of the  stock of the  Company  or any  subsidiary.  For
purposes of the preceding  sentence,  the attribution rules of Section 424(d) of
the Code shall apply in determining the stock ownership of an employee,  and all
stock which the employee has a contractual right to purchase shall be treated as
stock owned by the employee.

      3. OFFERINGS. The Company will make one or more offerings ("Offerings") to
employees to purchase stock under this Plan.  Offerings will begin each August 1
and February 1, or the first business day thereafter (the "Offering Commencement
Dates").  Each Offering Commencement Date will begin a six month period (a "Plan
Period") during which payroll  deductions will be made and held for the purchase
of Common Stock at the end of the Plan Period.  The Board or the Committee  may,
at its discretion,  choose a different Plan Period of twelve (12) months or less
for subsequent Offerings.

      4. PARTICIPATION.  An employee eligible on the Offering  Commencement Date
of any Offering may  participate in such Offering by completing and forwarding a
payroll  deduction  authorization  form to the  employee's  appropriate  payroll
office at least 30 days prior to the applicable Offering  Commencement Date. The
form will authorize a regular payroll  deduction from the Compensation  received
by the employee  during the Plan Period.  Unless an employee files a new form or
withdraws  from the Plan, his deductions and purchases will continue at the same
rate for future  Offerings under the Plan as long as the Plan remains in effect.
The term  "Compensation"  means the amount of money reportable on the employee's
Federal Income Tax Withholding  Statement,  excluding  overtime,  shift premium,
incentive or bonus awards,  allowances and  reimbursements  for expenses such as
relocation  allowances for travel  expenses,  income or gains on the exercise of
Company stock options or stock appreciation  rights, and similar items,  whether
or not shown on the employee's  Federal Income Tax  Withholding  Statement,  but
including,  in the  case  of  salespersons,  sales  commissions  to  the  extent
determined by the Board or the Committee.

      5. DEDUCTIONS.  The Company will maintain payroll  deduction  accounts for
all participating employees.  With respect to any Offering made under this Plan,
an employee  may  authorize  a payroll  deduction  in any dollar  amount up to a
maximum of ten percent (10%) of the  Compensation  he or she receives during the
Plan Period or such  shorter  period  during which  deductions  from payroll are
made.  The  Board  or  the  Committee  may  set  a  minimum  payroll   deduction
requirement.

      No  employee  may be  granted  an Option  (as  defined in Section 9) which
permits his rights to purchase  Common Stock under this Plan and any other stock
purchase  plan of the  Company and its  subsidiaries,  to accrue at a rate which
exceeds $25,000 of the fair market value of such Common Stock (determined at the
Offering  Commencement  Date of the Plan Period) for each calendar year in which
the Option is outstanding at any time.

      6. DEDUCTION CHANGES.  An employee may decrease or discontinue his payroll
deduction  once  during  any Plan  Period,  by  filing a new  payroll  deduction
authorization  form. However, an employee may not increase his payroll deduction
during  a  Plan  Period.  If an  employee  elects  to  discontinue  his  payroll
deductions  during a Plan  Period,  but does not  elect to  withdraw  his  funds
pursuant  to  Section  8  hereof,  funds  deducted  prior  to  his  election  to
discontinue will be applied to the purchase of Common Stock on the Exercise Date
(as defined below).

      7. INTEREST. Interest will not be paid on any employee accounts, except to
the extent that the Board or the Committee,  in its sole  discretion,  elects to
credit  employee  accounts  with  interest at such per annum rate as it may from
time to time determine.

      8.  WITHDRAWAL OF FUNDS. An employee may at any time prior to the close of
business  on  the  last  business  day in a  Plan  Period  and  for  any  reason
permanently  draw out the  balance  accumulated  in the  employee's  account and
thereby withdraw from participation in an Offering.  Partial withdrawals are not
permitted.  The employee may not begin  participation again during the remainder
of the Plan Period.  The employee may participate in any subsequent  Offering in
accordance with terms and conditions  established by the Board or the Committee,
except that  employees who are also  directors or officers of the Company within
the meaning of Section 16 of the Securities  Exchange Act of 1934 (the "Exchange
Act") and the  rules  promulgated  thereunder  may not  participate  again for a
period  of at  least  six  months  as  provided  in Rule  16b-3(d)(2)(i)  or any
successor provision.

      9.  PURCHASE OF SHARES.  On the  Offering  Commencement  Date of each Plan
Period,  the  Company  will  grant  to  each  eligible  employee  who is  then a
participant  in the Plan an option  ("Option")  to purchase on the last business
day of such Plan Period (the "Exercise  Date"),  at the Option Price hereinafter
provided  for,  such  number  of whole  shares of  Common  Stock of the  Company
reserved  for the  purposes  of the Plan as does not exceed the number of shares
determined  by  dividing  six  percent  (6%)  of  such   employee's   annualized
Compensation for the immediately  prior six-month period by the price determined
in accordance  with the formula set forth in the  following  paragraph but using
the closing price on the Offering Commencement Date of such Plan Period.

      The  purchase  price for each share  purchased  will be 85% of the closing
price of the Common  Stock on (i) the first  business day of such Plan Period or
(ii) the Exercise  Date,  whichever  closing  price shall be less.  Such closing
price  shall be (a) the closing  price on any  national  securities  exchange on
which the Common Stock is listed,  (b) the closing  price of the Common Stock on
the  Nasdaq  National  Market or (c) the  average of the  closing  bid and asked
prices in the over-the-counter market, whichever is applicable,  as published in
THE WALL STREET  JOURNAL.  If no sales of Common  Stock were made on such a day,
the price of the Common Stock for purposes of clauses (a) and (b) above shall be
the reported price for the next preceding day on which sales were made.

      Each  employee  who  continues  to be a  participant  in the  Plan  on the
Exercise  Date shall be deemed to have  exercised his Option at the Option Price
on such date and shall be deemed to have  purchased  from the Company the number
of full  shares of Common  Stock  reserved  for the purpose of the Plan that his
accumulated payroll deductions on such date will pay for pursuant to the formula
set forth  above  (but not in excess of the  maximum  number  determined  in the
manner set forth above).

      Any balance  remaining in an employee's  payroll  deduction account at the
end of a Plan Period will be automatically refunded to the employee, except that
any balance  which is less than the purchase  price of one share of Common Stock
will be carried forward into the employee's  payroll  deduction  account for the
following  Offering,  unless  the  employee  elects  not to  participate  in the
following  Offering  under the Plan, in which case the balance in the employee's
account shall be refunded.

      10. ISSUANCE OF CERTIFICATES.  Certificates  representing shares of Common
Stock  purchased  under the Plan may be issued only in the name of the employee,
in the name of the  employee  and another  person of legal age as joint  tenants
with rights of survivorship, or (in the Company's sole discretion) in the street
name of a  brokerage  firm,  bank or  other  nominee  holder  designated  by the
employee.

      11. RIGHTS ON RETIREMENT, DEATH OR TERMINATION OF EMPLOYMENT. In the event
of a  participating  employee's  termination  of  employment  prior  to the last
business day of a Plan Period,  no payroll deduction shall be taken from any pay
due and owing to an employee and the balance in the employee's  account shall be
paid  to the  employee  or,  in the  event  of the  employee's  death,  (a) to a
beneficiary  previously  designated in a revocable notice signed by the employee
(with any  spousal  consent  required  under state law) or (b) in the absence of
such  a  designated  beneficiary,  to  the  executor  or  administrator  of  the
employee's estate or (c) if no such executor or administrator has been appointed
to the knowledge of the Company,  to such other person(s) as the Company may, in
its  discretion,  designate.  If,  prior  to the last  business  day of the Plan
Period,  the Designated  Subsidiary by which an employee is employed shall cease
to be a  subsidiary  of the  Company,  or if the  employee is  transferred  to a
subsidiary  of the Company  that is not a  Designated  Subsidiary,  the employee
shall be deemed to have terminated employment for the purposes of this Plan.

      12.  OPTIONEES NOT  STOCKHOLDERS.  Neither the granting of an Option to an
employee  nor the  deductions  from his pay shall  constitute  such  employee  a
stockholder  of the shares of Common Stock  covered by an Option under this Plan
until such shares have been purchased by and issued to him.

      13. RIGHTS NOT  TRANSFERABLE.  Rights under this Plan are not transferable
by a  participating  employee  other  than by will or the  laws of  descent  and
distribution,  and are  exercisable  during the employee's  lifetime only by the
employee.

      14.  APPLICATION OF FUNDS. All funds received or held by the Company under
this Plan may be  combined  with other  corporate  funds and may be used for any
corporate purpose.

      15.  ADJUSTMENT IN CASE OF CHANGES AFFECTING COMMON STOCK. In the event of
a  subdivision  of  outstanding  shares of Common  Stock,  or the  payment  of a
dividend in Common Stock,  the number of shares  approved for this Plan, and the
share limitation set forth in Section 9, shall be increased proportionately, and
such other  adjustment  shall be made as may be deemed equitable by the Board or
the Committee. In the event of any other change affecting the Common Stock, such
adjustment  shall  be  made  as may be  deemed  equitable  by the  Board  or the
Committee to give proper effect to such event.

      16.  MERGER.  If the Company shall at any time merge or  consolidate  with
another  corporation  and  the  holders  of the  capital  stock  of the  Company
immediately prior to such merger or consolidation  continue to hold at least 80%
by voting power of the capital stock of the surviving  corporation  ("Continuity
of  Control"),  the holder of each Option then  outstanding  will  thereafter be
entitled to receive at the next  Exercise  Date upon the exercise of such Option
for each share as to which such Option  shall be  exercised  the  securities  or
property  which a holder of one share of the Common  Stock was  entitled to upon
and at the time of such  merger,  and the  Committee  shall  take such  steps in
connection with such merger as the Committee shall deem necessary to assure that
the  provisions  of Paragraph 15 shall  thereafter be  applicable,  as nearly as
reasonably  may be, in relation to the said  securities  or property as to which
such holder of such Option might thereafter be entitled to receive thereunder.

      In the  event of a merger or  consolidation  of the  Company  with or into
another  corporation which does not involve Continuity of Control,  or of a sale
of all or  substantially  all of the  assets of the  Company  while  unexercised
Options  remain  outstanding  under the Plan,  (a) subject to the  provisions of
clauses (b) and (c), after the effective date of such  transaction,  each holder
of an  outstanding  Option shall be entitled,  upon exercise of such Option,  to
receive  in lieu of  shares  of  Common  Stock,  shares  of such  stock or other
securities  as the holders of shares of Common  Stock  received  pursuant to the
terms of such  transaction;  or (b) all outstanding  Options may be cancelled by
the Board or the Committee as of a date prior to the effective  date of any such
transaction and all payroll  deductions  shall be paid out to the  participating
employees;  or (c) all outstanding  Options may be cancelled by the Board or the
Committee as of the effective date of any such transaction, provided that notice
of such cancellation shall be given to each holder of an Option, and each holder
of an Option  shall  have the right to  exercise  such  Option in full  based on
payroll  deductions  then credited to his account as of a date determined by the
Board or the  Committee,  which  date  shall  not be less  than  ten  (10)  days
preceding the effective date of such transaction.

      17.  AMENDMENT  OF THE PLAN.  The Board may at any time,  and from time to
time,  amend this Plan in any  respect,  except that (a) if the  approval of any
such amendment by the  shareholders of the Company is required by Section 423 of
the Code or by Rule 16b-3 under the Exchange  Act, such  amendment  shall not be
effected  without such  approval,  and (b) in no event may any amendment be made
which would cause the Plan to fail to comply with Section 16 of the Exchange Act
and the rules promulgated thereunder, as in effect from time to time, or Section
423 of the Code.

      18.  INSUFFICIENT  SHARES. In the event that the total number of shares of
Common Stock  specified in elections to be purchased under any Offering plus the
number of shares purchased under previous  Offerings under this Plan exceeds the
maximum  number of shares  issuable  under this Plan, the Board or the Committee
will allot the shares then available on a pro rata basis.

      19.  TERMINATION  OF THE PLAN.  This Plan may be terminated at any time by
the  Board.  Upon  termination  of this  Plan all  amounts  in the  accounts  of
participating employees shall be promptly refunded.

      20. GOVERNMENTAL REGULATIONS. The Company's obligation to sell and deliver
Common Stock under this Plan is subject to listing on a national  stock exchange
or quotation on the Nasdaq National Market and the approval of all  governmental
authorities  required in connection with the authorization,  issuance or sale of
such stock. The Plan shall be governed by Delaware law except to the extent that
such law is  preempted  by federal  law. The Plan is intended to comply with the
provisions of Rule 16b-3 promulgated under the Securities  Exchange Act of 1934.
Any provision  inconsistent  with such Rule shall to that extent be  inoperative
and shall not affect the validity of the Plan.

      21.  ISSUANCE OF SHARES.  Shares may be issued upon  exercise of an Option
from authorized but unissued  Common Stock,  from shares held in the treasury of
the Company, or from any other proper source.

      22.  NOTIFICATION  UPON SALE OF SHARES.  Each employee agrees, by entering
the Plan,  to promptly  give the  Company  notice of any  disposition  of shares
purchased  under the Plan where such  disposition  occurs within two years after
the date of grant of the Option pursuant to which such shares were purchased.

      23.  EFFECTIVE  DATE AND  APPROVAL  OF  SHAREHOLDERS.  The Plan shall take
effect on February  12, 1996  subject to  approval  by the  shareholders  of the
Company as required by Rule 16b-3 under the  Exchange  Act and by Section 423 of
the Code,  which approval must occur within twelve months of the adoption of the
Plan by the Board.



                                    Adopted by the Board of Directors
                                          on February 12, 1996



                                    Approved by the stockholders on
                                          June 5, 1996






                                                                 Exhibit 10.28

                              AVID TECHNOLOGY, INC.
                      1998 PROFIT SHARING PLAN DESCRIPTION




PURPOSE OF THE PLAN

The  purpose of the Profit  Sharing  Plan is to reward  all Avid  employees  for
improving Company performance as measured by Return on Invested Capital (ROIC).


ELIGIBILITY TO PARTICIPATE IN THE PLAN

All regular Avid  employees  who are not already  covered by a sales  commission
plan or the Executive  Variable  Compensation  Plan are eligible to participate.
Employees hired after January 1, 1998 but before October 1, 1998 are eligible to
participate  on a prorated  basis.  Employees  hired on or after October 1, 1998
will be eligible to participate in the Plan beginning January 1, 1999. Temporary
employees are excluded from the Plan. However, if a temporary employee transfers
to a regular  position  prior to October 1, 1998,  he/she will  participate on a
prorated basis. Rehires will be treated as new employees under the Plan.


OPERATION OF THE PLAN

At target  performance  the Plan pays a percentage of the 1998 base salary which
has been paid to  participants  during the year while a Plan  participant.  This
includes vacation,  personal time, sick time, and holiday time BUT NOT overtime,
shift  differential,  or other  premium pay. The Plan pays
 more for  performance
above target.

Performance  is measured by Avid's  1998 ROIC.  In 1998 Avid's ROIC  performance
will be evaluated against a peer group of other  publicly-traded high technology
companies.  The Standard & Poor's High  Technology  Composite will comprise this
peer group.  The 1998 Plan target award is set at a percentile  ROIC of the peer
group selected by the Board of Directors.

WHAT IS ROIC?

ROIC is calculated as shown below:

                             OPERATING INCOME
          ROIC = --------------------------------------------------
                  Total Non-Cash Assets MINUS Interest-Bearing Debt

Operating Income (the numerator) is defined as profit from operations.

Invested  Capital  (the  denominator)  is defined as total  assets less cash and
debt.


CHANGES IN STATUS

Individual awards will be prorated under the following circumstances:

      1) Any salary changes throughout the year are automatically prorated since
      Profit Sharing is calculated on the actual base salary paid during 1998.

      2) If a participant  is hired after January 1, his/her Profit Sharing will
      be  automatically  prorated for that portion of the fiscal year worked for
      Avid since it will be  calculated  on actual base salary paid during 1998.
      For example,  if the  participant  is hired July 1, 1998,  his/her  Profit
      Sharing will be based on a half a year's base salary.

      3) If a  participant  transfers  from a  temporary  to a regular  position
      before  October 1, 1998,  his/her Profit Sharing will be calculated on the
      base salary paid after transferring to the regular position.

      4) If a  participant  is on an approved  leave of absence for a portion of
      1998,  his/her  Profit  Sharing will be calculated on the base salary paid
      during  the  year.  This has the  effect  of  prorating  the award for any
      portion of the leave which was unpaid.

      5) If a participant  becomes  disabled and  qualifies  for benefits  under
      Avid's  long-term  disability  plan,  his/her Profit Sharing award will be
      calculated  on the  base  salary  paid  while on the  Avid  payroll  as an
      employee.

      6) If a participant  is laid off by Avid, the Profit Sharing award will be
      calculated  on the base  salary  paid  through  the  effective  employment
      termination  date.  In this case,  the  payout may not exceed  100% of the
      prorated target award.

      7) If a  participant  dies while in Avid  employment,  the Profit  Sharing
      award will be  calculated  on the base salary paid prior to date of death.
      The award will be paid to the surviving spouse, or if none, to the estate.

TIMING OF PLAN PAYOUT

The Plan payout will be determined after audited  financial results for 1998 are
determined and publicly  released,  near the end of January 1999. Plan payout is
expected to occur in February. Employees must be employed by Avid at the time of
actual Plan payout to receive their Plan award,  unless  eligible for a prorated
award as described above.  Employees who are on approved leave of absence at the
time of actual Plan payout will be considered to be employed for this purpose.

CHANGES TO THE PLAN

The Company reserves the right at its sole discretion to modify,  amend, revoke,
or suspend the Plan at any time

This is a Plan summary and is not intended to be and shall not be interpreted as
an employment contract.


<PAGE>



                                                                   Exhibit 10.29

                              EMPLOYMENT AGREEMENT


                                          November 10, 1997

CONFIDENTIAL

William J. Miller
c/o Avid Technology, Inc.
Metropolitan Technology Park
One Park West
Tewksbury, MA 01876

Dear Bill:

      Continuity of management of Avid Technology,  Inc.  ("Avid") is a critical
factor to the continued  growth and success of Avid. The Avid Board of Directors
believes  that it is in the  best  interest  of the  Company  to  reinforce  and
encourage the continued attention and dedication of key members of management to
their assigned duties.

      In  consideration of the mutual promises  contained in this letter,  it is
hereby  agreed that Avid shall  provide to you, and that you shall  receive from
Avid, the benefits set forth in this letter (the "Agreement") if your employment
with  Avid,  and  its  subsidiaries,  is  terminated  during  the  term  of this
Agreement.

1. PURPOSE

      This Agreement  establishes certain special  arrangements  relating to the
      termination  of your  employment  with Avid for any reason other than: (i)
      your becoming  totally and  permanently  disabled under the Avid long-term
      disability plan or policy, or (ii) your death.

2.  TERM OF AGREEMENT

      This Agreement  shall become  effective on the date hereof (the "Effective
      Date")  and  shall  terminate  one  year  thereafter.
  The  term  shall be
      automatically  extended for  successive  one-year  periods after the first
      anniversary,  unless 30 days' advance written notice is given by you or by
      Avid terminating this Agreement as of any anniversary date.

3.  TERMINATION OF EMPLOYMENT

      Your  employment may be terminated in accordance with any of the following
      paragraphs,  but only upon one (1) month's  advance  written notice (which
      period shall be referred to in this Agreement as the "Notice Period"). The
      expiration of the Notice Period shall be your "Date of Termination."

      (a)  INVOLUNTARY  TERMINATION  WITHOUT  CAUSE.  Avid  may  terminate  your
      employment  without Cause (as defined below).  In such an event, you shall
      continue to receive your full base salary during the Notice  Period.  Upon
      your Date of Termination, you shall be entitled to those benefits provided
      under Section 4.

      (b) INVOLUNTARY  TERMINATION FOR CAUSE. Avid may terminate your employment
      for "Cause" by written  notice  setting  forth the Cause for  termination.
      "Cause"  means a  willful  engaging  in gross  misconduct  materially  and
      demonstrably injurious to Avid or the willful and continued failure by you
      substantially to perform your duties with the Company (other than any such
      failure  resulting from your incapacity due to physical or mental illness)
      after a written demand for substantial  performance is delivered to you by
      the Board of Directors which  specifically  identifies the manner in which
      the Board believes that you have not substantially  performed your duties.
      "Willful"  means an act or omission  in bad faith and  without  reasonable
      belief  that  such  act or  omission  was in or not  opposed  to the  best
      interests of Avid.  Upon your Date of  Termination,  you shall be entitled
      only to those benefits provided under Section 5.

      (c)  VOLUNTARY  TERMINATION  WITHOUT  GOOD  REASON.  You  may  voluntarily
      terminate your employment  without Good Reason (as defined below). In such
      an event,  you shall  continue  to  receive  your  full  base  salary  and
      Employment  Benefits during the Notice Period provided you  satisfactorily
      perform your duties during the Notice  Period,  unless you are relieved of
      those duties by Avid. Upon your Date of Termination, you shall be entitled
      only to those benefits provided under Section 5.

      (d) VOLUNTARY  TERMINATION WITH GOOD REASON. You may voluntarily terminate
      your employment  with Good Reason.  "Good Reason" shall mean a significant
      diminution in your duties or  responsibilities  or any acquisition of Avid
      that results in your no longer  serving as Chief  Executive  Officer of an
      independent  public  company.  In such an  event,  you shall  continue  to
      receive your full base salary and  Employment  Benefits  during the Notice
      Period.  provided you satisfactorily perform your duties during the Notice
      Period, unless you are relieved of those duties by Avid. Upon your Date of
      Termination,  you  shall be  entitled  to those  benefits  provided  under
      Section 4.

4.  SPECIAL SEVERANCE BENEFITS

      If your employment with Avid is  involuntarily  terminated by Avid without
      Cause  pursuant  to Section  3(a) or by you for Good  Reason  pursuant  to
      Section 3(d), then you shall receive the following benefits as long as you
      continue to comply with your obligations under Section 8 of this Agreement
      and any  Invention  and  Nondisclosure  Agreement  (or similar  agreement)
      between you and the Company:

      (a) Your base salary  shall be  continued in effect for a period of twelve
      (12)  months  from  your  Date of  Termination  (hereinafter  called  your
      "Severance  Pay Period").  Avid will also pay you,  during the  thirteenth
      through  twenty-fourth  months  following  termination,  on a semi-monthly
      basis,  the  amount  by which  your  monthly  base  salary  at the Date of
      Termination exceeds your monthly compensation from your new employer;

      (b) You will  receive  incentive  compensation  payments  in an  aggregate
      amount  equal to your  target  award  for the  calendar  year  immediately
      preceding  the  calendar  year in which your Date of  Termination  occurs,
      payable in equal semi-monthly  installments during the 12 months following
      the  Date of  Termination.  You  shall  have  no  right  to any  pro-rated
      incentive compensation in respect of the year of termination;

      (c)  Notwithstanding any provision to the contrary in any Avid stock plan,
      or under the terms of any grant,  award  agreement or form for  exercising
      any right  under any such  plan,  any stock  options or  restricted  stock
      awards held by you as of the Date of Termination shall become  exercisable
      or vested,  as the case may be, as to an additional number of shares equal
      to the number that would have been  exercisable or vested as of the end of
      the 12 month period immediately following the Date of Termination. Nothing
      in this  Agreement  shall be  construed  to extend the time period  within
      which any option may be  exercised  beyond  the  period  specified  in the
      applicable stock plan or under the terms of any grant,  award agreement or
      form for exercising any right under any such plan;

      (d) During the Severance Pay Period, in the event you elect to continue to
      participate  in the  Company's  medical  and  dental  plans to the  extent
      permitted   under  COBRA,   the  Company   shall  pay  the  cost  of  such
      participation;

      (e) You shall be entitled to full executive  outplacement  assistance with
      an agency selected by Avid; and

      (f)  If you  do  not  find  employment  in  Massachusetts  following  such
      termination,  Avid shall  reimburse  you for  relocation  expenses back to
      California or Minnesota, as you may elect.

5.    BENEFITS UPON VOLUNTARY TERMINATION WITHOUT GOOD REASON OR TERMINATION
      FOR CAUSE.

      Upon your  termination  for Cause in accordance  with Section 3(b) or your
      termination  without  Good Reason in  accordance  with Section  3(c),  all
      benefits under this Agreement will be void. In such an event, you shall be
      eligible for the benefits (if any) provided in  accordance  with the plans
      and  policies  of Avid  which are then  applicable  to  employees  of Avid
      generally.

6.     CONFIDENTIALITY.

      The  provisions  of the Employee  Invention and  Non-Disclosure  Agreement
      between you and Avid shall continue in full force and effect following any
      termination of employment.

7.     RELATIONSHIP TO CHANGE-IN-CONTROL AGREEMENT, ETC.

      (a)  In  the  event  you  become   entitled  to  any  benefits  under  any
      Change-in-Control   Employment   Agreement  between  you  and  Avid,  such
      Change-in-Control  Employment  Agreement  shall control and this Agreement
      shall be void and of no further force or effect.

      (b)  Except  as  expressly  set  forth in  Section  7(a),  this  Agreement
      supersedes  all prior  agreements  with Avid related to the subject matter
      hereof  (including all provisions of the letter  agreement  dated April 3,
      1996 other than Sections 5(a),  5(b) and the language of Section 7 through
      and including  clause (i) thereof,  which shall survive),  and the special
      severance  benefits  provided  under  this  Agreement  are to be  provided
      instead  of  any  other  Avid  severance  arrangements.  Avid's  severance
      policies and practices are  superseded  except to the extent  incorporated
      herein. Notwithstanding the foregoing, nothing contained in this Agreement
      shall have any affect upon your rights  under any tax  qualified  "pension
      benefit plan", as such term is defined in the Employee  Retirement  Income
      Security Act of 1974, as amended  (ERISA);  or any other "welfare  benefit
      plan" as  defined  in  ERISA,  including  by way of  illustration  and not
      limitation,  any medical surgical or  hospitalization  benefit coverage or
      long-term disability benefit coverage;  or under any deferred compensation
      or equity incentive arrangement,  including by way of illustration and not
      limitation,  any stock  incentive  plan,  non-qualified  pension  plan, or
      phantom stock plan.

8.     COVENANT NOT TO COMPETE AND NOT TO SOLICIT.

      (a) During the term of this  Agreement,  and for a period of two (2) years
      following the termination of your employment for any reason, you agree you
      will not engage in any business  (whether as an owner,  partner,  officer,
      director,  employee,  consultant or otherwise, except as the holder of not
      more than 1% of the  outstanding  stock of a  publicly-held  company) that
      competes or plans to compete with Avid in the business of the development,
      manufacture,  promotion,  distribution  or sale of digital film,  video or
      audio editing,  special effects or newsroom automation systems or products
      or any other  business  in which Avid is engaged or plans to engage at the
      time of your  termination.  Without  limiting the  foregoing,  during such
      period you shall not be employed by or otherwise  serve as a consultant to
      Abekas,  Accom, Adobe, Carlton  Communications,  Chyron, Data Translation,
      Discreet Logic, DVision, FAST Technology,  Hewlett-Packard, Immix, InSync,
      Kodak,  Lightworks,  Macromedia,  Matrox, Media 100,  Metacreations,  MGI,
      Newsmaker, Newstar, Panasonic/Matsushita,  Philips, Pinnacle Systems, Play
      Systems, Pluto Technologies International,  Progressive Networks, Quantel,
      SADIE,  Scitex,  Sonic Solutions,  SONY,  Softimage/Microsoft,  Tektronix,
      Transoft,  Truevision, VDONet or VXtreme, or any of their subsidiaries and
      affiliates.

      (b) You also  agree  that,  for a period of two (2) years from the date of
      your termination,  you will not, either directly or indirectly  through an
      agency,  new employer or otherwise,  solicit the employment of (or solicit
      to engage as an independent  contractor or  consultant)  any person who at
      any time during the one year preceding such  solicitation  was an employee
      or independent contractor of Avid or any Avid affiliate.

      (c) If any  restriction  in  this  Section  8 is  found  by any  court  of
      competent jurisdiction to be unenforceable because it extends for too long
      a period of time or over too great a range of activities or in too broad a
      geographic  area, it shall be  interpreted to extend only over the maximum
      period of time,  range of activities or geographic area as to which it may
      be enforceable.

      (d) The  restrictions  contained in this Section 8 are  necessary  for the
      protection of the business and good will of Avid and are considered by you
      to be  reasonable  for such  purpose.  You agree  that any  breach of this
      Section  8  will  cause  Avid  substantial  and  irrevocable  damage  and,
      therefore,  in the event of any such  breach,  in  addition  to such other
      remedies  which  may be  available,  Avid  shall  have  the  right to seek
      specific performance and injunctive relief.

9.     NOTICE.

      Notice  required or permitted under this Agreement shall be in writing and
      shall be deemed to have been given when  delivered or mailed by the United
      States certified mail,  return receipt  requested,  postage prepaid,  in a
      properly  addressed  envelope.  Notices to Avid shall be  addressed to the
      Corporate Secretary.

10.    MODIFICATION; SUCCESSORS.

      No provision of this  Agreement  may be waived,  modified,  or  discharged
      except  pursuant  to a written  instrument  signed  by you and Avid.  This
      agreement  is  binding  upon any  successor  to all or  substantially  all
      business or assets of Avid.

11.    INDEMNIFICATION.

      The Company will indemnify you to the extent set forth in the  Certificate
      of  Incorporation  and By-laws of the  Company  for all acts or  omissions
      occurring during the period of your employment.

12.    VALIDITY;  COUNTERPARTS

      This  agreement  shall be governed by and construed  under the laws of the
      Commonwealth  of  Massachusetts.  The  validity or  enforceability  of any
      provision  hereof shall not affect the validity or  enforceability  of any
      other  provision  hereof.  This  Agreement  may be executed in one or more
      counterparts,  each of which  together  will  constitute  one and the same
      instrument.


Accepted and Agreed                 Sincerely,
as of November 10, 1997             Avid Technology, Inc.


                                    By: /S/ Judith Oppenheim
 /S/ William J. Miller                 -------------------------
- -------------------------           Name: Judith Oppenheim
William J. Miller                   Title: Sr. Vice President - Human Resources


<PAGE>



                                                                   Exhibit 10.30
                           CHANGE-IN-CONTROL AGREEMENT


                                          November 10, 1997


Mr. William J. Miller
Chief Executive Officer
Avid Technology, Inc.
Metropolitan Technology Park
One Park West
Tewksbury, MA 01876


      The Board of Directors (the "Board") of Avid  Technology,  Inc. ("Avid" or
the "Company")  recognizes that your contributions to the past and future growth
and  success  of the  Company  have been and will be  substantial  and the Board
desires to assure the Company of your continued  services for the benefit of the
Company, particularly in the face of a change-in-control of the Company.

      This letter  agreement  ("Agreement")  therefore sets forth those benefits
which the Company  will provide to you in the event your  employment  within the
Company is terminated  after a "Change in Control of the Company" (as defined in
Paragraph 2 (i)) under the circumstances described below.

1.    TERM.

      If a Change in Control of the Company  should occur while you are still an
employee of the Company,  then this Agreement  shall continue in effect from the
date of such  Change in  Control  of the  Company  for so long as you  remain an
employee of the Company,  but in no event for more than two full calendar  years
following  such Change in Control of the Company;  provided,  however,  that
 the
expiration of the term of this Agreement shall not adversely  affect your rights
under this Agreement which have accrued prior to such  expiration.  If no Change
in Control of the  Company  occurs  before  your  status as an  employee  of the
Company is  terminated,  this  Agreement  shall expire on such date.  Prior to a
Change in Control of the  Company,  your  employment  may be  terminated  by the
Company  with or without  Cause (as  defined in  Paragraph  3(ii)),  and/or this
Agreement may be terminated by the Company,  at any time upon written  notice to
you and, in either or both such events,  you shall not be entitled to any of the
benefits  provided  hereunder;  provided,  however,  that  the  Company  may not
terminate  this  Agreement  following the  occurrence  of a Potential  Change in
Control of the Company (as defined in Paragraph  2(ii))  unless (a) at least one
year has  expired  since the most recent  event or  transaction  constituting  a
Potential  Change in Control of the  Company  and (b) in respect of a  Potential
Change  in  Control  of the  Company  which  previously  occurred,  no  facts or
circumstances  continue to exist which,  if initially  occurring at the time any
termination of this Agreement is to occur,  would  constitute a Potential Change
in Control of the Company.

2. CHANGE IN CONTROL; POTENTIAL CHANGE IN CONTROL.

      (i) For purposes of this  Agreement,  a "Change in Control of the Company"
      shall be  deemed  to have  occurred  only if any of the  following  events
      occur:

            (a) The  acquisition by an  individual,  entity or group (within the
            meaning of Section  13(d)(3) or 14(d)(2) of the Securities  Exchange
            Act of  1934,  as  amended  (the  "Exchange  Act"))(a  "Person")  of
            beneficial  ownership  (within the meaning of Rule 13d-3 promulgated
            under  the  Exchange  Act)  of 30% or more of  either  (i) the  then
            outstanding  shares of common stock of the Company (the "Outstanding
            Company Common Stock") or (ii) the combined voting power of the then
            outstanding  voting  securities  of the  Company  entitled  to  vote
            generally  in the election of directors  (the  "Outstanding  Company
            Voting Securities");  provided,  however,  that for purposes of this
            subsection  (i), the following  acquisitions  shall not constitute a
            Change of Control:  (A) any  acquisition  directly from the Company,
            (B) any  acquisition  by the  Company,  (C) any  acquisition  by any
            employee  benefit plan (or related trust) sponsored or maintained by
            the Company or any corporation controlled by the Company, or (D) any
            acquisition  by any  corporation  pursuant  to a  transaction  which
            satisfies  the  criteria  set forth in clauses  (A),  (B) and (C) of
            subparagraph (c) of this Paragraph 2(i); or

            (b)  Individuals  who, as of the date hereof,  constitute  the Board
            (the "Incumbent  Board") cease for any reason to constitute at least
            a majority  of the Board;  provided,  however,  that any  individual
            becoming a director  subsequently to the date hereof whose election,
            or  nomination  for  election  by the  Company's  shareholders,  was
            approved  by a vote of at least a  majority  of the  directors  then
            comprising  the  Incumbent  Board shall be considered as though such
            individual were a member of the Incumbent Board, but excluding,  for
            this purpose, any such individual whose initial assumption of office
            occurs as a result of an actual or threatened  election contest with
            respect to the  election or removal of  directors or other actual or
            threatened  solicitation of proxies or consents by or on behalf of a
            Person other than the Board; or

            (c)  Consummation of a  reorganization,  merger or  consolidation or
            sale or other  disposition of all or substantially all of the assets
            of the Company (a  "Business  Combination"),  in each case,  unless,
            following such Business Combination, (A) all or substantially all of
            the  individuals  and  entities  who  were  the  beneficial  owners,
            respectively,   of  the   Outstanding   Company   Common  Stock  and
            Outstanding  Company  Voting  Securities  immediately  prior to such
            Business Combination beneficially own, directly or indirectly,  more
            than 50% of,  respectively,  the  then-outstanding  shares of common
            stock and the combined voting power of the  then-outstanding  voting
            securities  entitled to vote generally in the election of directors,
            of the corporation  resulting from such Business  Combination (which
            as used in this Paragraph 2(i)(c) shall include, without limitation,
            a  corporation  which as a result  of such  transaction  owns all or
            substantially all of the Company's assets either directly or through
            one or more  subsidiaries) in substantially  the same proportions as
            their ownership  immediately  prior to such Business  Combination of
            the Outstanding  Company Common Stock and Outstanding Company Voting
            Securities,  as the case  may be and (B) no  Person  (excluding  any
            corporation resulting from such Business Combination or any employee
            benefit plan (or related  trust) of the Company or such  corporation
            resulting  from  such  Business   Combination)   beneficially  owns,
            directly  or  indirectly,  30% or more  of,  respectively,  the then
            outstanding shares of common stock of the corporation resulting form
            such  Business  Combination,  or the  combined  voting  power of the
            then-outstanding voting securities of such corporation.

      (ii) For purposes of this Agreement, a "Potential Change in Control of the
      Company"  shall be deemed to have  occurred if (A) the Company shall enter
      into  an  agreement,  the  consummation  of  which  would  result  in  the
      occurrence of a Change in Control of the Company,  or (B) any person shall
      publicly announce an intention to take or to consider taking actions which
      if consummated would constitute a Change in Control of the Company, or (C)
      the Company shall receive any written  communication  from any third party
      or third parties, acting as principal or as authorized representative of a
      disclosed  principal,   which  is  publicly  disclosed  and  proposes  (or
      indicates a desire to engage in discussions relating to the possibility of
      or with a view  toward) a  transaction  the  consummation  of which  would
      result in the occurrence of a Change in Control of the Company, or (D) any
      Person  other than the  Company or a  subsidiary  thereof or any  employee
      benefit  plan  sponsored  by the  Company  or a  subsidiary  thereof  or a
      corporation  owned,  directly or indirectly,  by the  shareholders  of the
      Company in substantially  the same proportions as their ownership of stock
      in the Company,  shall (I) become the beneficial owner (within the meaning
      of  Rule  13d-3  under  the  Exchange  Act),  (II)  disclose  directly  or
      indirectly  to the Company or publicly a plan or  intention  to become the
      beneficial  owner or (E) any  Person  described  in  clause  (D) above who
      becomes the beneficial  owner,  directly or  indirectly,  of voting shares
      representing 20.0% or more of the combined voting power of the Outstanding
      Company Voting Securities shall increase his beneficial  ownership of such
      securities by 5% or more over the percentage  acquired in the  transaction
      which  previously  gave rise to the  occurrence  of a Potential  Change in
      Control  of the  Company.  Notwithstanding  the  foregoing,  any  event or
      transaction which would otherwise constitute a Potential Change in Control
      of the Company shall not  constitute a Potential  Change in Control of the
      Company  if the  negotiations  or other  actions  leading to such event or
      transaction  were initiated by the Company (it being  understood  that the
      occurrence  of such a  Company-initiated  event or  transaction  shall not
      affect the  existence  of any  Potential  Change in Control of the Company
      resulting from any other event or transaction).

3.    TERMINATION FOLLOWING CHANGE IN CONTROL.

      If a Change in Control of the Company  shall have  occurred  while you are
still an employee of the  Company,  you shall be  entitled to the  payments  and
benefits provided in Paragraph 4 hereof upon the subsequent  termination of your
employment within two (2) full calendar years of such Change in Control,  by you
or by the  Company  unless  such  termination  is (a)  because  of your death or
"Disability",  (b) by the Company for "Cause" (as defined below),  or (c) by you
other than for "Good  Reason" (as  defined  below),  in any of which  events you
shall not be entitled to receive benefits under this Agreement.

      (i)  "DISABILITY".  If, as a result of your  incapacity due to physical or
      mental illness,  you shall have been deemed  "disabled" by the institution
      appointed by the Company to administer the Company's Long-Term  Disability
      Plan (or  successor  plan)  because  you shall have been  absent from your
      duties with the Company on a full-time  basis for six months and shall not
      have returned to full-time  performance  of your duties within thirty days
      after  written  notice  is given  you,  the  Company  may  terminate  your
      employment for Disability.

      (ii) "CAUSE".  For the purposes of this Agreement,  the Company shall have
      "Cause" to terminate your employment only upon

            (A) the  willful  and  continued  failure  by you  substantially  to
            perform  your duties with the Company  (other than any such  failure
            resulting from your  incapacity due to physical or mental illness or
            any failure resulting from your terminating your employment with the
            Company for "Good Reason" (as defined below)) after a written demand
            for  substantial  performance is delivered to you by the Board which
            specifically  identifies the manner in which the Board believes that
            you have not substantially performed your duties, or

            (B) the willful engaging by you in gross  misconduct  materially and
            demonstrably injurious to the Company.

            For purposes of this  paragraph,  no act, or failure to act, on your
            part shall be  considered  "willful"  unless done,  or omitted to be
            done,  by you not in good faith and without  reasonable  belief that
            your action or omission  was in the best  interests  of the Company.
            Notwithstanding the foregoing,  you shall not be deemed to have been
            terminated  for  Cause  unless  and  until  there  shall  have  been
            delivered  to  you a  copy  of a  resolution  duly  adopted  by  the
            affirmative  vote of not  less  than  three-quarters  of the  entire
            membership  of the Board at a meeting  of the Board  called and held
            for that purpose  (after at least 20 days prior notice to you and an
            opportunity for you, together with your counsel,  to be heard before
            the Board),  finding that in the good faith opinion of the Board you
            failed to perform your duties or engaged in  misconduct as set forth
            in clause  (A) or (B) of this  Paragraph  3(ii) and that you did not
            correct such failure or cease such misconduct  after being requested
            to do so by the Board.

      (iii) "GOOD REASON".  You may terminate  your  employment for Good Reason.
      For purpose of this Agreement, "Good Reason" shall mean:

            (A) the  assignment  to you of any  duties  materially  inconsistent
            with,  or  any  material  diminution  of,  your  positions,  duties,
            responsibilities, and status with the Company immediately prior to a
            Change in  Control  of the  Company,  or a  material  change in your
            titles  or  offices  as in effect  immediately  prior to a Change in
            Control of the Company,  or any removal of you from,  or any failure
            to reelect you to, any such positions;

            (B) a  reduction  by the  Company  in your  base  salary  in  effect
            immediately prior to a Change in Control of the Company or a failure
            by the Company to increase your base salary  (within  fifteen months
            of your last increase) in an amount which is substantially  similar,
            on a percentage  basis, to the average  percentage  increase in base
            salary for all  officers  of the  Company  during the twelve  months
            preceding your increase;

            (C) the  failure  by the  Company  to  continue  in effect  any life
            insurance,  health or accident or  disability  plan in which you are
            participating or are eligible to participate at the time of a Change
            in Control of the Company (or plans providing you with substantially
            similar  benefits),  except as  otherwise  required in terms of such
            plans as in  effect  at the time of any  Change  in  Control  of the
            Company  or the  taking of any  action by the  Company  which  would
            adversely  affect your  participation  in or materially  reduce your
            benefits  under any of such  plans or  deprive  you of any  material
            fringe benefits enjoyed by you at the time of a Change in Control of
            the  Company or the  failure by the  Company to provide you with the
            number of paid vacation days to which you are entitled in accordance
            with the vacation policies of the Company in effect at the time of a
            Change in Control of the Company;

            (D) the  failure  by the  Company  to (i)  continue  in  effect  any
            material  incentive  or  variable  compensation  plan in  which  you
            participate  immediately  prior to the Change of Control,  unless an
            equitable   arrangement   (embodied  in  an  ongoing  substitute  or
            alternative  plan) has been made with  respect  to such  plan,  (ii)
            continue  your  participation  therein  (or in  such  substitute  or
            alternative plan) on a basis not materially less favorable,  both in
            terms of the  amount  of  benefits  provided  and the  level of your
            participation relative to other participants, as existed at the time
            of the  Change of  Control  or (iii)  award  cash  bonuses to you in
            amounts and in a manner substantially  consistent with past practice
            in light of the Company's financial performance;

            (E) any  requirement  by the Company  that (i) the location of which
            you perform  your  principal  duties for the Company be changed to a
            new  location  that is more than 45 miles from the location at which
            you perform your principal duties for the Company at the time of the
            Change in Control of the Company or (ii) you are  required to travel
            on an overnight  basis to a  significantly  greater  extent than you
            were  required  to so travel  prior to the  Change in Control of the
            Company;

            (F) any  material  breach by the  Company of any  provision  of this
            Agreement (including, without limitation, Paragraph 6), which is not
            cured within 30 days after written notice thereof; or

            (G) any  purported  termination  of your  employment  by the Company
            which is not effected pursuant to a Notice of Termination satisfying
            the  requirements  of  subparagraph  (iv) below (and, if applicable,
            subparagraph  (ii) above);  and for purposes of this  Agreement,  no
            such purported termination shall be effective.

      (iv) NOTICE OF  TERMINATION.  Any  termination by the Company  pursuant to
      subparagraphs  (i) or (ii) above or by you pursuant to subparagraph  (iii)
      above shall be  communicated by written Notice of Termination to the other
      party hereto.  For purposes of this  Agreement,  a "Notice of Termination"
      shall  mean  a  notice  which  shall  indicate  the  specific  termination
      provision in this Agreement  relied upon and shall set forth in reasonable
      detail  the  facts  and  circumstances  claimed  to  provide  a basis  for
      termination of your termination under the provision so indicated.

      (v) DATE OF TERMINATION. "Date of Termination" shall mean:

            (A) if this  Agreement is  terminated  for  Disability,  thirty days
            after Notice of  Termination  is given  (provided that you shall not
            have returned to the performance of your duties on a full-time basis
            during such thirty-day period),

            (B) if your employment is terminated  pursuant to subparagraph (iii)
            above, the date specified in the Notice of Termination, and

            (C) if your employment is terminated for any other reason,  the date
            on which a  Notice  of  Termination  is given  (or,  if a Notice  of
            Termination is not given, the date of such termination).

4.    COMPENSATION DURING DISABILITY OR UPON TERMINATION.

      (i) If,  after a Change in  Control  of the  Company,  you  shall  fail to
      perform your duties hereunder as a result of incapacity due to physical or
      mental illness,  you shall continue to receive your full base salary twice
      a  month  at  the  rate  then  in  effect   and  any   awards   under  the
      Executive/Senior  Management  Variable  Compensation Plan or any successor
      plan shall continue to accrue and to be paid during such period until your
      employment  is  terminated  (and,  if the  Company  maintains  a Long Term
      Disability  Plan,  you  shall  be  eligible  for  coverage  thereunder  in
      accordance  with the terms thereof and subject to the  satisfaction of all
      applicable conditions,  including without limitation, the timely filing of
      a notice of claim);  provided,  however, in the event the Company makes no
      interim individual accruals for the  Executive/Senior  Management Variable
      Compensation Plan or any successor plan in respect of any period for which
      no award has been made under such Plan because of such termination of this
      Agreement or of employment,  you shall receive payment in the amount equal
      to the  product  of (a) the  amount  awarded to you under such Plan or any
      successor plan during the period most recently ended,  multiplied by (b) a
      fraction  (hereinafter the "Partial Service  Fraction"),  the numerator of
      which is the whole and partial months of service  completed in the current
      period, and the denominator of which is the number of months in the period
      most recently ended for which an award was made.

      (ii) If, after a Change in Control of the Company,  your employment  shall
      be  terminated  for Cause,  the  Company  shall pay you for your full base
      salary  through the Date of  Termination at the rate in effect at the time
      Notice of  Termination  is given and the  Company  shall  have no  further
      obligations to you under this Agreement.

      (iii) If,  within two years after a Change in Control of the Company,  the
      Company shall terminate your employment,  other than pursuant to Paragraph
      3(i) or 3(ii) hereof or by reason of death,  or you shall  terminate  your
      employment for Good Reason,

            (A) The Company shall pay you as severance  pay (and without  regard
            to the  provisions of any benefit plan) in a lump sum in cash on the
            fifth day following the Date of Termination, the following amounts:

                  (x) your  accrued but unpaid  base salary  through the Date of
                  Termination  at the  rate in  effect  at the  time  Notice  of
                  Termination is given,  plus an amount equal to the amount,  if
                  any, of any incentive  compensation awards which have not been
                  paid  but   which   have   been   earned   by  you  under  the
                  Executive/Senior  Management Variable Compensation Plan or any
                  successor  plan  (including  awards which have been  deferred,
                  except to the extent such awards have been transferred,  prior
                  to a Change in Control  of the  Company,  by the  Company to a
                  trustee in an irrevocable  trust) it being understood that you
                  shall  have  earned in each  year for which an award  shall be
                  payable  an  amount  equal to the  product  of (a) the  amount
                  awarded you under such Plan or any  successor  plan during the
                  period  most  recently  ended,  multiplied  by (b) the Partial
                  Service Fraction; and

                  (y) an amount  equal to the sum of your  annual base salary at
                  the highest rate in effect during the twelve (12) month period
                  immediately  preceding the Date of Termination  plus two times
                  the   amount   of  the   highest   award  to  you   under  the
                  Executive/Senior  Management Variable Compensation Plan or any
                  successor plan during the twenty-four  (24) month period ended
                  on the Date of Termination.

            (B) For a twenty-four (24) month period after such termination,  the
            Company shall arrange to provide you with life, dental, accident and
            group health insurance benefits  substantially similar to those that
            you were  receiving  immediately  prior to such  termination  to the
            extent that the  Company's  plans then permit the Company to provide
            you with such benefits.  Notwithstanding the foregoing,  the Company
            shall not  provide  any such  benefits  to you to the extent that an
            equivalent  benefit is received by you from another  employer during
            such period, and you shall report any such benefit actually received
            by you to the Company;

            (C)  The   exercisability  of  all  outstanding  stock  options  and
            restricted  stock awards then held by you shall  accelerate  in full
            (to the extent such  options or awards  have not been,  or would not
            otherwise be,  accelerated  at or prior to such time pursuant to the
            terms of the letter  agreement  dated April 3, 1996  between you and
            the Company),  provided that if such  acceleration  would disqualify
            the  Change in  Control  from  being  accounted  for as a pooling of
            interests and such accounting treatment would otherwise be available
            and  is  desired,  such  exercisability  and  vesting  will  not  be
            accelerated; and

            (D) You shall be entitled to full executive outplacement  assistance
            with an agency selected by the Company.

      (iv) You shall not be  required  to  mitigate  the  amount of any  payment
      provided for in this Paragraph 4 by seeking other employment or otherwise,
      nor shall the amount of any payment  provided  for in this  Paragraph 4 be
      reduced by any  compensation  earned by you as the result of employment by
      another employer after the Date of Termination, or otherwise.

      (v) Nothing in this  Agreement  shall prevent or limit your  continuing or
      future participation in any plan, program,  policy or practice provided by
      the Company to its employees and for which you may qualify nor, subject to
      Paragraph 13 hereof,  shall anything herein limit or otherwise affect such
      rights as you may have under any contract or agreement between you and the
      Company; provided, however, that to the extent you are entitled to receive
      any payments hereunder upon termination of your employment,  you shall not
      be entitled to any payments under any severance plan,  program,  policy or
      practice of the Company then in effect.

5.    CERTAIN ADDITIONAL PAYMENTS BY THE COMPANY.

      (i) Anything in this Agreement to the contrary  notwithstanding and except
      as set forth below,  in the event it shall be determined  that any payment
      or  distribution  by the  Company  to or for the your  benefit  and/or any
      acceleration of vesting of any options or restricted stock awards (whether
      paid or payable or distributed or  distributable  or provided  pursuant to
      the terms of this Agreement or otherwise, but determined without regard to
      any  additional  payments  required  under this Paragraph 5) (a "Payment")
      would be subject to the excise tax imposed by Section 4999 of the Internal
      Revenue Code or any interest or penalties are incurred by you with respect
      to such excise tax (such excise tax,  together  with any such interest and
      penalties,  are hereinafter collectively referred to as the "Excise Tax"),
      then you shall be entitled to receive an  additional  payment (a "Gross-Up
      Payment")  in an amount  such that  after the  payment by you of all taxes
      (including any interest or penalties  imposed with respect to such taxes),
      including,  without  limitation,  any income  taxes (and any  interest  an
      penalties  imposed with  respect  thereto) and Excise Tax imposed upon the
      Gross-Up  Payment,  you retain an amount of the Gross-Up  Payment equal to
      the Excise Tax imposed upon the  Payments.  Notwithstanding  the foregoing
      provisions of this Paragraph  5(i), if it shall be determined that you are
      entitled to a Gross-Up  Payment,  but that you,  after taking into account
      the Payments and the Gross-Up  Payment,  would not receive a net after-tax
      benefit of at least $50,000 (taking into account both income taxes and any
      Excise  Tax) as compared to the net  after-tax  proceeds to you  resulting
      from  an  elimination  of the  Gross-Up  Payment  and a  reduction  of the
      Payments,  in an aggregate,  to an amount (the "Reduced Amount") such that
      the  receipt of Payments  would not give rise to any Excise  Tax,  then no
      Gross-Up Payment shall be made to you and the Payments,  in the aggregate,
      shall be reduced to the Reduced Amount.

      (ii) Subject to the  provisions  of  Paragraph  5(i),  all  determinations
      required to be made under this Paragraph 5,  including  whether and when a
      Gross-Up  Payment is required and the amount of such Gross-Up  Payment and
      the assumptions to be utilized in arriving at such determination, shall be
      made by Coopers and Lybrand or such other certified public accounting firm
      as may be  designated by the Company (the  "Accounting  Firm") which shall
      provide  detailed  supporting  calculations  to both the  Company  and you
      within 15  business  days of the receipt of notice from you that there has
      been a Payment,  or such earlier  time as is requested by the Company.  In
      the event that the Accounting Firm is serving as accountant or auditor for
      the  individual,  entity,  or group  affecting the Change of Control,  the
      Company shall appoint  another  nationally  recognized  accounting firm to
      make the determinations required hereunder.

      All  fees  and  expenses  of the  Accounting  Firm  shall  be borne by the
      Company. Any Gross-Up Payment, as determined pursuant to this Paragraph 5,
      shall  be paid by the  Company  to you  within  ten  business  days of the
      receipt of the Accounting Firm's  determination.  Any determination by the
      Accounting  Firm shall be binding upon the Company and you. As a result of
      the uncertainty in the application of Section 4999 of the Code at the time
      of the initial  determination  by the  Accounting  Firm  hereunder,  it is
      possible  that  Gross-Up  Payments  which  will not have  been made by the
      Company  should  have  been  made  ("Underpayment"),  consistent  with the
      calculations required to be made hereunder.  In the event that the Company
      exhausts its remedies  pursuant to Paragraph 5(iii) and you thereafter are
      required to make a payment of any Excise Tax,  the  Accounting  Firm shall
      determine  the amount of the  Underpayment  that has occurred and any such
      Underpayment shall be promptly paid by the Company to or for your benefit.

      (iii) You shall notify the Company in writing of any claim by the Internal
      Revenue  Service  that,  if  successful,  would require the payment by the
      Company of the Gross-Up Payment.  Such notification shall be given as soon
      as practical but no later than ten business days after you are informed in
      writing of such a claim and shall apprise the Company of the nature of the
      claim  and the  date on which  such  claim is  requested  to be paid.  The
      Executive  shall not pay such claim prior to the  expiration of the 30-day
      period following the date on which it gives such notice to the Company (or
      such  shorter  period  ending on the date that any  payment  of taxes with
      respect  to such claim is due).  If the  Company  notifies  you in writing
      prior to the  expiration  of such period  that it desires to contest  such
      claim, you shall:

            (A) give the Company any  information  reasonably  requested  by the
            Company relating to such claim,

            (B) take such action in connection with contesting such claim as the
            Company  shall  reasonably  request  in  writing  from time to time,
            including,  without limitation,  accepting legal representation with
            respect  to such claim by an  attorney  reasonably  selected  by the
            Company,

            (C) cooperate with the Company in good faith in order to effectively
            contest such claim, and

            (D) permit the Company to participate in any proceedings relating to
            such claim.

      provided,  however, that the Company shall bear and pay directly all costs
      and expenses  (including  additional  interest and penalties)  incurred in
      connection with such contest and shall indemnify and hold you harmless, on
      an after-tax basis,  for any Excise Tax or income tax (including  interest
      and  penalties  with  respect   thereto)  imposed  as  a  result  of  such
      representation  and payment of costs and expenses.  Without  limitation of
      the  foregoing  provisions  of this  Paragraph  5(iii),  the Company shall
      control all proceedings  taken in connection with such contest and, at its
      sole  option,  may  pursue or forego any and all  administrative  appeals,
      proceedings, hearings and conferences with the taxing authority in respect
      of such claim and may, at its sole  option,  either  direct you to pay the
      tax  claimed  and  sue  for a  refund  or to  contest  the  claim  in  any
      permissible  manner,  and  you  agree  to  prosecute  such  contest  to  a
      determination  before any administrative  tribunal,  in a court of initial
      jurisdiction  and in one or more  appellate  courts,  as the Company shall
      determine;  provided, however, that if the Company directs you to pay such
      claim and sue for a refund,  the Company  shall advance the amount of such
      payment to you, on an  interest-free  basis,  and shall indemnify and hold
      the you harmless, on an after-tax basis, from any Excise Tax or income tax
      (including  interest or  penalties  with  respect  thereto)  imposed  with
      respect to such advance or with respect to any imputed income with respect
      to such advance; and further provided that any extension of the statute of
      limitations  relating  to  payment  of taxes  for your  taxable  year with
      respect  to which  such  contested  amount is claimed to be due is limited
      solely to such contested amount. Furthermore, the Company's control of the
      contest  shall be  limited  to issues  with  respect  to which a  Gross-Up
      Payment would be payable  hereunder and you shall be entitled to settle or
      contest,  as the case may be,  any  other  issue  raised  by the  Internal
      Revenue Service or other taxing authority.

      (iv) If,  after the  receipt by you of an amount  advanced  by the Company
      pursuant to Paragraph  5(iii),  you become  entitled to receive any refund
      with  respect  to  such a  claim,  you  shall  (subject  to the  Company's
      complying with the  requirements of Paragraph  5(iii)) promptly pay to the
      Company  the amount of such refund  (together  with any  interest  paid or
      credited thereon after taxes applicable thereto). If, after the receipt by
      you of an amount advanced by the Company  pursuant to Paragraph  5(iii), a
      determination  is made that you shall not be  entitled  to any refund with
      respect  to such claim any the  Company  does not notify you in writing of
      its intent to contest such denial of refund prior to the  expiration of 30
      days after such  determination,  then such  advance  shall be forgiven and
      shall not be  required to be repaid and the amount of such  advance  shall
      offset, to the extent thereof,  the amount of Gross-Up Payment required to
      be paid.

6.    SUCCESSOR'S BINDING AGREEMENT.

      (i) The Company will require any successor (whether direct or indirect, by
      purchase, merger, consolidation, or otherwise) to all or substantially all
      of the business and/or the assets of the Company,  expressly to assume and
      agree to perform this  Agreement in the same manner and to the same extent
      that the Company  would be required to perform if no such  succession  had
      taken place. As used in this  Agreement,  "Company" shall mean the Company
      as  defined  above and any  successor  to its  business  and/or  assets as
      aforesaid  which executes and delivers the agreement  provided for in this
      paragraph  6 or  which  otherwise  becomes  bound  by all  the  terms  and
      provisions of this Agreement by operation of law.

      (ii) This Agreement  shall inure to the benefit of, and be enforceable by,
      your  personal  or  legal  representatives,   executors,   administrators,
      successors, heirs, distributees,  devisees and legatees. If you should die
      while any  amounts  would  still be  payable to you  hereunder  if you had
      continued to live, all such amounts,  unless  otherwise  provided  herein,
      shall be paid in  accordance  with the  terms  of this  Agreement  to your
      devisee,  legatee or other designee or, if there be no such  designee,  to
      your estate.

7.    EMPLOYMENT.

      In consideration of the foregoing obligations of the Company, you agree to
be bound by the  terms and  conditions  of this  Agreement  and to remain in the
employ of the Company during any period following the announcement by any person
of any proposed transaction or transactions which, if effected,  would result in
a Change in Control of the Company  until a Change in Control of the Company has
taken  place,  or in the  opinion of the Board,  such  person has  abandoned  or
terminated its efforts to effect a Change in Control of the Company.  Subject to
the foregoing,  nothing contained in this Agreement shall impair or interfere in
any way with your right to terminate your employment or the right of the Company
to terminate your  employment with or without Cause prior to a Change in Control
of the  Company.  Nothing  contained in this  Agreement  shall be construed as a
contract  of  employment  between  the  Company and you or as a right for you to
continue in the employ of the Company,  or as a  limitation  on the right of the
Company to discharge  you with or without  Cause prior to a Change in Control of
the Company.

8.    COMPETITIVE ACTIVITY.

      (i) If your employment  terminates under circumstances that entitle you to
      receive  benefits under this Agreement (as described in the first sentence
      of paragraph 3 of this  Agreement),  then,  unless the Company  materially
      breaches  this  Agreement,  you agree you will not for a period of two (2)
      years after such termination  engage in any business (whether as an owner,
      partner, officer, director,  employee,  consultant or otherwise, except as
      the holder of not more than 1% of the outstanding stock of a publicly-held
      company)  that  competes or plans to compete  with Avid in the business of
      the development,  manufacture,  promotion, distribution or sale of digital
      film,  video or audio  editing,  special  effects or  newsroom  automation
      systems  or  products  or any other  business  in which Avid is engaged or
      plans to  engage at the time of your  termination.  Without  limiting  the
      foregoing,  during such  period you shall not be employed by or  otherwise
      serve as a consultant to Abekas,  Accom,  Adobe,  Carlton  Communications,
      Chyron,  Data  Translation,  Discreet  Logic,  DVision,  FAST  Technology,
      Hewlett-Packard,  Immix, InSync, Kodak,  Lightworks,  Macromedia,  Matrox,
      Media 100, Metacreations,  MGI, Newsmaker, Newstar,  Panasonic/Matsushita,
      Philips, Pinnacle Systems, Play Systems, Pluto Technologies International,
      Progressive  Networks,  Quantel,  SADIE,  Scitex,  Sonic Solutions,  SONY,
      Softimage/Microsoft,  Tektronix,  Transoft, Truevision, VDONet or VXtreme,
      or any of their subsidiaries and affiliates.

      (ii) You also agree  that,  for a period of two (2) years from the date of
      your termination,  you will not, either directly or indirectly  through an
      agency,  new employer or otherwise,  solicit the employment of (or solicit
      to engage as an independent  contractor or  consultant)  any person who at
      any time during the one year preceding such  solicitation  was an employee
      or independent contractor of Avid or any Avid affiliate.

9.    INJUNCTIVE RELIEF.

      You  acknowledge  and agree that the remedy of the  Company at law for any
breach  of the  covenants  and  agreements  contained  in  Paragraph  8 of  this
Agreement  will be  inadequate,  and  that the  Company  shall  be  entitled  to
injunctive  relief against any such breach or threatened  breach.  You represent
and agree that such  injunctive  relief  shall not  prohibit  you from earning a
livelihood acceptable to you.

10.   NOTICE.

      For the purposes of this Agreement,  notices and all other  communications
provided for in this  Agreement  shall be in writing and shall be deemed to have
been duly given  when  delivered  or mailed by United  States  registered  mail,
return receipt requested, postage prepaid, addressed to the respective addresses
set forth on the first page of this  Agreement,  provided that all other notices
to the Company should be directed to the attention to the Corporate Secretary of
the Company,  or to such address as either party may have furnished to the other
in writing in  accordance  herewith,  except  that  notices of change of address
shall be effective only upon receipt.

11.   INDEMNIFICATION.

      The Company will indemnify you to the extent set forth in the  Certificate
of  Incorporation  and  By-laws  of the  Company as in effect on the date of the
Change in Control of the Company.

12.   FURTHER ASSURANCES.

      Each party hereto agrees to furnish and execute such additional  forms and
documents,  and to  take  such  further  action,  as  shall  be  reasonable  and
customarily required in connection with the performance of this Agreement or the
payment of benefits hereunder.


13.   ENTIRE AGREEMENT.

      This Agreement represents the entire agreement of the parties with respect
to the subject  matter hereof and  supersedes  any other  agreement  between the
parties with respect to such subject matter, including,  without limitation, all
provisions  of the letter  agreement  dated  April 3, 1996  between  you and the
Company (other than the provisions of Sections 5(a) and 5(b) thereof).

14.   COUNTERPARTS.

      This Agreement may be executed in one or more counterparts,  each of which
shall be deemed to be an original but all of which together will  constitute one
in the same instrument.

15.   LEGAL FEES AND EXPENSES.

      In addition to any other benefits to which you may be entitled  hereunder,
the Company shall pay all reasonable legal fees and expenses which you may incur
as a result of the Company's  contesting  the validity,  enforceability  or your
interpretation  of, or  determination  under,  this  Agreement or otherwise as a
result of any  termination as a result of which you are entitled to the benefits
set forth in this Agreement.

16.   MISCELLANEOUS.

      (i) No provision of this Agreement may be modified,  waived, or discharged
      unless such  waiver,  modification,  or  discharge is agreed to in writing
      signed by you and such officer as may be  specifically  designated  by the
      Board of Directors of the Company.

      (ii) No  waiver by either  party  hereto at any time of any  breach by the
      other party hereto of, or compliance  with,  any condition or provision of
      this  Agreement  to be  performed  by such other  party  shall be deemed a
      waiver of similar or dissimilar provisions or conditions at the same or at
      any time prior or subsequent time.

      (iii) The validity,  interpretation,  construction and performance of this
      Agreement   shall  be  governed  by  the  laws  of  the   Commonwealth  of
      Massachusetts.

      (iv) The invalidity or unenforceability of any provision of this Agreement
      shall not affect the validity or  enforceability of any other provision of
      this Agreement, which shall remain in full force and effect.

      (v) The Company may withhold from any amounts payable under this Agreement
      such  federal,  state,  local or foreign  taxes as shall be required to be
      withheld pursuant to any applicable law or regulation.

      If this Agreement correctly sets forth our agreement on the subject matter
hereof,  kindly  sign  and  return  to the  Company  the  enclosed  copy of this
Agreement which will then constitute our agreement on this subject.

                                   Sincerely,

                                   Avid Technology, Inc.

                                   By: /s/ Judith Oppenheim
                                       --------------------------
                                   Name:  Judith Oppenheim
                                   Title:  Sr. Vice President - Human Resources

I acknowledge receipt and agree with the foregoing terms and conditions.



 /S/ William J. Miller
- --------------------------
William J. Miller

Date:   NOVEMBER 10, 1997




                                                                   Exhibit 10.31


                              EMPLOYMENT AGREEMENT


                                          December 1, 1997

CONFIDENTIAL

William L. Flaherty
c/o Avid Technology, Inc.
Metropolitan Technology Park
One Park West
Tewksbury, MA 01876

Dear Bill:

      Continuity of management of Avid Technology,  Inc.  ("Avid") is a critical
factor to the continued  growth and success of Avid. The Avid Board of Directors
believes  that it is in the  best  interest  of the  Company  to  reinforce  and
encourage the continued attention and dedication of key members of management to
their assigned duties.

      In  consideration of the mutual promises  contained in this letter,  it is
hereby  agreed that Avid shall  provide to you, and that you shall  receive from
Avid, the benefits set forth in this letter (the "Agreement") if your employment
with  Avid,  and  its  subsidiaries,  is  terminated  during  the  term  of this
Agreement.

1.     PURPOSE

      This Agreement  establishes certain special  arrangements  relating to the
      termination  of your  employment  with Avid for any reason other than: (i)
      your becoming  totally and  permanently  disabled under the Avid long-term
      disability plan or policy, or (ii) your death.

2.     TERM OF AGREEMENT

      This Agreement  shall become  effective on the date hereof (the "Effective
      Date")  and  shall  terminate  one  year  thereafter.
  The  term  shall be
      automatically  extended for  successive  one-year  periods after the first
      anniversary,  unless 30 days' advance written notice is given by you or by
      Avid terminating this Agreement as of any anniversary date.

3.     TERMINATION OF EMPLOYMENT

      Your  employment may be terminated in accordance with any of the following
      paragraphs,  but only upon one (1) month's  advance  written notice (which
      period shall be referred to in this Agreement as the "Notice Period"). The
      expiration of the Notice Period shall be your "Date of Termination."

      (a) INVOLUNTARY  TERMINATION  WITHOUT  CAUSE.  Avid  may  terminate  your
      employment  without Cause (as defined below).  In such an event, you shall
      continue to receive your full base salary during the Notice  Period.  Upon
      your Date of Termination, you shall be entitled to those benefits provided
      under Section 4.

      (b) INVOLUNTARY  TERMINATION FOR CAUSE. Avid may terminate your employment
      for "Cause" by written  notice  setting  forth the Cause for  termination.
      "Cause"  means a  willful  engaging  in gross  misconduct  materially  and
      demonstrably injurious to Avid or the willful and continued failure by you
      substantially to perform your duties with the Company (other than any such
      failure  resulting from your incapacity due to physical or mental illness)
      after a written demand for substantial  performance is delivered to you by
      the Chief Executive  Officer which  specifically  identifies the manner in
      which the Chief Executive Officer believes that you have not substantially
      performed your duties. "Willful" means an act or omission in bad faith and
      without  reasonable belief that such act or omission was in or not opposed
      to the best interests of Avid. Upon your Date of Termination, you shall be
      entitled only to those benefits provided under Section 5.

      (c)  VOLUNTARY  TERMINATION  WITHOUT  GOOD  REASON.  You  may  voluntarily
      terminate your employment  without Good Reason (as defined below). In such
      an event,  you shall  continue  to  receive  your  full  base  salary  and
      Employment  Benefits during the Notice Period provided you  satisfactorily
      perform your duties during the Notice  Period,  unless you are relieved of
      those duties by Avid. Upon your Date of Termination, you shall be entitled
      only to those benefits provided under Section 5.

      (d) VOLUNTARY  TERMINATION WITH GOOD REASON. You may voluntarily terminate
      your employment  with Good Reason.  "Good Reason" shall mean a significant
      diminution in your duties or  responsibilities  or any acquisition of Avid
      that results in your no longer  serving as Chief  Financial  Officer of an
      independent  public  company.  In such an  event,  you shall  continue  to
      receive your full base salary and  Employment  Benefits  during the Notice
      Period.  provided you satisfactorily perform your duties during the Notice
      Period, unless you are relieved of those duties by Avid. Upon your Date of
      Termination,  you  shall be  entitled  to those  benefits  provided  under
      Section 4.

4.     SPECIAL SEVERANCE BENEFITS

      If your employment with Avid is  involuntarily  terminated by Avid without
      Cause  pursuant  to Section  3(a) or by you for Good  Reason  pursuant  to
      Section 3(d), then you shall receive the following benefits as long as you
      continue to comply with your obligations under Section 8 of this Agreement
      and any  Invention  and  Nondisclosure  Agreement  (or similar  agreement)
      between you and the Company:

      (a) Your base salary  shall be  continued in effect for a period of twelve
      (12)  months  from  your  Date of  Termination  (hereinafter  called  your
      "Severance  Pay Period").  Avid will also pay you,  during the  thirteenth
      through  twenty-fourth  months  following  termination,  on a semi-monthly
      basis,  the  amount  by which  your  monthly  base  salary  at the Date of
      Termination exceeds your monthly compensation from your new employer;

      (b) You will  receive  incentive  compensation  payments  in an  aggregate
      amount  equal to your  target  award  for the  calendar  year  immediately
      preceding  the  calendar  year in which your Date of  Termination  occurs,
      payable in equal semi-monthly  installments during the 12 months following
      the  Date of  Termination.  You  shall  have  no  right  to any  pro-rated
      incentive compensation in respect of the year of termination;

      (c)  Notwithstanding any provision to the contrary in any Avid stock plan,
      or under the terms of any grant,  award  agreement or form for  exercising
      any right  under any such  plan,  any stock  options or  restricted  stock
      awards held by you as of the Date of Termination shall become  exercisable
      or vested,  as the case may be, as to an additional number of shares equal
      to the number that would have been  exercisable or vested as of the end of
      the 12 month period immediately following the Date of Termination. Nothing
      in this  Agreement  shall be  construed  to extend the time period  within
      which any option may be  exercised  beyond  the  period  specified  in the
      applicable stock plan or under the terms of any grant,  award agreement or
      form for exercising any right under any such plan;

      (d) During the Severance Pay Period, in the event you elect to continue to
      participate  in the  Company's  medical  and  dental  plans to the  extent
      permitted   under  COBRA,   the  Company   shall  pay  the  cost  of  such
      participation; and

      (e) You shall be entitled to full executive  outplacement  assistance with
      an agency selected by Avid.

5.    BENEFITS UPON VOLUNTARY TERMINATION WITHOUT GOOD REASON OR TERMINATION
      FOR CAUSE.

      Upon your  termination  for Cause in accordance  with Section 3(b) or your
      termination  without  Good Reason in  accordance  with Section  3(c),  all
      benefits under this Agreement will be void. In such an event, you shall be
      eligible for the benefits (if any) provided in  accordance  with the plans
      and  policies  of Avid  which are then  applicable  to  employees  of Avid
      generally.

6.     CONFIDENTIALITY.

      The  provisions  of the Employee  Invention and  Non-Disclosure  Agreement
      between you and Avid shall continue in full force and effect following any
      termination of employment.

7.     RELATIONSHIP TO CHANGE-IN-CONTROL AGREEMENT, ETC.

      (a)  In  the  event  you  become   entitled  to  any  benefits  under  any
      Change-in-Control   Employment   Agreement  between  you  and  Avid,  such
      Change-in-Control  Employment  Agreement  shall control and this agreement
      shall be void and of no further force or effect.

      (b)  Except  as  expressly  set  forth in  Section  7(a),  this  Agreement
      supersedes  all prior  agreements  with Avid related to the subject matter
      hereof  (including all provisions of the letter agreement dated August 21,
      1996 other than the language  under the heading  "Severance  and Change in
      Control" through and including  clause (i) thereof,  which shall survive),
      and the special severance benefits provided under this Agreement are to be
      provided  instead  of  any  other  Avid  severance  arrangements.   Avid's
      severance  policies  and  practices  are  superseded  except to the extent
      incorporated herein.  Notwithstanding the foregoing,  nothing contained in
      this  Agreement  shall  have any  affect  upon your  rights  under any tax
      qualified  "pension benefit plan", as such term is defined in the Employee
      Retirement  Income Security Act of 1974, as amended (ERISA);  or any other
      "welfare  benefit  plan"  as  defined  in  ERISA,   including  by  way  of
      illustration and not limitation,  any medical surgical or  hospitalization
      benefit coverage or long-term  disability  benefit coverage;  or under any
      deferred compensation or equity incentive arrangement, including by way of
      illustration and not limitation,  any stock incentive plan,  non-qualified
      pension plan, or phantom stock plan.

8.     COVENANT NOT TO COMPETE AND NOT TO SOLICIT.

      (a) During the term of this  Agreement,  and for a period of two (2) years
      following the termination of your employment for any reason, you agree you
      will not engage in any business  (whether as an owner,  partner,  officer,
      director,  employee,  consultant or otherwise, except as the holder of not
      more than 1% of the  outstanding  stock of a  publicly-held  company) that
      competes or plans to compete with Avid in the business of the development,
      manufacture,  promotion,  distribution  or sale of digital film,  video or
      audio editing,  special effects or newsroom automation systems or products
      or any other  business  in which Avid is engaged or plans to engage at the
      time of your  termination.  Without  limiting the  foregoing,  during such
      period you shall not be employed by or otherwise  serve as a consultant to
      Abekas,  Accom, Adobe, Carlton  Communications,  Chyron, Data Translation,
      Discreet Logic, DVision, FAST Technology,  Hewlett-Packard, Immix, InSync,
      Kodak,  Lightworks,  Macromedia,  Matrox, Media 100,  Metacreations,  MGI,
      Newsmaker, Newstar, Panasonic/Matsushita,  Philips, Pinnacle Systems, Play
      Systems, Pluto Technologies International,  Progressive Networks, Quantel,
      SADIE,  Scitex,  Sonic Solutions,  SONY,  Softimage/Microsoft,  Tektronix,
      Transoft,  Truevision,  VDONet or VXtreme or any of their subsidiaries and
      affiliates.

      (b) You also  agree  that,  for a period of two (2) years from the date of
      your termination,  you will not, either directly or indirectly  through an
      agency,  new employer or otherwise,  solicit the employment of (or solicit
      to engage as an independent  contractor or  consultant)  any person who at
      any time during the one year preceding such  solicitation  was an employee
      or independent contractor of Avid or any Avid affiliate.

      (c) If any  restriction  in  this  Section  8 is  found  by any  court  of
      competent jurisdiction to be unenforceable because it extends for too long
      a period of time or over too great a range of activities or in too broad a
      geographic  area, it shall be  interpreted to extend only over the maximum
      period of time,  range of activities or geographic area as to which it may
      be enforceable.

      (d) The  restrictions  contained in this Section 8 are  necessary  for the
      protection of the business and good will of Avid and are considered by you
      to be  reasonable  for such  purpose.  You agree  that any  breach of this
      Section  8  will  cause  Avid  substantial  and  irrevocable  damage  and,
      therefore,  in the event of any such  breach,  in  addition  to such other
      remedies  which  may be  available,  Avid  shall  have  the  right to seek
      specific performance and injunctive relief.

9.    NOTICE.

      Notice  required or permitted under this Agreement shall be in writing and
      shall be deemed to have been given when  delivered or mailed by the United
      States certified mail,  return receipt  requested,  postage prepaid,  in a
      properly  addressed  envelope.  Notices to Avid shall be  addressed to the
      Corporate Secretary.

10.   MODIFICATION; SUCCESSORS.

      No provision of this  Agreement  may be waived,  modified,  or  discharged
      except  pursuant  to a written  instrument  signed  by you and Avid.  This
      agreement  is  binding  upon any  successor  to all or  substantially  all
      business or assets of Avid.

11.   INDEMNIFICATION.

      The Company will indemnify you to the extent set forth in the  Certificate
      of  Incorporation  and By-Laws of the  Company  for all acts or  omissions
      occurring during the period of your employment.

12.   VALIDITY;  COUNTERPARTS

      This  agreement  shall be governed by and construed  under the laws of the
      Commonwealth  of  Massachusetts.  The  validity or  enforceability  of any
      provision  hereof shall not affect the validity or  enforceability  of any
      other  provision  hereof.  This  Agreement  may be executed in one or more
      counterparts,  each of which  together  will  constitute  one and the same
      instrument.


Accepted and Agreed                 Sincerely,
as of December 1, 1997              Avid Technology, Inc.


                                    By: /S/ William J. Miller
                                       -------------------------------
 /S/ William L. Flaherty            Name: William J. Miller
- -------------------------           Title:Chairman and Chief Executive
William L. Flaherty                         Officer



                                                                   Exhibit 10.32

                           CHANGE-IN-CONTROL AGREEMENT


                                          December 1, 1997


Mr. William L. Flaherty
Chief Financial Officer
Avid Technology, Inc.
Metropolitan Technology Park
One Park West
Tewksbury, MA 01876


      The Board of Directors (the "Board") of Avid  Technology,  Inc. ("Avid" or
the "Company")  recognizes that your contributions to the past and future growth
and  success  of the  Company  have been and will be  substantial  and the Board
desires to assure the Company of your continued  services for the benefit of the
Company, particularly in the face of a change-in-control of the Company.

      This letter  agreement  ("Agreement")  therefore sets forth those benefits
which the Company  will provide to you in the event your  employment  within the
Company is terminated  after a "Change in Control of the Company" (as defined in
Paragraph 2 (i)) under the circumstances described below.

1.    TERM.

      If a Change in Control of the Company  should occur while you are still an
employee of the Company,  then this Agreement  shall continue in effect from the
date of such  Change in  Control  of the  Company  for so long as you  remain an
employee of the Company,  but in no event for more than two full calendar  years
following  such Change in Control of the Company;  provided,  however,  that
 the
expiration of the term of this Agreement shall not adversely  affect your rights
under this Agreement which have accrued prior to such  expiration.  If no Change
in Control of the  Company  occurs  before  your  status as an  employee  of the
Company is  terminated,  this  Agreement  shall expire on such date.  Prior to a
Change in Control of the  Company,  your  employment  may be  terminated  by the
Company  with or without  Cause (as  defined in  Paragraph  3(ii)),  and/or this
Agreement may be terminated by the Company,  at any time upon written  notice to
you and, in either or both such events,  you shall not be entitled to any of the
benefits  provided  hereunder;  provided,  however,  that  the  Company  may not
terminate  this  Agreement  following the  occurrence  of a Potential  Change in
Control of the Company (as defined in Paragraph  2(ii))  unless (a) at least one
year has  expired  since the most recent  event or  transaction  constituting  a
Potential  Change in Control of the  Company  and (b) in respect of a  Potential
Change  in  Control  of the  Company  which  previously  occurred,  no  facts or
circumstances  continue to exist which,  if initially  occurring at the time any
termination of this Agreement is to occur,  would  constitute a Potential Change
in Control of the Company.

2. CHANGE IN CONTROL; POTENTIAL CHANGE IN CONTROL.

      (i) For purposes of this  Agreement,  a "Change in Control of the Company"
      shall be  deemed  to have  occurred  only if any of the  following  events
      occur:

            (a) The  acquisition by an  individual,  entity or group (within the
            meaning of Section  13(d)(3) or 14(d)(2) of the Securities  Exchange
            Act of  1934,  as  amended  (the  "Exchange  Act"))(a  "Person")  of
            beneficial  ownership  (within the meaning of Rule 13d-3 promulgated
            under  the  Exchange  Act)  of 30% or more of  either  (i) the  then
            outstanding  shares of common stock of the Company (the "Outstanding
            Company Common Stock") or (ii) the combined voting power of the then
            outstanding  voting  securities  of the  Company  entitled  to  vote
            generally  in the election of directors  (the  "Outstanding  Company
            Voting Securities");  provided,  however,  that for purposes of this
            subsection  (i), the following  acquisitions  shall not constitute a
            Change of Control:  (A) any  acquisition  directly from the Company,
            (B) any  acquisition  by the  Company,  (C) any  acquisition  by any
            employee  benefit plan (or related trust) sponsored or maintained by
            the Company or any corporation controlled by the Company, or (D) any
            acquisition  by any  corporation  pursuant  to a  transaction  which
            satisfies  the  criteria  set forth in clauses  (A),  (B) and (C) of
            subparagraph (c) of this Paragraph 2(i); or

            (b)  Individuals  who, as of the date hereof,  constitute  the Board
            (the "Incumbent  Board") cease for any reason to constitute at least
            a majority  of the Board;  provided,  however,  that any  individual
            becoming a director  subsequently to the date hereof whose election,
            or  nomination  for  election  by the  Company's  shareholders,  was
            approved  by a vote of at least a  majority  of the  directors  then
            comprising  the  Incumbent  Board shall be considered as though such
            individual were a member of the Incumbent Board, but excluding,  for
            this purpose, any such individual whose initial assumption of office
            occurs as a result of an actual or threatened  election contest with
            respect to the  election or removal of  directors or other actual or
            threatened  solicitation of proxies or consents by or on behalf of a
            Person other than the Board; or

            (c)  Consummation of a  reorganization,  merger or  consolidation or
            sale or other  disposition of all or substantially all of the assets
            of the Company (a  "Business  Combination"),  in each case,  unless,
            following such Business Combination, (A) all or substantially all of
            the  individuals  and  entities  who  were  the  beneficial  owners,
            respectively,   of  the   Outstanding   Company   Common  Stock  and
            Outstanding  Company  Voting  Securities  immediately  prior to such
            Business Combination beneficially own, directly or indirectly,  more
            than 50% of,  respectively,  the  then-outstanding  shares of common
            stock and the combined voting power of the  then-outstanding  voting
            securities  entitled to vote generally in the election of directors,
            of the corporation  resulting from such Business  Combination (which
            as used in this Paragraph 2(i)(c) shall include, without limitation,
            a  corporation  which as a result  of such  transaction  owns all or
            substantially all of the Company's assets either directly or through
            one or more  subsidiaries) in substantially  the same proportions as
            their ownership  immediately  prior to such Business  Combination of
            the Outstanding  Company Common Stock and Outstanding Company Voting
            Securities,  as the case  may be and (B) no  Person  (excluding  any
            corporation resulting from such Business Combination or any employee
            benefit plan (or related  trust) of the Company or such  corporation
            resulting  from  such  Business   Combination)   beneficially  owns,
            directly  or  indirectly,  30% or more  of,  respectively,  the then
            outstanding shares of common stock of the corporation resulting form
            such  Business  Combination,  or the  combined  voting  power of the
            then-outstanding voting securities of such corporation.

      (ii) For purposes of this Agreement, a "Potential Change in Control of the
      Company"  shall be deemed to have  occurred if (A) the Company shall enter
      into  an  agreement,  the  consummation  of  which  would  result  in  the
      occurrence of a Change in Control of the Company,  or (B) any person shall
      publicly announce an intention to take or to consider taking actions which
      if consummated would constitute a Change in Control of the Company, or (C)
      the Company shall receive any written  communication  from any third party
      or third parties, acting as principal or as authorized representative of a
      disclosed  principal,   which  is  publicly  disclosed  and  proposes  (or
      indicates a desire to engage in discussions relating to the possibility of
      or with a view  toward) a  transaction  the  consummation  of which  would
      result in the occurrence of a Change in Control of the Company, or (D) any
      Person  other than the  Company or a  subsidiary  thereof or any  employee
      benefit  plan  sponsored  by the  Company  or a  subsidiary  thereof  or a
      corporation  owned,  directly or indirectly,  by the  shareholders  of the
      Company in substantially  the same proportions as their ownership of stock
      in the Company,  shall (I) become the beneficial owner (within the meaning
      of  Rule  13d-3  under  the  Exchange  Act),  (II)  disclose  directly  or
      indirectly  to the Company or publicly a plan or  intention  to become the
      beneficial  owner or (E) any  Person  described  in  clause  (D) above who
      becomes the beneficial  owner,  directly or  indirectly,  of voting shares
      representing 20.0% or more of the combined voting power of the Outstanding
      Company Voting Securities shall increase his beneficial  ownership of such
      securities by 5% or more over the percentage  acquired in the  transaction
      which  previously  gave rise to the  occurrence  of a Potential  Change in
      Control  of the  Company.  Notwithstanding  the  foregoing,  any  event or
      transaction which would otherwise constitute a Potential Change in Control
      of the Company shall not  constitute a Potential  Change in Control of the
      Company  if the  negotiations  or other  actions  leading to such event or
      transaction  were initiated by the Company (it being  understood  that the
      occurrence  of such a  Company-initiated  event or  transaction  shall not
      affect the  existence  of any  Potential  Change in Control of the Company
      resulting from any other event or transaction).

3.    TERMINATION FOLLOWING CHANGE IN CONTROL.

      If a Change in Control of the Company  shall have  occurred  while you are
still an employee of the  Company,  you shall be  entitled to the  payments  and
benefits provided in Paragraph 4 hereof upon the subsequent  termination of your
employment within two (2) full calendar years of such Change in Control,  by you
or by the  Company  unless  such  termination  is (a)  because  of your death or
"Disability",  (b) by the Company for "Cause" (as defined below),  or (c) by you
other than for "Good  Reason" (as  defined  below),  in any of which  events you
shall not be entitled to receive benefits under this Agreement.

      (i)  "DISABILITY".  If, as a result of your  incapacity due to physical or
      mental illness,  you shall have been deemed  "disabled" by the institution
      appointed by the Company to administer the Company's Long-Term  Disability
      Plan (or  successor  plan)  because  you shall have been  absent from your
      duties with the Company on a full-time  basis for six months and shall not
      have returned to full-time  performance  of your duties within thirty days
      after  written  notice  is given  you,  the  Company  may  terminate  your
      employment for Disability.

      (ii) "CAUSE".  For the purposes of this Agreement,  the Company shall have
      "Cause" to terminate your employment only upon

            (A) the  willful  and  continued  failure  by you  substantially  to
            perform  your duties with the Company  (other than any such  failure
            resulting from your  incapacity due to physical or mental illness or
            any failure resulting from your terminating your employment with the
            Company for "Good Reason" (as defined below)) after a written demand
            for  substantial  performance is delivered to you by the Board which
            specifically  identifies the manner in which the Board believes that
            you have not substantially performed your duties, or

            (B) the willful engaging by you in gross  misconduct  materially and
            demonstrably injurious to the Company.

            For purposes of this  paragraph,  no act, or failure to act, on your
            part shall be  considered  "willful"  unless done,  or omitted to be
            done,  by you not in good faith and without  reasonable  belief that
            your action or omission  was in the best  interests  of the Company.
            Notwithstanding the foregoing,  you shall not be deemed to have been
            terminated  for  Cause  unless  and  until  there  shall  have  been
            delivered  to  you a  copy  of a  resolution  duly  adopted  by  the
            affirmative  vote of not  less  than  three-quarters  of the  entire
            membership  of the Board at a meeting  of the Board  called and held
            for that purpose  (after at least 20 days prior notice to you and an
            opportunity for you, together with your counsel,  to be heard before
            the Board),  finding that in the good faith opinion of the Board you
            failed to perform your duties or engaged in  misconduct as set forth
            in clause  (A) or (B) of this  Paragraph  3(ii) and that you did not
            correct such failure or cease such misconduct  after being requested
            to do so by the Board.

      (iii) "GOOD REASON".  You may terminate  your  employment for Good Reason.
      For purpose of this Agreement, "Good Reason" shall mean:

            (A) the  assignment  to you of any  duties  materially  inconsistent
            with,  or  any  material  diminution  of,  your  positions,  duties,
            responsibilities, and status with the Company immediately prior to a
            Change in  Control  of the  Company,  or a  material  change in your
            titles  or  offices  as in effect  immediately  prior to a Change in
            Control of the Company,  or any removal of you from,  or any failure
            to reelect you to, any such positions;

            (B) a  reduction  by the  Company  in your  base  salary  in  effect
            immediately prior to a Change in Control of the Company or a failure
            by the Company to increase your base salary  (within  fifteen months
            of your last increase) in an amount which is substantially  similar,
            on a percentage  basis, to the average  percentage  increase in base
            salary for all  officers  of the  Company  during the twelve  months
            preceding your increase;

            (C) the  failure  by the  Company  to  continue  in effect  any life
            insurance,  health or accident or  disability  plan in which you are
            participating or are eligible to participate at the time of a Change
            in Control of the Company (or plans providing you with substantially
            similar  benefits),  except as  otherwise  required in terms of such
            plans as in  effect  at the time of any  Change  in  Control  of the
            Company  or the  taking of any  action by the  Company  which  would
            adversely  affect your  participation  in or materially  reduce your
            benefits  under any of such  plans or  deprive  you of any  material
            fringe benefits enjoyed by you at the time of a Change in Control of
            the  Company or the  failure by the  Company to provide you with the
            number of paid vacation days to which you are entitled in accordance
            with the vacation policies of the Company in effect at the time of a
            Change in Control of the Company;

            (D) the  failure  by the  Company  to (i)  continue  in  effect  any
            material  incentive  or  variable  compensation  plan in  which  you
            participate  immediately  prior to the Change of Control,  unless an
            equitable   arrangement   (embodied  in  an  ongoing  substitute  or
            alternative  plan) has been made with  respect  to such  plan,  (ii)
            continue  your  participation  therein  (or in  such  substitute  or
            alternative plan) on a basis not materially less favorable,  both in
            terms of the  amount  of  benefits  provided  and the  level of your
            participation relative to other participants, as existed at the time
            of the  Change of  Control  or (iii)  award  cash  bonuses to you in
            amounts and in a manner substantially  consistent with past practice
            in light of the Company's financial performance;

            (E) any  requirement  by the Company  that (i) the location of which
            you perform  your  principal  duties for the Company be changed to a
            new  location  that is more than 45 miles from the location at which
            you perform your principal duties for the Company at the time of the
            Change in Control of the Company or (ii) you are  required to travel
            on an overnight  basis to a  significantly  greater  extent than you
            were  required  to so travel  prior to the  Change in Control of the
            Company;

            (F) any  material  breach by the  Company of any  provision  of this
            Agreement (including, without limitation, Paragraph 6), which is not
            cured within 30 days after written notice thereof; or

            (G) any  purported  termination  of your  employment  by the Company
            which is not effected pursuant to a Notice of Termination satisfying
            the  requirements  of  subparagraph  (iv) below (and, if applicable,
            subparagraph  (ii) above);  and for purposes of this  Agreement,  no
            such purported termination shall be effective.

      (iv) NOTICE OF  TERMINATION.  Any  termination by the Company  pursuant to
      subparagraphs  (i) or (ii) above or by you pursuant to subparagraph  (iii)
      above shall be  communicated by written Notice of Termination to the other
      party hereto.  For purposes of this  Agreement,  a "Notice of Termination"
      shall  mean  a  notice  which  shall  indicate  the  specific  termination
      provision in this Agreement  relied upon and shall set forth in reasonable
      detail  the  facts  and  circumstances  claimed  to  provide  a basis  for
      termination of your termination under the provision so indicated.

      (v) DATE OF TERMINATION. "Date of Termination" shall mean:

            (A) if this  Agreement is  terminated  for  Disability,  thirty days
            after Notice of  Termination  is given  (provided that you shall not
            have returned to the performance of your duties on a full-time basis
            during such thirty-day period),

            (B) if your employment is terminated  pursuant to subparagraph (iii)
            above, the date specified in the Notice of Termination, and

            (C) if your employment is terminated for any other reason,  the date
            on which a  Notice  of  Termination  is given  (or,  if a Notice  of
            Termination is not given, the date of such termination).

4.    COMPENSATION DURING DISABILITY OR UPON TERMINATION.

      (i) If,  after a Change in  Control  of the  Company,  you  shall  fail to
      perform your duties hereunder as a result of incapacity due to physical or
      mental illness,  you shall continue to receive your full base salary twice
      a  month  at  the  rate  then  in  effect   and  any   awards   under  the
      Executive/Senior  Management  Variable  Compensation Plan or any successor
      plan shall continue to accrue and to be paid during such period until your
      employment  is  terminated  (and,  if the  Company  maintains  a Long Term
      Disability  Plan,  you  shall  be  eligible  for  coverage  thereunder  in
      accordance  with the terms thereof and subject to the  satisfaction of all
      applicable conditions,  including without limitation, the timely filing of
      a notice of claim);  provided,  however, in the event the Company makes no
      interim individual accruals for the  Executive/Senior  Management Variable
      Compensation Plan or any successor plan in respect of any period for which
      no award has been made under such Plan because of such termination of this
      Agreement or of employment,  you shall receive payment in the amount equal
      to the  product  of (a) the  amount  awarded to you under such Plan or any
      successor plan during the period most recently ended,  multiplied by (b) a
      fraction  (hereinafter the "Partial Service  Fraction"),  the numerator of
      which is the whole and partial months of service  completed in the current
      period, and the denominator of which is the number of months in the period
      most recently ended for which an award was made.

      (ii) If, after a Change in Control of the Company,  your employment  shall
      be  terminated  for Cause,  the  Company  shall pay you for your full base
      salary  through the Date of  Termination at the rate in effect at the time
      Notice of  Termination  is given and the  Company  shall  have no  further
      obligations to you under this Agreement.

      (iii) If,  within two years after a Change in Control of the Company,  the
      Company shall terminate your employment,  other than pursuant to Paragraph
      3(i) or 3(ii) hereof or by reason of death,  or you shall  terminate  your
      employment for Good Reason,

            (A) The Company shall pay you as severance  pay (and without  regard
            to the  provisions of any benefit plan) in a lump sum in cash on the
            fifth day following the Date of Termination, the following amounts:

                  (x) your  accrued but unpaid  base salary  through the Date of
                  Termination  at the  rate in  effect  at the  time  Notice  of
                  Termination is given,  plus an amount equal to the amount,  if
                  any, of any incentive  compensation awards which have not been
                  paid  but   which   have   been   earned   by  you  under  the
                  Executive/Senior  Management Variable Compensation Plan or any
                  successor  plan  (including  awards which have been  deferred,
                  except to the extent such awards have been transferred,  prior
                  to a Change in Control  of the  Company,  by the  Company to a
                  trustee in an irrevocable  trust) it being understood that you
                  shall  have  earned in each  year for which an award  shall be
                  payable  an  amount  equal to the  product  of (a) the  amount
                  awarded you under such Plan or any  successor  plan during the
                  period  most  recently  ended,  multiplied  by (b) the Partial
                  Service Fraction; and

                  (y) an amount  equal to the sum of your  annual base salary at
                  the highest rate in effect during the twelve (12) month period
                  immediately  preceding the Date of Termination  plus two times
                  the   amount   of  the   highest   award  to  you   under  the
                  Executive/Senior  Management Variable Compensation Plan or any
                  successor plan during the twenty-four  (24) month period ended
                  on the Date of Termination.

            (B) For a twenty-four (24) month period after such termination,  the
            Company shall arrange to provide you with life, dental, accident and
            group health insurance benefits  substantially similar to those that
            you were  receiving  immediately  prior to such  termination  to the
            extent that the  Company's  plans then permit the Company to provide
            you with such benefits.  Notwithstanding the foregoing,  the Company
            shall not  provide  any such  benefits  to you to the extent that an
            equivalent  benefit is received by you from another  employer during
            such period, and you shall report any such benefit actually received
            by you to the Company;

            (C)  The   exercisability  of  all  outstanding  stock  options  and
            restricted  stock awards then held by you shall  accelerate  in full
            (to the extent such  options or awards  have not been,  or would not
            otherwise be,  accelerated  at or prior to such time pursuant to the
            terms of the letter  agreement dated August 21, 1996 between you and
            the Company),  provided that if such  acceleration  would disqualify
            the  Change in  Control  from  being  accounted  for as a pooling of
            interests and such accounting treatment would otherwise be available
            and  is  desired,  such  exercisability  and  vesting  will  not  be
            accelerated; and

            (D) You shall be entitled to full executive outplacement  assistance
            with an agency selected by the Company.

      (iv) You shall not be  required  to  mitigate  the  amount of any  payment
      provided for in this Paragraph 4 by seeking other employment or otherwise,
      nor shall the amount of any payment  provided  for in this  Paragraph 4 be
      reduced by any  compensation  earned by you as the result of employment by
      another employer after the Date of Termination, or otherwise.

      (v) Nothing in this  Agreement  shall prevent or limit your  continuing or
      future participation in any plan, program,  policy or practice provided by
      the Company to its employees and for which you may qualify nor, subject to
      Paragraph 13 hereof,  shall anything herein limit or otherwise affect such
      rights as you may have under any contract or agreement between you and the
      Company; provided, however, that to the extent you are entitled to receive
      any payments hereunder upon termination of your employment,  you shall not
      be entitled to any payments under any severance plan,  program,  policy or
      practice of the Company then in effect.

5.    CERTAIN ADDITIONAL PAYMENTS BY THE COMPANY.

      (i) Anything in this Agreement to the contrary  notwithstanding and except
      as set forth below,  in the event it shall be determined  that any payment
      or  distribution  by the  Company  to or for the your  benefit  and/or any
      acceleration of vesting of any options or restricted stock awards (whether
      paid or payable or distributed or  distributable  or provided  pursuant to
      the terms of this Agreement or otherwise, but determined without regard to
      any  additional  payments  required  under this Paragraph 5) (a "Payment")
      would be subject to the excise tax imposed by Section 4999 of the Internal
      Revenue Code or any interest or penalties are incurred by you with respect
      to such excise tax (such excise tax,  together  with any such interest and
      penalties,  are hereinafter collectively referred to as the "Excise Tax"),
      then you shall be entitled to receive an  additional  payment (a "Gross-Up
      Payment")  in an amount  such that  after the  payment by you of all taxes
      (including any interest or penalties  imposed with respect to such taxes),
      including,  without  limitation,  any income  taxes (and any  interest  an
      penalties  imposed with  respect  thereto) and Excise Tax imposed upon the
      Gross-Up  Payment,  you retain an amount of the Gross-Up  Payment equal to
      the Excise Tax imposed upon the Payments.  Not  withstanding the foregoing
      provisions of this Paragraph  5(i), if it shall be determined that you are
      entitled to a Gross-Up  Payment,  but that you,  after taking into account
      the Payments and the Gross-Up  Payment,  would not receive a net after-tax
      benefit of at least $50,000 (taking into account both income taxes and any
      Excise  Tax) as compared to the net  after-tax  proceeds to you  resulting
      from  an  elimination  of the  Gross-Up  Payment  and a  reduction  of the
      Payments,  in an aggregate,  to an amount (the "Reduced Amount") such that
      the  receipt of Payments  would not give rise to any Excise  Tax,  then no
      Gross-Up Payment shall be made to you and the Payments,  in the aggregate,
      shall be reduced to the Reduced Amount.

      (ii) Subject to the  provisions  of  Paragraph  5(i),  all  determinations
      required to be made under this Paragraph 5,  including  whether and when a
      Gross-Up  Payment is required and the amount of such Gross-Up  Payment and
      the assumptions to be utilized in arriving at such determination, shall be
      made by Coopers and Lybrand or such other certified public accounting firm
      as may be  designated by the Company (the  "Accounting  Firm") which shall
      provide  detailed  supporting  calculations  to both the  Company  and you
      within 15  business  days of the receipt of notice from you that there has
      been a Payment,  or such earlier  time as is requested by the Company.  In
      the event that the Accounting Firm is serving as accountant or auditor for
      the  individual,  entity,  or group  affecting the Change of Control,  the
      Company shall appoint  another  nationally  recognized  accounting firm to
      make the determinations required hereunder.

      All  fees  and  expenses  of the  Accounting  Firm  shall  be borne by the
      Company. Any Gross-Up Payment, as determined pursuant to this Paragraph 5,
      shall  be paid by the  Company  to you  within  ten  business  days of the
      receipt of the Accounting Firm's  determination.  Any determination by the
      Accounting  Firm shall be binding upon the Company and you. As a result of
      the uncertainty in the application of Section 4999 of the Code at the time
      of the initial  determination  by the  Accounting  Firm  hereunder,  it is
      possible  that  Gross-Up  Payments  which  will not have  been made by the
      Company  should  have  been  made  ("Underpayment"),  consistent  with the
      calculations required to be made hereunder.  In the event that the Company
      exhausts its remedies  pursuant to Paragraph 5(iii) and you thereafter are
      required to make a payment of any Excise Tax,  the  Accounting  Firm shall
      determine  the amount of the  Underpayment  that has occurred and any such
      Underpayment shall be promptly paid by the Company to or for your benefit.

      (iii) You shall notify the Company in writing of any claim by the Internal
      Revenue  Service  that,  if  successful,  would require the payment by the
      Company of the Gross-Up Payment.  Such notification shall be given as soon
      as practical but no later than ten business days after you are informed in
      writing of such a claim and shall apprise the Company of the nature of the
      claim  and the  date on which  such  claim is  requested  to be paid.  The
      Executive  shall not pay such claim prior to the  expiration of the 30-day
      period following the date on which it gives such notice to the Company (or
      such  shorter  period  ending on the date that any  payment  of taxes with
      respect  to such claim is due).  If the  Company  notifies  you in writing
      prior to the  expiration  of such period  that it desires to contest  such
      claim, you shall:

            (A) give the Company any  information  reasonably  requested  by the
            Company relating to such claim,

            (B) take such action in connection with contesting such claim as the
            Company  shall  reasonably  request  in  writing  from time to time,
            including,  without limitation,  accepting legal representation with
            respect  to such claim by an  attorney  reasonably  selected  by the
            Company,

            (C) cooperate with the Company in good faith in order to effectively
            contest such claim, and

            (D) permit the Company to participate in any proceedings relating to
            such claim,

      provided,  however, that the Company shall bear and pay directly all costs
      and expenses  (including  additional  interest and penalties)  incurred in
      connection with such contest and shall indemnify and hold you harmless, on
      an after-tax basis,  for any Excise Tax or income tax (including  interest
      and  penalties  with  respect   thereto)  imposed  as  a  result  of  such
      representation  and payment of costs and expenses.  Without  limitation of
      the  foregoing  provisions  of this  Paragraph  5(iii),  the Company shall
      control all proceedings  taken in connection with such contest and, at its
      sole  option,  may  pursue or forego any and all  administrative  appeals,
      proceedings, hearings and conferences with the taxing authority in respect
      of such claim and may, at its sole  option,  either  direct you to pay the
      tax  claimed  and  sue  for a  refund  or to  contest  the  claim  in  any
      permissible  manner,  and  you  agree  to  prosecute  such  contest  to  a
      determination  before any administrative  tribunal,  in a court of initial
      jurisdiction  and in one or more  appellate  courts,  as the Company shall
      determine;  provided, however, that if the Company directs you to pay such
      claim and sue for a refund,  the Company  shall advance the amount of such
      payment to you, on an  interest-free  basis,  and shall indemnify and hold
      the you harmless, on an after-tax basis, from any Excise Tax or income tax
      (including  interest or  penalties  with  respect  thereto)  imposed  with
      respect to such advance or with respect to any imputed income with respect
      to such advance; and further provided that any extension of the statute of
      limitations  relating  to  payment  of taxes  for your  taxable  year with
      respect  to which  such  contested  amount is claimed to be due is limited
      solely to such contested amount. Furthermore, the Company's control of the
      contest  shall be  limited  to issues  with  respect  to which a  Gross-Up
      Payment would be payable  hereunder and you shall be entitled to settle or
      contest,  as the case may be,  any  other  issue  raised  by the  Internal
      Revenue Service or other taxing authority.

      (iv) If,  after the  receipt by you of an amount  advanced  by the Company
      pursuant to Paragraph  5(iii),  you become  entitled to receive any refund
      with  respect  to  such a  claim,  you  shall  (subject  to the  Company's
      complying with the  requirements of Paragraph  5(iii)) promptly pay to the
      Company  the amount of such refund  (together  with any  interest  paid or
      credited thereon after taxes applicable thereto). If, after the receipt by
      you of an amount advanced by the Company  pursuant to Paragraph  5(iii), a
      determination  is made that you shall not be  entitled  to any refund with
      respect  to such claim any the  Company  does not notify you in writing of
      its intent to contest such denial of refund prior to the  expiration of 30
      days after such  determination,  then such  advance  shall be forgiven and
      shall not be  required to be repaid and the amount of such  advance  shall
      offset, to the extent thereof,  the amount of Gross-Up Payment required to
      be paid.

6.    SUCCESSOR'S BINDING AGREEMENT.

      (i) The Company will require any successor (whether direct or indirect, by
      purchase, merger, consolidation, or otherwise) to all or substantially all
      of the business and/or the assets of the Company,  expressly to assume and
      agree to perform this  Agreement in the same manner and to the same extent
      that the Company  would be required to perform if no such  succession  had
      taken place. As used in this  Agreement,  "Company" shall mean the Company
      as  defined  above and any  successor  to its  business  and/or  assets as
      aforesaid  which executes and delivers the agreement  provided for in this
      paragraph  6 or  which  otherwise  becomes  bound  by all  the  terms  and
      provisions of this Agreement by operation of law.

      (ii) This Agreement  shall inure to the benefit of, and be enforceable by,
      your  personal  or  legal  representatives,   executors,   administrators,
      successors, heirs, distributees,  devisees and legatees. If you should die
      while any  amounts  would  still be  payable to you  hereunder  if you had
      continued to live, all such amounts,  unless  otherwise  provided  herein,
      shall be paid in  accordance  with the  terms  of this  Agreement  to your
      devisee,  legatee or other designee or, if there be no such  designee,  to
      your estate.

7.    EMPLOYMENT.

      In consideration of the foregoing obligations of the Company, you agree to
be bound by the  terms and  conditions  of this  Agreement  and to remain in the
employ of the Company during any period following the announcement by any person
of any proposed transaction or transactions which, if effected,  would result in
a Change in Control of the Company  until a Change in Control of the Company has
taken  place,  or in the  opinion of the Board,  such  person has  abandoned  or
terminated its efforts to effect a Change in Control of the Company.  Subject to
the foregoing,  nothing contained in this Agreement shall impair or interfere in
any way with your right to terminate your employment or the right of the Company
to terminate your  employment with or without Cause prior to a Change in Control
of the  Company.  Nothing  contained in this  Agreement  shall be construed as a
contract  of  employment  between  the  Company and you or as a right for you to
continue in the employ of the Company,  or as a  limitation  on the right of the
Company to discharge  you with or without  Cause prior to a Change in Control of
the Company.

8.    COMPETITIVE ACTIVITY.

      (i) If your employment  terminates under circumstances that entitle you to
      receive  benefits under this Agreement (as described in the first sentence
      of paragraph 3 of this  Agreement),  then,  unless the Company  materially
      breaches  this  Agreement,  you agree you will not for a period of two (2)
      years after such termination  engage in any business (whether as an owner,
      partner, officer, director,  employee,  consultant or otherwise, except as
      the holder of not more than 1% of the outstanding stock of a publicly-held
      company)  that  competes or plans to compete  with Avid in the business of
      the development,  manufacture,  promotion, distribution or sale of digital
      film,  video or audio  editing,  special  effects or  newsroom  automation
      systems  or  products  or any other  business  in which Avid is engaged or
      plans to  engage at the time of your  termination.  Without  limiting  the
      foregoing,  during such  period you shall not be employed by or  otherwise
      serve as a consultant to Abekas,  Accom,  Adobe,  Carlton  Communications,
      Chyron,  Data  Translation,  Discreet  Logic,  DVision,  FAST  Technology,
      Hewlett-Packard,  Immix, InSync, Kodak,  Lightworks,  Macromedia,  Matrox,
      Media 100, Metacreations,  MGI, Newsmaker, Newstar,  Panasonic/Matsushita,
      Philips, Pinnacle Systems, Play Systems, Pluto Technologies International,
      Progressive  Networks,  Quantel,  SADIE,  Scitex,  Sonic Solutions,  SONY,
      Softimage/Microsoft,  Tektronix,  Transoft, Truevision, VDONet or VXtreme,
      or any of their subsidiaries and affiliates.

      (ii) You also agree  that,  for a period of two (2) years from the date of
      your termination,  you will not, either directly or indirectly  through an
      agency,  new employer or otherwise,  solicit the employment of (or solicit
      to engage as an independent  contractor or  consultant)  any person who at
      any time during the one year preceding such  solicitation  was an employee
      or independent contractor of Avid or any Avid affiliate.

9.    INJUNCTIVE RELIEF.

      You  acknowledge  and agree that the remedy of the  Company at law for any
breach  of the  covenants  and  agreements  contained  in  Paragraph  8 of  this
Agreement  will be  inadequate,  and  that the  Company  shall  be  entitled  to
injunctive  relief against any such breach or threatened  breach.  You represent
and agree that such  injunctive  relief  shall not  prohibit  you from earning a
livelihood acceptable to you.

10.   NOTICE.

      For the purposes of this Agreement,  notices and all other  communications
provided for in this  Agreement  shall be in writing and shall be deemed to have
been duly given  when  delivered  or mailed by United  States  registered  mail,
return receipt requested, postage prepaid, addressed to the respective addresses
set forth on the first page of this  Agreement,  provided that all other notices
to the Company should be directed to the attention to the Corporate Secretary of
the Company,  or to such address as either party may have furnished to the other
in writing in  accordance  herewith,  except  that  notices of change of address
shall be effective only upon receipt.

11.   INDEMNIFICATION.

      The Company will indemnify you to the extent set forth in the  Certificate
of  Incorporation  and  By-laws  of the  Company as in effect on the date of the
Change in Control of the Company.

12.   FURTHER ASSURANCES.

      Each party hereto agrees to furnish and execute such additional  forms and
documents,  and to  take  such  further  action,  as  shall  be  reasonable  and
customarily required in connection with the performance of this Agreement or the
payment of benefits hereunder.


13.   ENTIRE AGREEMENT.

      This Agreement represents the entire agreement of the parties with respect
to the subject  matter hereof and  supersedes  any other  agreement  between the
parties with respect to such subject matter, including,  without limitation, all
provisions  of the letter  agreement  dated  August 21, 1996 between you and the
Company  (other than the first sentence of the section  entitled  "Severance and
Change in Control" thereof).

14.   COUNTERPARTS.

      This Agreement may be executed in one or more counterparts,  each of which
shall be deemed to be an original but all of which together will  constitute one
in the same instrument.

15.   LEGAL FEES AND EXPENSES.

      In addition to any other benefits to which you may be entitled  hereunder,
the Company shall pay all reasonable legal fees and expenses which you may incur
as a result of the Company's  contesting  the validity,  enforceability  or your
interpretation  of, or  determination  under,  this  Agreement or otherwise as a
result of any  termination as a result of which you are entitled to the benefits
set forth in this Agreement.

16.   MISCELLANEOUS.

      (i) No provision of this Agreement may be modified,  waived, or discharged
      unless such  waiver,  modification,  or  discharge is agreed to in writing
      signed by you and such officer as may be  specifically  designated  by the
      Board of Directors of the Company.

      (ii) No  waiver by either  party  hereto at any time of any  breach by the
      other party hereto of, or compliance  with,  any condition or provision of
      this  Agreement  to be  performed  by such other  party  shall be deemed a
      waiver of similar or dissimilar provisions or conditions at the same or at
      any time prior or subsequent time.

      (iii) The validity,  interpretation,  construction and performance of this
      Agreement   shall  be  governed  by  the  laws  of  the   Commonwealth  of
      Massachusetts.

      (iv) The invalidity or unenforceability of any provision of this Agreement
      shall not affect the validity or  enforceability of any other provision of
      this Agreement, which shall remain in full force and effect.

      (v) The Company may withhold from any amounts payable under this Agreement
      such  federal,  state,  local or foreign  taxes as shall be required to be
      withheld pursuant to any applicable law or regulation.

      If this Agreement correctly sets forth our agreement on the subject matter
hereof,  kindly  sign  and  return  to the  Company  the  enclosed  copy of this
Agreement which will then constitute our agreement on this subject.

                                   Sincerely,

                                   Avid Technology, Inc.

                                   By: /S/ William J. Miller
                                      ----------------------------
                                   Name: William J. Miller
                                   Title:Chairman and Chief Executive
                                            Officer

I acknowledge receipt and agree with the foregoing terms and conditions.



 /S/ William L. Flaherty
- ----------------------------
William L. Flaherty

Date:  DECEMBER 1, 1997





                                                                    Exhibit 21


              SUBSIDIARIES OF THE REGISTRANT AS OF DECEMBER 31, 1997

                    AVID TECHNOLOGY WORLDWIDE, INC. (Delaware)

              AVID TECHNOLOGY SECURITIES CORPORATION (Massachusetts)

                         ELASTIC REALITY, INC. (Wisconsin)

                      AVID TECHNOLOGY FSC LIMITED (Barbados)

                     AVID TECHNOLOGY EUROPE LIMITED (England)

                       AVID TECHNOLOGY HQ LIMITED (England)

                       AVID TECHNOLOGY IBERIA LTD (England)

                     AVID TECHNOLOGY SYSTEMS LIMITED (England)

                        PARALLAX SOFTWARE LIMITED (England)

                        3 SPACE SOFTWARE LIMITED (England)

                         AVID TECHNOLOGY S.A.R.L. (France)

                        AVID TECHNOLOGY G.m.b.H. (Germany)

                      AVID TECHNOLOGY SALES LIMITED (Ireland)

                          AVID TECHNOLOGY S.R.L. (Italy)

                    AVID TECHNOLOGY HOLDING B.V. (Netherlands)

                 AVID TECHNOLOGY INTERNATIONAL B.V. (Netherlands)

                              AVID JAPAN K.K. (Japan)

                  AVID TECHNOLOGY (S.E. ASIA) PTE LTD (Singapore)

                  AVID TECHNOLOGY (AUSTRALIA) PTY LTD (Australia)

                        AVID NORTH ASIA LIMITED (Hong Kong)






                                                                   Exhibit 23.1


                        Consent of Independent Accountants


We consent to the  incorporation by reference in the registration  statements of
Avid Technology,  Inc. on Form S-3 (File Nos. 33-93472,  33-96456 and 333-03128)
and Form S-8  (File  Nos.  33-64126,  33-64130,  33-64128,  33-64124,  33-82478,
33-88318, 33-98692, 333-08821,  333-08823,  333-08825,  333-30367, 333-42569 and
333-42571)  of  our  report  dated  February  4,  1998,  on  our  audits  of the
consolidated  financial  statements  and  financial  statement  schedule of Avid
Technology,  Inc.  as of December  31, 1997 and 1996,  and for each of the three
years in the period ended  December  31, 1997,  which report is included in this
Annual Report on Form 10-K.



                                             /s/ Coopers & Lybrand L.L.P

                                             COOPERS & LYBRAND L.L.P.


Boston, Massachusetts
March 25, 1998






<TABLE> <S> <C>


<ARTICLE>                     5
<LEGEND>
THIS SCHEDULE  CONTAINS  SUMMARY  INFORMATION  EXTRACTED  FROM THE  CONSOLIDATED
BALANCE  SHEETS ON THE FORM 10-K FOR THE PERIOD ENDED  DECEMBER 31, 1997 AND THE
CONSOLIDATED  STATEMENT  OF INCOME AS FILED ON FORM  10-K FOR THE  PERIOD  ENDED
DECEMBER  31,  1997  AND IS  QUALIFIED  IN ITS  ENTIRETY  BY  REFERENCE  TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>                                        
<MULTIPLIER>                                   1,000
       
<S>                             <C>                       
<PERIOD-TYPE>                   12-MOS
<FISCAL-YEAR-END>                             DEC-31-1997
<PERIOD-START>                                JAN-01-1997
<PERIOD-END>                                  DEC-31-1997
<CASH>                                         108,308
<SECURITIES>                                    78,654
<RECEIVABLES>                                   87,302
<ALLOWANCES>                                     7,529
<INVENTORY>                                      9,842
<CURRENT-ASSETS>                               301,082
<PP&E>                                          99,619
<DEPRECIATION>                                  60,702
<TOTAL-ASSETS>                                 356,805
<CURRENT-LIABILITIES>                          114,608
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<SALES>                                        471,338
<TOTAL-REVENUES>                               471,338
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<TABLE> <S> <C>


<ARTICLE>                     5
<LEGEND>
THIS SCHEDULE  CONTAINS  SUMMARY  INFORMATION  EXTRACTED  FROM THE  CONSOLIDATED
BALANCE  SHEETS ON THE FORM 10-K FOR THE PERIOD ENDED  DECEMBER 31, 1996 AND THE
CONSOLIDATED  STATEMENT  OF INCOME AS FILED ON FORM  10-K FOR THE  PERIOD  ENDED
DECEMBER  31,  1996  AND IS  QUALIFIED  IN ITS  ENTIRETY  BY  REFERENCE  TO SUCH
FINANCIAL  STATEMENTS.  THE EARNINGS PER SHARE INFORMATION,  INCLUDED BELOW, HAS
BEEN RESTATED TO REFLECT THE ADOPTION OF SFAS NO. 128.
</LEGEND>   
<RESTATED>                 
<MULTIPLIER>                                   1,000
       
<S>                             <C>                       
<PERIOD-TYPE>                   12-MOS
<FISCAL-YEAR-END>                             DEC-31-1996
<PERIOD-START>                                JAN-01-1996
<PERIOD-END>                                  DEC-31-1996
<CASH>                                          75,795
<SECURITIES>                                    17,248
<RECEIVABLES>                                   93,706
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<PP&E>                                          92,281
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<CURRENT-LIABILITIES>                           86,378
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<PREFERRED-MANDATORY>                                0
<PREFERRED>                                          0
<COMMON>                                           213
<OTHER-SE>                                     213,202
<TOTAL-LIABILITY-AND-EQUITY>                   300,979
<SALES>                                        429,009
<TOTAL-REVENUES>                               429,009
<CGS>                                          238,808
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<DISCONTINUED>                                       0
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<TABLE> <S> <C>


<ARTICLE>                     5
<LEGEND>
THIS  SCHEDULE  CONTAINS  SUMMARY  FINANCIAL   INFORMATION  EXTRACTED  FROM  THE
CONDENSED CONSOLIDATED BALANCE SHEET AND THE CONDENSED CONSOLIDATED STATEMENT OF
INCOME  AS FILED ON THE FORM  10-Q FOR THE  PERIODS  ENDED  SEPTEMBER  30,  1997
(UNAUDITED),  JUNE  30,  1997  (UNAUDITED),  AND  MARCH  31,  1997  (UNAUDITED),
RESPECTIVELY  AND IS QUALIFIED  IN ITS  ENTIRETY BY REFERENCE TO SUCH  FINANCIAL
STATEMENTS. THE QUARTERLY EARNINGS PER SHARE INFORMATION INCLUDED BELOW HAS BEEN
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</LEGEND>
<RESTATED>
<MULTIPLIER>                 1,000
       
<S>                          <C>               <C>              <C>
<PERIOD-TYPE>                9-MOS             6-MOS            3-MOS
<FISCAL-YEAR-END>                  DEC-31-1997      DEC-31-1997      DEC-31-1997
<PERIOD-END>                       SEP-30-1997      JUN-30-1997      MAR-31-1997
<CASH>                                115,704          89,606          122,981 
<SECURITIES>                           69,147          57,801           17,875
<RECEIVABLES>                          85,858          88,561           76,805
<ALLOWANCES>                            6,047           6,777            6,982
<INVENTORY>                            18,701          23,271           24,133
<CURRENT-ASSETS>                      307,548         277,809          259,691
<PP&E>                                 97,768          95,821           93,786
<DEPRECIATION>                         57,771          52,951           47,851
<TOTAL-ASSETS>                        367,032         348,965          324,015
<CURRENT-LIABILITIES>                 108,638         107,808           93,059
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<OTHER-SE>                            257,567         240,140          229,741
<TOTAL-LIABILITY-AND-EQUITY>          367,032         348,965          324,015
<SALES>                               347,602         231,093          108,209
<TOTAL-REVENUES>                      347,602         231,093          108,209
<CGS>                                 167,491         115,886           56,185
<TOTAL-COSTS>                         167,491         115,886           56,185
<OTHER-EXPENSES>                      161,234         105,792           50,516
<LOSS-PROVISION>                            0               0                0
<INTEREST-EXPENSE>                          0               0                0
<INCOME-PRETAX>                        24,759          12,700            2,748
<INCOME-TAX>                            7,675           4,445              962          
<INCOME-CONTINUING>                    17,084           8,255            1,786 
<DISCONTINUED>                              0               0                0
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<NET-INCOME>                           17,084           8,255            1,786      
<EPS-PRIMARY>                            0.75            0.37             0.08  
<EPS-DILUTED>                            0.72            0.36             0.08    
        


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<TABLE> <S> <C>


<ARTICLE>                     5
<LEGEND>
THIS  SCHEDULE  CONTAINS  SUMMARY  FINANCIAL   INFORMATION  EXTRACTED  FROM  THE
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INCOME  AS FILED ON THE FORM  10-Q FOR THE  PERIODS  ENDED  SEPTEMBER  30,  1996
(UNAUDITED),  JUNE  30,  1996  (UNAUDITED),  AND  MARCH  31,  1996  (UNAUDITED),
RESPECTIVELY  AND IS QUALIFIED  IN ITS  ENTIRETY BY REFERENCE TO SUCH  FINANCIAL
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</LEGEND>
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<MULTIPLIER>                 1,000
       
<S>                          <C>               <C>              <C>
<PERIOD-TYPE>                9-MOS             6-MOS            3-MOS
<FISCAL-YEAR-END>                  DEC-31-1996      DEC-31-1996      DEC-31-1996
<PERIOD-END>                       SEP-30-1996      JUN-30-1996      MAR-31-1996
<CASH>                                 72,986          53,902           25,750 
<SECURITIES>                            2,663           1,036           27,064
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<ALLOWANCES>                            5,058           4,729            7,585
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<PP&E>                                 98,199          96,650           91,645
<DEPRECIATION>                         45,176          39,987           35,197
<TOTAL-ASSETS>                        299,728         302,747          306,441
<CURRENT-LIABILITIES>                  80,559          77,907           77,619
<BONDS>                                     0               0                0  
<PREFERRED-MANDATORY>                       0               0                0 
<PREFERRED>                                 0               0                0
<COMMON>                                  213             211              211
<OTHER-SE>                            217,455         222,591          226,052
<TOTAL-LIABILITY-AND-EQUITY>          299,728         302,747          306,441
<SALES>                               315,798         201,134           92,039
<TOTAL-REVENUES>                      315,798         201,134           92,039
<CGS>                                 172,542         111,872           52,456
<TOTAL-COSTS>                         172,542         111,872           52,456
<OTHER-EXPENSES>                      193,941         129,503           73,697
<LOSS-PROVISION>                            0               0                0
<INTEREST-EXPENSE>                          0               0                0
<INCOME-PRETAX>                       (48,865)        (38,944)         (33,527)
<INCOME-TAX>                          (15,652)        (12,489)         (10,729)          
<INCOME-CONTINUING>                   (33,213)        (26,455)         (22,798) 
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<NET-INCOME>                          (33,213)        (26,455)         (22,798)     
<EPS-PRIMARY>                           (1.57)          (1.26)           (1.08)  
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