UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                    FORM 10-Q


[ x ]        QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
                         SECURITIES EXCHANGE ACT OF 1934

                  For the quarterly period ended June 30, 1998

                                       OR

[   ]       TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
                         SECURITIES EXCHANGE ACT OF 1934

                         Commission File Number: 0-18805


                          ELECTRONICS FOR IMAGING, INC.
             (Exact name of registrant as specified in its charter)


            Delaware                                             94-3086355
(State or other jurisdiction of                               (I.R.S.  Employer
 incorporation or organization)                              Identification No.)


                     2855 Campus Drive, San Mateo, CA 94403
          (Address of principal executive offices, including zip code)


                                 (650) 286-8600
              (Registrant's telephone number, including area code)


Indicate by check mark whether the registrant (1) has filed all reports required
by  Section  13 or 15(d)  of the  Securities  Exchange  Act of 1934  during  the
preceding 12 months (or for such shorter period that the registrant was required
to file such reports),  and (2) has been subject to such filing requirements for
the past 90 days.  Yes [x]  No [  ]


The  number  of  shares of  Common  Stock  outstanding  as of August 3, 1998 was
52,624,364.


An Exhibit Index can be found on Page 21.





<PAGE>




                          ELECTRONICS FOR IMAGING, INC.

                                      INDEX



                                                                        Page No.


PART I - Financial Information


Item 1.       Condensed Consolidated Financial Statements

                  Condensed Consolidated Statements of Income
                       Three Months Ended June 30, 1998 and 1997, and
                       Six Months Ended June 30, 1998 and 1997...............3

                  Condensed Consolidated Balance Sheets
                       June 30, 1998 and December 31, 1997 ..................4

                  Condensed Consolidated Statements of Cash Flows
                       Six Months Ended June 30, 1998 and 1997 ..............5

                  Notes to Condensed Consolidated Financial Statements ......6



Item 2.       Management's Discussion and Analysis of Financial
              Condition and Results of Operations ...........................9



PART II - Other Information


Items 1 - 3.  Not Applicable ...............................................20


Item 4.       Submission of Matters to a Vote of Security Holders...........20


Item 5.       Other Information ............................................20


Item 6.       Exhibits and Reports on Form 8-K .............................22


Signatures .................................................................23



                                       2

<PAGE>



PART I            FINANCIAL INFORMATION


     ITEM 1.          CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


<TABLE>
                                            ELECTRONICS FOR IMAGING, INC.
                                     CONDENSED CONSOLIDATED STATEMENTS OF INCOME
                                      (In thousands, except per share amounts)
                                                     (Unaudited)
<CAPTION>
                                                      Three Months Ended                   Six Months Ended
                                                           June 30,                            June 30,
                                                 -----------------------------       ------------------------------
                                                      1998            1997                1998            1997
                                                 -------------   -------------       -------------   --------------

<S>                                              <C>             <C>                 <C>             <C>           
Revenue                                          $      96,157   $     100,633       $     178,680   $      191,639
Cost of revenue                                         54,978          45,407             100,334           86,500
                                                 -------------   -------------       -------------   --------------

                                                        41,179          55,226              78,346          105,139
                                                 -------------   -------------       -------------   --------------

Operating expenses:
   Research and development                             14,089           9,265              28,173           17,391
   Sales and marketing                                  13,962          10,487              29,284           20,045
   General and administrative                            3,868           2,841               7,329            5,714
                                                 -------------   -------------       -------------   --------------

                                                        31,919          22,593              64,786           43,150
                                                 -------------   -------------       -------------   --------------

     Income from operations                              9,260          32,633              13,560           61,989

Other income, net                                        1,589           2,693               3,810            5,256
                                                 -------------   -------------       -------------   --------------

     Income before income taxes                         10,849          35,326              17,370           67,245

Provision for income taxes                               3,906          12,717               6,254           24,208
                                                 -------------   -------------       -------------   --------------

     Net income                                  $       6,943   $      22,609       $      11,116   $       43,037
                                                 =============   =============       =============   ==============


Net income per basic common share                $        0.13   $        0.44       $        0.21   $         0.83
                                                 =============   =============       =============   ==============

Shares used in per share
   calculation (basic)                                  52,615          51,818              52,591           51,729
                                                 =============   =============       =============   ==============


Net income per diluted common share              $        0.13   $        0.41       $        0.20   $         0.77
                                                 =============   =============       =============   ==============

Shares used in per share
   calculation (diluted)                                55,030          55,734              54,954           55,737
                                                 =============   =============       =============   ==============

<FN>
See accompanying notes to condensed consolidated financial statements.
</FN>
</TABLE>


                                        3

<PAGE>


<TABLE>
                                       ELECTRONICS FOR IMAGING, INC.
                                   CONDENSED CONSOLIDATED BALANCE SHEETS
                             (In thousands, except share and per share amounts)
                                                (Unaudited)

<CAPTION>
                                                                     June 30,                December 31,
                                                                       1998                      1997
                                                                     --------                ------------
<S>                                                                    <C>                       <C>
ASSETS
Current assets:
   Cash and cash equivalents                                           $  33,415                 $  57,195
   Short-term investments                                                206,526                   185,536
   Accounts receivable, net                                               63,756                    30,930
   Inventories                                                            21,014                    23,790
   Other current assets                                                   32,640                    32,445
                                                                  --------------             -------------

     Total current assets                                                357,351                   329,896

Property and equipment, net                                               48,103                    46,502
Other assets                                                               8,974                     9,600
                                                                  --------------             -------------

     Total assets                                                      $ 414,428                 $ 385,998
                                                                  ==============             =============

LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
   Accounts payable                                                    $  33,824                 $  20,255
   Accrued and other liabilities                                          21,704                    19,891
   Income taxes payable                                                    4,703                     2,923
                                                                  --------------             -------------

     Total current liabilities                                            60,231                    43,069
                                                                  --------------             -------------

Long-term debt                                                             3,924                     4,064
                                                                  --------------             -------------

Stockholders' equity:
   Preferred Stock, $.01 par value, 5,000,000 shares
     authorized; none issued and outstanding                                --                        --
   Common Stock, $.01 par value, 150,000,000 shares
      authorized; 52,624,364 and 52,558,383 shares issued
      and outstanding, respectively                                          526                       524
   Additional paid-in capital                                            137,700                   137,264
   Cumulative translation adjustment                                       (146)
   Retained earnings                                                     212,193                   201,077
                                                                  --------------             -------------

     Total stockholders' equity                                          350,273                   338,865
                                                                  --------------             -------------

     Total liabilities and stockholders' equity                       $  414,428                $  385,998
                                                                  ==============             =============

<FN>
See accompanying notes to condensed consolidated financial statements.
</FN>
</TABLE>


                                        4

<PAGE>



<TABLE>
                                       ELECTRONICS FOR IMAGING, INC.
                              CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                                               (In thousands)
                                                (Unaudited)

<CAPTION>
                                                                            Six Months Ended June 30,
                                                                        ---------------------------------
                                                                          1998                      1997
                                                                        --------                  --------
<S>                                                                     <C>                       <C>
Cash flows from operating activities:     
   Net income                                                           $ 11,116                  $ 43,037
   Adjustments  to  reconcile  net  income  to net
     cash  provided  by  operating  activities:
       Depreciation and amortization                                       5,816                     2,798
       Provision for doubtful accounts
         and sales returns                                                   241                      (454)
       Other                                                                (146)                        -
     Changes in operating assets and liabilities:
         Accounts receivable                                             (33,067)                  (14,916)
         Inventories                                                       2,776                    (3,578)
         Receivables from subcontract manufacturers                         (760)                   (7,365)
         Other current assets                                                565                    (3,816)
         Accounts payable and accrued liabilities                         15,382                    16,925
         Income taxes payable                                              1,780                     3,807
                                                                  --------------             -------------

           Net cash provided by operating activities                       3,703                    36,438
                                                                  --------------             -------------

Cash flows from investing activities:
   Purchase of short-term investments                                    (86,001)                  (85,797)
   Sales and maturities of short-term investments                         65,011                    74,403
   Purchase of property and equipment, net                                (6,845)                   (5,616)
   Increase (decrease) of other assets, net                                   54                       (96)
                                                                  --------------             --------------

           Net cash used for investing activities                        (27,781)                  (17,106)
                                                                  --------------             -------------

Cash flows from financing activities:
   Repayment of bonds payable                                               (140)                        -
   Issuance of common stock related to stock plans                           438                     2,429
                                                                  --------------             -------------

           Net cash provided by financing activities                         298                     2,429
                                                                  --------------             -------------

Net change in cash and cash equivalents                                  (23,780)                   21,761

Cash and cash equivalents at beginning of period                          57,195                    71,946
                                                                  --------------             -------------

Cash and cash equivalents at end of period                              $ 33,415                  $ 93,707
                                                                  ==============             =============

<FN>
See accompanying notes to condensed consolidated financial statements.
</FN>
</TABLE>


                                        5

<PAGE>


                          ELECTRONICS FOR IMAGING, INC.

              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                 (In thousands)
                                   (Unaudited)


1.       Basis of Presentation

         The accompanying  unaudited  interim condensed  consolidated  financial
         statements of Electronics for Imaging, Inc. (the Company) as of and for
         the interim periods ended June 30, 1998, have been prepared on the same
         basis as the audited  consolidated  financial  statements as of and for
         the year ended  December 31, 1997,  contained in the  Company's  Annual
         Report to  Stockholders.  In the opinion of  management  the  condensed
         consolidated  financial statements include all adjustments  (consisting
         generally of normal recurring  adjustments) necessary to present fairly
         the financial position of the Company and the results of its operations
         and cash  flows,  in  accordance  with  generally  accepted  accounting
         principles.  The interim condensed  consolidated  financial  statements
         should be read in conjunction with the audited  consolidated  financial
         statements and notes thereto referred to above.

         The  preparation  of  the  interim  condensed   consolidated  financial
         statements in conformity with generally accepted accounting  principles
         requires  management to make estimates and assumptions  that affect the
         reported amounts of assets and liabilities and disclosure of contingent
         assets  and  liabilities  as of  the  date  of  the  interim  condensed
         consolidated  financial  statements and the reported amounts of revenue
         and expenses during the reporting  period.  Actual results could differ
         from these estimates.

         The interim  results of the Company  are subject to  fluctuation.  As a
         result,  the Company believes the results of operations for the interim
         periods  ended  June 30,  1998 are not  necessarily  indicative  of the
         results to be expected for any other interim period or the full year.

2.       Comprehensive Income

         Effective  January 1, 1998, the company adopted  Statement of Financial
         Accounting Standards No. 130, "Reporting  Comprehensive  Income".  This
         Statement requires that all items recognized under accounting standards
         as  components  of  comprehensive  earnings  be  reported  in an annual
         financial statement that is displayed with the same prominence as other
         annual  financial  statements.  This  Statement  also  requires that an
         entity classify items of other  comprehensive  earnings by their nature
         in an annual financial  statement.  Comprehensive  income for the three
         months ended June 30, 1998 was $ 6,942,000.  The difference between the
         Company's net income and comprehensive income was caused by translation
         adjustments, which were immaterial.

3.       Accounting for Derivative Instruments and Hedging

         In June 1998, the Financial Accounting Standards Board issued Statement
         of Financial  Accounting  Standards No. 133 (SFAS 133)  Accounting  for
         Derivative Instruments and Hedging. SFAS 133 establishes accounting and
         reporting   standards  for  derivative   instruments  and  for  hedging
         activities and requires,  among other things,  that all  derivatives be
         recognized  as  either  assets  or  liabilities  in  the  statement  of
         financial  position and measure those  instruments at fair value.  SFAS
         133 is effective for fiscal  quarters and fiscal years  beginning after
         June 15, 1999. The Company is currently  studying the provisions of the
         SFAS  133  and  the  potential  impact  it may  have  on its  financial
         statements.

                                       6

<PAGE>


4.       Earnings Per Share


<TABLE>
         In February  1997,  The  Financial  Accounting  Standards  Board issued
         Statement of Financial Accounting Standards SFAS No. 128, "Earnings per
         Share" (SFAS No. 128). The Statement redefines earnings per share (EPS)
         under generally accepted accounting principles. Under the new standard,
         primary  (EPS)  is  replaced  by basic  EPS and  fully  diluted  EPS is
         replaced by diluted EPS. It also  requires dual  presentation  of basic
         and diluted EPS on the face of the financial  statements.  SFAS No. 128
         was  adopted in the fourth  quarter of 1997 and the EPS for all periods
         presented have been restated to conform with the provisions of SFAS No.
         128. The following table represents unaudited  disclosures of basic and
         diluted EPS in accordance  with SFAS No. 128 for the periods  presented
         below:

<CAPTION>
                                                      Three Months Ended                   Six Months Ended
                                                           June 30,                            June 30,
                                                 -----------------------------       ------------------------------
                                                       1998             1997                1998            1997
                                                 -------------   -------------       -------------   --------------
<S>                                                  <C>             <C>                 <C>             <C>       
         (in thousands, except per share amounts)

         Net income available to
              common shareholders                    $   6,943       $  22,609           $  11,116       $   43,037

         Shares
              Basic shares                              52,615          51,818              52,591           51,729
              Effect of Dilutive Securities              2,415           3,916               2,363            4,008
                                                        ------          ------              ------           ------
              Diluted shares                            55,030          55,734              54,954           55,737
                                                        ======          ======              ======           ======

         Earnings per common share
              Basic EPS                              $    0.13       $    0.44           $    0.21       $     0.83
              Diluted EPS                            $    0.13       $    0.41           $    0.20       $     0.77
</TABLE>



         Antidilutive  Options.  Options to purchase 2,774,000 and 63,000 shares
         of common stock outstanding as of June 30, 1998 and 1997, respectively,
         were not  included  in the  computations  of diluted  EPS  because  the
         options'  exercise prices were greater than the average market price of
         the common  shares for the three month  periods then ended.  Options to
         purchase  2,832,000 and 47,000 shares of common stock outstanding as of
         June  30,  1998  and  1997,  respectively,  were  not  included  in the
         computations  of diluted EPS because the options'  exercise prices were
         greater than the average  market price of the common shares for the six
         month periods then ended.

                                       7


<PAGE>


6.       Balance Sheet Components (in thousands)
                                                          June 30,  December 31,
                                                           1998         1997
                                                         --------      --------
Accounts receivable:

Accounts receivable                                      $ 65,382      $ 32,315
  Less Allowance for doubtful accounts
  and sales returns                                        (1,626)       (1,385)
                                                         --------      --------
                                                         $ 63,756      $ 30,930
                                                         ========      ========

Inventories:

Raw materials                                            $ 16,852      $ 19,216
Work-in-process                                             3,735         3,183
Finished goods                                                427         1,391
                                                         --------      --------
                                                         $ 21,014      $ 23,790
                                                         ========      ========

Other current assets:

Receivable from subcontract manufacturers                $ 18,402      $ 17,642
Other                                                      14,238        14,803
                                                         --------      --------
                                                         $ 32,640      $ 32,445
                                                         ========      ========

Property and equipment:

Land                                                     $ 27,384      $ 27,351
Equipment and purchased software                           40,269        34,201
Furniture and leasehold improvements                        8,369         7,494
                                                         --------      --------
                                                           76,022        69,046
Less accumulated depreciation and amortization            (27,919)      (22,544)
                                                         --------      --------
                                                         $ 48,103      $ 46,502
                                                         ========      ========

                                       8


<PAGE>



 
    ITEM 2.  MANAGEMENT'S  DISCUSSION  AND ANALYSIS OF FINANCIAL  CONDITION AND
              RESULTS OF OPERATIONS

The following  discussion and analysis  should be read in  conjunction  with the
Management's  Discussion  and  Analysis and the audited  consolidated  financial
statements  of  Electronics  for Imaging,  Inc.  (the Company) and related notes
thereto  contained in the Company's 1997 Annual Report to Stockholders.  Results
for the three and six month  periods  ended  June 30,  1998 are not  necessarily
indicative of the results  expected for the entire  fiscal year ending  December
31, 1998. All assumptions,  anticipations,  expectations and forecasts contained
herein are forward-looking statements that involve risks and uncertainties.  The
Company's actual results could differ  materially from those discussed here. For
a more complete  discussion of factors which might impact the Company's results,
please  see  the  section   entitled   "Factors  that  Could  Adversely   Affect
Performance"  below and in the  Company's  1997 Annual  Report on Form 10-K,  as
filed with the  Securities  and Exchange  Commission.  The Company  periodically
reviews such factors to ensure their appropriateness.

Results of  Operations  for the Three and Six Month  Periods Ended June 30, 1997
and 1998

Revenue
Revenue decreased 4.4% to $ 96.2 million in the second quarter of 1998, compared
to $100.6 million in the second quarter of 1997,  however the corresponding unit
volume increased  approximately 112%. Revenue decreased 6.8 % to $ 178.7 million
in the six month period ended June 30, 1998,  compared to $191.6  million in the
same  period  of  1997,   however  the   corresponding   unit  volume  increased
approximately  56%. The decrease in revenue is primarily due to price reductions
on existing  product lines in anticipation of new product  introductions as well
as continued  weak sales from Asia,  particularly  in Japan,  due to the ongoing
weakness in those economies.

The  Company's  revenue  for  1998  is  principally  derived  from  three  major
categories.  The first category is made up of stand-alone  servers which connect
digital color copiers.  This category includes Fiery XJ and XJ+, which accounted
for a vast majority of the Company's  revenue prior to 1998. The second category
is made up of embedded,  desktop and bundled color  solutions  primarily for the
office market.  The third category is made up of controllers for digital black &
white products.

                                       9


<PAGE>



<TABLE>
The  following is a break-down of categories of Revenue both in terms of volume,
as a percentage (%) of total units shipped, and absolute revenue dollars.

<CAPTION>
                                                            Three Months Ended                         Three Months Ended
                                                               June 30, 1998                              June 30, 1997
                                                   -------------------------------------       -------------------------------------
(dollars in thousands)                             Volume                 Revenue              Volume               Revenue
                                                   ------       ------------------------       ------       ------------------------
<S>                                                  <C>        <C>                <C>           <C>        <C>                <C>  
Stand-alone Servers Connecting
      to Digital Color Copiers                       26.5%      $ 60,882           63.3%         71.2%      $ 83,014           82.5%

Embedded, Desktop Controllers
     & Bundled Color Solutions                       53.6%        18,717           19.5%         28.8%        10,326           10.3%

Controllers for Digital
     Black & White Solutions                         19.9%         7,710            8.0%          0.0%             0            0.0%

Spares, licensing
     & other misc. sources                            0.0%         8,848            9.2%          0.0%         7,293            7.2%
                                                    -----       --------          -----         -----       --------          ----- 

Total revenues                                      100.0%      $ 96,157          100.0%        100.0%      $100,633          100.0%
                                                    =====       ========          =====         =====       ========          ===== 


                                                             Six Months Ended                           Six Months Ended
                                                               June 30, 1998                              June 30, 1997
                                                   -------------------------------------       -------------------------------------
(dollars in thousands)                             Volume                 Revenue              Volume               Revenue
                                                   ------       ------------------------       ------       ------------------------
Stand-alone Servers Connecting
      to Digital Color Copiers                       37.3%      $125,011           70.0%         67.5%      $147,844           77.1%

Embedded, Desktop Controllers
     & Bundled Color Solutions                       48.2%        28,626           16.0%         32.5%        23,483           12.3%

Controllers for Digital
     Black & White Solutions                         14.5%         8,838            4.9%          0.0%             0            0.0%

Spares, licensing
     & other misc. sources                            0.0%        16,205            9.1%          0.0%        20,312           10.6%
                                                    -----       --------          -----         -----       --------          ----- 

Total revenues                                      100.0%      $178,680          100.0%        100.0%      $191,639          100.0%
                                                    =====       ========          =====         =====       ========          ===== 
</TABLE>



         As noted above growth took place in the three and six months ended June
30, 1998 in the two newer product categories - the Embedded Desktop  Controllers
& Bundled  Color  Solutions  and the  Controllers  for  Digital  Black and White
Solutions.  These  products  are  generally  characterized  by much  higher unit
volumes  but lower unit  prices and  associated  margins  than the  Company  has
experienced in its more traditional  Stand-alone  Server line of products.  Over
time the  Company  anticipates  further  growth in these newer  categories  as a
percentage  of total  revenue.  To the extent these  categories do not grow over
time in absolute terms or the Company is not able to meet demand for higher unit
volumes,  it could have a material  adverse  affect on the Company.  The Company
believes that  Stand-alone  server products have not experienced  year over year
revenue growth in 1998 not because of a significant  change in unit volume,  but
rather due largely to price  reductions on the Company's  older  generations  of
product  that will  effectively  be  replaced by a newer  generation  of product
throughout 1998 as the different OEM customers qualify the new product and begin
to order in increasing volumes.

                                       10


<PAGE>



<TABLE>
Sales by Geographic Market for the three and six months ended June 30, 1998 were
as follows:

<CAPTION>
                                       Three Months Ended                                 Six Months Ended
(in thousands)                           June 30, 1998                                      June 30, 1998
                                  ------------------------------                       -----------------------------
<S>                                 <C>                   <C>                           <C>                   <C>  
North America                       $     45,319          47.1%                         $    83,080           46.5%

Europe                                    34,247          35.6%                              63,909           35.8%

Japan                                     13,071          13.6%                              25,840           14.5%

Rest of World                              3,520           3.7%                               5,851            3.3%
                                  ---------------   ------------                       -------------    ------------

                                    $     96,157         100.0%                         $   178,680          100.0%
                                  ===============   ============                       =============    ============
</TABLE>



As discussed below,  shipments to some of the Company's OEM partners are made to
centralized purchasing and manufacturing locations which in turn sell through to
foreign locations. As a result of these factors, the Company believes that sales
of its products  into Europe and Japan may actually be higher,  though  accurate
data is difficult to obtain. The Company expects that international revenue will
continue to represent a significant portion of its total revenue.

In the  middle  of the  second  quarter  of  1997,  one of the  Company's  major
customers began having its products for the European market shipped  directly to
Europe rather than through the United States. In order to have a more consistent
comparison  between the three and six months  ended June 30, 1998 as compared to
the same periods in 1997 we have  restated  1998 and 1997 figures on a pro-forma
basis as if this particular  major customer was still shipping  products for the
European  market  through its United States  operations.  This has the affect of
slightly  overstating  sales in the United States market and understating  sales
ultimately  bound  for  the  European  market,  however  it does  provide  for a
consistent comparison between the two years.



<TABLE>
Pro-forma - as if goods for one major  customer's  European  market  were  still
            shipped through the United States

<CAPTION>
                        Three Months Ended                                   Six Months Ended
                             June 30,                Increase                     June 30,               Increase
                       1998             1997        (Decrease)             1998          1997           (Decrease)
                   --------------  --------------   -----------         ------------  ------------    -------------
<S>                 <C>             <C>                   <C>           <C>           <C>                     <C> 
North America       $     51,127    $     49,242          3.8%          $    96,571   $    96,556             0.0%

Europe                    28,439          28,874        (1.5%)               50,418        51,379           (1.9%)

Japan                     13,071          19,010       (31.2%)               25,840        37,553          (31.2%)

Rest of World              3,520           3,507          0.4%                5,851         6,151           (4.9%)
                   --------------  --------------   -----------           ----------  ------------    -------------

                    $     96,157    $    100,633        (4.4%)          $   178,680   $   191,639           (6.8%)
                   ==============  ==============   ===========         ============  ============    =============
</TABLE>


                                                         11


<PAGE>


Although revenues for all markets,  except Japan, are essentially flat, as noted
previously, the unit volume for the entire company has increased by 112% quarter
over  quarter  and 56% six months over six  months.  The  increase in volume has
essentially been offset by the effect of price reductions on the Company's older
product lines,  effective  January of fiscal 1998, as well as a shift in product
mix to less expensive  desktop units.  The Company  expects the shift in product
mix to continue however this may be tempered  somewhat as the new Fiery ZX stand
alone  server line begins to ship in larger  volumes in the latter half of 1998.
The decline in sales to Japan is  primarily  due to a continued  weakness in the
Japanese and other Asian economies.

Substantially  all of the revenue of both periods was  attributable  to sales of
products through the Company's OEM channels with such partners as Canon,  Xerox,
Ricoh,  Minolta,  Fuji Xerox,  Oce,  Epson,  Sharp and others.  During 1998, the
Company has continued work on both increasing the number, and expanding the size
of existing relationships with OEM partners. For the three and six month periods
ended June 30,  1998,  the  Company  continued  to rely on three OEM  customers,
Canon,  Xerox and Ricoh for 66.3% and 70.9% of it's  revenue for the  respective
periods as, compared to 85.0% and 85.6%,  reported for the same periods of 1997.
In  the  event  that  any  of  these  OEM   relationships  are  scaled  back  or
discontinued,  the Company may experience a significant  negative  impact on its
consolidated  financial  position and results of  operations.  In  addition,  no
assurance can be given that the Company's  relationships with these OEM partners
will continue.  In addition,  the Company's  historical  results have followed a
seasonal  pattern  reflecting the buying  patterns of these large OEM customers.
That  historical  pattern has  indicated the  Company's  fiscal  fourth  quarter
results  may be  adversely  affected by a desire on the part of some or all its'
OEM customers to slow down, or otherwise delay fourth quarter orders in order to
minimize their respective inventory investments at the end of their fiscal year.

The Company continues to work on the development of products utilizing the Fiery
architecture  and other  products  and  intends to  continue  to  introduce  new
generations  of Fiery  products and other new product  lines in the remainder of
1998 and  beyond.  No  assurance  can be given that the  introduction  or market
acceptance of new, current or future products will be successful.

Cost of Revenue

Historically,  a majority of the Company's cost of revenue has been attributable
to the sale of Fiery  Color  Servers.  Fiery  Color  Servers as well as embedded
desktop  controllers  and digital black and white products are  manufactured  by
third-party  manufacturers  who purchase most of the necessary  components.  The
Company  sources  directly  proprietary  memory,  certain  ASICs,  and  software
licensed from various sources,  including PostScript interpreter software, which
the Company  licenses from Adobe  Systems,  Inc. The Company's  gross margin was
42.8% and 43.8% for the three and six month  periods  ended June 30, 1998,  down
from  54.9% for both of the  corresponding  periods  of 1997.  This was due to a
combination  of  factors  including  a  higher  mix of  low  end  products  with
relatively  lower margins  including  new embedded  products and black and white
products that the Company  introduced  during 1998.  The Company also  initiated
price  reductions  on older  products  as of January 1, 1998 in light of pending
introductions of newer generations of product. The Company expects that sales of
products with relatively  lower margins may further  increase as a percentage of
revenue.  Such  products  include  older  products  for which prices are reduced
during  product  transitions,  embedded  products for both desktop  printers and
copiers, and stand-alone and embedded  controllers for black-and-white  copiers.
If such sales increase as a percentage of the Company's  revenue,  gross margins
may further decline.

                                       12


<PAGE>


In general,  the Company believes that gross margin will continue to be impacted
by a variety of factors.  These factors include the  availability and pricing of
key components (including DRAM and Postscript interpreter software), third party
manufacturing  costs,  product,  channel and geographic  mix, the success of the
Company's  product  transitions  and  new  products,  competition,  and  general
economic conditions in the United States and abroad.  Consequently,  the Company
anticipates gross margins will fluctuate from quarter to quarter.

Operating Expenses

Operating  expenses  for the three and six month  periods  ended  June 30,  1998
increased $9.3 million and $21.6 million or 41.3% and 50.1%, respectively,  from
the corresponding periods in 1997. Operating expenses in 1998 also constituted a
higher  percentage  of revenues  than in 1997,  33.2% versus 22.5% for the three
month  periods ended June 30 and 36.3% and 22.5% for the six month periods ended
June 30, respectively.  Increases in operating expenses in absolute dollars were
primarily  caused  by the  hiring of  additional  full  time  employees  - a net
increase of 125 people or 29.0% from June 30, 1997 to June 30, 1998. The Company
has hired  additional  employees to support  product  development  as well as to
support expanded operations.  The increase in operating expenses as a percentage
of  revenues  resulted  from both  increases  in  absolute  costs as  previously
discussed  and a decrease  in revenues  in 1998  compared  to the  corresponding
periods in 1997. The Company  anticipates that operating  expenses will continue
to grow  and may  increase  both in  absolute  dollars  and as a  percentage  of
revenue. The components of operating expenses are detailed below.

Research  and  Development.   Expenses  for  research  and  development  consist
primarily  of  personnel  expenses  and,  to a  lesser  extent,  consulting  and
nonrecurring  engineering  expenses,   depreciation,   and  costs  of  prototype
materials.  Research  and  development  expenses  were $14.1  million  and $28.2
million  or 14.7% and  15.8% of  revenues,  respectively,  for the three and six
month periods ended June 30, 1998, compared to $9.3 million and $17.4 million or
9.2% and 9.1% of revenue in the  corresponding  periods  of 1997.  Research  and
development expenses have increased primarily due to an increase in research and
development  projects,  which has led to an increase in engineering headcount of
34.9% from June 30, 1997 to June 30, 1998.  In  addition,  due to all of the new
product  development,  the Company has experienced an increase in  non-recurring
engineering  expenses for prototype  development.  The Company believes that the
development of new products and enhancement of existing products is essential to
its continued success,  and management intends to continue to devote substantial
resources  to research  and new product  development.  Accordingly,  the Company
expects  that its  research  and  development  expenses may increase in absolute
dollars and possibly also as a percentage of revenue.

Sales  and  Marketing.  Such  expenses  include  personnel  expenses,  costs for
tradeshows,   marketing   programs  and  other   promotional   material,   sales
commissions,   travel  and  entertainment  expense,   depreciation,   and  costs
associated  with sales offices in the United States,  Europe and Japan and other
locations around the world.  Sales and marketing  expenses were $14.0 million or
14.5 % of revenue in the second  quarter of 1998,  compared to $10.5  million or
10.4 % of revenue in the  corresponding  quarter  of 1997.  Sales and  marketing
expenses  were $29.3  million or 16.4% of revenue for the six month period ended
1998, compared to $20.0 million or 10.5% of revenue in the corresponding  period
of 1997.  Sales and marketing  expenses  increased in absolute  dollars and as a
percentage  of total  revenue  due  primarily  to a 23.2%  increase  in employee
headcount  from June 30, 1997 to June 30, 1998.  In addition,  cost required for
the  introduction,  promotion and support of a broader range of current products
with both  existing and new OEM  relationships  as well as  technology  alliance
partners  has  increased.  The  Company  expects  that its sales  and  marketing
expenses may increase in absolute  dollars and possibly  also as a percentage of
revenue as it  continues  to  actively  promote its  products,  launch new Fiery
models  and  other  products,  and  continue  to build its  worldwide  sales and
marketing organization.

                                       13


<PAGE>


General  and  Administrative.  Such  expenses  consist  primarily  of  personnel
expenses and, to a lesser  extent,  professional  fees,  expenses  required of a
public company,  and depreciation and facility costs. General and administrative
expenses  were $3.9  million or 4.0% of revenue for the three month period ended
June 30, 1998,  compared to $2.8 million or 2.8% of revenue in the corresponding
period of 1997. General and administrative expenses were $7.3 million or 4.1% of
revenue for the six month period  ended June 30, 1998,  compared to $5.7 million
or 3.0% of revenue  in the  corresponding  period of 1997.  The  increases  were
primarily  due to  increased  headcount  as well  as  other  operating  expenses
including  the use of  outside  consultants  for legal and  other  matters.  The
Company  expects  that its general and  administrative  expenses may increase in
absolute  dollars  and  possibly  also as a  percentage  of  revenue in order to
support the  Company's  efforts to grow its business.  In addition,  the Company
anticipates certain non recurring general and administrative  expenses beginning
in the fourth fiscal quarter, and for one to two quarters thereafter, related to
the Company's pending move to a new central facility in Foster City.

Other income

Other income relates mainly to interest  income and expense and gains and losses
on foreign  currency  transactions.  Other  income  decreased by $1.1 million or
41.0% to $1.6 million and by $1.5 million or 27.5% to $3.8 million, in the three
and six month  periods  ended  June 30,  1998,  respectively,  compared  to $2.7
million and $5.3 million in the  corresponding  periods ended June 30, 1997. The
decrease  was due in part to $0.8 million in losses  suffered on Asian  currency
denominated  transactions.  Although to date the Company's  exposure to currency
fluctuations  has  been  relatively   minor,  in  response  to  recent  currency
fluctuations  in Asia - the Company began to implement a hedging program in June
1998. In addition,  the Company has been earning approximately $0.2 million less
per  quarter on  interest  in 1998  compared  to 1997 due to a decline in market
interest rates.

Income Taxes

The Company's  effective  tax rate was 36.0% for the second  quarter of 1998 and
1997. In each period the Company  benefited from increased  tax-exempt  interest
income,  increases in foreign  sales and to a lesser extent the  utilization  of
research and development credits in achieving a consolidated  effective tax rate
lower than the  consolidated  federal and state  statutory  income tax rate. The
Company  anticipates  that these  benefits  will  continue and may increase as a
percentage of income before income taxes resulting in a favorable  impact on the
Company's consolidated effective tax rate.

Liquidity and Capital Resources

Cash, cash equivalents and short-term  investments  decreased by $5.3 million to
$239.9  million as of June 30, 1998  compared  to $245.3  million as of June 30,
1997.  The  Company  has  an  investment  portfolio  of  short-term  investments
comprised of fixed income  securities  that are  classified as "held to maturity
securities". These securities, like all fixed income instruments, are subject to
interest rate risk and will fall in value if market interest rates increase. The
Company  attempts to limit this  exposure by investing  primarily in  short-term
securities.

Net cash provided by operating  activities decreased to $3.7 million for the six
month period ended June 30, 1998 compared to $36.4 million for the corresponding
period ended June 30, 1997.  The

                                       14


<PAGE>


$32.7  million six month over six month  decrease  was a result of a decrease in
net income and to a lesser extent an increase in account receivables.  The $33.1
million  increase in accounts  receivable  within  fiscal 1998 was mainly due to
timing differences in payments from customers. For example, the Company received
approximately  $8.0  million  in  payments  from one  customer  in the first two
business days following the end of the quarter.  To a lesser degree the increase
within fiscal 1998 was also due to the  relatively  higher volume in revenue for
the quarter  ended June 30, 1998 as compared to the quarter  ended  December 31,
1997. The Company purchased  approximately $6.8 million of capital equipment and
furniture  during the six month period ended June 30, 1998 compared to purchases
of $5.6  million  in the  corresponding  period of 1997.  Cash  provided  by the
exercise of options amounted to $0.4 million for the six month period ended June
30, 1998, a $2.0 million decrease over the corresponding period in 1997.

The Company does not have a  comprehensive  and formal Year 2000 plan for all of
its operations. The Company has informally reviewed its internal MIS systems and
believes  that Year 2000  issues will not  materially  affect its  internal  MIS
systems.  Also, the Company has tested its products to determine if the products
will successfully  rollover from the years 1999 to 2000 and 2000 to 2001, and if
the products will correctly recognize the date February 29, 2000. Products first
released after November 1, 1997 have passed  internal tests for these  criteria,
and future  products  will be required to pass the same  internal  tests  before
shipping.  Because the Company cannot control other companies'  products used in
conjunction with the Company's products (such as other companies' software), the
Company does not intend to assure its customers  that its products will meet the
above-referenced  criteria when used in  conjunction  with any other software or
hardware not manufactured by the Company.  To date, the Company has not reviewed
Year 2000 plans and preparations of its manufacturers, suppliers, customers, and
other third parties with whom it does business.  The Company continues to assess
the effects and costs  associated  with possible Year 2000;  however,  the total
effects and costs are  unknown to the Company at this time,  and there can be no
assurance that such effects and costs will not have a material adverse effect on
the Company, its financial condition, results of operations.

The Company  believes  that its existing  capital  resources  together with cash
generated from  continuing  operations will be sufficient to fund its operations
and meet capital requirements through at least 1999.

Factors That Could Adversely Affect Performance

The following factors may adversely impact the Company's future  performance and
financial results:

Reliance  on  OEM  Resellers;   Risks  Associated  with  Significant  OEM  Group
Concentration

The  Company's  strategy of selling  principally  to OEMs  anticipates  that the
Company will be relying on high sales  volumes to a  relatively  small number of
customers. Although there can be no assurance that the Company's major customers
will continue to utilize the Company's  products at current  levels,  if at all,
the Company  expects to continue to depend upon such customers for a significant
percentage of its revenues. A decline in demand for color copiers or color laser
printers,  or other factors affecting the computer industry in general, or major
customers  in  particular,   may  adversely  affect  the  Company's  results  of
operations.

The  Company  relies  upon the  ability  of its OEMs to  develop  new  products,
applications and product enhancements on a timely and cost-effective  basis. The
ability of these OEMs to meet  changing  customer  needs and respond to emerging
industry standards and other technological changes is essential to the Company's
continued  success.   There  is  no  assurance  that  the  Company's  OEMs  will
effectively meet these technological challenges.  These OEMs, who are not within
the control of the Company, may incorporate into their products the technologies
of other companies in addition to or instead of the Company's products, and with
the  exception of certain  minimum  purchase  obligations,  are not obligated to
purchase products from the Company.  There can be no assurance that any OEM will
continue to carry the Company's products,  and the loss of important OEMs, or an
inability to recruit  additional OEMs, may have a material adverse effect on the
Company's business, operating results, and financial condition.

                                       15


<PAGE>


The  Company's  sales have been and will  continue to be heavily  influenced  by
order  quantities  and timing of delivery to its OEMs. No assurance can be given
that the Company will be able to successfully  maintain sales of its products in
any OEM  channel.  The  Company's  sales  may be  adversely  affected  if an OEM
introduces  or supports  additional  products  that compete  with the  Company's
products, fails to effectively market the Company's products, modifies its color
copiers or printers such that the Company's  products are no longer  compatible,
introduces  new  color  copiers  or  printers  that  are  incompatible  with the
Company's  products,  or does not allow the Company's products to support all of
the features available on its new copiers or printers.

Although the Company is pursuing,  and will continue to pursue,  the business of
additional copier and printer OEMs, customer concentration will continue to be a
risk due to the  limited  number  of OEMs  producing  copiers  and  printers  in
sufficient volume to be attractive to the Company.

Product Transitions

Although the Company plans to introduce  new  products,  delays in the launch or
availability  of these  products  could have an adverse  effect on the Company's
financial results.  Product  transitions also carry the risk that customers will
delay or cancel  orders for  existing  products.  If the  Company is not able to
successfully  manage product transitions or cannot guarantee the availability of
products  once they have been  introduced,  its  results  of  operations  may be
adversely affected.

Product Diversification and Coordination of Development with Customers

The  Company's  customers  have  requested  a  broader  range of  products  with
different  and unique  features,  and the Company  believes  that this trend may
continue.  If the  Company  cannot  successfully  manage  the  effort  and risks
associated  with a broader range of products,  its results of operations  may be
adversely affected.

The Company's  customers work closely with the Company to develop  products that
are specific to each  customer.  Many of the products the Company is  developing
require  the  Company  and its  customers  to  coordinate  development,  quality
testing,  marketing and other tasks. The Company cannot control other companies'
efforts,  and such  coordination  may result in delays that the  Company  cannot
manage by itself. If the Company cannot successfully manage the effort and risks
associated  with  coordination,  its  results  of  operations  may be  adversely
affected.

Reliance on  Continued  Demand for the  Company's  Products  That  Enable  Color
Printing of Digital Data and the effects of a Potential Decrease

Although  the  Company  has  expanded  its  product  line in recent  years,  and
continues  to explore  opportunities  to further  diversify  its  business,  the
Company's business has been focused heavily on sales of products that enable the
color printing of digital data.  Should  conditions arise that reduce the demand
for this service, the Company's results of operations may be adversely affected.
The Company believes that purchases of the Company's products may be affected by
a  variety  of  economic  conditions  and  considerations,  and  there can be no
assurance  that  demand for the  Company's  products  will  continue  at current
levels.  For example,  although such  conditions  are difficult to predict,  the
Company is not assuming that there will be  significant  improvement in economic
conditions  in Japan during the  remainder of 1998.  The Company  believes  that
continued  economic  distress in Japan and elsewhere in Asia may limit demand in
these  regions for the  Company's  products.  In addition,  it is possible  that
individuals with responsibility for purchasing the Company's  products,  such as
information   technology   professionals,   may   choose  to  devote   available
discretionary  resources to other perceived needs,  such as technology  expenses
associated with Year 2000 preparation and, or Euro currency conversion projects.

New Product Introductions

The Company continues to explore opportunities to develop product lines distinct
from its Fiery Color  Servers.  Such new products may require the  investment of
capital for the  development of new  distribution  and marketing  channels at an
unknown cost to the Company. There can be no guarantee that the Company would be
successful in the  development  of such channels or that any new products  would

                                       16


<PAGE>


gain market  acceptance.  If the Company is not able to successfully  manage the
introduction  of new  products,  its  results  of  operations  may be  adversely
affected.  In  addition  to  these  risks,  if  the  Company  is  successful  in
introducing  new  products,   there  can  be  no  assurance  that  such  product
introductions  (including more powerful products sold at a lower price) will not
adversely impact gross margins or sales of existing products.

Competition

The Company has seen  competition in the market from companies and products that
provide similar  functionality to the Company's  products and believes that such
competition  will  continue  and may  intensify.  It is also  possible  that the
Company's  customers  may  themselves  internally  develop  and supply  products
presently  sold by the Company.  There can be no assurance that the Company will
be able to continue to  successfully  compete against other  companies'  product
offerings or their  financial and other  resources.  In addition to  competition
among suppliers of the Company's products, the Company believes that competition
among the Company's  customers and potential  customers,  including  competition
over price,  may increase.  Such  competition  may have an adverse impact on the
Company's results of operations.

Managing Growth

The  Company  continues  to  increase  its  headcount,  and is  working to build
relationships  with  OEMs and  other  customers.  As a result,  the  number  and
complexity of  relationships  the Company must manage,  including  relationships
with  customers,  manufacturers,  and suppliers,  has increased and may increase
further.  If the  Company  cannot  successfully  manage  growth,  its results of
operations may be adversely affected.

Hiring and Retention of Employees

The Company  depends  upon  skilled  employees,  such as software  and  hardware
engineers, quality assurance engineers,  marketing and sales professionals,  and
persons in administrative and managerial positions. Demand for such employees in
Northern  California,  where the Company's main offices are located, is high. To
assure  that the  Company  can  adequately  support  its  business,  the Company
undertakes a number of efforts to hire and retain  qualified  employees.  If the
Company cannot successfully hire and retain employees, its results of operations
could be adversely affected.

Fluctuations in Operating Results

Operating  results may fluctuate due to factors such as demand for the Company's
products, success and timing of the new product introductions,  price reductions
by the Company and its  competitors,  delay,  cancellation  or  rescheduling  of
orders,  product  performance,  or  availability  of key  components.  Operating
results  may also  fluctuate  due to  seasonal  purchasing  patterns  of its OEM
partners or the status of the Company's  relationships  with its OEM partners as
well  as to  performance  of  third-party  manufacturers  or the  status  of the
Company's  relationships  with its key  suppliers.  The  Company's  results have
followed a seasonal  pattern  reflecting  the buying  patterns of its' large OEM
customers.  In the past that pattern has indicated  the Company's  fiscal fourth
quarter results may be adversely affected by a desire on the part of some or all
its' OEM customers to slow down,  or otherwise  delay fourth  quarter  orders in
order to minimize  their  inventory  investment at the end of their fiscal year.
Moreover,  the Company's ability to develop and market new products,  the timing
and amount of sales and marketing expenditures, and the general demand for color
copiers,  digital  black-and-white  copiers,  and color laser printers will also
effect operating results.

                                       17


<PAGE>


Interest Rate risk

The  Company has an  investment  portfolio  of fixed  income  securities.  These
securities  are subject to  interest  rate risk and will fall in value if market
interest  rates  increase.  The Company  attempts to limit  these  exposures  by
investing primarily in short-term securities.

Limited Backlog

The Company  typically does not obtain long-term volume purchase  contracts from
its customers,  and a substantial  portion of the Company's backlog is scheduled
for  delivery  within 90 days or less.  Customers  may cancel  orders and change
volume levels or delivery  times without  penalty.  Sales and operating  results
therefore  depend on the volume and  timing of the  backlog as well as  bookings
received.  Significant  portions of the Company's  operating expenses are fixed,
and planned  expenditures  are based  primarily on sales  forecasts  and product
development  programs.  If sales do not meet the Company's  expectations  in any
given period,  the adverse  impact on operating  results may be magnified by the
Company's inability to adjust operating expenses  sufficiently or quickly enough
to compensate for such a shortfall.

Volatility of Stock Price

Due to various  factors,  including  those noted  above,  the  Company's  future
earnings and stock price may be subject to significant volatility. Any shortfall
in revenue or earnings from levels expected by securities analysts could have an
immediate and  significant  adverse effect on the trading price of the Company's
common stock in any given period.  The Company  participates in a highly dynamic
industry, which often results in significant volatility for the Company's common
stock price.

Risks Associated With The Company's Ownership of Real Property And Transition To
New Facilities

In late 1998 or early 1999, the Company anticipates moving into new headquarters
on land in Foster City,  California that the Company owns. If the Company cannot
successfully  manage the  transition,  disruption to the Company's  business and
delays  in sales  could  arise,  and  results  of  operations  may be  adversely
affected.

International Operations and Currency Fluctuations

Approximately  52.9% and 53.5%,  respectively,  of the Company's product revenue
for the three and six month periods ended June 30, 1998,  were  attributable  to
international  sales,  primarily in Europe and Japan.  The Company  expects that
international  sales will  continue to  represent a  significant  portion of its
total  revenue.  The  Company  is  subject  to  certain  risks  associated  with
international  operations,  including  tariff  regulations and  requirements for
export   licenses,   particularly   with   respect  to  the  export  of  certain
technologies, which may on occasion be delayed or difficult to obtain. Given the
significance  of  international  sales  to the  Company,  the  Company  faces  a
continuing risk in that the strengthening of the U.S. dollar versus the Japanese
yen and major European  currencies could adversely impact the Company's revenues
and gross margin. Although the Company typically invoices in U.S. dollars, these
adverse impacts could occur through lower unit demand and the necessity to lower
average  selling  prices  to  compensate  for  the  reduced  strength  of  local
currencies. Where the company does invoice in local currency, the Company's cash
flows and earnings  are exposed to  fluctuations  in interest  rates and foreign
currency  exchange rates. The Company attempts to limit these exposures  through
operational strategies and where appropriate the use of hedge oriented financial
market instruments. To date the Company has primarily utilized forward contracts
to mitigate its exposure in these markets.

                                       18


<PAGE>


Proprietary Information

The  Company  relies on a  combination  of  copyright,  patent and trade  secret
protection,   nondisclosure   agreements,   and  licensing  and  cross-licensing
arrangements  to establish and protect its proprietary  rights.  There can be no
assurance  that any  patents  that may be  issued to the  Company,  or which the
Company may license from third parties,  or that any other proprietary rights of
the Company will not be  challenged,  invalidated or  circumvented,  or that any
rights granted thereunder would provide proprietary protection to the Company.

Infringement and Potential Litigation

The  Company  may  receive  in the  future  communications  from  third  parties
asserting that the Company's products infringe, or may infringe, the proprietary
rights of third parties. There can be no assurance that any of these claims will
not result in  protracted  and costly  litigation.  While it may be necessary or
desirable  in the  future  to  obtain  licenses  relating  to one or more of its
products  or  relating  to  current  or  future  technologies,  there  can be no
assurance  that the  Company  will be able to do so on  commercially  reasonable
terms, or at all.

Reliance on Adobe Systems, Incorporated

Under the Company's  license  agreements with Adobe, a separate  license must be
granted from Adobe to the Company for each type of copier or printer used with a
Fiery  Server or  Controller.  To date,  the Company has  successfully  obtained
licenses to use Adobe's  PostScript(TM)  software for  products  that it offers.
However,  there can be no  assurance  that Adobe will  continue to grant  future
licenses to Adobe  PostScript(TM)  software  on  reasonable  terms,  in a timely
manner,  or at all,  or that  Adobe  will  continue  to give  quality  assurance
approvals.  Such actions by Adobe may adversely affect the Company's  results of
operations.  If Adobe does not grant the Company such licenses or approvals,  if
the Adobe license  agreements are terminated,  or if the Company's  relationship
with Adobe is otherwise  impaired,  the  Company's  operations  may be adversely
affected.

Year 2000 Issues

The Company does not have a  comprehensive  and formal Year 2000 plan for all of
its operations. The Company has informally reviewed its internal MIS systems and
believes  that Year 2000  issues will not  materially  affect its  internal  MIS
systems.  Also, the Company has tested its products to determine if the products
will successfully  rollover from the years 1999 to 2000 and 2000 to 2001, and if
the products will correctly recognize the date February 29, 2000. Products first
released after November 1, 1997 have passed  internal tests for these  criteria,
and future  products  will be required to pass the same  internal  tests  before
shipping.  Because the Company cannot control other companies'  products used in
conjunction with the Company's products (such as other companies' software), the
Company does not intend to assure its customers  that its products will meet the
above-referenced  criteria when used in  conjunction  with any other software or
hardware not manufactured by the Company.  To date, the Company has not reviewed
Year 2000 plans and preparations of its manufacturers, suppliers, customers, and
other third  parties  with whom it does  business.  . The Company  continues  to
assess the effects and costs  associated with possible Year 2000;  however,  the
total  effects and costs are unknown to the Company at this time,  and there can
be no  assurance  that such  effects and costs will not have a material  adverse
effect on the Company, its financial condition, results of operations.

                                       19


<PAGE>



P
ART II           OTHER INFORMATION



     ITEMS 1 - 3.

There is no applicable  information  to report under Part II, Items 1 - 3 during
the period covered by this report.




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

The following  items were  submitted to the  stockholders  of the Company at the
Company's Annual Meeting of Stockholders held May 7, 1998.

         (a)      The election of six  directors to serve a one-year  term until
                  their successors are duly elected and qualified. The following
                  is a summary of the votes cast for and the votes  withheld for
                  each individual.

                                                Votes For         Votes Withheld
                                                ---------         --------------

                      Efraim Arazi              47,749,452           193,708
                      Dan Avida                 47,780,249           152,911
                      Gill Cogan                47,754,121           189,039
                      Dan Maydan                47,784,831           158,329
                      Jean-Louis Gassee         47,781,022           162,138
                      Thomas Unterberg          47,781,807           161,353


         (b)      The approval of an amendment to the Company's  1990 Stock Plan
                  to  increase  the  number  of  shares  reserved  for  issuance
                  thereunder by an additional  1,000,000 shares.  Results of the
                  voting included 31,336,820 votes for, 16,096,272 votes against
                  and 510,068 shares abstained or not voted.

         (c)      The ratification of the appointment of Price Waterhouse LLP as
                  the independent accountants of the Company for the fiscal year
                  ended  December  31,  1998.  Results  of the  voting  included
                  47,845,061  votes for,  52,880 votes against and 45,219 shares
                  abstained.



     ITEM 5.          OTHER INFORMATION

Effective  July 15, 1998 the Company  accepted the  resignation  of an Executive
Officer - Jeffrey  Lenches,  Executive Vice President  since October 1994 and an
Officer of the Company  since 1991.  Certain other changes in the make-up of the
Executive Officers as announced on August 6, 1998 are as follows:

Mr. Fred Rosenzweig,  previously Vice President,  Manufacturing and Support will
become  Executive Vice President of Operations.  Mr Rosenzweig  will continue in
his capacity as Vice President, Manufacturing and Support until such time as the
Company  hires  an  individual  who  can  assume  some  or all  of his  previous
responsibilities.

Mr. Eric Saltzman,  previously  Vice  President,  Strategic  Relations,  General
Counsel and Corporate  Secretary will become Chief  Financial  Officer & General
Counsel.

                                       20


<PAGE>


ITEM 5.  OTHER INFORMATION (continued)

Ms. Jan Smith  previously  Vice President of Human  Resources,  will become Vice
President  of Human  Resources  and  Corporate  Communications  and an Executive
Officer of the Company.

Mr. Mark Lee  previously  a Vice  President of Sales for the Company will become
the Vice President of Worldwide  Sales and an Executive  Officer of the Company.
Mr. Lee will continue in his capacity as Vice President of Sales until such time
as the Company  hires an  individual  who can assume some or all of his previous
responsibilities.

Pursuant to recent changes to the proxy rules,  unless a stockholder  who wishes
to bring a matter before the  stockholders  at the Company's 1999 annual meeting
of stockholders  notifies the Company of such matter prior to February 15, 1999,
management will have discretionary authority to vote all shares for which it has
proxies in opposition to such matter.

Other than the  information  reported above,  there is no additional  applicable
information  to report  under Part II, Item 5 during the period  covered by this
report.

                                       21


<PAGE>






     ITEM 6.          EXHIBITS AND REPORTS ON FORM 8-K

         (a)          Exhibits
                      Exhibit 27.1 Financial Data Schedule.............. Page 23

         (b)          Reports on Form 8-K
                      No reports on Form 8-K were  filed by the  Company  during
                      the three month period ended June 30, 1998.

                                       22


<PAGE>



                                   SIGNATURES

Pursuant  to the  requirements  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.


                                         ELECTRONICS FOR IMAGING, INC.

Date: August 6, 1998


                                         By /s/  Dan Avida
                                         --------------------------------------
                                         Dan Avida
                                         President and Chief Executive Officer




                                         By /s/  Eric Saltzman
                                         --------------------------------------
                                         Eric Saltzman
                                         Chief Financial Officer

                                       23






<TABLE> <S> <C>


<ARTICLE>                     5
<LEGEND>
     This schedule  contains summary  financial  information  extracted from the
     condensed  balance sheet,  condensed  statement of operations and condensed
     statement of cash flows  included in the Company's  form 10-Q for the three
     month  period  ended June 30,  1998 and is  qualified  in its  entirety  by
     reference to such financial statements and notes thereto.
</LEGEND>
       
<S>                             <C>
<PERIOD-TYPE>                   3-MOS
<FISCAL-YEAR-END>                          DEC-31-1998
<PERIOD-START>                             APR-01-1998
<PERIOD-END>                               JUN-30-1998
<CASH>                                          33,415
<SECURITIES>                                   206,526
<RECEIVABLES>                                   65,382
<ALLOWANCES>                                     1,626
<INVENTORY>                                     21,014
<CURRENT-ASSETS>                               357,351
<PP&E>                                          76,022
<DEPRECIATION>                                  27,919
<TOTAL-ASSETS>                                 414,428
<CURRENT-LIABILITIES>                           60,231
<BONDS>                                          3,924
<PREFERRED-MANDATORY>                                0
<PREFERRED>                                          0
<COMMON>                                           526
<OTHER-SE>                                     349,747
<TOTAL-LIABILITY-AND-EQUITY>                   414,428
<SALES>                                         96,157
<TOTAL-REVENUES>                                96,157
<CGS>                                           54,978
<TOTAL-COSTS>                                   54,978
<OTHER-EXPENSES>                                31,919
<LOSS-PROVISION>                                   200
<INTEREST-EXPENSE>                                 170
<INCOME-PRETAX>                                 10,849
<INCOME-TAX>                                     3,906
<INCOME-CONTINUING>                              6,943
<DISCONTINUED>                                       0
<EXTRAORDINARY>                                      0
<CHANGES>                                            0
<NET-INCOME>                                     6,943
<EPS-PRIMARY>                                      .13
<EPS-DILUTED>                                      .13
        


</TABLE>