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UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D. C. 20549

Form 10-K

(Mark One)

For the fiscal year ended January 31, 2004,

OR

For the transition period from              to             

Commission file number 000-22009

NEOMAGIC CORPORATION

(Exact name of Registrant as specified in its charter)

Registrant’s telephone number, including area code (408) 988-7020

Securities registered pursuant to Section 12(b) of the Act: None

Securities registered pursuant to Section 12(g) of the Act: Common Stock, $.001 par value

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

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 the Registrant’s knowledge, in definitive proxy or information statements incorporated by reference to Part III of this Form 10-K or any amendment to this Form 10-K.  x

Indicate by check mark whether the Registrant is an accelerated filer (as defined in Rule 12b-2 of the Act)

Yes  x    No  ¨

The aggregate market value of voting stock held by non-affiliates of the Registrant was approximately $81,732,361 as of July 25, 2003 based upon the closing price on the Nasdaq National Market reported for such date, the last business day of the Registrant’s most recently completed second fiscal quarter. This calculation does not reflect a determination that certain persons are affiliates of the Registrant for any other purposes.

The number of shares of the Registrant’s Common Stock, $.001 par value, outstanding at March 26, 2004 was 32,190,389.

DOCUMENTS INCORPORATED BY REFERENCE

Portions of the Registrant’s Proxy Statement related to the 2004 Annual Meeting of Stockholders, to be filed with the Securities and Exchange Commission subsequent to the date hereof, are incorporated by reference in Part III of this Annual Report on Form 10-K.

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NeoMagic Corporation

FORM 10-K

FOR THE FISCAL YEAR ENDED JANUARY 31, 2004

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FORWARD-LOOKING STATEMENTS

When used in this discussion, the words “expects,” “anticipates,” “believes” and similar expressions are intended to identify forward-looking statements. Such statements reflect management’s current intentions and expectations. However, actual events and results could vary significantly based on a variety of factors including, but not limited to: customer acceptance of new NeoMagic products, the market acceptance of handheld system products developed and marketed by customers that use the Company’s products, the Company’s ability to execute product and technology development plans on schedule, and the Company’s ability to access advanced manufacturing technologies in sufficient capacity without significant cash pre-payments or investment. Examples of forward-looking statements include statements about the Company’s expected revenues, the Company’s competitive advantage in its markets, the Company’s potential market for its products, the Company’s expected production timelines, the Company’s customer base and the Company’s need for additional financing. These statements are subject to significant risks and uncertainties, including those set forth below under “Factors that May Affect Results,” that could cause actual results to differ materially from those projected. These forward-looking statements speak only as of the date hereof. The Company expressly disclaims any obligation or undertaking to release publicly any updates or revisions to any forward-looking statements contained herein, to reflect any changes in the Company’s expectations with regard thereto or any changes in events, conditions or circumstances on which any such statement is based.

PART I

General

NeoMagic Corporation (the Company or NeoMagic) designs, develops and markets high-performance semiconductor solutions, known as Applications Processors, for sale to original equipment manufacturers (OEMs) and original design manufacturers (ODMs) of handheld systems. Applications Processors are semiconductors, or System-on-Chips (SOCs), used to enable multimedia applications and sophisticated operating systems on handheld systems. NeoMagic’s Applications Processors are focused on enabling high performance multimedia on handheld systems within a low power consumption environment. The Company’s Applications Processors are sold under the “MiMagic” brand name. Specifically, the Company is targeting customers in three consumer end markets: mobile phones, personal digital assistants (PDAs) and handheld entertainment devices. The largest projected market opportunity for Applications Processors is in the mobile phone market, where Applications Processors that enable multimedia functionality work side-by-side with baseband processors that are used for communications functionality.

In the past, the Company provided semiconductor solutions, called multimedia accelerators, to top notebook computer manufacturers. In April 2000, the Company began to exit the multimedia accelerator market. However, the majority of the Company’s historical net sales through the end of fiscal year 2002 continued to come from these multimedia accelerator products. The Company does not expect to have revenue related to these products in the future. The Company is now focused solely on the Applications Processor market. The Company believes that its expertise and experience in providing multimedia accelerators for the laptop computer market, where multimedia processing with low power consumption is a requirement, will give it an advantage in the Applications Processor market which also requires high performance processing with low power consumption.

International Data Corporation (IDC), an industry research firm for the technology market, states that 536 million mobile phones were shipped worldwide in 2003. IDC estimates that this number will grow to 745 million mobile phones by 2007. NeoMagic believes that next-generation mobile phones, PDAs and other handheld devices will feature dramatically increased multimedia functionality including: camera applications,

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highly compressed video using MPEG-4 and H.264 video standards, 3D graphics for gaming, and audio. The Company’s strategy is to become a leading provider of Applications Processors by:

NeoMagic has established strategic relationships with third-party manufacturing partners to produce semiconductor products for the Company. Pursuant to these strategic relationships, NeoMagic designs the overall product, including the logic and analog circuitry, and the manufacturing partners manufacture the wafers, assemble and test the products.

NeoMagic Corporation was incorporated in California in May 1993 and subsequently reincorporated in Delaware in February 1997.

Products

Through the end of fiscal year 2002, the majority of the Company’s net sales came from the sale of multimedia accelerators to notebook computer OEMs, or to third-party subsystem manufacturers who design and manufacture notebook computers on behalf of the OEMs. The multimedia accelerator products for notebook computers were part of the Company’s MagicGraph128 and MagicMedia256 product lines, which integrated DRAM with analog circuitry on a single chip. In April 2000, the Company announced its intention to exit the multimedia accelerator notebook computer marketplace. The Company does not expect additional revenues relating to its legacy products for the notebook computer market in the future.

Going forward, the Company’s main product line is the MiMagic Applications Processor family. The MiMagic family of Applications Processors incorporate microprocessor, 3D graphics, audio and video capabilities. The Company introduced the first member of the MiMagic Applications Processor family in July of 2001. The Company has since phased out production of the MiMagic 1 (NMS7200) and MiMagic 2 (NMS7205) Applications Processors. Currently, the MiMagic 3 Applications Processor (NMS7210) is in full production. The MiMagic 5 Applications Processor (NMS9200) is production ready and is expected to begin shipping for revenue in the summer of 2004. In November of 2003, the Company completed the first version of its MiMagic 6 Applications Processor (NMS9600), which it expects to begin shipping in early calendar 2005.

The Company also produces two companion chips (NMC1110 and NMC1121), which provide a seamless interface between MiMagic and other third party Applications Processors and the PC Card socket resulting in a much smaller board area and lower power requirements. These companion chips are currently being phased out.

For fiscal year 2004, 57 percent of the Company’s net revenue came from the MiMagic 3 Application Processor, with the remaining revenue derived primarily from its companion chips. The Company expects to begin to realize revenue from the sale of the MiMagic 5 Applications Processor in the summer of 2004.

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The following products fall within the category of Applications Processors for handheld systems:

The following products fall within the category of companion chips, which add IO (input/output) functions to processors made by other companies:

Research and Development

The Company believes the timely development and introduction of new products are essential to maintaining its competitive position and its ability to capitalize on market opportunities. NeoMagic’s research and development efforts are now primarily focused on developing Integrated System-on-Chip semiconductor products for the mobile phone and handheld systems marketplace. At the end of fiscal 2004, the Company had approximately 138 employees engaged in research and development activities. Research and development expenses were $19.7 million, $24.7 million, and $25.2 million, in fiscal 2004, 2003 and 2002, respectively. NeoMagic has historically focused much of its personnel and resources on research and development. The Company’s research and development activities are focused on bringing the MiMagic 6 to production as well as on developing next generation products. The Company is also developing new technologies that will improve the quality of multimedia applications on low-power consumption mobile phones, PDAs and handheld entertainment devices. The Company plans to continue innovating the functionality of its MiMagic family of Applications Processors, as well as to lower its product manufacturing costs.

In November of 2003, the Company completed the first version of its MiMagic 6 Applications Processor which includes a new technology architecture, called Associative Processor Array (APA). The APA multimedia engine uses a massively parallel approach to processing information. Competitive architectures use a sequential approach to processing that means they process each bit of data separately. To increase performance, sequential architectures rely on increased clock rates. These faster clock rates result in increased power consumption and reduced battery life. Because APA operates on data in parallel, it is able to process more information per clock cycle than sequential approaches. With its ability to handle large amounts of data simultaneously, the APA platform is able to efficiently process multimedia data such as images, video and graphics, with low power consumption. The Company anticipates that the MiMagic 6, the first of its chips to use APA, will begin production shipments in early calendar 2005.

Sales and Marketing

NeoMagic’s sales and marketing strategy is an integral part of the Company’s effort to become a leading supplier of Applications Processors to the leading manufacturers of mobile phones, PDAs and other handheld systems. To meet customer requirements and achieve design wins, the Company’s sales and marketing personnel work closely with its customers, business partners and key industry trendsetters to define product features, performance, price, and market timing of new products. The Company employs a sales and marketing organization with a high level of technical expertise and product and industry knowledge to support a lengthy and

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complex design win process. Additionally, the Company employs a highly trained team of application engineers to assist customers in designing, testing and qualifying system designs that incorporate NeoMagic products as part of the pre-sale process. The Company believes that the depth and quality of this design support is key to improving customers’ time-to-market deliveries and maintaining a high level of customer satisfaction, which in turn encourages customers to utilize subsequent generations of NeoMagic’s products.

In the United States, the Company sells its products to key customers primarily through a direct sales and marketing organization, and also uses manufacturer’s sales representatives in some regions where there are potential customer opportunities. In fiscal 2004, the Company hired sales managers in Japan and in Korea to drive the local sales representative firms that the Company had previously employed. In Taiwan, the Company has one direct employee to support the activities of multiple sales representatives. In fiscal 2004, the Company hired a dedicated sales manager for North America and Europe. This manager is responsible for managing one direct sales consultant, as well as multiple sales representatives in various national locations.

In many cases, handheld systems are designed and manufactured by third-party ODMs on behalf of the final brand name OEM. NeoMagic focuses on developing long-term customer relationships with ODMs and the brand name OEMs. The Company believes that this approach increases the likelihood of design wins, improves the overall quality of support, and enables the timely release of customer products to market.

Manufacturing

NeoMagic has strategic relationships with several foundries to produce its semiconductor wafers. These relationships enable the Company to concentrate its resources on product design, development, engineering, marketing and sales, where NeoMagic believes it has greater competitive advantages, and to eliminate the high cost of owning and operating a semiconductor wafer fabrication facility. The Company depends on these suppliers to allocate to the Company a portion of their manufacturing capacity sufficient to meet the Company’s needs, to produce products of acceptable cost and quality at acceptable manufacturing yields, and to deliver those products to the Company on a timely basis. A manufacturing disruption experienced by any of the Company’s manufacturing partners would have an adverse effect on the Company’s business, financial condition and results of operations. Furthermore, in the event that the transition to the next generation of manufacturing technologies at one of the Company’s suppliers is unsuccessful, the Company’s business, financial condition and results of operations would be materially and adversely affected.

The Company uses other third-party subcontractors to perform assembly, packaging and testing of the Company’s products. The Company also works with these third-party subcontractors for advanced packaging capabilities. The Company does not have long-term agreements with any of these subcontractors. As a result of its reliance on third-party subcontractors to assemble, test and provide advanced packaging for its products, the Company cannot directly control product delivery schedules, which could lead to product shortages or quality assurance problems that could increase the costs of manufacturing or assembly of the Company’s products. Due to the amount of time normally required to qualify these assembly and test subcontractors, shipments could be delayed significantly if the Company is required to find alternative subcontractors.

Competition

The market for Applications Processors is intensely competitive and is characterized by rapid technological change, evolving industry standards and declining average selling prices. NeoMagic believes that the principal factors of competition in this market are video and 3D graphics performance, price, features, power consumption, size and customer support. The ability of the Company to compete successfully in the Applications Processor market depends on a number of factors including, success in designing and subcontracting the manufacture of new products that implement new technologies, product quality and reliability, price, ramp of production of the Company’s products for particular system manufacturers, customer demand and acceptance of more sophisticated multimedia functionality on handheld systems, end-user acceptance of the system manufacturers’

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products, market acceptance of competitors’ products and general economic conditions. The Company’s ability to compete will also depend on its ability to identify and ensure compliance with evolving industry standards and market trends.

NeoMagic competes with both domestic and international companies, some of which have substantially greater financial and other resources than the Company with which to pursue engineering, manufacturing, marketing and distribution of their products. The Company’s principal competitors include ST Microelectronics’ Nomadik line, certain of Samsung’s S3C chips and Texas Instruments’ OMAP product line, as well as a number of vertically integrated electronics firms that are developing their own solutions. NeoMagic may also face increased competition from new entrants into the market including companies currently at developmental stages. NeoMagic believes it has significant intellectual properties and historically demonstrated expertise in SOC technology. However, the inability of the Company to introduce timely new products for its market, to support these products in customer programs, or to manufacture these products could have a material adverse effect on the Company’s business, financial condition and operating results.

Intellectual Property

The Company relies in part on patents to protect its intellectual property. As of January 31, 2004, the Company has been issued 71 patents, each covering certain aspects of the design and architecture of the Company’s products. The issued patents are scheduled to expire no later than January 2022. Additionally, the Company has several patent applications pending. There can be no assurance that the Company’s pending patent applications, or any future applications will be approved. Further, there can be no assurance that any issued patents will provide the Company with significant intellectual property protection, competitive advantages, or will not be challenged by third parties, or that the patents of others will not have an adverse effect on the Company’s ability to do business. In addition, there can be no assurance that others will not independently develop similar products, duplicate the Company’s products or design around any patents that may be issued to the Company.

The Company also relies on a combination of mask work protection, trademarks, copyrights, trade secret laws, employee and third-party nondisclosure agreements and licensing arrangements to protect its intellectual property. Despite these efforts, there can be no assurance that others will not independently develop substantially equivalent intellectual property or otherwise gain access to the Company’s trade secrets or intellectual property, disclose such intellectual property or trade secrets, or that the Company can meaningfully protect its intellectual property. A failure by the Company to meaningfully protect its intellectual property could have a material adverse effect on the Company’s business, financial condition and results of operations.

As a general matter, the semiconductor industry is characterized by substantial litigation regarding patent and other intellectual property rights. In December 1998, the Company filed a lawsuit in the United States District Court for the District of Delaware seeking damages and an injunction against Trident Microsystems, Inc. The suit alleged that Trident’s embedded DRAM graphics accelerators infringe certain patents held by the Company. In January 1999, Trident filed a counter claim against the Company alleging an attempted monopolization in violation of antitrust laws, arising from NeoMagic’s filing of the patent infringement action against Trident. The Court ruled that there was no infringement by Trident. The Company filed an appeal in the United States Court of Appeals, for the Federal Circuit. On April 17, 2002, the United States Court of Appeals for the Federal Circuit affirmed the lower court’s judgment of non-infringement on one patent and vacated the court’s judgment of non-infringement on another patent, thereby remanding it to the lower court for further proceedings. In November 2002, the lower court heard oral arguments on cross-motions for summary judgment on the matter. In May 2003, the lower court ruled in favor of Trident. In December 2003, the Company filed an appeal in the United States Court of Appeals, for the Federal Circuit. Management believes the Company has valid defenses against Trident’s claims. There can be no assurance as to the results of the patent infringement appeal and the counter-suit for antitrust filed by Trident.

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Backlog

Sales of the Company’s products are primarily made pursuant to standard purchase orders that are cancelable without significant penalties. These purchase orders are subject to price renegotiations and to changes in quantities of products and delivery schedules in order to reflect changes in customers’ requirements and manufacturing availability. Also, many of the Company’s customers are moving to “just in time” relationships with their vendors, whereby orders for product deliveries are not provided to the supplier until just prior to the requested delivery. A large portion of the Company’s sales are made pursuant to short lead-time orders. In addition, the Company’s actual shipments depend on the manufacturing capacity of the Company’s suppliers and the availability of products from such suppliers. As a result of the foregoing factors, the Company does not believe that backlog is a meaningful indicator of future sales.

Employees

As of January 31, 2004, the Company employed a total of 175 full-time employees, including 138 in research and development, 6 in applications engineering, 12 in sales and marketing, 4 in manufacturing and 15 in finance and administration. The Company also employs, from time to time, a number of temporary and part-time employees as well as consultants on a contract basis. The Company’s employees are not represented by a collective bargaining organization, and the Company believes that it has good relations with its employees.

Management

Executive Officers

The executive officers of the Company as of January 31, 2004 are as follows:

Prakash C. Agarwal, a co-founder of the Company, has been President, Chief Executive Officer, and a Director of the Company since its inception in 1993. Mr. Agarwal has over 20 years of engineering, marketing and general management experience in the semiconductor industry. Prior to joining the Company, he was employed as Vice President and General Manager of Cirrus Logic’s Portable Product Division. In addition to his duties as President of the Company, Mr. Agarwal is on the Board of Directors of Zeevo, Inc. Mr. Agarwal holds a BS and a MS degree in Electrical Engineering from the University of Illinois.

Scott Sullinger joined NeoMagic in March of 2004. Prior to joining NeoMagic Mr. Sullinger was Director of Finance at ON Semiconductor, a provider of power and data management semiconductors and standard semiconductor components. Before joining ON Semiconductor, Mr. Sullinger spent seven years in investment banking, most recently as Vice President of Technology Investment Banking at Morgan Stanley, in Menlo Park, California. In his role as an investment banker, Mr. Sullinger advised a variety of semiconductor companies, including Atmel, LSI Logic and STMicroelectronics, on acquisition and financing strategies. Mr. Sullinger previously worked as an auditor and as a senior consultant at the accounting firm of Price Waterhouse. He has a BS degree in Economics from the University of California, Los Angeles, where he graduated cum laude, and an MBA from Columbia University. Mr. Sullinger is also a Certified Public Accountant.

Stephen Lanza joined NeoMagic in June 2000 as Vice President of Finance and Chief Financial Officer and served as Acting Chief Financial Officer from November 3, 2003 until March 2, 2004. Mr. Lanza has over two decades of experience in financial management of technology companies. Previously, Mr. Lanza served as Vice

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President of Finance and Administration, and Chief Financial Officer at PolyStor from 1999 to 2000. Before joining PolyStor, Mr. Lanza spent several years at semiconductor equipment maker Watkins-Johnson Company, as Director of Finance for global business operations, Managing Director of Watkins-Johnson Europe, and as Vice President and General Manager for global business operations from 1996 to 1999. He holds a BS degree in Business Administration from California Polytechnic University, an MBA from Golden Gate University, is a Certified Management Accountant, and has a Certificate in Engineering Management from the California Institute of Technology.

Mark Singer joined NeoMagic in March 1997 as a Senior Staff member managing Strategic Business Planning and Corporate Communications and currently serves as Vice President of Marketing. Mr. Singer has nearly 20 years management experience in the semiconductor industry. Prior to joining NeoMagic, Mr. Singer was employed at Cirrus Logic, where he was a co-founder. Mr. Singer holds a BS degree from the University of California, Berkeley, School of Business.

Sanjay Adkar joined NeoMagic in June 2000 as Vice President of Corporate Engineering. Mr. Adkar has over a decade and a half of experience in design engineering and engineering management, developing innovative integrated circuits. Before joining NeoMagic Mr. Adkar was Senior Director of the information application organization at National Semiconductor Corporation from 1998 to 2000, where he had general management responsibility for an organization of about 90 people developing chipsets and intellectual property for information appliances. Prior to that he worked for five years at LSI Logic Corporation, most recently as Director of Design and methodology for the ASIC products organization. He holds a BS degree in Electrical Engineering from the Indian Institute of Technology, Bombay, and a MS degree in Electrical Engineering from Virginia Tech.

Ernest Lin joined NeoMagic in December 2001 as a result of the acquisition of LinkUp Systems Corporation. Mr. Lin has over 20 years of engineering, sales, and general management experience in the semiconductor industry, with extensive experience in establishing and managing large and successful international sales teams and forging strong business relationships with key management at major equipment manufacturers and system design firms. Before joining NeoMagic, Mr. Lin was a co-founder and Executive Vice President of LinkUp Systems. Prior to co-founding LinkUp in 1997, Mr. Lin spent 12 years at Cirrus Logic, most recently as Vice President of Asia Pacific sales. Mr. Lin holds a Bachelor’s degree in Electrical Engineering from National Taiwan University, a MBA degree from Santa Clara University, and a Master’s degree in Computer Science from the University of Utah.

Available Information

We file our annual reports on Form 10-K, quarterly reports on Form 10-Q and current reports on Form 8-K pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934 with the SEC electronically. The public may read and copy any materials we file with the SEC at the SEC’s Public Reference Room at 450 Fifth Street, NW, Washington, DC 20549. The public may obtain information on the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330. The SEC maintains an Internet site that contains reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC. The address of that site is http://www.sec.gov.

You may obtain a free copy of our annual reports on Form 10-K, quarterly reports on Form 10-Q and current reports on Form 8-K and amendments to those reports on the day of filing with the SEC on our website on the World Wide Web at http://www.neomagic.com, by calling the Investor Relations Department at our corporate offices at (408) 988-7020 or by sending an e-mail message to ir@neomagic.com.

The Company’s corporate headquarters, which is also its principal administrative, selling and marketing, customer service, applications engineering and product development facility, is located in Santa Clara, California

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and consists of approximately 45,000 square feet under a lease which will expire on April 30, 2010. Prior to April 30, 2003, the Company had leases on two buildings with 45,000 square feet each. However, the Company exited one of these buildings and chose not to renew the lease on this building. The Company also leases 7,500 square feet of office space in Israel and 13,000 square feet of office space in India under operating leases that expire at various times through December 2006. The Company believes its existing facilities are adequate for its current needs, but that additional space for growth may be required in the future.

As a general matter, the semiconductor industry is characterized by substantial litigation regarding patent and other intellectual property rights. In December 1998, the Company filed a lawsuit in the United States District Court for the District of Delaware seeking damages and an injunction against Trident Microsystems, Inc. The suit alleged that Trident’s embedded DRAM graphics accelerators infringe certain patents held by the Company. In January 1999, Trident filed a counter claim against the Company alleging an attempted monopolization in violation of antitrust laws, arising from NeoMagic’s filing of the patent infringement action against Trident. The Court ruled that there was no infringement by Trident. The Company filed an appeal in the United States Court of Appeals, for the Federal Circuit. On April 17, 2002, the United States Court of Appeals for the Federal Circuit affirmed the lower court’s judgment of non-infringement on one patent and vacated the court’s judgment of non-infringement on another patent, thereby remanding it to the lower court for further proceedings. In November 2002, the lower court heard oral arguments on cross-motions for summary judgment on the matter. In May 2003, the lower court ruled in favor of Trident. In December 2003, the Company filed an appeal in the United States Court of Appeals, for the Federal Circuit. Management believes the Company has valid defenses against Trident’s claims. There can be no assurance as to the results of the patent infringement appeal and the counter-suit for antitrust filed by Trident.

None.

PART II

The Company’s common stock trades on the Nasdaq National Market under the symbol “NMGC”. The high and low closing sales prices set forth below are as reported on the Nasdaq National Market.

The Company had 237 stockholders of record as of March 26, 2004. The Company has not paid any dividends on its common stock. The Company currently intends to retain earnings for use in its business and does not anticipate paying cash dividends to stockholders.

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Information as of January 31, 2004 regarding equity compensation plans approved and not approved by stockholders is summarized in the following:

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The following selected financial data is qualified in its entirety by and should be read in conjunction with the more detailed consolidated financial statements and related notes included elsewhere herein.

Five Year Summary