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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM 10-Q

(Mark One)

|  |                                                                                                                                        
|- | ---------------------------------------------------------------------------------------------------------------------------------------
|x | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED
July 31, 2002 OR
| 
|o | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM  TO            



COMMISSION FILE NUMBER: 0-13994

|                                                      
|------------------------------------------------------
|COMPUTER NETWORK TECHNOLOGY CORPORATION               
|                                                      
|(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)



|                         |  |                                     
|------------------------ |  | ------------------------------------
|Minnesota                |  | 41-1356476                          
|                         |  |                                     
|(State of Incorporation) |  | (I.R.S. Employer Identification No.)

|                                                    
|----------------------------------------------------
|6000 Nathan Lane North, Minneapolis, Minnesota 55442
|                                                    
|(Address of principal executive offices)(Zip Code)  
|                                                    
|                                                    
|Telephone Number: (763) 268-6000                    
|                                                    
|(Registrants telephone number, including area code)

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 the filing
requirements for at least the past 90 days. Yes x No

As of August 31, 2002, the registrant had 26,935,601 shares of $.01 par value
common stock issued and outstanding.



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TABLE OF CONTENTS



|                                                                                              |                                                                                                 |  |  |  |  |  |  | 
|--------------------------------------------------------------------------------------------- | ----------------------------------------------------------------------------------------------- |  |  |  |  |  |  | 
|PART I. FINANCIAL INFORMATION                                                                
|Item 1. Financial Statements (unaudited)                                                     
|                                                                                              | Consolidated Statements of Operations for the three and six months ended July 31, 2002 and 2001
|                                                                                              | Consolidated Balance Sheets as of July 31, 2002 and January 31, 2002                           
|                                                                                              | Consolidated Statements of Cash Flows for the six months ended July 31, 2002 and 2001          
|                                                                                              | Notes to Consolidated Financial Statements                                                     
|Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
|Item 3. Market Risk                                                                          
|Item 4. Controls and Procedures                                                              
|Part II. Other Information                                                                   
|Item 1-3. None                                                                               
|Item 4. Submission of matters to a vote of security holders                                  
|Item 5. None                                                                                 
|Item 6. Exhibits and Reports on Form 8-K                                                     
|SIGNATURES                                                                                   
|EX-11 Computation of Net Loss Per Basic Shares                                               



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COMPUTER NETWORK TECHNOLOGY CORPORATION

INDEX

PART I. FINANCIAL INFORMATION

|           |  |                                                                                                  |  |     
|---------- |  | ------------------------------------------------------------------------------------------------ |  | ----
|           |  |                                                                                                  |  | Page
|           |  |                                                                                                  |  |     
|Item 1.    |  | Financial Statements (unaudited)                                                                 |  |     
|           |  |                                                                                                  |  |     
|           |  | Consolidated Statements of Operations for the
three and six months ended July 31, 2002 and 2001. |  | 3   
|           |  |                                                                                                  |  |     
|           |  | Consolidated Balance Sheets as of July 31, 2002
and January 31, 2002.                            |  | 4   
|           |  |                                                                                                  |  |     
|           |  | Consolidated Statements of Cash Flows for the
six months ended July 31, 2002 and 2001.           |  | 5   
|           |  |                                                                                                  |  |     
|           |  | Notes to Consolidated Financial Statements                                                       |  | 6   
|           |  |                                                                                                  |  |     
|Item 2.    |  | Managements Discussion and Analysis of Financial
Condition and Results of Operations            |  | 12  
|           |  |                                                                                                  |  |     
|Item 3.    |  | Market Risk                                                                                      |  | 20  
|           |  |                                                                                                  |  |     
|Item 4.    |  | Controls and Procedures                                                                          |  | 21  
|           |  |                                                                                                  |  |     
|PART II.   |  | OTHER INFORMATION                                                                                |  | 22  
|           |  |                                                                                                  |  |     
|Item 1-3.  |  | None                                                                                             |  |     
|           |  |                                                                                                  |  |     
|Item 4.    |  | Submission of Matters to a Vote of Security Holders                                              |  | 22  
|           |  |                                                                                                  |  |     
|Item 5.    |  | None                                                                                             |  |     
|           |  |                                                                                                  |  |     
|Item 6.    |  | Exhibits and Reports on Form 8-K                                                                 |  | 23  
|           |  |                                                                                                  |  |     
|SIGNATURES |  |                                                                                                  |  | 24  

2



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COMPUTER NETWORK TECHNOLOGY CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share data)
(unaudited)

|                                                                    |                                                     |                                   |                          |        |                    |        |        |                  |   |        |         |        |   |        |         |         |        |        | 
|------------------------------------------------------------------- | --------------------------------------------------- | --------------------------------- | ------------------------ | ------ | ------------------ | ------ | ------ | ---------------- | - | ------ | ------- | ------ | - | ------ | ------- | ------- | ------ | ------ | 
|                                                                    |                                                     |                                   |                          |        | Three months ended |        |        | Six months ended |  
|                                                                    |                                                     |                                   |                          |        |                    |        |        |                  |  
|                                                                    |                                                     |                                   |                          |        | July 31,           |        |        | July 31,         |  
|                                                                    |                                                     |                                   |                          |        |                    |        |        |                  |  
|                                                                    |                                                     |                                   |                          |        | 2002               |        |        | 2001             |   |        | 2002    |        |   | 2001   |        
|                                                                    |                                                     |                                   |                          |        |                    |        |        |                  |   |        |         |        |   |        |        
|Revenue:                                                            |                                                     |                                   |                          |        |                    |        |        |                  |   |        |         |        |   |        |         |        
|                                                                    | Product sales                                       |                                   | $                        | 33,128 |                    |        | $      | 27,682           |   |        | $       | 62,882 |   |        | $       | 43,719  |       
|                                                                    | Service fees                                        |                                   |                          | 15,738 |                    |        |        | 13,901           |   |        |         | 31,196 |   |        |         | 27,277  |       
|                                                                    |                                                     |                                   |                          |        |                    |        |        |                  |   |        |         |       
|                                                                    |                                                     |                                   | Total revenue            |        |                    | 48,866 |        |                  |   | 41,583 |         |        |   | 94,078 |         |         |        | 70,996 | 
|                                                                    |                                                     |                                   |                          |        |                    |        |        |                  |   |        |         |       
|Cost of revenue:                                                    |                                                     |                                   |                          |        |                    |        |        |                  |   |        |         |        |   |        |         |        
|                                                                    | Cost of product sales                               |                                   |                          | 19,612 |                    |        |        | 15,556           |   |        |         | 36,980 |   |        |         | 25,017  |       
|                                                                    | Cost of service fees                                |                                   |                          | 9,308  |                    |        |        | 9,467            |   |        |         | 19,068 |   |        |         | 18,954  |       
|                                                                    |                                                     |                                   |                          |        |                    |        |        |                  |   |        |         |       
|                                                                    |                                                     |                                   | Total cost of revenue    |        |                    | 28,920 |        |                  |   | 25,023 |         |        |   | 56,048 |         |         |        | 43,971 | 
|                                                                    |                                                     |                                   |                          |        |                    |        |        |                  |   |        |         |       
|Gross profit                                                        |                                                     |                                   | 19,946                   |        |                    |        | 16,560 |                  |   |        | 38,030  |        |   |        | 27,025  |        
|                                                                    |                                                     |                                   |                          |        |                    |        |        |                  |   |        |         |       
|Operating expenses:                                                 |                                                     |                                   |                          |        |                    |        |        |                  |   |        |         |        |   |        |         |        
|                                                                    | Sales and marketing                                 |                                   |                          | 14,208 |                    |        |        | 11,854           |   |        |         | 29,785 |   |        |         | 22,749  |       
|                                                                    | Engineering and development                         |                                   |                          | 6,591  |                    |        |        | 5,134            |   |        |         | 13,259 |   |        |         | 11,418  |       
|                                                                    | General and administrative                          |                                   |                          | 2,694  |                    |        |        | 2,169            |   |        |         | 5,207  |   |        |         | 4,937   |       
|                                                                    | Restructuring charge                                |                                   |                          |       |                    |        |        |                 |   |        |         |       |   |        |         | 996     |       
|                                                                    |                                                     |                                   |                          |        |                    |        |        |                  |   |        |         |       
|                                                                    |                                                     |                                   | Total operating expenses |        |                    | 23,493 |        |                  |   | 19,157 |         |        |   | 48,251 |         |         |        | 40,100 | 
|                                                                    |                                                     |                                   |                          |        |                    |        |        |                  |   |        |         |       
|Loss from operations                                                |                                                     |                                   | (3,547                   | )      |                    |        | (2,597 | )                |   |        | (10,221 | )      |   |        | (13,075 | )      
|                                                                    |                                                     |                                   |                          |        |                    |        |        |                  |   |        |         |       
|Other income (expense):                                             |                                                     |                                   |                          |        |                    |        |        |                  |   |        |         |        |   |        |         |        
|                                                                    | Loss on sale and write-down of WebMethods stock     |                                   |                          |       |                    |        |        |                 |   |        |         |       |   |        |         | (10,283 | )     
|                                                                    | Other, net                                          |                                   |                          | 373    |                    |        |        | 1,371            |   |        |         | 1,429  |   |        |         | 3,223   |       
|                                                                    |                                                     |                                   |                          |        |                    |        |        |                  |   |        |         |       
|Other income (expense), net                                         |                                                     |                                   | 373                      |        |                    |        | 1,371  |                  |   |        | 1,429   |        |   |        | (7,060  | )      
|                                                                    |                                                     |                                   |                          |        |                    |        |        |                  |   |        |         |       
|Loss before income taxes                                            |                                                     |                                   | (3,174                   | )      |                    |        | (1,226 | )                |   |        | (8,792  | )      |   |        | (20,135 | )      
|Benefit for income taxes                                            |                                                     |                                   | (1,068                   | )      |                    |        | (405   | )                |   |        | (2,989  | )      |   |        | (6,336  | )      
|                                                                    |                                                     |                                   |                          |        |                    |        |        |                  |   |        |         |       
|Loss from continuing operations                                     |                                                     |                                   | (2,106                   | )      |                    |        | (821   | )                |   |        | (5,803  | )      |   |        | (13,799 | )      
|                                                                    |                                                     |                                   |                          |        |                    |        |        |                  |   |        |         |       
|Discontinued operations:                                            |                                                     |                                   |                          |        |                    |        |        |                  |   |        |         |        |   |        |         |        
|                                                                    |                                                     | Gain on sale of IntelliFrame      |                          |        |                   |        |        |                  |  |        |         |        |  |        |         |         | 12,620 |       
|                                                                    |                                                     | Loss on sale of Propelis Software |                          |        |                   |        |        |                  |  |        |         |        |  |        |         |         | (6,197 | )     
|                                                                    |                                                     |                                   |                          |        |                    |        |        |                  |   |        |         |       
|                                                                    |                                                     |                                   |                         |        |                    |        |       |                  |   |        |        |        |   |        | 6,423   |        
|                                                                    |                                                     |                                   |                          |        |                    |        |        |                  |   |        |         |       
|Net loss before cumulative effect of
change in accounting principle |                                                     |                                   | (2,106                   | )      |                    |        | (821   | )                |   |        | (5,803  | )      |   |        | (7,376  | )      
|                                                                    |                                                     |                                   |                          |        |                    |        |        |                  |   |        |         |       
|Cumulative effect of change in accounting principle                 |                                                     |                                   |                         |        |                    |        |       |                  |   |        | (10,068 | )      |   |        |        |        
|                                                                    |                                                     |                                   |                          |        |                    |        |        |                  |   |        |         |       
|Net loss                                                            |                                                     | $                                 | (2,106                   | )      |                    | $      | (821   | )                |   | $      | (15,871 | )      |   | $      | (7,376  | )      
|                                                                    |                                                     |                                   |                          |        |                    |        |        |                  |   |        |         |       
|Basic and diluted income (loss) per share:                          |                                                     |                                   |                          |        |                    |        |        |                  |   |        |         |        |   |        |         |        
|                                                                    | Continuing operations                               |                                   | $                        | (.07   | )                  |        | $      | (.03             | ) |        | $       | (.20   | ) |        | $       | (.46    | )     
|                                                                    |                                                     |                                   |                          |        |                    |        |        |                  |   |        |         |       
|                                                                    | Discontinued operations                             |                                   | $                        |       |                    |        | $      |                 |   |        | $       |       |   |        | $       | .22     |       
|                                                                    |                                                     |                                   |                          |        |                    |        |        |                  |   |        |         |       
|                                                                    | Cumulative effect of change in accounting principle |                                   | $                        |       |                    |        | $      |                 |   |        | $       | (.34   | ) |        | $       |        |       
|                                                                    |                                                     |                                   |                          |        |                    |        |        |                  |   |        |         |       
|                                                                    | Net loss                                            |                                   | $                        | (.07   | )                  |        | $      | (.03             | ) |        | $       | (.54   | ) |        | $       | (.25    | )     
|                                                                    |                                                     |                                   |                          |        |                    |        |        |                  |   |        |         |       
|                                                                    | Shares                                              |                                   |                          | 28,466 |                    |        |        | 29,729           |   |        |         | 29,437 |   |        |         | 29,746  |       
|                                                                    |                                                     |                                   |                          |        |                    |        |        |                  |   |        |         |       

See accompanying notes to Consolidated Financial Statements

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CNT
CONSOLIDATED BALANCE SHEETS
(in thousands, except per share data)

|                                                           |                                                                                                                                        |                           |                            |         |        |             |   |  |  |  |         |         |             |         |  | 
|---------------------------------------------------------- | -------------------------------------------------------------------------------------------------------------------------------------- | ------------------------- | -------------------------- | ------- | ------ | ----------- | - |  |  |  | ------- | ------- | ----------- | ------- |  | 
|                                                           |                                                                                                                                        |                           |                            |         |        | July 31,    |   |  |  |  |         |         |             |         | 
|                                                           |                                                                                                                                        |                           |                            |         |        | 2002        |   |  |  |  |         |         | January 31, |        
|                                                           |                                                                                                                                        |                           |                            |         |        | (unaudited) |   |  |  |  |         |         | 2002        |        
|                                                           |                                                                                                                                        |                           |                            |         |        |             |   |  |  |  |         |         |             |        
|Assets                                                     |                                                                                                                                        |                           |                            |         |        |             |   |  |  |  |         |        
|Current assets:                                            |                                                                                                                                        |                           |                            |         |        |             |   |  |  |  |         |        
|                                                           | Cash and cash equivalents                                                                                                              |                           | $                          | 84,485  |        |             | $ |  |  |  |         | 34,402  |            
|                                                           | Marketable securities                                                                                                                  |                           |                            | 115,868 |        |             |   |  |  |  |         | 83,612  |            
|                                                           | Receivables, net                                                                                                                       |                           |                            | 48,401  |        |             |   |  |  |  |         | 53,962  |            
|                                                           | Inventories                                                                                                                            |                           |                            | 33,386  |        |             |   |  |  |  |         | 31,410  |            
|                                                           | Deferred tax asset                                                                                                                     |                           |                            | 5,134   |        |             |   |  |  |  |         | 5,134   |            
|                                                           | Other current assets                                                                                                                   |                           |                            | 2,690   |        |             |   |  |  |  |         | 4,138   |            
|                                                           |                                                                                                                                        |                           |                            |         |        |             |   |  |  | 
|                                                           |                                                                                                                                        |                           | Total current assets       |         |        | 289,964     |   |  |  |  |         |         |             | 212,658 | 
|                                                           |                                                                                                                                        |                           |                            |         |        |             |   |  |  | 
|Property and equipment, net                                |                                                                                                                                        |                           | 25,356                     |         |        |             |   |  |  |  | 25,604  |        
|Field support spares, net                                  |                                                                                                                                        |                           | 5,321                      |         |        |             |   |  |  |  | 4,562   |        
|Deferred tax asset                                         |                                                                                                                                        |                           | 10,402                     |         |        |             |   |  |  |  | 11,048  |        
|Goodwill and other intangibles, net                        |                                                                                                                                        |                           | 12,490                     |         |        |             |   |  |  |  | 14,533  |        
|Other assets                                               |                                                                                                                                        |                           | 4,452                      |         |        |             |   |  |  |  | 1,333   |        
|                                                           |                                                                                                                                        |                           |                            |         |        |             |   |  |  | 
|                                                           |                                                                                                                                        | $                         | 347,985                    |         |        | $           |   |  |  |  | 269,738 |        
|                                                           |                                                                                                                                        |                           |                            |         |        |             |   |  |  | 
|Liabilities and Shareholders Equity                       |                                                                                                                                        |                           |                            |         |        |             |   |  |  |  |         |        
|Current liabilities:                                       |                                                                                                                                        |                           |                            |         |        |             |   |  |  |  |         |        
|                                                           | Accounts payable                                                                                                                       |                           | $                          | 13,581  |        |             | $ |  |  |  |         | 17,240  |            
|                                                           | Accrued liabilities                                                                                                                    |                           |                            | 19,421  |        |             |   |  |  |  |         | 20,158  |            
|                                                           | Deferred revenue                                                                                                                       |                           |                            | 15,825  |        |             |   |  |  |  |         | 13,466  |            
|                                                           | Current installments of obligations under capital lease                                                                                |                           |                            | 1,231   |        |             |   |  |  |  |         | 1,523   |            
|                                                           |                                                                                                                                        |                           |                            |         |        |             |   |  |  | 
|                                                           |                                                                                                                                        | Total current liabilities |                            |         | 50,058 |             |   |  |  |  |         |         | 52,387      |        
|                                                           |                                                                                                                                        |                           |                            |         |        |             |   |  |  | 
|Convertible subordinated debt                              |                                                                                                                                        |                           | 125,000                    |         |        |             |   |  |  |  |        |        
|Obligations under capital lease, less current installments |                                                                                                                                        |                           | 282                        |         |        |             |   |  |  |  | 708     |        
|                                                           |                                                                                                                                        |                           |                            |         |        |             |   |  |  | 
|                                                           |                                                                                                                                        |                           | Total liabilities          |         |        | 175,340     |   |  |  |  |         |         |             | 53,095  | 
|                                                           |                                                                                                                                        |                           |                            |         |        |             |   |  |  | 
|Shareholders equity:                                      |                                                                                                                                        |                           |                            |         |        |             |   |  |  |  |         |        
|                                                           | Undesignated preferred stock, authorized 965
shares; none issued and outstanding                                                       |                           |                            |        |        |             |   |  |  |  |         |        |            
|                                                           | Series A Junior participating preferred stock,
authorized 40 shares, none issued & outstanding                                         |                           |                            |        |        |             |   |  |  |  |         |        |            
|                                                           | Common stock, $.01 par value; authorized
100,000 shares, issued and outstanding
27,026 at July 31, 2002 and
30,383 at January 31, 2002 |                           |                            | 270     |        |             |   |  |  |  |         | 304     |            
|                                                           | Additional paid-in capital                                                                                                             |                           |                            | 174,724 |        |             |   |  |  |  |         | 202,996 |            
|                                                           | Unearned compensation                                                                                                                  |                           |                            | (982    | )      |             |   |  |  |  |         | (1,232  | )          
|                                                           | Retained earnings (accumulated deficit)                                                                                                |                           |                            | (412    | )      |             |   |  |  |  |         | 15,459  |            
|                                                           | Accumulated other comprehensive loss                                                                                                   |                           |                            | (955    | )      |             |   |  |  |  |         | (884    | )          
|                                                           |                                                                                                                                        |                           |                            |         |        |             |   |  |  | 
|                                                           |                                                                                                                                        |                           | Total shareholders equity |         |        | 172,645     |   |  |  |  |         |         |             | 216,643 | 
|                                                           |                                                                                                                                        |                           |                            |         |        |             |   |  |  | 
|                                                           |                                                                                                                                        | $                         | 347,985                    |         |        | $           |   |  |  |  | 269,738 |        
|                                                           |                                                                                                                                        |                           |                            |         |        |             |   |  |  | 

See accompanying notes to Consolidated Financial Statements

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COMPUTER NETWORK TECHNOLOGY CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)

|                                                     |                                                                                 |                                                                  |                      |                                                      |        |                  |         |         |        |         |         |  
|---------------------------------------------------- | ------------------------------------------------------------------------------- | ---------------------------------------------------------------- | -------------------- | ---------------------------------------------------- | ------ | ---------------- | ------- | ------- | ------ | ------- | ------- | -
|                                                     |                                                                                 |                                                                  |                      |                                                      |        | Six months ended |        
|                                                     |                                                                                 |                                                                  |                      |                                                      |        | July 31,         |        
|                                                     |                                                                                 |                                                                  |                      |                                                      |        |                  |        
|                                                     |                                                                                 |                                                                  |                      |                                                      |        | 2002             |         |         | 2001   |        
|                                                     |                                                                                 |                                                                  |                      |                                                      |        |                  |         |         |        |        
|Operating Activities:                                |                                                                                 |                                                                  |                      |                                                      |        |                  |         |        
|                                                     | Net loss                                                                        |                                                                  | $                    | (15,871                                              | )      |                  | $       | (7,376  | )     
|                                                     | Adjustments to reconcile net loss to net cash
provided by operating activities: |                                                                  |                      |                                                      |        |                  |         |         |       
|                                                     |                                                                                 | Cumulative effect of change in accounting principle              |                      |                                                      | 10,068 |                  |         |         |       |        
|                                                     |                                                                                 | Discontinued operations                                          |                      |                                                      |       |                  |         |         | (6,423 | )      
|                                                     |                                                                                 | Depreciation and amortization                                    |                      |                                                      | 8,138  |                  |         |         | 7,421  |        
|                                                     |                                                                                 | Non-cash compensation expense                                    |                      |                                                      | 354    |                  |         |         | 286    |        
|                                                     |                                                                                 | Loss on sale and write-down of webMethods stock                  |                      |                                                      |       |                  |         |         | 10,283 |        
|                                                     |                                                                                 | Changes in operating assets and liabilities,
net of acquisition: |                      |                                                      |        |                  |         |         |        |        
|                                                     |                                                                                 |                                                                  | Receivables          |                                                      |        | 9,442            |         |         |        | 17,676  |        
|                                                     |                                                                                 |                                                                  | Inventories          |                                                      |        | (1,925           | )       |         |        | (12,992 | )      
|                                                     |                                                                                 |                                                                  | Other current assets |                                                      |        | 1,448            |         |         |        | (52     | )      
|                                                     |                                                                                 |                                                                  | Accounts payable     |                                                      |        | (5,418           | )       |         |        | (25,517 | )      
|                                                     |                                                                                 |                                                                  | Accrued liabilities  |                                                      |        | (4,578           | )       |         |        | (14,079 | )      
|                                                     |                                                                                 |                                                                  | Deferred revenue     |                                                      |        | 2,359            |         |         |        | (1,316  | )      
|                                                     |                                                                                 |                                                                  |                      |                                                      |        |                 
|                                                     |                                                                                 |                                                                  |                      | Net cash provided by (used in) continuing
operations |        |                  | 4,017   |         |        |         | (32,089 | )
|                                                     |                                                                                 |                                                                  |                      | Net cash used in discontinued operations             |        |                  |        |         |        |         | (3,566  | )
|                                                     |                                                                                 |                                                                  |                      |                                                      |        |                 
|                                                     |                                                                                 |                                                                  |                      | Cash provided by (used in) operating
activities      |        |                  | 4,017   |         |        |         | (35,655 | )
|                                                     |                                                                                 |                                                                  |                      |                                                      |        |                 
|Investing Activities:                                |                                                                                 |                                                                  |                      |                                                      |        |                  |         |        
|                                                     | Additions to property and equipment                                             |                                                                  |                      | (4,052                                               | )      |                  |         | (3,615  | )     
|                                                     | Additions to field support spares                                               |                                                                  |                      | (2,823                                               | )      |                  |         | (1,717  | )     
|                                                     | Acquisition of Articulent, net of cash acquired                                 |                                                                  |                      |                                                     |        |                  |         | (11,132 | )     
|                                                     | Acquisition of Bi-Tech, net of cash acquired                                    |                                                                  |                      | (7,723                                               | )      |                  |         |        |       
|                                                     | Net proceeds from the sale of IntelliFrame                                      |                                                                  |                      |                                                     |        |                  |         | 5,800   |       
|                                                     | Proceeds from the sale of webMethods stock                                      |                                                                  |                      |                                                     |        |                  |         | 6,281   |       
|                                                     | Net (purchase) redemption of marketable securities                              |                                                                  |                      | (32,775                                              | )      |                  |         | 21,876  |       
|                                                     | Other assets                                                                    |                                                                  |                      | 175                                                  |        |                  |         | 557     |       
|                                                     |                                                                                 |                                                                  |                      |                                                      |        |                 
|                                                     |                                                                                 |                                                                  |                      | Cash provided by (used in) investing
activities      |        |                  | (47,198 | )       |        |         | 18,050  |  
|                                                     |                                                                                 |                                                                  |                      |                                                      |        |                 
|Financing Activities:                                |                                                                                 |                                                                  |                      |                                                      |        |                  |         |        
|                                                     | Net proceeds from issuance of convertible
subordinated debt                     |                                                                  |                      | 121,706                                              |        |                  |         |        |       
|                                                     | Proceeds from issuance of common stock                                          |                                                                  |                      | 1,531                                                |        |                  |         | 1,625   |       
|                                                     | Repurchase of common stock                                                      |                                                                  |                      | (29,941                                              | )      |                  |         | (687    | )     
|                                                     | Repayments of obligations under capital
leases                                  |                                                                  |                      | (719                                                 | )      |                  |         | (771    | )     
|                                                     |                                                                                 |                                                                  |                      |                                                      |        |                 
|                                                     |                                                                                 |                                                                  |                      | Cash provided by financing
activities                |        |                  | 92,577  |         |        |         | 167     |  
|                                                     |                                                                                 |                                                                  |                      |                                                      |        |                 
|Effects of exchange rate changes                     |                                                                                 |                                                                  | 687                  |                                                      |        |                  | (206    | )      
|                                                     |                                                                                 |                                                                  |                      |                                                      |        |                 
|Net increase (decrease) in cash and cash
equivalents |                                                                                 |                                                                  | 50,083               |                                                      |        |                  | (17,644 | )      
|Cash and cash equivalents  beginning of
period      |                                                                                 |                                                                  | 34,402               |                                                      |        |                  | 39,444  |        
|                                                     |                                                                                 |                                                                  |                      |                                                      |        |                 
|Cash and cash equivalents  end of period            |                                                                                 | $                                                                | 84,485               |                                                      |        | $                | 21,800  |        
|                                                     |                                                                                 |                                                                  |                      |                                                      |        |                 

See accompanying notes to Consolidated Financial Statements

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS)

(1)  BASIS OF PRESENTATION

The accompanying consolidated financial statements have been prepared in
accordance with instructions to Form 10-Q and do not include all of the
information and notes required by accounting principles generally accepted
in the United States of America for
complete financial statements. In the
opinion of management, all adjustments
(consisting of normal recurring accruals) considered necessary for a fair
presentation have been included. These consolidated financial statements should
be read in conjunction with the
consolidated financial statements and
accompanying notes included in the
Companys Annual Report on Form 10-K for the
fiscal year ended January 31,
2002 as filed with the Securities and Exchange
Commission. References to fiscal 2002 and 2001, represent the twelve months
ended January 31, 2003 and 2002, respectively.

(2)  MARKETABLE SECURITIES

During the first quarter of fiscal 2001, the Company sold 232,511 shares
of webMethods stock received from the sale of IntelliFrame for approximately
$6.2 million, resulting in a pre-tax loss of approximately $8.7 million. The
Company also wrote-down the carrying value of the remaining 41,031 shares of
webMethods stock that it still owns, resulting in a pre-tax loss of
approximately $1.5 million.

The Companys remaining investments in marketable securities primarily
consist of U.S. government and agency securities, corporate debt securities and
bank certificates of deposit. Excluding the sale of webMethods stock noted
above, the Company did not realize any significant gains or losses from the
sale of marketable securities during the first six months of fiscal 2002 or
2001.

(3)  INVENTORIES

Inventories, stated at the lower of cost (first-in, first-out method) or
market, consist of:

|             |                              |   |          |        |  |             |        |        | 
|------------ | ---------------------------- | - | -------- | ------ |  | ----------- | ------ | ------ | 
|             |                              |   | July 31, |        |  | January 31, |       
|             |                              |   | 2002     |        |  | 2002        |       
|             |                              |   |          |        |  |             |       
|Inventories: |                              |   |          |        |  |             |        |       
|             | Components and subassemblies |   | $        | 25,313 |  |             | $      | 22,391 | 
|             | Work in process              |   |          | 2,817  |  |             |        | 3,834  | 
|             | Finished goods               |   |          | 5,256  |  |             |        | 5,185  | 
|             |                              |   |          |        |  |            
|             |                              | $ | 33,386   |        |  | $           | 31,410 |       
|             |                              |   |          |        |  |            

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(4) CUMULATIVE EFFECT OF CHANGE IN ACCOUNTING PRINCIPLE

In June 2001, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standard (SFAS) No. 141, Business
Combinations and SFAS No. 142, Goodwill and Other Intangible Assets. SFAS
No. 141 requires use of the purchase method of accounting for all business
combinations initiated after June 30, 2001. SFAS No. 141 also provides new
criteria in the determination of intangible assets, including goodwill acquired
in a business combination, and expands financial disclosure concerning business
combinations consummated after June 30, 2001. SFAS No. 142 requires that
goodwill and intangible assets with indefinite useful lives no longer be
amortized but instead be tested for impairment at least annually using a
two-step impairment test. The application of SFAS No. 141 did not affect
previously reported amounts included in goodwill and other intangible assets.

Effective February 1, 2002, the Company adopted SFAS No. 142. SFAS No.
142 provides a six-month transitional period from the effective date of
adoption for the Company to perform an assessment of whether there is an
indication of goodwill impairment. The Company tested its reporting units for
impairment by comparing fair value to carrying value. Fair value was
determined using a discounted cash flow and cost methodology. The Company
engaged a third-party appraisal firm to determine the fair value of a reporting
unit within its Storage Solutions segment. This evaluation indicated that the
goodwill associated with the acquisition of Articulent in April of 2001 was
impaired. The performance of this business has not met managements original
expectations, primarily due to the unexpected global slow down in capital
spending for information technology equipment. Accordingly, a non-cash
impairment charge of $10.1 million from the adoption of SFAS No. 142 was
recognized as a cumulative effect of change in accounting principle in the
first quarter ended April 30, 2002. Impairment adjustments recognized after
adoption, if any, generally are required to be recognized as an operating
expense.

(5) ACQUISITION

On June 24, 2002, the Company acquired all the outstanding stock of
Bi-Tech Solutions, Inc. (Bi-Tech), a leading provider of storage management
solutions and services, for $12 million in cash plus the assumption of
approximately $3.6 million of liabilities and the acquisition of approximately
$8.7 million of tangible assets. The Company has allocated $5.9 million and
$1.8 million of the purchase price to goodwill and customer list, respectively.
The customer list is currently being amortized over a ten-year period. The
final allocation of the purchase price will be subject to adjustment based on
an independent third party appraisal. The accompanying financial statements
include the results of Bi-Tech since June 24, 2002.

The purchase agreement requires payment of additional consideration to the
former stockholders and the Bi-Tech employees based on achievement of certain
earnings levels for each of the next two years starting July 1, 2002. The
additional consideration can be paid in cash or stock of the Company at the
Companys option. The portion payable to the former stockholders will be
recorded as goodwill. The portion payable to Bi-Tech employees will be
recorded as compensation expense. During the second quarter ended July 31,
2002 and based on Bi-Techs operations since July 1, 2002, an additional $431
was added to goodwill and $88 was recorded as compensation expense.

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(6) GOODWILL AND INTANGIBLE ASSETS

As described previously, the Company adopted SFAS No. 142 as of February
1, 2002. The following table reflects the consolidated results adjusted as if
the adoption of SFAS No. 142 occurred as of the beginning of the six month
period ended July 31, 2001:

|                                              |  |                             |        |   |                           |   |       |      |  |   |         |   |  |         |        |   |  |   |        |  
|--------------------------------------------- |  | --------------------------- | ------ | - | ------------------------- | - | ----- | ---- |  | - | ------- | - |  | ------- | ------ | - |  | - | ------ | -
|                                              |  | Three months ended July 31, |        |   | Six months ended July 31, |   |       |      |  |  
|                                              |  |                             |        |   |                           |   |       |      |  |  
|                                              |  | 2002                        |        |   | 2001                      |   |       | 2002 |  |   | 2001    |   |  | FY 2001 |       
|                                              |  |                             |        |   |                           |   |       |      |  |   |         |   |  |         |       
|Net loss, as reported                         |  | $                           | (2,106 | ) |                           | $ | (821  | )    |  | $ | (15,871 | ) |  | $       | (7,376 | ) |  | $ | (3,706 | )
|Add back amortization of
goodwill             |  |                             |       |   |                           |   | 196   |      |  |   |        |   |  |         | 262    |   |  |   | 624    |  
|                                              |  |                             |        |   |                           |   |       |      |  |   |         |   |  |         |       
|Net loss, as adjusted                         |  | $                           | (2,106 | ) |                           | $ | (625  | )    |  | $ | (15,871 | ) |  | $       | (7,114 | ) |  | $ | (3,082 | )
|                                              |  |                             |        |   |                           |   |       |      |  |   |         |   |  |         |       
|Basic and diluted loss per
share, as reported |  | $                           | (0.07  | ) |                           | $ | (0.03 | )    |  | $ | (0.54   | ) |  | $       | (0.25  | ) |  | $ | (0.12  | )
|Add back amortization of
goodwill             |  |                             |       |   |                           |   | 0.01  |      |  |   |        |   |  |         | 0.01   |   |  |   | 0.02   |  
|                                              |  |                             |        |   |                           |   |       |      |  |   |         |   |  |         |       
|Basic and diluted loss per
share, as adjusted |  | $                           | (0.07  | ) |                           | $ | (0.02 | )    |  | $ | (0.54   | ) |  | $       | (0.24  | ) |  | $ | (0.10  | )
|                                              |  |                             |        |   |                           |   |       |      |  |   |         |   |  |         |       

The change in the net carrying amount of goodwill for the six months ended
July 31, 2002 was as follows:

|                            |  |            |     |   |           |   |         |       |  |   |         |  
|--------------------------- |  | ---------- | --- | - | --------- | - | ------- | ----- |  | - | ------- | -
|                            |  | Networking |     |   | Storage   |   |         |       |  |  
|                            |  | Solutions  |     |   | Solutions |   |         |       |  |  
|                            |  | Segment    |     |   | Segment   |   |         | Total | 
|                            |  |            |     |   |           |   |         |       | 
|Balance February 1, 2002    |  | $          | 471 |   |           | $ | 13,599  |       |  | $ | 14,070  |  
|Acquisition of Bi-Tech      |  |            |    |   |           |   | 6,321   |       |  |   | 6,321   |  
|Translation Adjustment      |  |            | (45 | ) |           |   |         |       |  |   | (45     | )
|Impairment Charge           |  |            |    |   |           |   | (10,068 | )     |  |   | (10,068 | )
|                            |  |            |     |   |           |   |         |       | 
|Balance as of July 31, 2002 |  | $          | 426 |   |           | $ | 9,852   |       |  | $ | 10,278  |  
|                            |  |            |     |   |           |   |         |       | 

The components of other amortizable intangible assets were as follows:

|                                   |  |                |       |  |                  |   |     |                |  |   |              |  |  |   |     |  
|---------------------------------- |  | -------------- | ----- |  | ---------------- | - | --- | -------------- |  | - | ------------ |  |  | - | --- | -
|                                   |  | July 31, 2002  |       |  | January 31, 2002 |  
|                                   |  |                |       |  |                  |  
|                                   |  | Gross Carrying |       |  | Accumulated      |   |     | Gross Carrying |  |   | Accumulated  | 
|                                   |  | Amount         |       |  | Amortization     |   |     | Amount         |  |   | Amortization | 
|                                   |  |                |       |  |                  |   |     |                |  |   |              | 
|Customer List                      |  | $              | 2,298 |  |                  | $ | (86 | )              |  | $ | 505          |  |  | $ | (42 | )
|                                   |  |                |       |  |                  |   |     |                |  |   |              | 
|Total other
intangible
assets, net |  | $              | 2,212 |  |                  |   |     |                |  | $ | 463          |  |  |   |     |  
|                                   |  |                |       |  |                  |   |     |                |  |   |              |  |  |  

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Amortization expense for intangible assets during the six months ended
July 31, 2002 was $44. Amortization expense for the remainder of fiscal 2002
is estimated to be $115. Amortization expense is estimated to be $230 each
year from 2003 through 2007.

(7) COMPREHENSIVE LOSS

Comprehensive loss consists of the following:

|                                                                    |  |                  |         |   |      |   |        |  
|------------------------------------------------------------------- |  | ---------------- | ------- | - | ---- | - | ------ | -
|                                                                    |  | Six months ended |        
|                                                                    |  | July 31,         |        
|                                                                    |  |                  |        
|                                                                    |  | 2002             |         |   | 2001 |  
|                                                                    |  |                  |         |   |      |  
|Net loss                                                            |  | $                | (15,871 | ) |      | $ | (7,376 | )
|Unrealized loss on marketable securities,
net of tax effect of $267 |  |                  | (519    | ) |      |   |       |  
|Foreign currency translation adjustment, net
of tax effect of $0    |  |                  | 448     |   |      |   | (313   | )
|                                                                    |  |                  |         |   |      |  
|Total comprehensive loss                                            |  | $                | (15,942 | ) |      | $ | (7,689 | )
|                                                                    |  |                  |         |   |      |  

(8) SEGMENT INCOME

The Company has two reportable segments consisting of its
Networking Solutions business unit and Storage Solutions business
unit. The Networking Solutions business unit consists of our storage
and channel networking products and related services. The Storage
Solutions business unit consists of our storage networking design and
implementation services, the Articulent storage management business
we acquired in April of 2001 and the Bi-Tech storage management
business we acquired in June of 2002. The Companys two reportable
segments are strategic business units that offer different products
and services. They are managed separately because each business
requires different market strategies. The Company evaluates
performance based on operating profit or loss before special charges
and income taxes.

|                      |                      |       |   |                    |        |   |                  |        |        |      |   |        |         |   |   |        |         |  
|--------------------- | -------------------- | ----- | - | ------------------ | ------ | - | ---------------- | ------ | ------ | ---- | - | ------ | ------- | - | - | ------ | ------- | -
|                      |                      |       |   | Three months ended |        |   | Six months ended |       
|                      |                      |       |   | July 31,           |        |   | July 31,         |       
|                      |                      |       |   |                    |        |   |                  |       
|                      |                      |       |   | 2002               |        |   | 2001             |        |        | 2002 |   |        | 2001    |  
|                      |                      |       |   |                    |        |   |                  |        |        |      |   |        |         |  
|Revenue:              |                      |       |   |                    |        |   |                  |        |        |      |   |        |         |   |   |       
|                      | Networking Solutions |       | $ | 34,575             |        |   | $                | 30,024 |        |      | $ | 67,776 |         |   | $ | 55,180 |        
|                      | Storage Solutions    |       |   | 14,291             |        |   |                  | 11,559 |        |      |   | 26,302 |         |   |   | 15,816 |        
|                      |                      |       |   |                    |        |   |                  |        |        |      |   |       
|                      |                      | Total |   | $                  | 48,866 |   |                  | $      | 41,583 |      |   | $      | 94,078  |   |   | $      | 70,996  |  
|                      |                      |       |   |                    |        |   |                  |        |        |      |   |       
|Loss from Operations: |                      |       |   |                    |        |   |                  |        |        |      |   |        |         |   |   |       
|                      | Networking Solutions |       | $ | (2,301             | )      |   | $                | (1,494 | )      |      | $ | (6,541 | )       |   | $ | (6,930 | )      
|                      | Storage Solutions    |       |   | (1,246             | )      |   |                  | (1,103 | )      |      |   | (3,680 | )       |   |   | (2,824 | )      
|                      | Special charges      |       |   |                   |        |   |                  |       |        |      |   |       |         |   |   | (3,321 | )      
|                      |                      |       |   |                    |        |   |                  |        |        |      |   |       
|                      |                      | Total |   | $                  | (3,547 | ) |                  | $      | (2,597 | )    |   | $      | (10,221 | ) |   | $      | (13,075 | )
|                      |                      |       |   |                    |        |   |                  |        |        |      |   |       

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(9) CONVERTIBLE DEBT

In February 2002, the Company sold $125 million of 3% convertible
subordinated notes due February 2007, raising net proceeds of $121 million.
The notes are convertible into the Companys common stock at a price of $19.17
per share. The Company may redeem the notes upon payment of the outstanding
principal balance, accrued interest and a make whole premium if the closing
price of its common stock exceeds 175% of the conversion price for at least 20
consecutive trading days within a period of 30 consecutive trading days ending
on the trading day prior to the date the redemption notice is mailed. On
August 15, 2002 a registration statement for the resale of the notes and the
6.5 million shares of common stock issuable upon conversion of the notes became
effective.

(10) DISCONTINUED OPERATIONS

Propelis Software, Inc., formerly known as the Enterprise Integration Solutions Division,
including IntelliFrame, developed and sold EAI software that automates the
integration of computer software applications, and business workflow processes.
In August 2000, the Company determined to divest Propelis Software, Inc. and
focus on its core storage networking business. As a result, Propelis Software,
Inc. has been accounted for as a discontinued operation in the accompanying
financial statements. During 2001 the Company sold substantially all of the
assets of its discontinued operations in a series of transactions. These
included the sale of its IntelliFrame subsidiary to webMethods and the sale of
other assets to Jacada Ltd. All outstanding options to purchase stock of
Propelis Software were cancelled or have lapsed.

On February 2, 2001 the Company sold all of the outstanding stock of
IntelliFrame Corporation, including the technology underlying the Propelis BPm
product, to webMethods, Inc. for $8.8 million in cash and 273,542 shares of
webMethods common stock. The stock received from webMethods, Inc. was valued at
$17.1 million which reflects a discount from its publicly reported trading
price due to the initial restrictions placed on the Companys ability to freely
sell the stock. In connection with this transaction, the Company paid $3.0
million to two employees, who were former shareholders of IntelliFrame, to
satisfy all obligations to make further bonus payments under their employment
agreements. The sale resulted in an after tax gain of $12.6 million in the
first quarter of fiscal 2001.

In the first quarter of fiscal 2001, the Company accrued $9.3 million for
the estimated future operating losses of Propelis Software, Inc. through the
potential date of divestiture, resulting in an after tax loss of $6.2 million.

On August 23, 2001 the Company sold substantially all of the remaining
assets and liabilities of Propelis Software, Inc. to Jacada Ltd. for $6.0
million in cash, plus a warrant to purchase 350,000 ordinary shares of Jacada
Ltd. stock at a price of $3.26 per share. The transaction resulted in an
after tax gain of $1.8 million in the third quarter of fiscal 2001.

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(11) NEW ACCOUNTING PRONOUNCEMENTS

In July 2002, the Financial Accounting Standards Board issued SFAS No. 146
Accounting for Costs Associated with Exit or Disposal Activities. The
standard requires companies to recognize costs associated with exit or disposal
activities when they are incurred rather than at a date of a commitment to an
exit or disposal plan. Management believes the adoption of SFAS No. 146 will
not have a material effect on the Companys financial statements. SFAS No. 146
is to be applied prospectively to exit or disposal activities initiated after
December 31, 2002 with early application encouraged.

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|        |  |                                                                                      
|------- |  | -------------------------------------------------------------------------------------
|ITEM 2. |  | MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS

Overview

We are a leading provider of end-to-end storage solutions, including
hardware and software products, related consulting and integration services,
and managed services in the growing storage networking market. We focus
primarily on helping our customers design, develop, deploy and manage storage
networks, including storage area networks, or SANs, a high speed network within
a business existing computer system that allows the business to manage its
data storage needs with greater efficiency and less disruption to its overall
network. We design, manufacture, market and support a wide range of solutions
for critical storage networking applications such as remote data replication,
or the real-time backup of data to remotely located disks, and remote tape
vaulting, or the backup of data to remotely archived tapes. We also supply
storage systems, Fibre Channel switches, telecommunications capacity and
storage application software.

Our storage networking solutions enable businesses to cost-effectively
design, implement, monitor and manage their storage requirements, connect
geographically dispersed storage networks, provide continuous availability to
greater amounts of data and protect increasing amounts of data more
efficiently. We market out storage networking products and services directly
to customers through our sales force and worldwide distributors. We also have
strategic marketing and supply relationships with leading storage,
telecommunications and fibre switching companies, including Brocade, Dynergy
Global Communications, EMC, Hewlett-Packard, Hitachi Data Systems, IBM, McDATA,
StorageTek and Veritas.

Economic conditions in early 2001 caused our customers to reevaluate their
capital spending plans, and to defer previously planned projects for
information technology infrastructure. However, we believe the need for
storage networking solutions is significant and will continue to increase. The
reduction in demand for our products and services resulted in the following
charges in the first quarter of fiscal 2001:



| |  |  | $2.0 million to write-down slow moving inventory  
| | - |  | --------------------------------------------------
|
| |  |  | $325,000 for the write-off of a product; and      
|
| |  |  | $996,000 for restructuring, principally severance.

Cumulative Effect of Change in Accounting Principle

Effective February 1, 2002, we adopted SFAS No. 142 Goodwill and Other
Intangible Assets. In connection with the adoption of SFAS No. 142, we
engaged a third party appraisal firm to determine the fair value of one of the
reporting units within our Storage Solutions segment. This evaluation
indicated that the goodwill associated with our acquisition of Articulent in
April of 2001 was impaired resulting in a $10.1 million non-cash charge. This
non-cash charge was recognized as a cumulative effect of change in accounting
principle in our first quarter ended April 30, 2002.

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Sale and Write-down of webMethods Stock

During the first quarter of fiscal 2001, we sold 232,511 shares of
webMethods stock received from the sale of IntelliFrame for approximately $6.2
million, resulting in a pre-tax loss of approximately $8.7 million. We also
wrote-down the carrying value of the remaining 41,031 shares of webMethods
stock that we still own, resulting in a pre-tax loss of approximately $1.5
million.

Discontinued Operations  Divestiture of Propelis Software, Inc.

Propelis Software, Inc., formerly known as our Enterprise Integration Solutions Division,
including IntelliFrame, developed and sold our Enterprise Access Integration
software that automates the integration of computer software applications, and
business workflow processes. In August 2000, we determined to divest Propelis
Software, Inc. and focus on our core storage networking business. As a result,
Propelis Software, Inc. has been accounted for as a discontinued operation in
the accompanying financial statements. During fiscal 2001 we sold
substantially all of the assets of our discontinued operations in a series of
transactions. These included the sale of our IntelliFrame subsidiary to
webMethods and the sale of other assets to Jacada Ltd. All outstanding options
to purchase stock of Propelis Software have been cancelled or have lapsed.

On February 2, 2001 we sold all of the outstanding stock of IntelliFrame
Corporation, including the technology underlying the Propelis BPm product, to
webMethods, Inc. for $8.8 million in cash and 273,542 shares of webMethods
common stock. The stock received from webMethods, Inc. was valued at $17.1
million, which reflects a discount from its publicly reported trading price due
to the initial restrictions placed on our ability to freely sell the stock. In
connection with this transaction, we paid $3.0 million to two employees, who
were former shareholders of IntelliFrame, to satisfy all obligations to make
further bonus payments under their employment agreements. The sale resulted in
an after tax gain of $12.6 million in the first quarter of fiscal 2001.

In the first quarter of fiscal 2001, we accrued $9.3 million for the
estimated future operating losses of Propelis Software, Inc. through the
potential date of divestiture, resulting in an after tax loss of $6.2 million.

On August 23, 2001 we sold substantially all of the remaining assets and
liabilities of Propelis Software, Inc. to Jacada Ltd. for $6.0 million in cash,
plus a warrant to purchase 350,000 ordinary shares of Jacada Ltd. stock at a
price of $3.26 per share. The transaction resulted in an after tax gain of
$1.8 million in the third quarter of fiscal 2001.

Acquisition of Articulent

On April 3, 2001 we acquired all of the outstanding stock of Articulent
Inc., a leading provider of storage solutions and services for $12.4 million in
cash, plus the assumption of approximately $24.4 million of liabilities and the
acquisition of approximately $19.3 million of tangible assets. The
accompanying financial statements include the results of Articulent since April
3, 2001.

Acquisition of Bi-Tech Solutions, Inc.

On June 24, 2002, we acquired all the outstanding stock of Bi-Tech
Solutions, Inc. (Bi-Tech), a leading provider of storage management solutions
and services, for $12 million in cash plus the assumption of approximately

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$3.6 million of liabilities and the acquisition of approximately $8.7 million
of tangible assets. The accompanying financial statements include the results
of Bi-Tech since June 24, 2002.

The purchase agreement requires that we pay at our option in cash or in
our stock to the former stockholders and the Bi-Tech employees additional
consideration based on certain earnings levels for each of the next two years
starting July 1, 2002. The portion payable to the former stockholders will be
recorded as goodwill. The portion payable to Bi-Tech employees will be
recorded as compensation expense. During the second quarter ended July 31,
2002 and based on Bi-Techs operations since July 1, 2002, an additional
$431,000 was added to goodwill and $88,000 was recorded as compensation
expense.

Convertible Debt Offering

In February 2002, we sold $125 million of 3% convertible subordinated
notes due February 2007, raising net proceeds of $121 million. The notes are
convertible into our common stock at a price of $19.17 per share. We may
redeem the notes upon payment of the outstanding principal balance, accrued
interest and a make whole premium if the closing price of our common stock
exceeds 175% of the conversion price for at least 20 consecutive trading days
within a period of 30 consecutive trading days ending on the trading day prior
to the date we mail the redemption notice. On August 15, 2002 a registration
statement for the resale of the notes and the 6.5 million shares of common
stock issuable upon conversion of the notes became effective.

14



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##### Table of Contents



Results of Continuing Operations

The following table sets forth financial data for our continuing
operations for the periods indicated as a percentage of total revenue except
for gross profit, which is expressed as a percentage of the related revenue.

The segment operating information for the three and six months ended July
31, 2002 and 2001 is for illustrative purposes only and has been adjusted to
eliminate the effects of special items and other charges recognized by our
Networking Solutions segment during the first quarter of fiscal 2001,
including a $2.0 million write-down of inventory, a $325,000 write-off of a
product and a $996,000 restructuring charge.

|                     |       |            |          |      |  |                   |      |  |              |          |    |            |          |                     |    |  |                      |  |  |       |    |  |      |       |    |      |  |       |    |  |  |       |    |  |  | 
|-------------------- | ----- | ---------- | -------- | ---- |  | ----------------- | ---- |  | ------------ | -------- | -- | ---------- | -------- | ------------------- | -- |  | -------------------- |  |  | ----- | -- |  | ---- | ----- | -- | ---- |  | ----- | -- |  |  | ----- | -- |  |  | 
|Networking Solutions |       |            |          |      |  | Storage Solutions |     
|                     |       |            |          |      |  |                   |      | 
|Three
months ended   |       | Six months |          |      |  |                   |      |  | Three months |          |    | Six months |         
|July 31,             |       | ended      |          |      |  |                   |      |  | ended        |          |    | ended      |         
|                     |       |            | July 31, |      |  |                   |      |  |              | July 31, |    |            | July 31, |                    
|                     |       |            |          |      |  |                   |      |  |              |          |    |            |         
|2002                 |       |            |          | 2001 |  |                   | 2002 |  |              | 2001     |    |            |          |                     |    |  | 2002                 |  |  | 2001  |    |  | 2002 |       |    | 2001 | 
|                     |       |            |          |      |  |                   |      |  |              |          |    |            |          |                     |    |  |                      |  |  |       |    |  |      |       |    |      | 
|                     |       |            |          |      |  |                   |      |  |              |          |    |            |          | Revenue:            |    |  |                      |  |  |       |    |  |      |       |    |      |  |       |    | 
|                     | 68.4  | %          |          |      |  | 63.9              | %    |  |              | 67.7     | %  |            |          | 59.4                | %  |  | Product
sales        |  |  | 66.3  | %  |  |      | 73.4  | %  |      |  | 64.5  | %  |  |  | 69.2  | % 
|                     | 31.6  |            |          |      |  | 36.1              |      |  |              | 32.3     |    |            |          | 40.6                |    |  | Service
fees         |  |  | 33.7  |    |  |      | 26.6  |    |      |  | 35.5  |    |  |  | 30.8  |   
|                     |       |            |          |      |  |                   |      |  |              |          |    |            |          |                     |    |  |                      |  |  |       |    |  |      |       |    |      | 
|                     | 100.0 |            |          |      |  | 100.0             |      |  |              | 100.0    |    |            |          | 100.0               |    |  | Total
revenue        |  |  | 100.0 |    |  |      | 100.0 |    |      |  | 100.0 |    |  |  | 100.0 |   
|                     |       |            |          |      |  |                   |      |  |              |          |    |            |          |                     |    |  |                      |  |  |       |    |  |      |       |    |      | 
|                     |       |            |          |      |  |                   |      |  |              |          |    |            |          | Gross profit:       |    |  |                      |  |  |       |    |  |      |       |    |      |  |       |    | 
|                     | 47.8  |            |          |      |  | 52.7              |      |  |              | 49.2     |    |            |          | 56.2                |    |  | Product
sales        |  |  | 23.4  |    |  |      | 23.7  |    |      |  | 19.5  |    |  |  | 23.7  |   
|                     | 50.2  |            |          |      |  | 48.5              |      |  |              | 47.7     |    |            |          | 44.8                |    |  | Service
fees         |  |  | 19.7  |    |  |      | (26.7 | )  |      |  | 18.3  |    |  |  | (35.2 | ) 
|                     |       |            |          |      |  |                   |      |  |              |          |    |            |          |                     |    |  |                      |  |  |       |    |  |      |       |    |      | 
|                     | 48.5  |            |          |      |  | 51.2              |      |  |              | 48.7     |    |            |          | 51.6                |    |  | Total
gross profit   |  |  | 22.1  |    |  |      | 10.3  |    |      |  | 19.1  |    |  |  | 5.6   |   
|                     |       |            |          |      |  |                   |      |  |              |          |    |            |          |                     |    |  |                      |  |  |       |    |  |      |       |    |      | 
|                     |       |            |          |      |  |                   |      |  |              |          |    |            |          | Operating expenses: |    |  |                      |  |  |       |    |  |      |       |    |      |  |       |    | 
|                     | 30.8  |            |          |      |  | 32.5              |      |  |              | 33.2     |    |            |          | 35.3                |    |  | Sales
and marketing  |  |  | 25.0  |    |  |      | 18.1  |    |      |  | 27.9  |    |  |  | 20.6  |   
|                     | 18.1  |            |          |      |  | 17.1              |      |  |              | 18.9     |    |            |          | 20.7                |    |  | Engineering
and      |  |  | 2.4   |    |  |      | 0.0   |    |      |  | 1.7   |    |  |  | 0.0   |   
|                     |       |            |          |      |  |                   |      |  |              |          |    |            |          | development         |    |  |                      |  |  |       |    |  |      |       |    |      |  |       |    | 
|                     |       |            |          |      |  |                   |      |  |              |          |    |            |          | General
and         |    |  |                      |  |  |       |    |  |      |       |    |      |  |       |    | 
|                     | 6.3   |            |          |      |  | 6.6               |      |  |              | 6.3      |    |            |          | 8.1                 |    |  | administrative       |  |  | 3.5   |    |  |      | 1.7   |    |      |  | 3.5   |    |  |  | 2.8   |   
|                     |       |            |          |      |  |                   |      |  |              |          |    |            |          |                     |    |  |                      |  |  |       |    |  |      |       |    |      | 
|                     |       |            |          |      |  |                   |      |  |              |          |    |            |          | Total
operating     |    |  |                      |  |  |       |    |  |      |       |    |      |  |       |    | 
|                     | 55.2  |            |          |      |  | 56.2              |      |  |              | 58.4     |    |            |          | 64.1                |    |  | expenses             |  |  | 30.9  |    |  |      | 19.8  |    |      |  | 33.1  |    |  |  | 23.4  |   
|                     |       |            |          |      |  |                   |      |  |              |          |    |            |          |                     |    |  |                      |  |  |       |    |  |      |       |    |      | 
|                     | (6.7) | %          |          |      |  | (5.0              | )%   |  |              | (9.7     | )% |            |          | (12.5               | )% |  | Loss from operations |  |  | (8.8  | )% |  |      | (9.5  | )% |      |  | (14.0 | )% |  |  | (17.8 | )%
|                     |       |            |          |      |  |                   |      |  |              |          |    |            |          |                     |    |  |                      |  |  |       |    |  |      |       |    |      | 

Revenue

Networking Solutions

Our networking solutions business generated revenues of $34.6 million and
$67.8 million in the second quarter and first half of fiscal 2002,
respectively, increases of 15% and 23%, respectively, from $30.0 million and
$55.2 million for the second quarter and first half of fiscal 2001. Storage
networking product revenues totaled $19.8 million and $38.4 million in the
second quarter and first half of fiscal 2002, respectively, increases of 23%
and 61%, respectively, from $16.1 million and $23.8 million in the second
quarter and first half of fiscal 2001. Channel networking product revenues
totaled $3.9 million and $7.6 million in the second quarter and first half of
fiscal 2001, respectively, an increase of 26% and decrease of 16%,
respectively, from $3.1 million and $8.9 million for the second quarter and
first half of fiscal 2001. We expect that revenue from our storage networking
products will account for a substantial and growing portion of our total
networking revenue for the foreseeable future. Further we do not expect
revenue for our channel networking products to increase significantly and it
may decline in the future.

Service revenues associated with our networking business totaled $10.9
million and $21.9 million in the second quarter and first half of fiscal 2002,
respectively, an increase of 1% and decrease of 2%, respectively, from $10.8
million and $22.4 million in the second quarter and first half of fiscal 2001.

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Storage Solutions

Revenue for our storage solutions business increased in the second quarter
and first half of fiscal 2002 to $14.3 million and $26.3 million, respectively,
up 24% and 66%, respectively, from $11.6 million and $15.8 million for the
second quarter and first half of fiscal 2001. Our acquisition of Bi-Tech in
June 2002 contributed $1.7 million of revenue in the second quarter of fiscal
2002. Our acquisition of Articulent in April 2001 and Bi-Tech in June 2002 has
significantly expanded our solution offerings and accounts for a significant
portion of the increase in revenue when comparing the first half of fiscal 2002
to 2001.

General

Revenue generated from the sale of products and services outside the
United States for the second quarter and first half of fiscal 2002 totaled
$12.7 million and $22.2 million, respectively, increases of 15% and 7%,
respectively, from $11.0 million and $20.7 million for the second quarter and
first half of fiscal 2001. Bi-Tech increased our international sales in the
second quarter and first half of fiscal 2002 by $1.7 million. Bi-Tech is based
in the United Kingdom and will increase our international sales in future
periods.

No single customer accounted for more than 10% of our revenue during the
first half of fiscal 2002 or 2001. Price discounting had a small impact on our
product revenue during these periods.

During the first half of fiscal 2002, approximately 34% and 10% of our
product revenue was derived from businesses in the financial services and
information outsourcing industries, respectively.

We primarily sell our storage networking products directly to end-user
customers in connection with joint marketing activities with our business
partners. For a new customer, the initial sales and design cycle, from first
contact through shipment, can vary from 90 days to 12 months or more. We
expect this cycle will continue.

We expect continued quarter-to-quarter fluctuations in revenue in both
domestic and international markets. The timing of sizable orders, because of
their relative impact on total quarterly sales, may contribute to such
fluctuations. The level of product sales reported by us in any given period
will continue to be affected by the receipt and fulfillment of sizable new
orders in both domestic and international markets.

Gross Profit Margin

Networking

Gross product margins for our networking business for the second quarter
and first half of fiscal 2002 were 48% and 49%, respectively, compared to 53%
and 49%, respectively, in the second quarter and first half of fiscal 2001.
Excluding the $2.0 million write-down of slow moving inventory and the $325,000
write-off of a product, gross product margins from the sale of
networking products for the first half of fiscal 2001 would have been 56%. The
decline in gross margin percentage, excluding charges, was due to

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the continued movement in sales mix toward our UltraNet® products which carry a
lower margin than our older Channelink® products.

Gross service margins for our networking business improved in the second
quarter and first half of fiscal 2002 to 50% and 48%, respectively, from 49%
and 45%, respectively, in the second quarter and first half of fiscal 2001. The
improvement was due to economies of scale resulting from the steadily
increasing base of customers contracting for services, actions taken in April
2001 to reduce headcount and wage expense, and a change in third party
maintenance and logistic suppliers in 2001 that also reduced costs.

Storage Solutions

Gross product margins for our storage solutions business for the second
quarter and first half of fiscal 2002 were 23% and 20%, respectively, compared
to 24% in the second quarter and first half of fiscal 2001. The decline in
gross margin percentage was primarily due to a change in product mix, with a
higher percentage of revenue coming from the sale of lower margin third party
products.

Gross service margins for our storage solutions business improved in the
second quarter and first half of fiscal 2002 to 20% and 18%, respectively, from
a negative 27% and 35%, respectively, in the second quarter and first half of
fiscal 2001. The service costs for the solutions business, mainly people, tend
to be fixed in nature. The improvement in gross service margins was due to
higher utilization of our employee consultants.

Operating Expenses

Networking

Sales and marketing expense for the second quarter and first half of
fiscal 2002 totaled $10.6 million and $22.5 million, up 9% and 15%,
respectively, from $9.8 million and $19.5 million in the second quarter and
first half of fiscal 2001. Since the beginning of 2001, we have increased our
sales force by over 25% and have added additional sales management to increase
revenue and grow our business. Commission expenses were also higher in the
second quarter and first half of fiscal 2002 when compared to the same periods
of 2001 as a result of higher levels of sales.

Engineering and development expense for the second quarter and first half
of fiscal 2002 totaled $6.2 million and $12.8 million, up 22% and 12%,
respectively, from $5.1 million and $11.4 million in the second quarter and
first half of fiscal 2001. The increase was primarily due to continued
development of our UltraNet® family of products, particularly the UltraNet®
Edge product, which has generated $9.0 million of revenue since its
introduction in the third quarter of fiscal 2001. This increase was partially
offset by cost reduction actions taken in April 2001, including a workforce
reduction, wage cuts and reductions in discretionary spending.

Storage Solutions

Sales, marketing, engineering and development expense for the second
quarter and first half of fiscal 2002 totaled $3.9 million and $7.8 million, up
87% and 138%, respectively, from $2.1 million and $3.3 million in the second
quarter and first half of fiscal 2001. The increase was primarily due to the
incremental costs associated with the acquisitions of Articulent in April 2001
and Bi-Tech in June 2002. The Bi-Tech acquisition increased sales,

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marketing, engineering and development expense in the second quarter of fiscal
2002 by $378,000.

General and administrative

General and administrative expenses for the second quarter and first half
of fiscal 2002 totaled $2.7 million and $5.2 million, respectively, up from
$2.2 million and $4.9 million in the second quarter and first half of fiscal
2001. General and administrative expense in the second quarter and first half
of fiscal 2002 include approximately $122,000 of legal fees for potential
acquisitions that were not pursued. The Bi-Tech acquisition also increased
general and administrative expenses by $106,000 in the second quarter of fiscal
2002. The remainder of the increase was due to higher professional fees and
employee related expenses. Elimination of goodwill amortization in the second
quarter and first half of fiscal 2002 due to adoption of SFAS 142 reduced
expense by $196,000 and $262,000, respectively, when compared to the second
quarter and first half of fiscal 2001.

Other

Excluding the $10.3 million loss from the sale and write-down of
webMethods stock in the first quarter of fiscal 2001, other income for the
second quarter and first half of fiscal 2002 totaled $373,000 and $1.4 million,
respectively, compared to $1.4 million and $3.2 million in the second quarter
and first half of fiscal 2001. In February 2002, we sold $125 million of 3%
convertible subordinated notes due February 2007, raising net proceeds of $121
million. Coupon interest on the notes, plus amortization of debt issuance
costs, resulted in increases of $1.1 million and $1.9 million in interest
expense for the second quarter and first half of fiscal 2002 when compared the
same periods of 2001. Pending use of the offering proceeds for general
corporate purposes or complementary acquisitions, the funds will be invested in
investment grade, interest-bearing securities. During the second quarter and
first half of fiscal 2002, we recorded interest and other income of $1.5
million and $3.5 million, respectively, compared to $1.4 million and $3.4
million in the second quarter and first half of fiscal 2001. Additional
interest income resulting from investment of the debt offering proceeds was
offset by lower interest rates.

We recorded a benefit for income taxes for the second quarter and first
half of fiscal 2002 at an effective income tax rate of 34%, compared to 33% and
31% for second quarter and first half of fiscal 2001. The $10.3 million loss
on the sale and write-down of the webMethods stock in the first quarter of
fiscal 2001 was taxed at an effective tax rate of 30%. Excluding this item,
our effective tax rate for the first half of fiscal 2001 would have been 33%.
Based on an assessment of our taxable earnings history and prospective future
taxable income, we have determined it to be more likely than not that our net
deferred tax asset will be realized in future periods. We may be required to
provide a valuation allowance for this asset in the future if we do not
generate sufficient taxable income as planned.

Liquidity and Capital Resources

We have historically financed our operations through the public and
private sale of debt and equity securities, bank borrowings under lines of
credit, capital and operating leases and cash generated by operations.

Cash, cash equivalents and marketable securities at July 31, 2002 totaled
$200 million, an increase of $82 million since January 31, 2002. The increase

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is primarily due to receipt of the $121 million of net proceeds from the sale
of 3% convertible subordinated notes in February 2002. The proceeds from the
offering will be used for general working capital purposes, including potential
acquisitions. Operations also contributed $4.0 million of cash in the first
half of fiscal 2002. Uses of cash in the first half of fiscal 2002 included
$6.9 million for capital equipment and field support spares, along with $7.7
million for the acquisition of Bi-Tech. In April of 2001, our board of
directors authorized the repurchase of up to $50.0 million of our common stock.
As of July 31, 2002 we had repurchased 3.8 million shares of our common stock
for $30.6 million pursuant to this authorization. Approximately $29.9 million
of these repurchases were in the second quarter of fiscal 2002.

Expenditures for capital equipment and field support spares have been, and
will likely continue to be, a significant capital requirement. We believe that
our current balances of cash, cash equivalents and marketable securities, when
combined with anticipated cash flows from operations will be adequate to fund
our operating plans and meet our current anticipated aggregate capital
requirements, at least through the next twelve months.

We believe that inflation has not had a material impact on our operations
or liquidity to date.

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Our future minimum contractual cash obligations at July 31, 2002,
including open purchase orders incurred in the ordinary course of business, are
as follows:

|                                              |   |               |   |             |  |             |              |        |  |       |  |               |  |            |   |             |  |  |  |  |  |  |  | 
|--------------------------------------------- | - | ------------- | - | ----------- |  | ----------- | ------------ | ------ |  | ----- |  | ------------- |  | ---------- | - | ----------- |  |  |  |  |  |  |  | 
|                                              |   |               |   |             |  | Less Than   |              | One to |  |       |  | Four to Five  |  |            |   | After      
|Cash Obligation                               |   | Total         |   | One year    |  | Three Years |              |        |  | Years |  |               |  | Five Years
|                                              |   |               |   |             |  |             |              |        |  |       |  |               |  |           
|Capital leases                                | $ | 1.7 million   | $ | 1.4 million |  | $           | 328,000      |        |  | $     |  | None          |  |            | $ | None       
|Operating leases                              | $ | 25.3 million  | $ | 5.3 million |  | $           | 8.9 million  |        |  | $     |  | 2.5 million   |  |            | $ | 8.6 million
|Purchase orders                               | $ | 6.7 million   | $ | 5.9 million |  | $           | 790,000      |        |  | $     |  | None          |  |            | $ | None       
|Convertible subordinated
notes, plus interest | $ | 143.8 million | $ | 3.8 million |  | $           | 11.3 million |        |  | $     |  | 128.7 million |  |            | $ | None       




ITEM 3. MARKET RISK

Our exposure to market risk due to changes in the general level of U.S.
interest rates relates primarily to our cash, cash equivalents, and marketable
securities. Our cash, cash equivalents and marketable securities are primarily
maintained at six major financial institutions in the United States. As of
July 31, 2002, we did not hold any derivative instruments. The primary
objective of our investment activities is the preservation of principal while
maximizing investment income and minimizing risk. We mainly invest our cash,
cash equivalents and marketable securities in investment grade, highly liquid
investments, consisting of U.S. government and agency securities, corporate
debt securities and bank certificates of deposits. We believe that market risk
due to changes in interest rates is not material.

Our convertible subordinated debt is subject to a fixed interest rate and
the notes are based on a fixed conversion ratio into common stock. Therefore,
we are not exposed to changes in interest rates related to our long-term debt
instruments. Our common stock is quoted on the Nadsaq National Market under
the symbol CMNT. On July 31, 2002, the last reported sale price of our
common stock on the Nasdaq Market was $5.48 per share.

At July 31, 2002, our marketable securities included a $202,000 investment
in a Standard & Poors 500 stock price index fund and a $176,000 investment in a
NASDAQ 100 index tracking stock. These investments were purchased to directly
offset any investment gains or losses owed to participants under our executive
deferred compensation plan which has been established for selected key
employees. We also own 41,031 shares of webMethods stock received from the
sale of IntelliFrame.

We are exposed to market risks related to fluctuations in foreign exchange
rates because some sales transactions, and the assets and liabilities of our
foreign subsidiaries, are denominated in foreign currencies, primarily the euro
and British pound sterling. As of July 31, 2002, we had an open forward
exchange contract for 300,000 euro that settled in August 2002.

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ITEM 4. CONTROLS AND PROCEDURES

In the quarter ended July 31, 2002, we did not make any significant
changes in, nor take any corrective actions regarding, our internal controls or
other factors that could significantly affect these controls. We periodically
review our internal controls for effectiveness and we plan to conduct an
evaluation of our disclosure controls and procedures each quarter.

Forward Looking Statements

This Form 10-Q and other documents we have filed with the Securities and
Exchange Commission contain forward-looking statements, which may include
statements about our:



| |  |  | anticipated receipt of orders and their impact on quarterly sales;                                              
| | - |  | ----------------------------------------------------------------------------------------------------------------
|
| |  |  | business strategy;                                                                                              
|
| |  |  | expectations regarding future revenue levels, gross margins, expenses,
operating margins and earnings per share;
|
| |  |  | timing of and plans for the introduction or phase-out of products or
services;                                  
|
| |  |  | enhancements of existing products or services;                                                                  
|
| |  |  | plans for hiring or reducing personnel;                                                                         
|
| |  |  | entering into strategic partnerships;                                                                           
|
| |  |  | other plans, objectives, expectations and intentions contained in this
Form 10-Q that are not historical facts. 

When used in this Form 10-Q, the words may, should, expect, plan,
anticipate, believe, estimate, predict, intend, potential or
continue and similar expressions are generally intended to identify
forward-looking statements, although not all forward-looking statements contain
these identifying words. These forward-looking statements involve
risks and uncertainties. Actual results could differ materially from those
expressed or implied by these forward-looking statements as a result of certain
risk factors, including but not limited to (i) competitive factors, including
pricing pressures; (ii) variability in quarterly sales; (iii) economic trends
generally and in various geographic markets; (iv) relationships with our
strategic partners; (v) technological change affecting our products; (vi)
whether any delayed orders will be received; (vii) whether share repurchases,
if continued, will have a positive impact on our stock price; (viii)
unanticipated risks associated with introducing new products and features, and,
(ix) other events and other important factors, including those discussed under
cautionary statements in Exhibit 99 to our Form 10-K filing with the Securities
and Exchange Commission for the year ended January 31, 2002. We assume no
obligation to update any forward-looking statements. These statements are only
predictions. Although we believe that the expectations reflected in the
forward-looking statements are reasonable, we cannot guarantee future results,
levels of activity, performance or achievements. The forward looking
statements speak as of the date hereof. Unless otherwise required by
applicable securities laws, we disclaim any intention or obligation to update
or revise any forward looking statements, whether as a result of new
information, future events or otherwise.

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PART II. OTHER INFORMATION




Item 1-3. None




Item 4.    Submission of matters to a vote of security holders



| | (a) |  | The annual meeting of shareholders was held on June 25, 2002
| | --- |  | ------------------------------------------------------------
| | (b) |  | Election as directors of the company:                       
| |     |  | Thomas G. Hudson                                            
| |     |  | Erwin A. Kelen                                              
| |     |  | John A. Rollwagen                                           
| |     |  | Patrick W. Gross                                            
| |     |  | Lawrence A. McLernon                                        
| | (c) |  | Matters voted upon                                          

|   |  |                                                                                                                                                     |  |             |  |           |  |           |  |          
|-- |  | --------------------------------------------------------------------------------------------------------------------------------------------------- |  | ----------- |  | --------- |  | --------- |  | ---------
|   |  |                                                                                                                                                     |  | Affirmative |  | Negative  |  | Abstain   |  | Broker   
|   |  |                                                                                                                                                     |  | Votes       |  | Votes     |  | Votes     |  | Non-Votes
|   |  |                                                                                                                                                     |  |             |  |           |  |           |  |          
|1. |  | Election of
Directors                                                                                                                               |  |             |  |           |  |           |  |          
|   |  | Thomas G. Hudson                                                                                                                                    |  | 21,238,619  |  | 7,098,346 |  |          |  |         
|   |  | Erwin A. Kelen                                                                                                                                      |  | 27,353,598  |  | 983,367   |  |          |  |         
|   |  | John A. Rollwagen                                                                                                                                   |  | 27,331,978  |  | 1,004,987 |  |          |  |         
|   |  | Patrick W. Gross                                                                                                                                    |  | 27,380,763  |  | 956,202   |  |          |  |         
|   |  | Lawrence A. McLernon                                                                                                                                |  | 27,357,472  |  | 979,493   |  |          |  |         
|  
|2. |  | Proposal to
amend the 1992
employee Stock purchase
plan to increase the
number of shares
authorized for
issuance thereunder by
400,000 to 1,500,000 |  | 27,409,875  |  | 1,543,311 |  | 1,223,190 |  |         
|  
|3. |  | Proposal to
adopt the 2002
stock award plan with an
initial share authorization
for issuance thereunder
of 1,000,000                                |  | 20,220,619  |  | 6,981,619 |  | 1,134,727 |  |         
|  
|4. |  | Proposal to
ratify and approve
the appointment
of KPMG LLP as
independent
auditors for
the fiscal year
ending January 31, 2003                      |  | 27,521,314  |  | 768,725   |  | 46,926    |  |         




Item 5.    None

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Item 6. Exhibits and Reports on Form 8-K

(a)  Exhibits filed herewith.

| |  |  |     |  |  |                                                                                                                                                                                                                                                                                                                                   
| |  |  | --- |  |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  |  | 2.1 |  |  | Purchase Agreement dated June 24, 2002 between
Computer Network Technology Corporation, Greg
Scorziello, Paul John Foskett and Owen George Smith
and agreed form of registration rights agreement
set forth in Annex I thereto (Incorporated by
reference to Exhibit 2.2 Registration Statement
No. 333-87376.)                   
| |  |  |     |  |  |                                                                                                                                                                                                                                                                                                                                   
| |  |  | 3.1 |  |  | Second Restated Articles of incorporation of the
Company. (Incorporated by reference to Exhibits 3(i)-1
and 3(i)-2 to current report on Form 8-K dated May 25,
1999).                                                                                                                                                             
| |  |  |     |  |  |                                                                                                                                                                                                                                                                                                                                   
| |  |  | 3.2 |  |  | Articles of Amendment of the Second Restated Articles
of the Company. (Incorporated by reference to Exhibit
3(i)-1 to current report on Form 8-K dated May 25,
1999.)                                                                                                                                                             
| |  |  |     |  |  |                                                                                                                                                                                                                                                                                                                                   
| |  |  | 3.3 |  |  | By-laws of the Company (Incorporated by reference to
Exhibit 3 (ii)-1 to current report on Form 8-K dated
May 25, 1999.)                                                                                                                                                                                                          
| |  |  |     |  |  |                                                                                                                                                                                                                                                                                                                                   
| |  |  | 4.1 |  |  | Rights Agreement between the
Company and Chase Mellon
Shareholder Services, L.L.C., as Rights Agent
including the form of Rights Certificate and the
Summary of Rights to Purchase Preferred Shares.
(Incorporated by reference to Exhibit 1 to Form 8-A
dated July 29, 1998 and Exhibit 1 to Form 8-A/A
dated November 27, 2000.)
| |  |  |     |  |  |                                                                                                                                                                                                                                                                                                                                   
| |  |  | 4.2 |  |  | First Amendment of Rights Agreement dated November 21,
2000. (Incorporated by reference to Exhibit 1 to Form
8-A/A dated November 27, 2000.)                                                                                                                                                                                      
| |  |  |     |  |  |                                                                                                                                                                                                                                                                                                                                   
| |  |  | 4.3 |  |  | First Amendment of Certificate of Designations,
Preferences and Right of Series A Junior Participating
Preferred Stock. ($.01 Par Value Per Share) of
Computer Network Technology Corporation (Incorporated
by reference to Exhibit 2 to Form 8-A/A dated November
27, 2000.)                                                     
| |  |  |     |  |  |                                                                                                                                                                                                                                                                                                                                   
| |  |  | 11. |  |  | Statement Re: Computation of Net Loss per Basic and
Diluted Share.                                                                                                                                                                                                                                                                

(b)  Reports on Form 8-K



| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | During the quarter ended July 31, 2002 the Company filed three
reports on Form 8-K. On June 15, 2002, a Form 8-K was filed
containing the Companys Amended/Restated 1999 Stock Award Plan
and the Amended/Restated 1992 Employee Stock Purchase Plan. On
July 18, 2002 a Form 8-K was filed outlining the Change of
Control Agreements the Company entered into with Thomas Hudson
and Gregory Barnum. On August 5, 2002, a Form 8-K was filed
containing the Approval of Amendments related to the Companys
1992 and 2002 Stock Award Plans.

23



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##### Table of Contents






SIGNATURES

Pursuant to the requirements of the Securities and Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned duly authorized officers.

COMPUTER NETWORK TECHNOLOGY CORPORATION
(Registrant)

|      |  |                     |  |     |                                              |                         
|----- |  | ------------------- |  | --- | -------------------------------------------- | ------------------------
|Date: |  | September 11,  2002 |  | By: |                                              | /s/ Gregory T. Barnum   
|      |  |                     |  |     |                                             
|      |  |                     |  |     | Gregory T. Barnum                           
|      |  |                     |  |     | Chief Financial Officer                     
|      |  |                     |  |     | (Principal financial officer)               
|      |  |                     |  |     |                                              |                         
|      |  |                     |  | By: |                                              | /s/ Jeffrey A. Bertelsen
|      |  |                     |  |     |                                             
|      |  |                     |  |     | Jeffrey A. Bertelsen                        
|      |  |                     |  |     | Corporate Controller                        
|      |  |                     |  |     | and Treasurer
(Principal accounting officer)

24



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##### Table of Contents



CERTIFICATIONS

I, Thomas G. Hudson, certify that:

1.     I have reviewed this quarterly report on Form 10-Q of Computer Network
Technology Corporation;

2.     Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this quarterly
report; and

3.     Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this quarterly report.

Date: September 11, 2002



| | /s/ Thomas G. Hudson
Thomas G. Hudson
Chief Executive Officer
| | -------------------------------------------------------------

25



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##### Table of Contents



I, Gregory T. Barnum, certify that:

1.     I have reviewed this quarterly report on Form 10-Q of Computer Network
Technology Corporation;

2.     Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this quarterly
report; and

3.     Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this quarterly report.

Date: September 11, 2002



| | /s/ Gregory T. Barnum
Gregory T. Barnum
Chief Financial Officer
| | ---------------------------------------------------------------

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##### Table of Contents



EXHIBIT INDEX

|     |  |             |     |  |  |                                                                                                                                                                                                                                                                                                                                   
|---- |  | ----------- | --- |  |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Item |  | Description
|     |  |            
|     |  |             | 2.1 |  |  | Purchase Agreement dated June 24, 2002 between
Computer Network Technology Corporation, Greg
Scorziello, Paul John Foskett and Owen George Smith
and agreed form of registration rights agreement
set forth in Annex I thereto (Incorporated by
reference to Exhibit 2.2 Registration Statement
No. 333-87376.)                   
|     |  |             |     |  |  |                                                                                                                                                                                                                                                                                                                                   
|     |  |             | 3.1 |  |  | Second Restated Articles of incorporation of the
Company. (Incorporated by reference to Exhibits 3(i)-1
and 3(i)-2 to current report on Form 8-K dated May 25,
1999).                                                                                                                                                             
|     |  |             |     |  |  |                                                                                                                                                                                                                                                                                                                                   
|     |  |             | 3.2 |  |  | Articles of Amendment of the Second Restated Articles
of the Company. (Incorporated by reference to Exhibit
3(i)-1 to current report on Form 8-K dated May 25,
1999.)                                                                                                                                                             
|     |  |             |     |  |  |                                                                                                                                                                                                                                                                                                                                   
|     |  |             | 3.3 |  |  | By-laws of the Company (Incorporated by reference to
Exhibit 3 (ii)-1 to current report on Form 8-K dated
May 25, 1999.)                                                                                                                                                                                                          
|     |  |             |     |  |  |                                                                                                                                                                                                                                                                                                                                   
|     |  |             | 4.1 |  |  | Rights Agreement between the
Company and Chase Mellon
Shareholder Services, L.L.C., as Rights Agent
including the form of Rights Certificate and the
Summary of Rights to Purchase Preferred Shares.
(Incorporated by reference to Exhibit 1 to Form 8-A
dated July 29, 1998 and Exhibit 1 to Form 8-A/A
dated November 27, 2000.)
|     |  |             |     |  |  |                                                                                                                                                                                                                                                                                                                                   
|     |  |             | 4.2 |  |  | First Amendment of Rights Agreement dated November 21,
2000. (Incorporated by reference to Exhibit 1 to Form
8-A/A dated November 27, 2000.)                                                                                                                                                                                      
|     |  |             |     |  |  |                                                                                                                                                                                                                                                                                                                                   
|     |  |             | 4.3 |  |  | First Amendment of Certificate of Designations,
Preferences and Right of Series A Junior Participating
Preferred Stock. ($.01 Par Value Per Share) of
Computer Network Technology Corporation (Incorporated
by reference to Exhibit 2 to Form 8-A/A dated November
27, 2000.)                                                     
|     |  |             |     |  |  |                                                                                                                                                                                                                                                                                                                                   
|     |  |             | 11. |  |  | Statement Re: Computation of Net Loss per Basic and
Diluted Share. Electronically Filed                                                                                                                                                                                                                                           

27