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

FORM 10-Q

(Mark One)

|  |  |                                                                                                                                
|- |  | -------------------------------------------------------------------------------------------------------------------------------
|x |  | QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED
APRIL 30, 2003

|  |  |                                                                                                                                          
|- |  | -----------------------------------------------------------------------------------------------------------------------------------------
|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





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



6000 Nathan Lane North, Minneapolis, Minnesota 55442



Telephone Number: (763) 268-6000

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 o

Indicate by check mark whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Exchange Act). Yes x No o

As of May 30, 2003, the registrant had 27,008,895 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 months ended April 30, 2003 and 2002
|                                                                                              | Consolidated Balance Sheets as of April 30, 2003 and January 31, 2003                   
|                                                                                              | Consolidated Statements of Cash Flows for the three months ended April 30, 2003 and 2002
|                                                                                              | 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. Legal Proceedings                                                                    
|Items 2-5. None                                                                              
|Item 6. Exhibits and Reports on Form 8-K                                                     
|SIGNATURES                                                                                   
|CERTIFICATIONS                                                                               
|EXHIBIT INDEX                                                                                
|EX-10.1 Tax Sharing Agreement                                                                
|EX-10.3 Letter Agreement - Kenneth H. Koch                                                   
|EX-10.4 Letter Agreement - John R. Schwab                                                    
|EX-11 Statement Re: Computation of Net Income                                                
|EX-99.1 Certification of CEO and CFO                                                         



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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 months ended April 30, 2003 and 2002 |  |  |  | 3   
|               |  |                                                                                          |  |  |  |     
|               |  | Consolidated Balance Sheets as of April 30, 2003
and January 31, 2003                    |  |  |  | 4   
|               |  |                                                                                          |  |  |  |     
|               |  | Consolidated Statements of Cash Flows for the
three months ended April 30, 2003 and 2002 |  |  |  | 5   
|               |  |                                                                                          |  |  |  |     
|               |  | Notes to Consolidated Financial Statements                                               |  |  |  | 6   
|               |  |                                                                                          |  |  |  |     
|Item 2.        |  | Managements Discussion and Analysis of Financial
Condition and Results of Operations    |  |  |  | 11  
|               |  |                                                                                          |  |  |  |     
|Item 3.        |  | Market Risk                                                                              |  |  |  | 19  
|               |  |                                                                                          |  |  |  |     
|Item 4.        |  | Controls and Procedures                                                                  |  |  |  | 20  
|               |  |                                                                                          |  |  |  |     
|PART II        |  | OTHER INFORMATION                                                                        |  |  |  | 22  
|               |  |                                                                                          |  |  |  |     
|Item 1.        |  | Legal Proceedings                                                                        |  |  |  | 22  
|               |  |                                                                                          |  |  |  |     
|Items 2-5.     |  | None                                                                                     |  |  |  |     
|               |  |                                                                                          |  |  |  |     
|Item 6.        |  | Exhibits and Reports on Form 8-K                                                         |  |  |  | 23  
|               |  |                                                                                          |  |  |  |     
|SIGNATURES     |  |                                                                                          |  |  |  | 24  
|               |  |                                                                                          |  |  |  |     
|CERTIFICATIONS |  |                                                                                          |  |  |  | 25  
|               |  |                                                                                          |  |  |  |     
|EXHIBIT INDEX  |  |                                                                                          |  |  |  | 27  

2



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PART I

Item 1.

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

|                                                                    |                                                     |                          |        |                    |        |   |         |        |        | 
|------------------------------------------------------------------- | --------------------------------------------------- | ------------------------ | ------ | ------------------ | ------ | - | ------- | ------ | ------ | 
|                                                                    |                                                     |                          |        | Three months ended
|                                                                    |                                                     |                          |        |                   
|                                                                    |                                                     |                          |        | April
30,         
|                                                                    |                                                     |                          |        | 2003               |        |   | 2002    |       
|                                                                    |                                                     |                          |        |                    |        |   |         |       
|Revenue:                                                            |                                                     |                          |        |                    |        |   |         |       
|                                                                    | Product sales                                       |                          | $      | 34,404             |        |   | $       | 29,754 |       
|                                                                    | Service fees                                        |                          |        | 17,926             |        |   |         | 15,458 |       
|                                                                    |                                                     |                          |        |                    |        |  
|                                                                    |                                                     | Total revenue            |        |                    | 52,330 |   |         |        | 45,212 | 
|                                                                    |                                                     |                          |        |                    |        |  
|Cost of revenue:                                                    |                                                     |                          |        |                    |        |   |         |       
|                                                                    | Cost of product sales                               |                          |        | 21,634             |        |   |         | 17,368 |       
|                                                                    | Cost of service fees                                |                          |        | 10,086             |        |   |         | 9,760  |       
|                                                                    |                                                     |                          |        |                    |        |  
|                                                                    |                                                     | Total cost of revenue    |        |                    | 31,720 |   |         |        | 27,128 | 
|                                                                    |                                                     |                          |        |                    |        |  
|Gross profit                                                        |                                                     |                          | 20,610 |                    |        |   | 18,084  |       
|                                                                    |                                                     |                          |        |                    |        |  
|Operating expenses:                                                 |                                                     |                          |        |                    |        |   |         |       
|                                                                    | Sales and marketing                                 |                          |        | 14,206             |        |   |         | 15,577 |       
|                                                                    | Engineering and development                         |                          |        | 5,920              |        |   |         | 6,668  |       
|                                                                    | General and administrative                          |                          |        | 2,556              |        |   |         | 2,513  |       
|                                                                    |                                                     |                          |        |                    |        |  
|                                                                    |                                                     | Total operating expenses |        |                    | 22,682 |   |         |        | 24,758 | 
|                                                                    |                                                     |                          |        |                    |        |  
|Loss from operations                                                |                                                     |                          | (2,072 | )                  |        |   | (6,674  | )     
|                                                                    |                                                     |                          |        |                    |        |  
|Other income (expense):                                             |                                                     |                          |        |                    |        |   |         |       
|                                                                    | Net gain on sale of marketable securities           |                          |        | 747                |        |   |         |       |       
|                                                                    | Other, net                                          |                          |        | (47                | )      |   |         | 1,056  |       
|                                                                    |                                                     |                          |        |                    |        |  
|Other income, net                                                   |                                                     |                          | 700    |                    |        |   | 1,056   |       
|                                                                    |                                                     |                          |        |                    |        |  
|Loss before income taxes                                            |                                                     |                          | (1,372 | )                  |        |   | (5,618  | )     
|Provision (benefit) for income taxes                                |                                                     |                          | 710    |                    |        |   | (1,921  | )     
|                                                                    |                                                     |                          |        |                    |        |  
|Net loss before cumulative effect of
change in accounting principle |                                                     |                          | (2,082 | )                  |        |   | (3,697  | )     
|Cumulative effect of change in accounting principle                 |                                                     |                          |       |                    |        |   | (10,068 | )     
|                                                                    |                                                     |                          |        |                    |        |  
|Net loss                                                            |                                                     | $                        | (2,082 | )                  |        | $ | (13,765 | )     
|                                                                    |                                                     |                          |        |                    |        |  
|Basic & diluted loss per share:                                     |                                                     |                          |        |                    |        |   |         |       
|                                                                    | Operations                                          |                          | $      | (.08               | )      |   | $       | (.12   | )     
|                                                                    |                                                     |                          |        |                    |        |  
|                                                                    | Cumulative effect of change in accounting principle |                          | $      |                   |        |   | $       | (.33   | )     
|                                                                    |                                                     |                          |        |                    |        |  
|                                                                    | Net loss                                            |                          | $      | (.08               | )      |   | $       | (.45   | )     
|                                                                    |                                                     |                          |        |                    |        |  
|                                                                    | Shares                                              |                          |        | 26,960             |        |   |         | 30,441 |       
|                                                                    |                                                     |                          |        |                    |        |  

See accompanying notes to Consolidated Financial Statements

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COMPUTER NETWORK
TECHNOLOGY CORPORATION
CONSOLIDATED BALANCE SHEETS
(in thousands, except per share data)

|                              |                                                                                                                                         |                           |                            |                                      |        |             |         |         |             |         |  | 
|----------------------------- | --------------------------------------------------------------------------------------------------------------------------------------- | ------------------------- | -------------------------- | ------------------------------------ | ------ | ----------- | ------- | ------- | ----------- | ------- |  | 
|                              |                                                                                                                                         |                           |                            |                                      |        | April 30,   |         |         |             |        
|                              |                                                                                                                                         |                           |                            |                                      |        | 2003        |         |         | January
31, |        
|                              |                                                                                                                                         |                           |                            |                                      |        | (unaudited) |         |         | 2003       
|                              |                                                                                                                                         |                           |                            |                                      |        |             |         |         |             |        
|                              |                                                                                                                                         |                           |                            | Assets                               |        |             |         |         |             |         |  | 
|Current assets:               |                                                                                                                                         |                           |                            |                                      |        |             |         |        
|                              | Cash and cash equivalents                                                                                                               |                           | $                          | 219,878                              |        |             | $       | 98,341  |            
|                              | Marketable securities                                                                                                                   |                           |                            | 1,277                                |        |             |         | 111,143 |            
|                              | Receivables, net                                                                                                                        |                           |                            | 45,665                               |        |             |         | 56,040  |            
|                              | Inventories                                                                                                                             |                           |                            | 17,856                               |        |             |         | 24,091  |            
|                              | Other current assets                                                                                                                    |                           |                            | 2,616                                |        |             |         | 2,118   |            
|                              |                                                                                                                                         |                           |                            |                                      |        |            
|                              |                                                                                                                                         |                           | Total current assets       |                                      |        | 287,292     |         |         |             | 291,733 | 
|                              |                                                                                                                                         |                           |                            |                                      |        |            
|Property and equipment, net   |                                                                                                                                         |                           | 20,831                     |                                      |        |             | 22,566  |        
|Field support spares, net     |                                                                                                                                         |                           | 5,812                      |                                      |        |             | 6,009   |        
|Goodwill                      |                                                                                                                                         |                           | 14,844                     |                                      |        |             | 14,113  |        
|Other intangibles, net        |                                                                                                                                         |                           | 1,597                      |                                      |        |             | 1,669   |        
|Other assets                  |                                                                                                                                         |                           | 3,007                      |                                      |        |             | 3,079   |        
|                              |                                                                                                                                         |                           |                            |                                      |        |            
|                              |                                                                                                                                         | $                         | 333,383                    |                                      |        | $           | 339,169 |        
|                              |                                                                                                                                         |                           |                            |                                      |        |            
|                              |                                                                                                                                         |                           |                            | Liabilities and Shareholders Equity |        |             |         |         |             |         |  | 
|Current liabilities:          |                                                                                                                                         |                           |                            |                                      |        |             |         |        
|                              | Accounts payable                                                                                                                        |                           | $                          | 14,908                               |        |             | $       | 16,889  |            
|                              | Accrued liabilities                                                                                                                     |                           |                            | 23,094                               |        |             |         | 25,060  |            
|                              | Deferred revenue                                                                                                                        |                           |                            | 20,897                               |        |             |         | 19,340  |            
|                              | Current installments of obligations under capital lease                                                                                 |                           |                            | 482                                  |        |             |         | 708     |            
|                              |                                                                                                                                         |                           |                            |                                      |        |            
|                              |                                                                                                                                         | Total current liabilities |                            |                                      | 59,381 |             |         |         | 61,997      |        
|                              |                                                                                                                                         |                           |                            |                                      |        |            
|Convertible subordinated debt |                                                                                                                                         |                           | 125,000                    |                                      |        |             | 125,000 |        
|Deferred tax liability        |                                                                                                                                         |                           | 490                        |                                      |        |             | 541     |        
|                              |                                                                                                                                         |                           |                            |                                      |        |            
|                              |                                                                                                                                         |                           | Total liabilities          |                                      |        | 184,871     |         |         |             | 187,538 | 
|                              |                                                                                                                                         |                           |                            |                                      |        |            
|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
26,988 at April 30, 2003 and
26,921 at January 31, 2003 |                           |                            | 270                                  |        |             |         | 269     |            
|                              | Additional paid-in capital                                                                                                              |                           |                            | 174,154                              |        |             |         | 173,955 |            
|                              | Unearned compensation                                                                                                                   |                           |                            | (631                                 | )      |             |         | (675    | )          
|                              | Accumulated deficit                                                                                                                     |                           |                            | (25,028                              | )      |             |         | (22,946 | )          
|                              | Accumulated other comprehensive income (loss)                                                                                           |                           |                            | (253                                 | )      |             |         | 1,028   |            
|                              |                                                                                                                                         |                           |                            |                                      |        |            
|                              |                                                                                                                                         |                           | Total shareholders equity |                                      |        | 148,512     |         |         |             | 151,631 | 
|                              |                                                                                                                                         |                           |                            |                                      |        |            
|                              |                                                                                                                                         | $                         | 333,383                    |                                      |        | $           | 339,169 |        
|                              |                                                                                                                                         |                           |                            |                                      |        |            

See accompanying notes to Consolidated Financial Statements

4



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

|                                               |                                                                                 |                                                                  |                      |                                                 |       |                    |         |         |        |        |         |  
|---------------------------------------------- | ------------------------------------------------------------------------------- | ---------------------------------------------------------------- | -------------------- | ----------------------------------------------- | ----- | ------------------ | ------- | ------- | ------ | ------ | ------- | -
|                                               |                                                                                 |                                                                  |                      |                                                 |       | Three months ended |        
|                                               |                                                                                 |                                                                  |                      |                                                 |       | April 30,          |        
|                                               |                                                                                 |                                                                  |                      |                                                 |       |                    |        
|                                               |                                                                                 |                                                                  |                      |                                                 |       | 2003               |         |         | 2002   |       
|                                               |                                                                                 |                                                                  |                      |                                                 |       |                    |         |         |        |       
|Operating Activities:                          |                                                                                 |                                                                  |                      |                                                 |       |                    |         |        
|                                               | Net loss                                                                        |                                                                  | $                    | (2,082                                          | )     |                    | $       | (13,765 | )     
|                                               | Adjustments to reconcile net loss to net cash
provided by operating activities: |                                                                  |                      |                                                 |       |                    |         |         |       
|                                               |                                                                                 | Cumulative effect of change in accounting principle              |                      |                                                 |      |                    |         |         | 10,068 |       
|                                               |                                                                                 | Depreciation and amortization                                    |                      |                                                 | 3,712 |                    |         |         | 4,020  |       
|                                               |                                                                                 | Non-cash compensation expense                                    |                      |                                                 | 132   |                    |         |         | 161    |       
|                                               |                                                                                 | Net
gain on sale of marketable securities                        |                      |                                                 | (747  | )                  |         |         |       |       
|                                               |                                                                                 | Changes in deferred taxes                                        |                      |                                                 | (51   | )                  |         |         |       |       
|                                               |                                                                                 | Changes in operating assets and liabilities,
net of acquisition: |                      |                                                 |       |                    |         |         |        |       
|                                               |                                                                                 |                                                                  | Receivables          |                                                 |       | 10,322             |         |         |        | 13,611 |        
|                                               |                                                                                 |                                                                  | Inventories          |                                                 |       | 6,235              |         |         |        | (2,102 | )      
|                                               |                                                                                 |                                                                  | Other current assets |                                                 |       | (498               | )       |         |        | (1,487 | )      
|                                               |                                                                                 |                                                                  | Accounts payable     |                                                 |       | (1,981             | )       |         |        | (966   | )      
|                                               |                                                                                 |                                                                  | Accrued liabilities  |                                                 |       | (2,697             | )       |         |        | (4,720 | )      
|                                               |                                                                                 |                                                                  | Deferred revenue     |                                                 |       | 1,557              |         |         |        | 2,543  |        
|                                               |                                                                                 |                                                                  |                      |                                                 |       |                   
|                                               |                                                                                 |                                                                  |                      | Cash
provided by operating activities           |       |                    | 13,902  |         |        |        | 7,363   |  
|                                               |                                                                                 |                                                                  |                      |                                                 |       |                   
|Investing Activities:                          |                                                                                 |                                                                  |                      |                                                 |       |                    |         |        
|                                               | Additions to property and equipment                                             |                                                                  |                      | (1,020                                          | )     |                    |         | (2,931  | )     
|                                               | Additions to field support spares                                               |                                                                  |                      | (688                                            | )     |                    |         | (1,049  | )     
|                                               | Net redemption (purchase) of marketable securities                              |                                                                  |                      | 109,866                                         |       |                    |         | (25,694 | )     
|                                               | Other assets                                                                    |                                                                  |                      | 72                                              |       |                    |         | 83      |       
|                                               |                                                                                 |                                                                  |                      |                                                 |       |                   
|                                               |                                                                                 |                                                                  |                      | Cash provided by (used in) investing activities |       |                    | 108,230 |         |        |        | (29,591 | )
|                                               |                                                                                 |                                                                  |                      |                                                 |       |                   
|Financing Activities:                          |                                                                                 |                                                                  |                      |                                                 |       |                    |         |        
|                                               | Net proceeds from issuance of convertible
subordinated debt                     |                                                                  |                      |                                                |       |                    |         | 121,706 |       
|                                               | Proceeds from issuance of common stock                                          |                                                                  |                      | 112                                             |       |                    |         | 499     |       
|                                               | Repayments of obligations under capital leases                                  |                                                                  |                      | (226                                            | )     |                    |         | (300    | )     
|                                               |                                                                                 |                                                                  |                      |                                                 |       |                   
|                                               |                                                                                 |                                                                  |                      | Cash provided by (used in) financing activities |       |                    | (114    | )       |        |        | 121,905 |  
|                                               |                                                                                 |                                                                  |                      |                                                 |       |                   
|Effects of exchange rate changes               |                                                                                 |                                                                  | (481                 | )                                               |       |                    | 169     |        
|                                               |                                                                                 |                                                                  |                      |                                                 |       |                   
|Net increase in cash and cash equivalents      |                                                                                 |                                                                  | 121,537              |                                                 |       |                    | 99,846  |        
|Cash and cash equivalents beginning of period |                                                                                 |                                                                  | 98,341               |                                                 |       |                    | 34,402  |        
|                                               |                                                                                 |                                                                  |                      |                                                 |       |                   
|Cash and cash equivalents end of period       |                                                                                 | $                                                                | 219,878              |                                                 |       | $                  | 134,248 |        
|                                               |                                                                                 |                                                                  |                      |                                                 |       |                   

See accompanying notes to Consolidated Financial Statements

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS EXCEPT SHARE AND PER SHARE AMOUNTS)

(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,
2003 as filed with the Securities and Exchange Commission. References to
fiscal 2003 and 2002, represent the twelve months ended January 31, 2004
and 2003, respectively.

(2) MARKETABLE SECURITIES

During the first quarter of fiscal 2003, the Company sold marketable
securities totaling $122 million, resulting in a net pre-tax gain of
approximately $747. No significant gains or losses from the sale of
marketable securities were recorded during the first quarter of fiscal 2002.

The Companys investments in marketable securities primarily consist of
U.S. government and agency securities, corporate debt securities and bank
certificates of deposit. The Company also has 41,031 shares of
webMethods stock
received in connection with the sale of IntelliFrame.

(3) INVENTORIES

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

|             |                              |   |           |        |  |             |        |        | 
|------------ | ---------------------------- | - | --------- | ------ |  | ----------- | ------ | ------ | 
|             |                              |   | April 30, |        |  | January 31, |       
|             |                              |   | 2003      |        |  | 2003        |       
|             |                              |   |           |        |  |             |       
|Inventories: |                              |   |           |        |  |             |        |       
|             | Components and subassemblies |   | $         | 13,233 |  |             | $      | 16,918 | 
|             | Work in process              |   |           | 920    |  |             |        | 306    | 
|             | Finished goods               |   |           | 3,703  |  |             |        | 6,867  | 
|             |                              |   |           |        |  |            
|             |                              | $ | 17,856    |        |  | $           | 24,091 |       
|             |                              |   |           |        |  |            

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(4) ACQUISITIONS

Inrange (subsequent event)

On April 6, 2003, the Company entered into an agreement where a wholly
owned subsidiary of the Company would acquire all of the shares of Inrange
Technologies Corporation (Inrange) that were owned by SPX Corporation. The shares
acquired constituted approximately 91% of the issued and outstanding shares of
Inrange for a purchase price of approximately $2.31 per share and $173 million
in the aggregate. On May 5, 2003 the Company completed the acquisition of
Inrange and pursuant to the agreement the subsidiary merged into Inrange, and
the remaining capital stock owned by the other Inrange shareholders
was converted into
the right to receive approximately $2.31 per share in cash, resulting in a
total payment of $190 million for both the stock purchase and merger. The
Company expects to record an integration charge during the fiscal second
quarter ending July 31, 2003 for severance costs related to termination of the
Companys employees, professional fees and travel costs related to the
integration. Other possible integration charges include inventory and asset
write-downs related to discontinued product lines. The Company may also record
a charge for in-process research and development pending completion of the
purchase price allocation analysis. The size and scope of any charges will not
be known until the Companys integration planning is complete.

The following table presents the unaudited pro forma consolidated results
of operations of the Company for the first quarter of fiscal 2003 and 2002 as
if the acquisition of Inrange took place on February 1, 2003 and 2002,
respectively:

|                   |  |                    |         |   |      |   |         |  
|------------------ |  | ------------------ | ------- | - | ---- | - | ------- | -
|                   |  | Pro Forma          |        
|                   |  | Three months ended |        
|                   |  | April 30,          |        
|                   |  |                    |        
|                   |  | 2003               |         |   | 2002 |  
|                   |  |                    |         |   |      |  
|Total revenue      |  | $                  | 92,492  |   |      | $ | 107,114 |  
|Net loss           |  | $                  | (12,846 | ) |      | $ | (13,463 | )
|Net loss per share |  | $                  | (.48    | ) |      | $ | (.44    | )

The unaudited pro forma results are for comparative purposes only and do
not necessarily reflect the results that would have been recorded had the
acquisition occurred at the beginning of the period presented or the results
which might occur in the future. The allocation of the purchase price to the
acquired assets and liabilities of Inrange is subject
to adjustment pending completion of a purchase price allocation study and will
likely result in changes to the pro forma net loss amounts.

BI-Tech

On June 24, 2002, the Company acquired all the outstanding stock of
Business Impact Technology Solutions Limited (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 allocated $6.5 million, $1.1
million and $250 of the purchase price to goodwill, customer list and
non-compete agreements, respectively. The customer list and non-compete
agreements are amortized over periods of ten and two years,
respectively. 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 for each of the two years beginning July 1, 2002. The purchase
agreement required the Company to pay this additional consideration at its
option, in the form of a note payable or the Companys stock to the former
stockholders, and in cash to the BI-Tech employees. The portion payable to the
former stockholders is recorded as goodwill. The portion payable to
BI-Tech employees is recorded as compensation expense. During the first
quarter of 2003 and based on BI-Techs operations since July 1, 2002, an
additional $719 and $4.3 million, respectively, was added to goodwill and
$312 and $1.1 million, respectively, was recorded as compensation expense
and a corresponding liability was recorded.

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(5) GOODWILL AND INTANGIBLE ASSETS

The change in the net carrying amount of goodwill for the first quarter of
fiscal 2003 was as follows:

|                                                   |  |       |        | 
|-------------------------------------------------- |  | ----- | ------ | 
|                                                   |  | Total |       
|                                                   |  |       |       
|Balance February 1, 2003                           |  | $     | 14,113 | 
|Acquisition
of BI-Tech  additional purchase price |  |       | 719    | 
|Translation adjustment                             |  |       | 12     | 
|                                                   |  |       |       
|Balance as of April 30, 2003                       |  | $     | 14,844 | 
|                                                   |  |       |       

The components of other amortizable intangible assets were as follows:

|                                   |       |   |                |       |  |                  |      |      |                |   |       |              |  |   |      |      |  
|---------------------------------- | ----- | - | -------------- | ----- |  | ---------------- | ---- | ---- | -------------- | - | ----- | ------------ |  | - | ---- | ---- | -
|                                   |       |   | April 30, 2003 |       |  | January 31, 2003 |     
|                                   |       |   |                |       |  |                  |     
|                                   |       |   | Gross Carrying |       |  | Accumulated      |      |      | Gross Carrying |   |       | Accumulated  | 
|                                   |       |   | Amount         |       |  | Amortization     |      |      | Amount         |   |       | Amortization | 
|                                   |       |   |                |       |  |                  |      |      |                |   |       |              | 
|Customer list                      |       | $ | 1,630          |       |  | $                | (202 | )    |                | $ | 1,630 |              |  | $ | (161 | )   
|Non-compete
agreements             |       |   | 250            |       |  |                  | (81  | )    |                |   | 250   |              |  |   | (50  | )   
|                                   |       |   |                |       |  |                  |      |      |                |   |       |              | 
|                                   | Total |   | $              | 1,880 |  |                  | $    | (283 | )              |   | $     | 1,880        |  |   | $    | (211 | )
|                                   |       |   |                |       |  |                  |      |      |                |   |       |             
|Total other
intangible assets, net |       | $ | 1,597          |       |  |                  |      |      |                | $ | 1,669 |              |  |   |      |     
|                                   |       |   |                |       |  |                  |      |      |                |   |       |              |  |  

Amortization expense for intangible assets during the first quarter of
fiscal 2003 was $72. Amortization expense for the remainder of fiscal 2003 is
estimated to be $216. Amortization expense is estimated to be $238 in fiscal
2004 and $163 in fiscal 2005 through 2008.

(6) COMPREHENSIVE LOSS

Comprehensive loss consists of the following:

|                                                                           |  |                    |        |   |      |   |         |  
|-------------------------------------------------------------------------- |  | ------------------ | ------ | - | ---- | - | ------- | -
|                                                                           |  | Three months ended |       
|                                                                           |  | April 30,          |       
|                                                                           |  |                    |       
|                                                                           |  | 2003               |        |   | 2002 |  
|                                                                           |  |                    |        |   |      |  
|Net loss                                                                   |  | $                  | (2,082 | ) |      | $ | (13,765 | )
|Unrealized loss on marketable securities,
net of tax effect of $0 and $338 |  |                    |       |   |      |   | (586    | )
|Foreign currency translation adjustment, net
of tax effect of $0           |  |                    | (213   | ) |      |   | 82      |  
|                                                                           |  |                    |        |   |      |  
|Total comprehensive loss                                                   |  | $                  | (2,295 | ) |      | $ | (14,269 | )
|                                                                           |  |                    |        |   |      |  

(7) CONVERTIBLE SUBORDINATED 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. The make
whole payment represents additional interest payments that would be made if the
notes were not redeemed prior to the due date.

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(8) STOCK-BASED COMPENSATION

The estimated per share weighted average fair value of all stock options
granted during the three months ended April 30, 2003 and 2002 was $5.01 and
$8.63, respectively. The fair value of each option grant was estimated using
the Black-Scholes option pricing model with the following weighted average
assumptions:

|                        |  |                    |       |   |      |  |       |  
|----------------------- |  | ------------------ | ----- | - | ---- |  | ----- | -
|                        |  | Three Months Ended |      
|                        |  | April 30,          |      
|                        |  |                    |      
|                        |  | 2003               |       |   | 2002 | 
|                        |  |                    |       |   |      | 
|Risk free interest rate |  |                    | 3.15  | % |      |  | 4.56  | %
|Expected life           |  |                    | 6.18  |   |      |  | 5.33  |  
|Expected volatility     |  |                    | 87.38 | % |      |  | 87.48 | %

Had the Company recorded compensation cost based on the estimated fair
value on the date of grant, as defined by SFAS 123, the Companys pro forma net
loss would have been as follows:

|                                                                                                  |             |   |                    |       |   |      |         |       |  
|------------------------------------------------------------------------------------------------- | ----------- | - | ------------------ | ----- | - | ---- | ------- | ----- | -
|                                                                                                  |             |   | Three Months Ended |      
|                                                                                                  |             |   | April 30,          |      
|                                                                                                  |             |   |                    |      
|                                                                                                  |             |   | 2003               |       |   | 2002 |        
|                                                                                                  |             |   |                    |       |   |      |        
|Net loss, as reported                                                                             |             | $ | (2,082             | )     |   | $    | (13,765 | )    
|Stock-based employee compensation expense
determined under fair value based method for
all awards |             |   | (2,508             | )     |   |      | (1,750  | )    
|                                                                                                  |             |   |                    |       |   |      |        
|Pro forma net loss                                                                                |             | $ | (4,590             | )     |   | $    | (15,515 | )    
|                                                                                                  |             |   |                    |       |   |      |        
|Basic and diluted net loss per share:                                                             |             |   |                    |       |   |      |         |      
|                                                                                                  | As reported |   | $                  | (0.08 | ) |      | $       | (0.45 | )
|                                                                                                  | Pro forma   |   | $                  | (0.17 | ) |      | $       | (0.51 | )

(9) WARRANTY

The Company records a
liability for warranty claims at the time of sale. The amount of the
liability is based on contract terms and historical warranty loss
expenses, which is periodically adjusted for recent actual
experience. Warranty terms on the Company's equipment range from 90
days to 1 year. The changes in warranty reserve balances for the
three months ended April 30, 2003 and 2002 were as follows:

|                           |  |           |       |   |      |   |       |  
|-------------------------- |  | --------- | ----- | - | ---- | - | ----- | -
|                           |  | April 30, |      
|                           |  |           |      
|                           |  | 2003      |       |   | 2002 |  
|                           |  |           |       |   |      |  
|Beginning
balance          |  | $         | 1,521 |   |      | $ | 1,935 |  
|Charged
to cost of product |  |           | 358   |   |      |   | 534   |  
|Revisions
to estimates     |  |           |      |   |      |   |      |  
|Cost
of warranty           |  |           | (711  | ) |      |   | (686  | )
|                           |  |           |       |   |      |  
|Ending
balance             |  | $         | 1,168 |   |      | $ | 1,783 |  
|                           |  |           |       |   |      |  

(10) NEW ACCOUNTING PRONOUNCEMENTS

In December 2002, the EITF reached a consensus on EITF 00-21, Revenue
Arrangements with Multiple Deliverables. This Issue addresses certain aspects
of the accounting by a vendor for arrangements under which it will perform
multiple revenue-generating activities. In some arrangements, the different
revenue-generating activities (deliverables) are sufficiently separable and
there exists sufficient evidence of their fair values to separately account for
some or all of the deliverables (that is, there are separate units of
accounting). In other arrangements, some or all of the deliverables are not
independently functional, or there is not sufficient evidence of their fair
values to account for them separately. This Issue addresses when and, if so,
how an arrangement involving multiple deliverables should be divided into
separate units of accounting. This Issue does not change otherwise applicable
revenue recognition criteria. The guidance in this Issue is effective for
revenue arrangements entered into in fiscal periods beginning after June 15,
2003. We do not expect the adoption of EITF 00-21 will have a material effect
on our financial statements.

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(11) Litigation

Inrange Technologies Corporation, which is now a wholly owned subsidiary of the
Company, has been named as a defendant in the case SBC Technology Resources,
Inc. v. Inrange Technologies Corp., Eclipsys Corp. and Resource Bancshares
Mortgage Group, Inc., No. 303-CV-418-N, pending in the United States District
Court for the Northern District of Texas, Dallas Division. The action was
commenced on February 27, 2003. The complaint alleges Inrange is infringing
the SBC patent by manufacturing and selling storage area networking equipment,
including Fibre Channel directors and switches, for use in storage networks
that embody certain inventions claimed in a patent owned by SBC. The complaint
asks for judgment that SBCs patent is infringed by the defendants in the case,
an accounting for actual damages, actual damages, attorneys fees, costs of suit
and other relief. Additionally, Eclipsys has demanded that Inrange indemnify
and defend Eclipsys pursuant to documentation under which it acquired the
product from Inrange. Hitachi Data Systems Corporation has informed Inrange
that it has also received a demand from Eclipsys that Hitachi indemnify and
defend Eclipsys for this action. Hitachi has put Inrange on notice that it
will tender any claim by Eclipsys for indemnification and defense of this
action to Inrange. The case is in its preliminary stages and management is
evaluating the litigation.

Inrange has also been named as a defendant in the case Onex, Inc., Joseph P.
Huffine, and Sally Huffine Breen v. Inrange Technologies Corporation, No.
CV-0593LJM-WTL, pending in the United States District Court, Southern District
of Indiana.The action was commenced on April 23, 2003. The complaint alleges
breach of the contract pursuant to which Inrange acquired certain assets of
Onex, Inc. The contract includes a provision for additional payments of
purchase price based on the performance of the business acquired over a two
year period. The contract requires the payments be made at the end of each
year in such two year period. Specifically, the complaint alleges, among other
things, that Inrange did not conduct the business in a commercially reasonable
manner and the pay out for the first year should have been $6 million and that
the payment for the second year will be substantially smaller. The complaint
also alleges the plaintiffs were harmed by the failure to provide accurate data
with respect to the business acquired and Inranges failure to pay certain
liabilities harmed the plaintiffs. The case is in its preliminary stages and
management is evaluating the litigation.

A shareholder class action was filed against Inrange and certain of its
officers on November 30, 2001, in the United States District Court for the
Southern District of New York, seeking recovery of damages caused by Inranges
alleged violation of securities laws, including section 11 of the Securities
Act of 1933 and section 10(b) of the Exchange Act of 1934. The complaint, which
was also filed against the various underwriters that participated in Inranges
initial public offering (IPO), is identical to hundreds of shareholder class
actions pending in this Court in connection with other recent IPOs and is
generally referred to as In re Initial Public Offering Securities Litigation.
The complaint alleges, in essence, (a) that the underwriters combined and
conspired to increase their respective compensation in connection with the IPO
by (i) receiving excessive, undisclosed commissions in exchange for lucrative
allocations of IPO shares, and (ii) trading in Inranges stock after creating
artificially high prices for the stock post-IPO through tie-in or laddering
arrangements (whereby recipients of allocations of IPO shares agreed to
purchase shares in the aftermarket for more than the public offering price for
Inrange shares) and dissemination of misleading market analysis on our
prospects; and (b) that Inrange violated federal securities laws by not
disclosing these underwriting arrangements in its prospectus. The defense has
been tendered to the carriers of Inranges director and officer liability
insurance, and a request for indemnification has been made to the various
underwriters in the IPO. At this point the insurers have issued a reservation
of rights letter and the underwriters have refused indemnification. The court
has granted Inranges motion to dismiss claims under Section 10(b) of the
Securities Exchange Act of 1934 because of the absence of a pleading of intent
to defraud. The court granted plaintiffs leave to replead these claims, but no
further amended complaint has been filed. The court also denied Inranges
motion to dismiss claims under Section 11 of the Securities Act of 1933. The
court has also dismissed Inranges individual officers without prejudice, after
they entered into a tolling agreement with the plaintiffs. At this point, it
is too early to form a definitive opinion concerning the ultimate outcome.

(12) CUMULATIVE EFFECT OF CHANGE IN ACCOUNTING PRINCIPLE

In June 2001, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standard (SFAS) No. 142, Goodwill and Other Intangible Assets.
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.

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 valuation of the Companys
former Storage Solutions segment indicated
that the goodwill associated with the acquisition of Articulent in April of
2001 was impaired. The performance of this business had 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.

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

This Managements Discussion and
Analysis of Financial Condition and Results of Operations
(MD&A) should be read in conjunction with our interim
consolidated financial statements and notes thereto which appear
elsewhere in this Quarterly Report and the MD&A contained in our
Annual Report on Form 10-K filed with the Securities and Exchange
Commission on April 30, 2003.

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 EMC,
Hewlett-Packard, Hitachi Data Systems, IBM, StorageTek, Dell Computer
Corporation and Veritas.

Our wholly owned
subsidiary, Inrange Technologies Corporation (Inrange), which we
acquired on May 5, 2003, also designs, manufactures, markets and services
networking and switching products for storage and data networks. These
products provide fast and reliable connections among networks of computers and
related devices, allowing customers to manage and expand large, complex,
storage networks efficiently, without geographic limitations.

The flagship product
of Inrange, the FC/9000, is the storage area networks most
scalable storage networking director-class Fibre Channel switch available for SANs.
With an ability for customers to upgrade and scale to 256
ports without disrupting existing systems, the FC/9000 provides a platform from
which an enterprise can build storage networks that can be used in systems
where reliability and continuous availability are critical. These products are
designed to be compatible with various vendors products and multiple
communication standards and protocols. Inrange distributes and
supports these products through a combination of direct sales and service
operations and indirect channels.

Acquisition of Inrange

On April 6, 2003, we entered into an agreement where our wholly owned
subsidiary would acquire all of the shares of Inrange
that were owned by SPX Corporation. The shares acquired constituted
approximately 91% of the issued and outstanding shares of Inrange for a
purchase price of approximately $2.31 per share and $173 million in the
aggregate. On May 5, 2003 we completed the acquisition of Inrange and pursuant
to the agreement the subsidiary merged into Inrange, and the remaining capital

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stock owned by the other Inrange shareholders was converted into the right to receive
approximately $2.31 per share in cash, resulting in a total payment of $190
million for both the stock purchase and merger. We expect to record an
integration charge during the fiscal second quarter ending July 31, 2003 for
severance costs related to termination of employees, professional fees and
travel costs related to the integration. Other possible integration charges
include inventory and asset write-downs related to discontinued product lines.
We may also record a charge for in-process research and development pending
completion of the purchase price allocation analysis. The size and scope of any
charges will not be known until the integration planning is complete.

Completion of this acquisition makes us one of the worlds largest
providers of complete storage networking products, solutions and services, with
combined 2002 pro forma annual revenues of approximately
$435 million. We have
global leadership positions in our markets. The
acquisition significantly broadens and strengthens our portfolio of storage and
networking products and solutions, increases our global size and scope, expands
our customer base, and provide us with significant scale and cost reduction
opportunities.

Acquisition of BI-Tech

In June 2002, we
acquired all of the outstanding stock of Business Impact Technology
Solutions Limited (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
accompanying financial statements include the results of BI-Tech since June 24,
2002. The purchase agreement requires that we pay at our option, in the form of
a note payable or our stock to the former stockholders, and in cash to the
BI-Tech employees, additional consideration based on achievement of certain
earnings for each of the two years beginning July 1, 2002. The portion
payable to the former stockholders is recorded as goodwill. The portion
payable to BI-Tech employees is recorded as compensation expense. During
the first quarter ended April 30, 2003 and based on BI-Techs operations since
July 1, 2002, an additional $719,000 and $4.3 million, respectively, was added
to goodwill and $312,000 and $1.1 million, respectively, was recorded as
compensation expense, and a corresponding liability was recorded.

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.

Valuation Allowance for Deferred Tax Assets

In the fourth quarter of fiscal 2002, we recorded a non-cash charge of
$23.6 million to provide a full valuation allowance for our United States deferred
tax assets. As we generate taxable income in future periods, we do not expect
to record significant income tax expense in the United States until it becomes

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likely that we will be able to utilize the deferred tax assets, and we reduce
the valuation allowance. The establishment of the valuation allowance does not
impair our ability to use the deferred tax assets upon achieving profitability.
Our federal net operating loss carry-forwards and credits do not expire for
the next 15-20 years.

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 former storage solutions segment. This valuation
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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Results of Operations

The following table sets forth financial data for our 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.

|                     |                             |                          |      |                    |       |  |       |      |       | 
|-------------------- | --------------------------- | ------------------------ | ---- | ------------------ | ----- |  | ----- | ---- | ----- | 
|                     |                             |                          |      | Three months ended |      
|                     |                             |                          |      | April 30,          |      
|                     |                             |                          |      |                    |      
|                     |                             |                          |      | 2003               |       |  | 2002  |     
|                     |                             |                          |      |                    |       |  |       |     
|Revenue:             |                             |                          |      |                    |       |  |       |     
|                     | Product sales               |                          |      | 65.7               | %     |  |       | 65.8 | %    
|                     | Service fees                |                          |      | 34.3               |       |  |       | 34.2 |      
|                     |                             |                          |      |                    |       | 
|                     |                             | Total revenue            |      |                    | 100.0 |  |       |      | 100.0 | 
|                     |                             |                          |      |                    |       | 
|Gross profit:        |                             |                          |      |                    |       |  |       |     
|                     | Product sales               |                          |      | 37.1               |       |  |       | 41.6 |      
|                     | Service fees                |                          |      | 43.7               |       |  |       | 36.9 |      
|                     |                             |                          |      |                    |       | 
|                     |                             | Total gross profit       |      |                    | 39.4  |  |       |      | 40.0  | 
|                     |                             |                          |      |                    |       | 
|Operating expenses:  |                             |                          |      |                    |       |  |       |     
|                     | Sales and marketing         |                          |      | 27.1               |       |  |       | 34.5 |      
|                     | Engineering and development |                          |      | 11.3               |       |  |       | 14.7 |      
|                     | General and administrative  |                          |      | 4.9                |       |  |       | 5.6  |      
|                     |                             |                          |      |                    |       | 
|                     |                             | Total operating expenses |      |                    | 43.3  |  |       |      | 54.8  | 
|                     |                             |                          |      |                    |       | 
|Loss from operations |                             |                          | (3.9 | )%                 |       |  | (14.8 | )%  
|                     |                             |                          |      |                    |       | 

Revenue

Product revenue

Sales of our networking products generated revenues of $18.3 million in
the first quarter of 2003, down $4.0 million or 18% from the first quarter of
2002. Storage networking product revenue for the first quarter of 2003 totaled $16.6
million, down 11% from $18.6 million in the first quarter of 2002. Sales of
our channel extension product applications decreased 53% in the first quarter
of 2003 to $1.7 million from $3.7 million in the first quarter of 2002. Our
older channel extension products continue to be a profitable part of our
business and a key application for many of our storage networking customers.
While we experienced reduced demand in the first quarter, we expect that revenue from our storage networking products will account for a
substantial portion of our total networking product sales for the foreseeable
future. We anticipate that the Fibre Channel director switching products acquired from Inrange
will also account for a significant portion of our networking product revenue
in future periods. Further, we do not expect revenue for our channel networking
products to increase significantly and it may decline in the future.

Sales of our third party storage solutions products generated revenues of
$16.1 million in the first quarter of 2003, up $8.6 million or 115% from the
first quarter of 2002. Our acquisition of Articulent in April 2001 and BI-Tech
in June 2002 significantly expanded our third party solution offerings. The
BI-Tech acquisition accounted for $3.9 million of third party product revenue
in the first quarter of 2003.

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Service revenue

Service revenues from maintenance of our networking products for the first
quarter of 2003 totaled $10.8 million, down $111,000 or 1% from the first of
2002. The decrease can be attributed to cancellations of maintenance related to
our Channelink® products and migration of customers to our UltraNet® products.
We anticipate service revenues from maintenance of networking products will increase
significantly next quarter due to our acquisition of Inrange.

Our storage consulting fee revenues increased 57% in the first quarter of
2003 to $7.1 million from $4.5 million in fiscal 2002. The growth in storage
consulting fee revenue was due to increased customer acceptance of our service
offerings. In addition, our sales team has become more experienced and
proficient at selling solutions that include our service offerings. During the
first quarter of 2003, BI-Tech contributed $1.0 million of storage consulting revenue.

General

Revenue generated from the sale of products and services outside the
United States for the first quarter of 2003 totaled $15.3 million, an increase
of 61%, or $5.8 million from the first quarter of 2002. We
derived 29% of our revenue from sales outside of the United States in the first quarter of 2003 compared to 21%
in the first quarter of 2002. The increase in revenue generated outside the
United States is primarily attributed to the BI-Tech acquisition in June of
2002. BI-Tech increased our international sales during the first quarter of
2003 by $4.9 million. BI-Tech is based in the United Kingdom and we expect it
will increase our international sales in future periods. During calendar year
2002, international sales accounted 40% or $89.3 million of Inranges total
revenue. We expect our volume of international sales to increase significantly
in future periods due to the Inrange acquisition.

No single customer accounted for more than 10% of our revenue during the
first quarter of 2003 or 2002. Price discounting had a small impact on our
product revenue during these periods.

During the first
quarter of 2003, approximately 35% and 17% 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.

15



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##### Table of Contents



Gross Profit Margins

Product margins

Gross margins from the sale of networking products for the first quarter
of 2003 were 55%, compared to 51% in the first quarter of 2002. The increase
in gross margin percentage was due to actions taken to reduce the manufactured
cost of our UltraNet® Director products. In addition, price discounting was
somewhat lower in the first quarter of 2003. We expect overall margins for our
networking products to be somewhat lower in future periods due to our
acquisition of Inrange. The Inrange Fibre Channel switch director products
carry gross margins between 30% and 40%, depending upon whether the sale is
through indirect channels or direct to the end user. Sales through indirect
channels carry a lower gross margin, but approximately the same operating margin
as a direct sale to the end user.

Gross margins from the sale of third party storage solutions products for
the first quarter of 2003 were 17%, compared to 15% in the first quarter of
2002. The slight increase in gross margin percentage was primarily due to
product mix. We anticipate that product margins for third party products will
remain in the high teens in future periods.

Service margins

Gross service margins for our networking business improved in the first
quarter of 2003 to 50%, compared to 45% in the first quarter of 2002. The
improvement was primarily due to the cost reduction actions taken during the
fourth quarter of 2002. We anticipate that gross service
margins for our networking business will be about 50% after the integration of Inrange is
complete.

Gross profit margins
from our storage consulting fees improved to 34% in
the first quarter of 2003, or 36%, excluding a $131,000 earn-out payable to the
service employees of BI-Tech. The gross profit margins for our storage
consulting fees were 17% for the first quarter of 2002. The
improvement in the gross profit margin percentage in the first quarter of 2003 compared to the
same period of 2002 was due to higher utilization of our employee consultants.
Our storage consultant fee revenue increased to $7.1 million in the first
quarter of 2003 from $4.5 million in the first quarter of 2002, an increase of
57%. Costs associated with our storage consulting fees were $4.7 million, or
$4.6 million, excluding the BI-Tech earn-out, up from $3.7 million in the first
quarter of 2002.

Operating Expenses

Impact of Inrange acquisition on operating expenses

Operating expenses are expected to increase significantly in future
periods due to the Inrange acquisition which we expect to be offset
in whole or part by increased revenues. The amount of the increase in each
category of expense will not be known until our integration of Inrange is
complete.

Sales and marketing

Sales and marketing expense for the first quarter of 2003 totaled $14.2
million, down 9% from $15.6 million in the first quarter of 2002. The decrease
in sales and marketing expense was primarily the result of the cost reduction
actions taken during the fourth quarter of 2002. These costs savings were
partially offset by the incremental sales and marketing costs associated with

16



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##### Table of Contents



our BI-Tech acquisition in June of 2002. Sales and
marketing expense for BI-Tech in the first quarter of 2003 which totaled $1.1 million, of which
$158,000 relates to the earn-out payable to the BI-Tech sales and marketing employees.

Engineering

Engineering and development expense for the first quarter of 2003 totaled
$5.9 million, down 11% from $6.7 million in the first quarter of 2002. The
decrease was primarily due to cost reduction actions taken during the
fourth quarter of 2002, including a workforce reduction and reductions in
discretionary spending. These costs savings were partially offset by our
continued development of our UltraNet® family of products, particularly the
UltraNet® Edge product, which has generated $19.0 million of revenue since its
introduction in the third quarter of 2001.

General and administrative

General and administrative expenses for the first quarter of 2003 totaled
$2.6 million compared to $2.5 million in the first quarter of 2002. The June
2002 acquisition of BI-Tech added $186,000 to general and administrative
expense, of which $23,000 relates to the earn-out payable to the
BI-Tech general and
administrative employees. This additional expense was offset by lower costs
for employee wages and, fringe benefits due to reduction in number of
employees, as well as lower  insurance and professional fees.

Other

Interest and other income for the three months ended April 30, 2003 and
2002 totaled $700,000 and $1.1 million, respectively. 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 interest expense of $1.1
million and $893,000 for the three months ended April 30, 2003 and 2002.
Interest income totaled $1.1 million and $1.9 million for the three months
ended April 30, 2003 and 2002. The main reason for the decrease in interest
income was primarily due to lower investment yields. During the first quarter
of 2003, we sold substantially all of our investments in marketable securities
resulting in a net realized gain totaling $747,000. The sale of the marketable
securities was necessary due to our acquisition of Inrange Technologies
Corporation on May 5, 2003 for $190 million in cash.

Given our losses in fiscal 2002 and 2001, and our cautious outlook for
information technology spending, we concluded that it was necessary to provide
a full valuation allowance for our United States deferred tax assets, in our
fourth quarter ended January 31, 2003.
As we generate taxable income in future periods, we do not expect to record
significant income tax expense in the United States until it becomes likely
that we will be able to utilize the deferred tax assets, and we reduce the
valuation allowance. The establishment of the valuation allowance does not
impair our ability to use the deferred tax assets upon achieving profitability.
Our federal net operating loss carry-forwards and credits do not
expire until 15-20 years from now.

17



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##### Table of Contents



has entered into a Memorandum of Understanding with the plaintiffs
and the insurers with respect to a settlement of plaintiffs claims, which is
subject to approval by the various issuer defendants. Even if the settlement
with the plaintiffs is approved, Inrange could still be subject to litigation
and discovery requests. SPX Corporation controls the defense and settlement of
this matter and has certain indemnification obligations under the agreement
where Computer Network Technology Corporation acquired SPXs shares of Inrange.
At this point, it is too early to form a definitive opinion concerning the
ultimate outcome. Management believes, after consultation with legal counsel,
that this matter will not have a material adverse effect on Computer Network
Technology Corporations financial condition or results of operations.

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 April 30, 2003 totaled
$221 million, an increase of $11.7 million since January 31, 2003. The increase
is primarily due to lower levels of accounts receivables and inventory, which
contributed over $16 million of cash during the first quarter of 2003. Uses of
cash for the first quarter of 2003, included $1.7 million for capital equipment
and field support spares.
Expenditures for capital equipment and field support spares have been, and
will likely continue to be, a significant capital requirement.

On May 5, 2003,
we completed the acquisition of Inrange Technology Corporation for $190 million
in cash. After the closing of this transaction, our overall cash position was
approximately $70 million before transaction and integration costs. We believe
that our available cash after closing, when combined with our anticipated cash
flows from the combined operations of the two companies, including cash flow
improvements resulting from increased scale and cost synergies, will be
adequate to fund our operating plans and meet our current anticipated aggregate
capital requirements, at least through fiscal 2003.
This belief is based upon a number of assumptions and estimates,
including obtaining certain revenue levels from Inrange products and
services, completion of certain restructuring activities and payments
of integration and restructuring charges in line with estimates by
management. If these estimates and assumptions do not turn out to be
correct, or if we encounter unanticipated difficulties or economic
conditions, our liquidity could be impaired.

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

Our future minimum contractual cash obligations at April 30, 2003,
including open purchase orders incurred in the ordinary course of business, are
as follows (in millions):

|                                              |  |       |  |  |          |      |       |             |  |           |       |  |        |            |     |              |  |   |       |  |    |      |      |   |  |   |  |      |  |   |       |  |  |      |  |  |  |      |     | 
|--------------------------------------------- |  | ----- |  |  | -------- | ---- | ----- | ----------- |  | --------- | ----- |  | ------ | ---------- | --- | ------------ |  | - | ----- |  | -- | ---- | ---- | - |  | - |  | ---- |  | - | ----- |  |  | ---- |  |  |  | ---- | --- | 
|                                              |  |       |  |  |          |      |       |             |  | Less Than |       |  | One to |            |     | Four to Five |  |   | After | 
|Cash Obligation                               |  | Total |  |  | One year |      |       | Three Years |  |           | Years |  |        | Five Years |    
|                                              |  |       |  |  |          |      |       |             |  |           |       |  |        |            |    
|Capital leases                                |  | $     |  |  |          |      | .5    |             |  | $         |       |  |        |            | .5  |              |  | $ |       |  |    | None |      | $ |  |   |  | None |  | $ |       |  |  | None
|Operating leases                              |  | $     |  |  |          |      | 21.4  |             |  | $         |       |  |        |            | 4.2 |              |  | $ |       |  |    |      | 7.9  |   |  | $ |  |      |  |   | 4.7   |  |  | $    |  |  |  |      | 4.6 | 
|Purchase orders                               |  | $     |  |  |          | 12.8 |       | $           |  |           |       |  | 12.2   |            |     | $            |  |   |       |  | .6 |      |      | $ |  |   |  | None |  | $ |       |  |  | None
|Convertible subordinated
notes, plus
interest |  | $     |  |  |          |      | 138.1 |             |  | $         |       |  |        |            | 3.8 |              |  | $ |       |  |    |      | 11.3 |   |  | $ |  |      |  |   | 123.0 |  |  | $    |  |  |  | None

18



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On December 3, 2002 we entered into a product development agreement that
requires us to purchase $10.0 million of product prior to March 15, 2005. The
commitment expires if the product is not generally available by March 31, 2004.
This purchase commitment has also been reflected in the above table under the
Purchase Order caption.

Our acquisition of BI-Tech requires that we pay to the former stockholders
and the BI-Tech employees additional consideration based on achievement of
certain earnings for each of the two years beginning July 1, 2002. The
additional consideration of $5.3 million at April 30, 2003 for the first year of the earn-out is not reflected in
the above table because terms of payment have not yet been elected. Payment
may be in the form of a note payable or stock at our option, or in the case of
the employees, cash.

We acquired the stock of Inrange and therefore
Inrange continues to be obligated for its contractual obligations
which it had outstanding as of May 5, 2003, and performance of these
obligations will be reflected in our consolidated results. These
commitments consisting of operating leases and open purchases orders
totaled $24.6 million as of December 31, 2002. Inrange also has other
obligations, including the potential contingent obligations described
in Item I of Part II of this Form 10-Q under the heading "Legal
Proceedings".




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. 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. On April 30, 2003, the average bid and ask price of our
convertible subordinated notes due 2007 was 74.38, resulting in an aggregate
fair value of approximately $93.0 million. Our common stock is quoted on the
Nasdaq National Market under the symbol CMNT. On April 30, 2003, the last
reported sale price of our common stock on the Nasdaq Market was $5.67 per
share.

At April 30, 2003, our marketable securities included a $194,000
investment in a Standard & Poors 500 stock price index fund and a $292,000
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 April 30, 2003, we had no open forward
exchange contracts.

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ITEM 4. CONTROLS AND PROCEDURES

(a) Evaluation of Disclosure Controls and Procedures

The Company reviewed and evaluated the effectiveness of our disclosure
controls and procedures (as defined in the Securities Exchange Act of 1934
Rules 13a-14(c) and 15d-14(c)) as of a date within 90 days of the filing date
of this quarterly report on Form 10-Q (the Evaluation Date). This review and
evaluation was done under the supervision and with the participation of
management, including our Chief Executive Officer (CEO) and Chief Financial
Officer (CFO). Based on their review and evaluation, the Chief Executive
Officer and Chief Financial Officer have concluded that, as of the Evaluation
Date, our disclosure controls and procedures were adequate and effective to
ensure that material information relating to us and our consolidated
subsidiaries has been made known to them in a timely manner, particularly
during the period in which this quarterly report on Form 10-Q was being
prepared, and that no changes are required at this time.

The Companys management, including the CEO and CFO, do not expect that
our disclosure controls or our internal controls will prevent all error and all
fraud. A control system, no matter how well conceived and operated, can provide
only reasonable, not absolute, assurance that the objectives of the control
system are met. Further, the design of a control system must reflect the fact
that there are resource constraints, and the benefits of controls must be
considered relative to their costs. Because of the inherent limitations in all
control systems, no evaluation of controls can provide absolute assurance that
all control issues and instances of fraud, if any, within the company have been
detected. These inherent limitations include the realities that judgments in
decision-making can be faulty, and that breakdowns can occur because of simple
error or mistake. Additionally, controls can be circumvented by the individual
acts of some persons, by collusion of two or more people, or by management
override of the controls. The design of any system of controls also is based in
part upon certain assumptions about the likelihood of future events, and there
can be no assurance that any design will succeed in achieving its stated goals
under all potential future conditions; over time, controls may become inadequate
because of changes in conditions, or the degree of compliance with the policies
or procedures may deteriorate. Because of the inherent limitations in a
cost-effective control system, misstatements due to error or fraud may occur
and not be detected. However, the CEO and CFO believe the
Companys disclosure controls and procedures provide reasonable
assurance that the disclosure controls and procedures are effective at the
reasonable assurance level.

(b) Change in Internal Controls

There have been no significant changes in our internal controls or in
other factors that could significantly affect our internal controls subsequent
to the Evaluation Date, or any significant deficiencies or material weaknesses
in such internal controls requiring corrective actions. As a result, no
corrective actions have been taken.

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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 liquidity 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) unanticipated
difficulties in integration of Inranage; (viii)
unanticipated risks associated with introducing new products and
features, and, (ix) risks associated with the unfavorable developments in litigation,
(x) 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, 2003. 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. Legal Proceedings

Inrange Technologies Corporation, which is now a wholly owned subsidiary of the
Company, has been named as a defendant in the case SBC Technology Resources,
Inc. v. Inrange Technologies Corp., Eclipsys Corp. and Resource Bancshares
Mortgage Group, Inc., No. 303-CV-418-N, pending in the United States District
Court for the Northern District of Texas, Dallas Division. The action was
commenced on February 27, 2003. The complaint alleges Inrange is infringing
the SBC patent by manufacturing and selling storage area networking equipment,
including Fibre Channel directors and switches, for use in storage networks
that embody certain inventions claimed in a patent owned by SBC. The complaint
asks for judgment that SBCs patent is infringed by the defendants in the case,
an accounting for actual damages, actual damages, attorneys fees, costs of suit
and other relief. Additionally, Eclipsys has demanded that Inrange indemnify
and defend Eclipsys pursuant to documentation under which it acquired the
product from Inrange. Hitachi Data Systems Corporation has informed Inrange
that it has also received a demand from Eclipsys that Hitachi indemnify and
defend Eclipsys for this action. Hitachi has put Inrange on notice that it
will tender any claim by Eclipsys for indemnification and defense of this
action to Inrange. The case is in its preliminary stages and management is
evaluating the litigation.

Inrange has also been named as a defendant in the case Onex, Inc., Joseph P.
Huffine, and Sally Huffine Breen v. Inrange Technologies Corporation, No.
CV-0593LJM-WTL, pending in the United States District Court, Southern District
of Indiana.The action was commenced on April 23, 2003. The complaint alleges
breach of the contract pursuant to which Inrange acquired certain assets of
Onex, Inc. The contract includes a provision for additional payments of
purchase price based on the performance of the business acquired over a two
year period. The contract requires the payments be made at the end of each
year in such two year period. Specifically, the complaint alleges, among other
things, that Inrange did not conduct the business in a commercially reasonable
manner and the pay out for the first year should have been $6 million and that
the payment for the second year will be substantially smaller. The complaint
also alleges the plaintiffs were harmed by the failure to provide accurate data
with respect to the business acquired and Inranges failure to pay certain
liabilities harmed the plaintiffs. The case is in its preliminary stages and
management is evaluating the litigation.

A shareholder class action was filed against Inrange and certain of its
officers on November 30, 2001, in the United States District Court for the
Southern District of New York, seeking recovery of damages caused by Inranges
alleged violation of securities laws, including section 11 of the Securities
Act of 1933 and section 10(b) of the Exchange Act of 1934. The complaint, which
was also filed against the various underwriters that participated in Inranges
initial public offering (IPO), is identical to hundreds of shareholder class
actions pending in this Court in connection with other recent IPOs and is
generally referred to as In re Initial Public Offering Securities Litigation.
The complaint alleges, in essence, (a) that the underwriters combined and
conspired to increase their respective compensation in connection with the IPO
by (i) receiving excessive, undisclosed commissions in exchange for lucrative
allocations of IPO shares, and (ii) trading in Inranges stock after creating
artificially high prices for the stock post-IPO through tie-in or laddering
arrangements (whereby recipients of allocations of IPO shares agreed to
purchase shares in the aftermarket for more than the public offering price for
Inrange shares) and dissemination of misleading market analysis on our
prospects; and (b) that Inrange violated federal securities laws by not
disclosing these underwriting arrangements in its prospectus. The defense has
been tendered to the carriers of Inranges director and officer liability
insurance, and a request for indemnification has been made to the various
underwriters in the IPO. At this point the insurers have issued a reservation
of rights letter and the underwriters have refused indemnification. The court
has granted Inranges motion to dismiss claims under Section 10(b) of the
Securities Exchange Act of 1934 because of the absence of a pleading of intent
to defraud. The court granted plaintiffs leave to replead these claims, but no
further amended complaint has been filed. The court also denied Inranges
motion to dismiss claims under Section 11 of the Securities Act of 1933. The
court has also dismissed Inranges individual officers without prejudice, after
they entered into a tolling agreement with the plaintiffs. At this point, it
is too early to form a definitive opinion concerning the ultimate outcome.

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Items 2-5. None




Item 6. Exhibits and Reports on Form 8-K

(a)  Exhibits filed herewith.

|     |  |                                                                                                                                                                                                                                                                                                                                   
|---- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|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.)                                                     
|     |  |                                                                                                                                                                                                                                                                                                                                   
|10.1 |  | Tax Sharing Agreement, between Inrange Technologies Corporation and
SPX Corporation.(2)                                                                                                                                                                                                                                           
|     |  |                                                                                                                                                                                                                                                                                                                                   
|10.2 |  | Inrange Technologies Corporation 2000 Stock Compensation Plan. (Incorporated by reference to Exhibit 99.1 to
Form S-8 filed on May 14, 2003.)(1)                                                                                                                                                                                  
|     |  |                                                                                                                                                                                                                                                                                                                                   
|10.3 |  | Letter Agreement between Inrange Technologies Corporation and Kenneth H. Koch effective October 28, 2002.(1)(2)                                                                                                                                                                                                                   
|     |  |                                                                                                                                                                                                                                                                                                                                   
|10.4 |  | Letter Agreement between Inrange Technologies Corporation and John R. Schwab effective
October 28, 2002.(1)(2)                                                                                                                                                                                                                    
|     |  |                                                                                                                                                                                                                                                                                                                                   
|11.  |  | Statement Re: Computation of Net income (loss) per
Basic and Diluted Share.                                                                                                                                                                                                                                                       
|     |  |                                                                                                                                                                                                                                                                                                                                   
|99.1 |  | Computer Network Technology Corporation Certification
of Chief Executive Officer and Chief Financial Officer
Pursuant to Section 906 of the Sarbanes-Oxley Act of
2002 (18 U.S.C. 1350).(2)                                                                                                                                       



---

(2)     Filed herewith.

(b)  Reports on Form 8-K



| |  |  | The Company filed a current
report on March 19, 2003, to report the execution of employment
agreements with Thomas G. Hudson and Gregory T. Barnum. The company
also filed a current report on Form 8-K on April 8, 2003, to report
that it had entered into a definitive agreement to acquire Inrange. A
current report on Form 8-K was dated and furnished May 12, 2003,
pursuant to Item 9 (Regulation FD Disclosure) to report the
press release announcing the Companys financial results for the
first quarter of 2003 and certain other information. The
Company also filed a Form 8-K dated May 15, 2003 to report the
press release announcing the Companys agreement to acquire
Inrange Technologies Corporation.
| |  |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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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: June 13, 2003

|    |  |                                                                                                               
|--- |  | --------------------------------------------------------------------------------------------------------------
|By: |  | /s/ Gregory T. BarnumGregory T. Barnum
Chief Financial Officer
(Principal financial officer)                  
|   
|By: |  | /s/ Jeffrey A. BertelsenJeffrey A. Bertelsen
Corporate Controller
and Treasurer
(Principal accounting officer)

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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;

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;

4.     The registrants other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrants and we have:



| | a) |  | Designed such disclosure controls and procedures to ensure
that material information relating to the registrants, including its
consolidated subsidiaries, is made known to us by others within
those entities, particularly during the period in which this
quarterly report is being prepared;
| | -- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| | b) |  | Evaluated the effectiveness of the registrants disclosure
controls and procedures as of a date within 90 days prior to the
filing date of this quarterly report (the Evaluation Date); and                                                                                                   
|
| | c) |  | Presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;                                                                                                                         

5.     The registrants other certifying officers and I have disclosed, based on
our most recent evaluation, to the registrants auditors and the audit
committee of the registrants board of directors (or persons performing the
function):



| | a) |  | All significant deficiencies in the design or operation of
internal controls which could adversely affect the registrants
ability to record, process, summarize and report financial data and
have identified for the registrants auditors any material weakness
in internal controls; and
| | -- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| | b) |  | Any fraud, whether or not material, that involves management
or other employees who have a significant role in the registrants
internal controls; and                                                                                                                                      

6.     The registrants other certifying officers and I have indicated in this
quarterly report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal controls
subsequent to the date of our most recent evaluation, including any corrective
actions with regard to significant deficiencies and material weaknesses.

|                    |  |                        
|------------------- |  | -----------------------
|Date: June 12, 2003 |  |                        
|                    |  | /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;

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;

4.     The registrants other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrants and we have:



| | a) |  | Designed such disclosure controls and procedures to ensure
that material information relating to the registrants, including its
consolidated subsidiaries, is made known to us by others within
those entities, particularly during the period in which this
quarterly report is being prepared;
| | -- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| | b) |  | Evaluated the effectiveness of the registrants disclosure
controls and procedures as of a date within 90 days prior to the
filing date of this quarterly report (the Evaluation Date); and                                                                                                   
|
| | c) |  | Presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;                                                                                                                         

5.     The registrants other certifying officers and I have disclosed, based on
our most recent evaluation, to the registrants auditors and the audit
committee of the registrants board of directors (or persons performing the
function):



| | a) |  | All significant deficiencies in the design or operation of
internal controls which could adversely affect the registrants
ability to record, process, summarize and report financial data and
have identified for the registrants auditors any material weakness
in internal controls; and
| | -- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| | b) |  | Any fraud, whether or not material, that involves management
or other employees who have a significant role in the registrants
internal controls; and                                                                                                                                      

6.     The registrants other certifying officers and I have indicated in this
quarterly report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal controls
subsequent to the date of our most recent evaluation, including any corrective
actions with regard to significant deficiencies and material weaknesses.

|                    |  |                        
|------------------- |  | -----------------------
|Date: June 12, 2003 |  |                        
|                    |  | /s/ GREGORY T. BARNUM  
|                    |  | Gregory T. Barnum      
|                    |  | Chief Financial Officer

26



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##### Table of Contents






EXHIBIT INDEX

|     |  |                                                                                                                                                                                                                                                                                                                                   
|---- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Item |  | Description                                                                                                                                                                                                                                                                                                                       
|     |  |                                                                                                                                                                                                                                                                                                                                   
|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.)                                                     
|     |  |                                                                                                                                                                                                                                                                                                                                   
|10.1 |  | Tax Sharing Agreement, between Inrange Technologies Corporation and
SPX Corporation.(2)                                                                                                                                                                                                                                           
|     |  |                                                                                                                                                                                                                                                                                                                                   
|10.2 |  | Inrange Technologies Corporation 2000 Stock Compensation Plan. (Incorporated by reference to Exhibit 99.1 to
Form S-8 filed on May 14, 2003.)(1)                                                                                                                                                                                  
|     |  |                                                                                                                                                                                                                                                                                                                                   
|10.3 |  | Letter Agreement between Inrange Technologies Corporation and Kenneth H. Koch effective October 28, 2002.(1)(2)                                                                                                                                                                                                                   
|     |  |                                                                                                                                                                                                                                                                                                                                   
|10.4 |  | Letter Agreement between Inrange Technologies Corporation and John R. Schwab effective
October 28, 2002.(1)(2)                                                                                                                                                                                                                    
|     |  |                                                                                                                                                                                                                                                                                                                                   
|11.  |  | Statement Re: Computation of Net income (loss) per Basic and
Diluted Shares.(2)                                                                                                                                                                                                                                                   
|     |  |                                                                                                                                                                                                                                                                                                                                   
|99.1 |  | Computer Network Technology Corporation Certification
of Chief Executive Officer and Chief Financial Officer
Pursuant to Section 906 of the Sarbanes-Oxley Act of
2002 (18 U.S.C. 1350).(2)                                                                                                                                       



---

(2)     Filed herewith.

27