<PAGE>

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

                                    FORM 10-Q

(Mark One)

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

         For the quarterly period ended March 31, 1999

[  ]     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 0-23263

                           EXCEL SWITCHING CORPORATION
                           ---------------------------
             (Exact name of registrant as specified in its charter)

        Massachusetts                                         04-2992806
        -------------                                         ----------
(State or other jurisdiction of                            (I.R.S. Employer
incorporation or organization)                          Identification Number)

                             255 Independence Drive
                             ----------------------
                          Hyannis, Massachusetts 02601
                          ----------------------------
               (Address of principal executive offices) (Zip code)

                                 (508) 862-3000
                                 --------------
              (Registrant's telephone number, including area code)

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

         As of May 5, 1999, there were 34,482,590 shares of the Registrant's
Common Stock, $.01 par value, outstanding.


                                       1


<PAGE>


                           EXCEL SWITCHING CORPORATION

                                    FORM 10-Q

                                TABLE OF CONTENTS

<TABLE>
<CAPTION>
                                                                                                    Page
<S>               <C>                                                                               <C>
PART I.           FINANCIAL INFORMATION

ITEM 1.           Consolidated Condensed Financial Statements

                  Consolidated Condensed Balance Sheets as of December 31,1998
                    and March 31, 1999                                                                  3

                  Consolidated Condensed Statements of Income for the three months
                    ended March 28, 1998 and March 31, 1999                                             4

                  Consolidated Condensed Statements of Cash Flows for the three
                    months ended March 28, 1998 and March 31, 1999                                      5

                  Notes to Consolidated Condensed Financial Statements                                  6

ITEM 2.           Management's Discussion and Analysis of Financial Condition and
                    Results of Operations                                                               8

ITEM 3.           Quantitative and Qualitative Disclosures About Market Risk                           27

PART II.          OTHER INFORMATION

ITEM 1.           Legal Proceedings                                                                    28

ITEM 2.           Changes in Securities and Use of Proceeds                                            28

ITEM 3.           Defaults Upon Senior Securities                                                      29

ITEM 4.           Submission of Matters to a Vote of Security Holders                                  29

ITEM 5.           Other Information                                                                    29

ITEM 6.           Exhibits and Reports on Form 8-K                                                     29

                  SIGNATURES                                                                           30

                  EXHIBIT INDEX                                                                        31
</TABLE>



                                       2


<PAGE>


                           EXCEL SWITCHING CORPORATION
                      CONSOLIDATED CONDENSED BALANCE SHEETS
                 (in thousands, except share and per share data)

                                     ASSETS
<TABLE>
<CAPTION>
                                                                                      December 31,        March 31,
                                                                                          1998              1999
                                                                                                         (unaudited)
<S>                                                                                  <C>                <C>
CURRENT ASSETS:
   Cash and cash equivalents                                                           $  62,517          $ 58,738
   Marketable securities                                                                  55,579            66,965
   Accounts receivable, net of reserves of $2,000 and $2,500                              30,912            36,220
   Inventories                                                                             5,404             9,476
   Deferred tax asset                                                                      7,461             7,430
   Other current assets                                                                    2,013             4,446
                                                                                   -------------      ------------

         Total current assets                                                            163,886           183,275
PROPERTY AND EQUIPMENT, NET                                                               18,438            20,674
DEFERRED TAX ASSET                                                                           990             3,441
INTANGIBLE ASSETS, NET                                                                     9,702             9,360
OTHER ASSETS                                                                               5,766             6,480
                                                                                   -------------      ------------

                                                                                       $ 198,782          $223,230
                                                                                   =============      ============

                       LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
   Current maturities of long-term obligations                                         $   3,408          $  4,262
   Accounts payable                                                                        5,102             9,428
   Accrued expenses                                                                       16,874            13,936
   Accrued income taxes                                                                    6,052             8,223
   Deferred revenue                                                                        1,047             1,481
   Recourse obligation                                                                        --             8,495
                                                                                   -------------      ------------

         Total current liabilities                                                        32,483            45,825
                                                                                   -------------      ------------
LONG-TERM OBLIGATIONS, LESS CURRENT MATURITIES                                             4,858             3,958
                                                                                   --------------     ------------
STOCKHOLDERS' EQUITY:
   Preferred stock, $.01 par value-
     Authorized--10,000,000 shares; no shares outstanding                                     --                --
   Common stock, $.01 par value-
     Authorized--100,000,000 shares
     Issued and outstanding--34,020,043 and 34,465,955 shares at December 31,
       1998 and March 31, 1999, respectively                                                 340               345
   Additional paid-in capital                                                            101,864           106,443
   Deferred compensation                                                                    (526)             (480)
   Accumulated other comprehensive income                                                    107                51
   Retained earnings                                                                      59,656            67,088
                                                                                   -------------      ------------

         Total stockholders' equity                                                      161,441           173,447
                                                                                   --------------     ------------

                                                                                       $ 198,782          $223,230
                                                                                   =============      ============
</TABLE>

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


                                       3


<PAGE>


                           EXCEL SWITCHING CORPORATION

                   CONSOLIDATED CONDENSED STATEMENTS OF INCOME
                      (in thousands, except per share data)
                                   (unaudited)

<TABLE>
<CAPTION>
                                                                                       Three Months Ended
                                                                                March 28,                March 31,
                                                                                   1998                     1999
<S>                                                                            <C>                     <C>
REVENUES                                                                         $25,556                   $36,615

COST OF REVENUES                                                                   7,580                    10,785
                                                                              ----------               -----------

         Gross profit                                                             17,976                    25,830
                                                                              ----------               -----------

OPERATING EXPENSES:
   Engineering, research and development                                           4,726                     7,599
   Selling and marketing                                                           3,920                     4,750
   General and administrative                                                      2,418                     3,151
                                                                              ----------               -----------

         Total operating expenses                                                 11,064                    15,500
                                                                              ----------               -----------

         Income from operations                                                    6,912                    10,330

OTHER INCOME, NET                                                                  1,648                     1,349
                                                                              ----------               -----------

         Income before provision for income taxes                                  8,560                    11,679

PROVISION FOR INCOME TAXES                                                         3,210                     4,263
                                                                              ----------               -----------

NET INCOME                                                                       $ 5,350                   $ 7,416
                                                                              ==========               ===========

BASIC EARNINGS PER SHARE                                                         $   .16                   $   .22
                                                                              ==========               ===========

DILUTED EARNINGS PER SHARE                                                       $   .14                   $   .19
                                                                              ==========               ===========

BASIC WEIGHTED AVERAGE SHARES OUTSTANDING                                         32,645                    34,278

DILUTED WEIGHTED AVERAGE SHARES OUTSTANDING                                       38,936                    40,027
</TABLE>



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


                                       4


<PAGE>


                           EXCEL SWITCHING CORPORATION

                 CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
                                 (in thousands)
                                   (unaudited)

<TABLE>
<CAPTION>
                                                                                         Three Months Ended
                                                                                  March 28,              March 31,
                                                                                     1998                   1999
<S>     <C>    <C>    <C>    <C>    <C>    <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
   Net income                                                                      $ 5,350                $  7,416
   Adjustments to reconcile net income to net cash provided by operating                             
   activities-
     Depreciation and amortization                                                     725                   1,234
     Unrealized gain (loss) on investments                                              18                     (56)
     Deferred income taxes                                                            (470)                 (2,420)
     Compensation expense associated with the grant of stock options, net
       of forfeitures                                                                   40                      96
     Changes in assets and liabilities-
       Accounts receivable                                                          (1,205)                 (5,308)
       Inventories                                                                    (869)                 (4,072)
       Prepaid taxes                                                                   122                      --
       Other current assets                                                           (579)                 (2,433)
       Accounts payable                                                                135                   4,327
       Accrued expenses                                                              2,386                  (2,938)
       Accrued income taxes                                                          1,013                   6,028
       Deferred revenue                                                                 --                     434
       Recourse obligation                                                              --                   8,495
                                                                                ----------               ---------

             Net cash provided by operating activities                               6,666                  10,803
                                                                                ----------               ---------

CASH FLOWS FROM INVESTING ACTIVITIES:
   Purchases of property and equipment                                              (2,853)                 (3,128)
   Purchases of marketable securities, net                                            (430)                (11,386)
   Increase in other assets                                                             --                    (714)
                                                                                ----------               ---------

            Net cash used in investing activities                                   (3,283)                (15,228)
                                                                                ----------               ---------

CASH FLOWS FROM FINANCING ACTIVITIES:
   Payments on long-term obligations                                                (3,179)                    (46)
   Issuance of  stock under employee stock  purchase plan                               --                     214
   Proceeds from the exercise of stock options                                          54                     478
                                                                                ----------               ---------

            Net cash used in financing activities                                   (3,125)                    646
                                                                                ----------               ---------

NET INCREASE IN CASH AND CASH EQUIVALENTS                                              258                  (3,779)

CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD                                      47,968                  62,517
                                                                                ----------               ---------

CASH AND CASH EQUIVALENTS, END OF PERIOD                                           $48,226                $ 58,738
                                                                                ==========               =========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
  Cash paid during the period for-
     Interest                                                                      $    22                $    210
                                                                                ==========               =========

     Taxes                                                                         $ 2,545                $    598
                                                                                ==========               =========
</TABLE>



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


                                       5


<PAGE>


                           EXCEL SWITCHING CORPORATION

              NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS


Note 1 - Interim Consolidated Condensed Financial Statements


         The accompanying unaudited interim consolidated condensed financial
statements have been prepared in accordance with generally accepted accounting
principles for interim financial information and pursuant to the rules and
regulations of the Securities and Exchange Commission for reporting on Form
10-Q. Accordingly, certain information and footnote disclosure required for
complete financial statements are not included herein. It is recommended that
these financial statements be read in conjunction with the consolidated
financial statements and related notes of Excel Switching Corporation (the
"Company") for the year ended December 31, 1998 as reported in the Company's
Annual Report on Form 10-K. In the opinion of management, all adjustments
(consisting of normal, recurring adjustments) considered necessary for a fair
presentation of financial position, results of operations and cash flows at the
dates and for the periods presented have been included. The consolidated
condensed balance sheet presented as of December 31, 1998 has been derived from
the consolidated financial statements that have been audited by the Company's
independent public accountants. The results of operations for the three months
ended March 31, 1999 may not be indicative of the results that may be expected
for the year ended December 31, 1999, or for any other period.


Note 2 - Earnings Per Share


         Basic earnings per share was determined by dividing net income by the
weighted average common shares outstanding during the period. Diluted earnings
per share was determined by dividing net income by diluted weighted average
shares outstanding. Diluted weighted average shares reflect the dilutive effect,
if any, of common stock options based on the treasury stock method. The
calculations of basic and diluted weighted average shares outstanding are as
follows (in thousands):

<TABLE>
<CAPTION>
                                                                                  Three Months Ended
                                                                     ------------------------------------------------
                                                                       March 28, 1998             March 31, 1999
                                                                     -------------------      -----------------------
<S>                                                                       <C>                      <C>
Basic weighted average common shares outstanding                              32,645                     34,278

Weighted average common equivalent shares                                      6,291                      5,749
                                                                             -------                    -------
Diluted weighted average shares outstanding                                   38,936                     40,027
                                                                             =======                    =======
</TABLE>


Note 3 - Comprehensive Income


         Comprehensive income for the three month periods ended March 28, 1998
and March 31, 1999 is approximately $5,361,000 and $7,380,000, respectively. The
difference between comprehensive income and net income relates to unrealized
gains and losses on marketable securities.

Note 4 - Significant Customers

         During three month period ended March 31, 1999, there were no customers
that generated 10% or more of the Company's total revenues. During the three
month period ended March 28, 


                                       6


<PAGE>


1998, significant customers that generated 10% or more of the Company's total
revenues were as follows:


<TABLE>
         <S>                                       <C>  
          Significant Customer A                    22.2%

          Significant Customer B                    10.2%

          Significant Customer C                    10.2%
</TABLE>


Note 5 - Lease Program

         In March 1999, the Company entered into an arrangement with a 
leasing entity to enable the Company's customers to finance the purchase of 
Excel equipment. Under the terms of this arrangement, the Company has a 
recourse obligation in the amount of the greater of $2,000,000 or 20% of the 
aggregate net book value of annual equipment sales financed. In addition, the 
Company has a 100% recourse obligation for contracts funded for customers 
with certain credit ratings, as determined by the leasing entity.

         During the first quarter of 1999, the Company sold approximately 
$7.9 million of equipment under sales-type lease agreements to this leasing 
entity. In addition, the Company sold to this entity an existing receivable 
of approximately $1.0 million. The Company's total recourse obligation at 
March 31, 1999 is approximately $8.5 million. Due to the credit ratings of 
certain of these customers and the related recourse obligations, the Company 
determined it was appropriate to record the related $7.5 million of revenue 
ratably as the lease payments are received or until such time as collection 
of the underlying lease payments can be reasonably assured.

Note 6 - Acquisition of RAScom, Inc.


         On May 10, 1999, the Company completed an acquisition of RAScom, 
Inc., a provider of open remote access server technology. Under terms of the 
agreement, Excel acquired all outstanding shares and options of RAScom in 
exchange for up to 1.1 million shares of Excel common stock. The transaction 
is intended to be accounted for as a pooling-of-interests transaction and 
qualify as a tax-free reorganization. Accordingly, the Company's financial 
statements for the period ended June 30, 1999 will reflect the combined 
results of both entities. In addition, financial results for previous periods 
will be restated to reflect the combined operations for both entities. Based 
on the closing price of Excel common stock on the date of closing, the 
transaction is valued at approximately $23.9 million. During the second 
quarter of 1999, the Company expects to record a one-time charge for 
acquisition related expenses of an amount estimated to be approximately $2 
million.

         Information regarding the pro forma results for the first quarter of 
1999 reflecting the acquisition is not currently available, however, such 
information will be provided in the Company's Form 8-K filing in June 1999.

                                       7


<PAGE>


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


         The following discussions contain statements which may be
"forward-looking" statements and are subject to risks and uncertainties that
could cause actual results to differ significantly from expectations. In
particular, statements contained in this "Management's Discussion and Analysis
of Financial Condition and Results of Operations" which are not historical
facts, including, but not limited to, statements regarding the anticipated
adequacy of cash resources to meet the Company's working capital requirements;
anticipated payment terms relating to accounts receivable; statements regarding
the anticipated proportion of revenues to be derived from a limited number of
customers; anticipated revenues from Qualcomm; statements regarding the
Company's recourse obligation under its lease program; unanticipated costs and
difficulties with integrating the operations, products and personnel of acquired
businesses, including RAScom; anticipated extension of the bank line of credit
agreement; statements regarding the size of the expected one-time charge for
acquisition-related expenses; and statements regarding the Company's readiness
for Y2K, may constitute forward-looking statements. Factors that might cause
such a difference include those relating to: fluctuations in quarterly results
of operations; dependence on and concentration of relationships with application
developers, original equipment manufacturers (OEMs) and systems integrators;
risks relating to lease financing; length of sales cycle; concentration of
customers; dependence on single and sole source suppliers; dependence on
third-party manufacturers; and management of growth and hiring of additional
personnel. Other factors may include, but are not limited to, those relating to
the evolving market for telecommunication services; concentrated product family;
risk of new product introductions; rapid technological change; risks relating to
acquisitions; difficulty of integrating two companies; difficulty of integrating
RAScom product lines; uncertainties relating to integration of operations; need
to integrate and retain key employees of RAScom; risks related to failure to
achieve beneficial synergies; risks related to sales to end-users; dependence on
key personnel; highly competitive market; and compliance with regulations and
evolving industry standards; dependence on proprietary rights; risks associated
with international sales; risks associated with litigation and other risks
identified in the Company's Securities and Exchange Commission filings including
those risks identified in the section entitled "Risk Factors" of the Company's
Annual Report for the fiscal year ended December 31, 1998 on Form 10-K.


Overview

         Excel Switching Corporation (the "Company") is a leading provider of
open switching platforms for telecommunications networks worldwide. The Company
develops, manufactures, markets and supports a family of open, programmable,
carrier-class switches that address the complex enhanced services and wireless
and wireline infrastructure needs of network providers. Excel's products offer
network providers the flexibility to address multiple market applications and
the scalability to deploy a variety of system capacities. The Company's
programmable switching platforms enable network providers to deliver improved
networking functionality at a lower cost than purchasing, upgrading or
reprogramming traditional, closed, central office switches.

         Excel offers a family of programmable switching platforms that are
designed with distributed architecture and open software to maximize performance
and provide multiple levels of programmability and redundancy. Excel's open
switching platforms integrate with a wide variety of host computer systems,
operating systems and application development environments. The Company's
product family scales from approximately 100 to 30,720 ports. Using Excel's
patented Programmable Protocol Language ("PPL"), application developers can
customize the 


                                       8


<PAGE>


switching software to their unique requirements, allowing them to introduce new
services and applications rapidly. As customer requirements evolve, the Excel
platform can be upgraded without requiring extensive and complex programming
changes to the underlying software.

         The Company sells to a variety of customers in the worldwide
telecommunications market. Excel's customers integrate the Company's open,
programmable switching platforms with their product offerings to address a
variety of market applications for network providers, ranging from enhanced
services such as voice messaging, one number services and prepaid debit cards,
to wireless and wireline infrastructure services such as tandem, end-office,
mobile switching centers, intelligent base station controllers and wireless
local loop.


         Excel's products and technology are contained within the framework of
Open Network Expansion Architecture ("ONE Architecture(TM)"). ONE Architecture
is Excel's concept that its switching systems provide an open, scalable and
cost-effective solution for the telecommunication needs of network providers.
ONE Architecture encompasses a family of switching products and related embedded
software technologies.


Recent Acquisition


         On May 10, 1999, the Company completed an acquisition of RAScom, Inc.,
a provider of open remote access server technology. Under terms of the
agreement, Excel acquired all outstanding shares and options of RAScom in
exchange for the right to receive up to 1.1 million shares of Excel common
stock. The transaction is intended to be accounted for as a pooling-of-interests
transaction and qualify as a tax-free reorganization. Accordingly, the Company's
financial statements for the period ended June 30, 1999 will reflect the
combined results of both entities. In addition, financial results for previous
periods will be restated to reflect the combined operations for both entities.
During the second quarter of 1999, the Company expects to record a one-time
charge for acquisition related expenses of an amount estimated to be
approximately $2 million. Management anticipates that the acquisition of RAScom
will expand Excel's addressable market by adding data capabilities to the EXS
product line. See Footnote 6 of Notes to Consolidated Condensed Financial
Statements.





                                       9


<PAGE>


Results of Operations

         The following table sets forth, for the periods indicated, the
percentage of revenues represented by certain items reflected in the Company's
Consolidated Condensed Statements of Income:

<TABLE>
<CAPTION>

                                                                    Three Months Ended
                                                ------------------------------------------------------------
                                                         March 28,                      March 31,
                                                            1998                          1999
                                                            ----                          ----
<S>                                                      <C>                           <C>
Revenues...................................                100.0%                         100.0%
Cost of revenues...........................                 29.7                           29.5
                                                          ------                         ------
         Gross profit......................                 70.3                           70.5
                                                          ------                         ------
Operating expenses:
    Engineering, research and
         development.......................                 18.5                           20.7
    Selling and marketing..................                 15.3                           13.0
    General and administrative.............                  9.5                            8.6
                                                          ------                         ------
         Total operating expenses..........                 43.3                           42.3
                                                          ------                         ------
         Income from operations............                 27.0                           28.2
Other income, net..........................                  6.5                            3.7
                                                          ------                         ------
         Income before provision for
           income  taxes...................                 33.5                           31.9
Provision for income taxes.................                 12.6                           11.6
                                                          ------                         ------
Net income.................................                 20.9%                          20.3%
                                                          ======                         ======
</TABLE>


Three Months Ended March 28, 1998 and March 31, 1999


         Revenues. The Company's revenues consist of sales of its open,
programmable switching platforms and related components. Revenues increased 43%
from $25.6 million in the three months ended March 28, 1998 to $36.6 million for
the comparable period in 1999. The Company believes that the increase resulted
from a number of factors. The Company's efforts to enhance the scalability,
performance, capacity and functionality of its products has contributed to an
increased interest in Excel's programmable switching platforms as a means of
addressing the evolving needs of the telecommunications industry. This includes
enhancements in the areas of switch management, PPL and SS7 as well as in
infrastructure solution offerings. Over the past several years, the Company's
customer base has also broadened, resulting in increased sales from a larger
number of sources. The introduction of new or enhanced offerings by this growing
customer base as well as the expansion of their markets resulted in an increased
demand for Excel's products. Excel also increased its efforts to provide
customers with assistance in designing, planning and testing new customer
applications. The Company expanded or established relationships with a growing
number of network service providers, resulting in an increased amount of direct
sales to end-users. Revenues also benefited by the expansion of the selling and
marketing organizations, including the establishment of two international sales
offices in 1998.


                                       10


<PAGE>


         Revenues from the Company's five largest customers represented
approximately 55.6% and 29.7% of the Company's revenues for the first quarters
of 1998 and 1999, respectively. In the first quarter of 1999, no single customer
represented 10% or more of the Company's total revenue. During the comparable
1998 period, the following customers represented greater than 10% of the
Company's revenue: Qualcomm Incorporated represented approximately 22.2%;
Comverse Network Systems (Comverse) represented approximately 10.2%; and Brite
Voice Systems, Inc. represented approximately 10.2%. The Company anticipates
that revenues in 1999 from the Company's largest customer of 1998, Qualcomm
Incorporated, will decrease from the previous two fiscal years on both an
absolute dollar and percentage of sales basis. Although the Company's largest
customers have varied from period to period and the customer base continues to
broaden, the Company believes that revenues derived from current and potential
large customers will continue to represent a significant proportion of revenues,
and that its results of operations in any given period will continue to depend
to a significant extent upon sales to a limited number of customers. The volume
of future purchases, if any, by the Company's principal customers cannot be
estimated based upon historical purchasing trends. Revenues from the Company's
largest customers may significantly fluctuate period to period on both an
absolute dollar basis and as a percentage of sales.

         Gross Profit. Cost of revenues consists primarily of the cost of
purchased components and subassemblies, contract manufacturing costs, labor and
overhead relating to material procurement, final assembly, testing and quality
control, and warranty and post-sale support costs. Cost of revenues increased
42.3% from $7.6 million in the three months ended March 28, 1998 to $10.8
million for the comparable period in 1999. Gross margin increased from 70.3% in
the first quarter of 1998 to 70.5% in the comparable period of 1999. The
increase in cost of revenues is attributable to the increase in sales volume.


         Engineering, Research and Development. Engineering, research and
development costs consist primarily of compensation and benefit related costs of
engineering and development personnel, materials and supplies consumed in
prototype development and related facility and equipment costs. Engineering,
research and development costs increased 60.8% from $4.7 million in the first
quarter of 1998 to $7.6 million for the comparable period in 1999. As a
percentage of revenues, these costs were 18.5% and 20.7%, respectively, in such
periods. The increase in engineering, research and development costs in absolute
dollars was primarily attributable to an increase in engineering and research
personnel.


         Selling and Marketing. Selling and marketing costs consist primarily of
compensation and benefit related costs for sales, marketing and customer support
personnel, travel, promotional activities and related facility costs. Selling
and marketing costs increased 21.2% from $3.9 million in the first quarter of
1998 to $4.8 million for the comparable period of 1999. As a percentage of
revenues, these costs were 15.3% and 13.0%, respectively, in such periods. The
increase in selling and marketing costs in absolute dollars was primarily
attributable to an increases in sales, marketing and customer support personnel,
promotional activities and costs related to the international offices
established in 1998.

         General and Administrative. General and administrative costs include
compensation and benefit related costs of management, finance, information
technology and administrative personnel, professional services, costs to
maintain manufacturing and management information systems, goodwill amortization
and other general corporate expenses. General and administrative costs increased
30.3% from $2.4 million in the first quarter of 1998 to $3.2 


                                       11


<PAGE>


million for the comparable period in 1999. As a percentage of revenues, these
costs were 9.5% and 8.6%, respectively, in such periods. The increase in general
and administrative costs in absolute dollars was primarily attributable to
increases in bad debt expense and amortization of goodwill as well as
professional fees associated with recruiting, acquisition activities and
litigation. See Part II, Item 1, Legal Proceedings.


         Other Income. Other income is primarily composed of interest income,
offset by interest expense. Other income decreased 18% from $1.6 million in the
first quarter of 1998 to $1.3 million for the comparable period in 1999. This
decrease was primarily attributable to the interest expense associated with $8.2
million of acquisition related long-term obligations issued in 1998.

         Provision For Income Taxes. The Company's effective rate for Federal
and state income taxes was approximately 37.5% and 36.5% for the first quarters
of 1998 and 1999, respectively. The decrease is effective tax rates is primarily
attributable to a decrease in the effective state income tax rate and the
utilization of certain tax credits.

Liquidity and Capital Resources

         At March 31, 1999, the Company's principal sources of liquidity
consisted of cash, cash equivalents and marketable securities of approximately
$125.7 million, working capital of approximately $137.5 million and $15.0
million of funds available under a bank line of credit. At December 31, 1998,
the Company had $118.1 million invested in cash, cash equivalents and marketable
securities.


         Net cash provided by operations for the three months ended March 28,
1998 and March 31, 1999 totaled $6.7 million and $10.8 million, respectively.
The increase in 1999 was primarily the result of proceeds received under the
lease program with a leasing entity offset by an increase in accounts
receivable and inventories.


         During the first quarter of 1999, the Company's accounts receivable
increased $5.3 million or 17% from December 31, 1998. Management believes this
increase is due to a number of factors including the timing of order placements
and shipments within the quarter and an increase in sales to international
customers and to network providers and other end-users. Sales to such customers
typically require longer payment terms than the Company historically has
extended to its established customer base. The Company expects this trend to
continue as it seeks to increase revenues and further expand its business
internationally and with network service providers.


         In March 1999, the Company entered into an arrangement with a leasing
entity to enable the Company's customers to finance the purchase of Excel
equipment. Under the terms of this arrangement, the Company has a recourse
obligation in the amount of the greater of $2,000,000 or 20% of the aggregate
net book value of annual equipment sales financed. In addition, the Company has
a 100% recourse obligation for contracts funded for customers with certain
credit ratings, as determined by the leasing entity.

         During the first quarter of 1999, the Company sold approximately $7.9
million of equipment under sales-type lease agreements to the leasing entity. In
addition, the Company sold an existing receivable of approximately $1.0 million
to the leasing entity. The Company's total recourse obligation at March 31, 1999
is approximately $8.5 million.


                                       12


<PAGE>


         During the first quarter of 1999, inventories increased 
approximately 75% or $4.1 million from December 31, 1999. This increase was 
primarily due to the timing of the purchase and receipt of inventory 
components prior to the end of the quarter.

         Net cash used in investing activities for the three months ended March
28, 1998 and March 31, 1999 totaled $3.3 million and $15.2 million,
respectively. The increase primarily relates to an increase in the dollar amount
of investments purchased in 1999 with maturity dates of ninety-one days or
greater.

         The Company's existing unsecured bank line of credit arrangement
expires in June 1999. Management is presently negotiating a possible extension
of this agreement and believes that such an extension will be finalized prior to
the expiration of the credit agreement.

         The Company believes that available cash and investments and cash funds
generated from operations will be sufficient to meet the Company's anticipated
cash requirements for working capital and capital expenditures for at least the
next twelve months.

Year 2000 Readiness Disclosure Statement

         Many currently installed computer systems and software products are
designed to accept only two-digit entries in the date code field. As a result,
they may have problems properly recognizing 1/1/00 as January 1, 2000. In less
than a year, computer systems and/or software used by many companies may need to
be upgraded to comply with such "Year 2000" or "Y2K" requirements. Significant
uncertainty exists in the computer software, hardware and telecommunications
industries concerning the potential effects associated with the Year 2000 issue.

         The Company has instituted a program to review the Y2K compliance
status of the Company's product offerings and the software and systems used in
its internal business processes. Suppliers of the components that make up
Excel's products, as well as service suppliers, are being contacted as part of
the Company's Y2K assessment. In July 1998, Excel received ITAA*2000
certification from ITAA (Information Technology Association of America). ITAA's
review examined eleven discrete process areas deemed necessary for a successful
Y2K conversion. ITAA's certification indicates that Excel meets the information
technology's best software development practices for addressing the Year 2000
issue.

         The Company has integrated Y2K testing into the development process for
all of its products. The Company has reviewed its entire EXS family of products,
which includes the EXS and the products formerly named the LNX and CSN. The
Company believes that its entire EXS family of products is generally Y2K
compliant. Accordingly, the use or occurrence of dates on or after January 1,
2000 and the occurrence of leap years will not affect the performance of the
Company's products with respect to the ability of such products to correctly
create, store, process and output information related to such date data. Excel's
programmable switches are controlled by a host computer owned and operated
generally by a customer or end user, and are typically integrated into
telecommunication applications by application developers, original equipment
manufacturers and system integrators or other third parties. Excel's switch
software is embedded, real time software. By design, date values are rarely used
in Excel's products. The Company found no discrepancies with Y2K or leap year
date processing during its internal testing. Excel believes that the PCX product
line will also function properly with a host computer using DOS version 6.22 and
beyond. This belief is based on an engineering review and internal test results
of the PCX product line.


                                       13


<PAGE>


         The Company has also reviewed the product offerings resulting from the
acquisitions of XNT and Quantum for Y2K compliance and believes they are
generally Y2K compliant. Prior to being acquired by Excel, both XNT and Quantum
performed their own Y2K assessment. Quantum's products use a 4-digit date code
and, therefore, have no known Y2K problems. Excel received test reports from XNT
verifying that XNT's NT-based ADS software from version 5.14.98 forward had
passed their internal Y2K testing. The DOS-based ADS software is currently
undergoing testing. These products and their related product development
processes are currently being integrated into Excel's existing, ITAA-approved
process for the development, test and release of enhancements.

         Excel's primary internal information systems used to support its
operations (specifically, its ERP system, individual servers and workstations
and common office applications) have either been researched to be Y2K compliant
or are in the process of being upgraded. The Company is expects to be fully
compliant by the end of the third quarter with regard to its ERP system,
individual servers and workstations and common office applications.


         The Company is in the process of contacting its major customers and
critical suppliers of components, equipment and services to determine whether
products and services obtained by the Company from such vendors or sold by the
customer to third parties are Y2K compliant. The Company's suppliers and
customers are under no contractual obligation to provide such information to the
Company. The Company intends to continue its efforts to monitor the Y2K
compliance of suppliers and major customers.

         Based on the information available to date, the Company believes it
will be able to complete its Y2K compliance review and make modifications, if
necessary, prior to the end of 1999. The Company is prioritizing its efforts to
focus on Y2K discrepancies that would significantly impact operations.
Nevertheless, to the extent the Company is relying on vendors or suppliers to
notify Excel or resolve Y2K issues within their own products, the Company may
experience delays in implementing such changes. If key systems, or a significant
number of systems were to fail as a result of Y2K problems, the Company could
incur substantial costs and disruption of its business, which would potentially
have a material adverse effect on the Company's business and results of
operations. In addition, because the Company purchases many critical components
from single or sole-source suppliers, failure of any such supplier to adequately
address issues relating to the Y2K problem in its own products or internal
systems may have a material adverse effect on the Company's business, financial
condition and results of operations.

         Because a majority of the Company's products are sold through
application developers, original equipment manufacturers and system integrators
or other third parties, users of the Company's products may experience Y2K
problems as a result of the integration of the Company's Y2K compliant products
with noncompliant Y2K products of third party suppliers. In certain
circumstances, the Company has warranted to customers that the use or occurrence
of dates on or after January 1, 2000 will not adversely affect the performance
of the Company's products with respect to the ability to create, store, process
and output information related to such date data. If any of these customers
experience Y2K problems, such customers could assert claims for damages against
the Company.

         To date, the Company has not required a complete and separate budget
for investigating and remedying issues related to Y2K compliance of the
Company's own products or the software 


                                       14


<PAGE>


         underlying systems used in its internal operations. The costs of
Excel's Y2K initiative have been incorporated into existing workloads and
budgets within the quality, engineering and information technology departments,
and are not expected to be material to the Company's results of operations or
financial position. Management expects to develop a contingency plan in the
third quarter of 1999 based upon the results of Excel's supplier and customer
readiness reviews. To the extent the Company has not adequately assessed its Y2K
compliance, additional or significant Company resources may be spent on
investigating and remedying Y2K issues and the expenditure of such resources may
have a material adverse effect on the Company's business, financial condition
and results of operations in the future.

Factors That May Affect Future Operating Results

         Statements contained in this Quarterly Report on Form 10-Q that are not
historical fact may constitute forward-looking statements and are made under the
safe harbor provisions of the Private Securities Litigation Reform Act of 1995.
The Company's actual results of operations and financial condition may in the
future vary significantly from those stated in any forward-looking statements.
Factors that may cause such differences include, but are not limited to, the
risks, uncertainties and other information discussed within this Quarterly
Report on Form 10-Q and other risks identified in the Company's Securities and
Exchange Commission filings, including those risks identified in the Company's
Annual Report for the fiscal year ended December 31, 1998 on Form 10-K.

         The following discussion of the Company's risk factors should be read
in conjunction with the consolidated financial statements and related notes
thereto set forth elsewhere in this report and in the Company's Annual Report
for the fiscal year ended December 31, 1998 on Form 10-K. The following factors,
among others, could cause actual results to differ materially from those set
forth in forward-looking statements contained or incorporated by reference in
this report and presented by management from time to time. Such factors, among
others, may have a material adverse effect upon the Company's business, results
of operations and financial condition:

         Fluctuations in Results of Operations. The Company's results of
operations have varied significantly in the past and may vary significantly in
the future, on a quarterly and annual basis, as a result of a variety of
factors, many of which are outside the Company's control. These factors include,
without limitation: (i) the timing and size of orders which are received and can
be shipped in any particular period; (ii) the commercial success of the
Company's products; (iii) delays in the introduction of products or product
enhancements by the Company and the Company's ability to introduce new products
and technologies on a timely basis; (iv) the financial stability of the
Company's major customers; (v) the timing of new product introductions or
announcements by the Company or its competitors; (vi) the availability of
adequate supplies of key components and assemblies and the adequacy of
third-party manufacturing capabilities; (vii) the seasonality of the placement
of customer orders; (viii) the timing and nature of selling and marketing
expenses such as tradeshows and advertising campaigns; (ix) the timing of
development expenditures and personnel changes; (x) the publication of opinions
about the Company and its products, or its competitors or their products, by
industry analysts; (xi) customer order deferrals in anticipation of product
enhancements or new product offerings by the Company or its competitors; and
(xii) customer cancellation of orders and the gain or loss of significant
customers, including those due to industry combinations. Moreover, any downturn
in general economic conditions could precipitate significant reductions in
corporate spending for 


                                       15


<PAGE>


telecommunications infrastructure, which could result in delays or cancellations
of orders for the Company's products. The Company's expense levels are
relatively fixed and are based, in significant part, on expectations of future
revenues. Consequently, if revenue levels are below expectations, expense levels
could be disproportionately high as a percentage of revenues, and the Company's
business, financial condition and results of operations would be materially
adversely affected. The Company has historically operated with little backlog
because the Company generally ships its products within 60 days of acceptance of
an order. As a result, revenues in any quarter are substantially dependent on
orders booked and shipped in that quarter and on sales by the Company's
customers to end users.

         The Company has experienced significant fluctuations in revenues,
expenses and results from operations from quarter to quarter, and such
fluctuations are likely to continue. The Company typically receives more product
orders and generates greater revenues in the fourth quarter. During the last
several years, revenues in the first quarter have typically been lower than
those recorded in the preceding fourth quarter. The Company believes that this
concentration of order placements in specific quarterly periods is due to
customers' buying patterns and budgeting cycles. A significant portion of the
Company's revenues have been generated from a limited number of customers and it
is difficult to predict the timing of future orders and shipments to these and
other customers. The Company anticipates that its results of operations in any
given period will continue to depend to a significant extent upon sales to a
small number of customers.

         The Company also believes that the purchase of its products generally
involves a significant commitment of a customer's capital resources. Therefore,
any downturn in any customer's business could have a material adverse effect on
the Company's revenues, business, financial condition and quarterly results of
operations. In addition, the Company historically has recognized a large portion
of its revenues from sales booked and shipped in the last month of a quarter
such that the magnitude of quarterly fluctuations may not become evident until
late in, or at the end of, a particular quarter. Because a number of the
Company's individual orders are for significant amounts, the failure to ship a
significant order in a particular quarter could materially adversely affect
revenues and results of operations for such quarter. To the extent that
significant sales occur earlier than expected, results of operations for
subsequent quarters may be materially adversely affected. Due to these and other
factors, the Company's quarterly revenues, expenses and results of operations
could vary significantly in the future, and period-to-period comparisons should
not be relied upon as indications of future performance. The Company's ability
to increase its revenues in future periods, sustain its level of revenues in
future periods or sustain its rate of revenue growth on a quarterly or annual
basis cannot be assured.

         Due to all of the foregoing factors, it is possible that in some future
quarter, the Company's results of operations will be below the expectations of
public market analysts and investors. In such event, the market price of the
Company's Common Stock would likely be materially adversely affected.

         Concentration of Customers. During the three months ended March 31,
1999, the Company's five largest customers accounted for approximately 29.7% of
the Company's revenues. During 1998's first quarter and fiscal 1998, the
Company's five largest customers accounted for approximately 55.6% and 45.0%,
respectively, of the Company's revenues. Although the Company's largest
customers have varied from period to period and the customer base continues to
broaden, the Company anticipates that its results of operations in any given
period will continue to depend to a significant extent upon sales to a small
number of customers. 


                                       16


<PAGE>


None of the Company's customers have entered into a long-term supply agreement
requiring any of them to purchase a minimum amount of product from the Company.
Revenues from the Company's largest customers may significantly fluctuate period
to period on both an absolute dollar basis and as a percentage of sales. The
Company anticipates that revenues in 1999 from the Company's largest customer of
1998, QUALCOMM Incorporated, will decrease from the previous two fiscal years on
both an absolute dollar and percentage of sales basis. It is unknown whether the
Company's principal customers will continue to purchase product from the Company
at current levels, if at all, or whether the Company will be able to replace
such purchases with sales to other customers. The loss of one or more major
customers could have a material adverse effect on the Company's business,
financial condition and results of operations.


         Highly Competitive Market. The market for telecommunications products
is highly competitive and subject to rapid technological change. The telecom
industry has also been subject to rapid consolidation of equipment and suppliers
by larger telecom and data network service providers. The Company competes or
may compete directly or indirectly with the following categories of companies:
(i) other manufacturers of programmable switches such as Cisco Systems, Inc.
(primarily through its recent acquisition of Summa Four, Inc.), Redcom
Laboratories, Inc. and Harris Corporation; (ii) large, well-established switch
and telecommunications equipment manufacturers such as Alcatel Alsthom Compagnie
Generale d'Electricite SA, Lucent Technologies Inc., Northern Telecom Limited,
Siemens AG and Telefonaktiebolaget LM Ericsson; and (iii) to a lesser degree,
systems integrators and application developers whose switches are based on PC
card-level products manufactured by companies such as Aculab Inc., Dialogic
Corporation and Natural MicroSystems Corporation. In addition, the Company may
be subject to competition from several smaller companies that have begun to
manufacture programmable switching platforms as well as from emerging data
communications equipment manufacturers. Due to the rapidly evolving markets in
which the Company competes, additional competitors with significant market
presence and financial resources, including large telecommunications equipment
manufacturers and computer hardware and software companies, may enter those
markets, thereby further intensifying competition. Additionally, one or more of
the Company's application developers may begin to develop or market products in
competition with the Company. Increased competition could result in price
reductions and loss of market share which would materially adversely affect the
Company's business, financial condition and results of operations. Many of the
Company's current and potential competitors have significantly greater
financial, selling and marketing, technical, manufacturing and other resources
than the Company. Some of the Company's competitors currently offer financing
alternatives to their customers. The Company has recently established a
relationship with an independent leasing company to offer a financing
alternative to some or all of Excel's customers. It is not certain that
financing alternative provided by this relationship will be on terms that are
competitive with the financial offerings of the Company's competitors. It is not
certain the Company will continue to offer such financing alternatives in the
future. Moreover, the Company's competitors may also foresee the course of
market developments more accurately than the Company. Although the Company
believes it has certain technological and other advantages over its competitors,
realizing and maintaining such advantages will require a continued high level of
investment by the Company in research and product development, marketing and
customer service and support. It is not certain that the Company will have
sufficient resources to continue to make such investments or that the Company
will be able to make the technological advances necessary to compete
successfully with its existing competitors or with new competitors.



                                       17


<PAGE>


         Year 2000 Compliance. The Company has implemented a Year 2000
compliance program designed to ensure that the Company's computer systems and
applications will function properly beyond 1999. The Company believes that
adequate resources have been allocated for this purpose and expects the
Company's Year 2000 date conversion programs to be completed on a timely basis.
The Company does not expect to incur significant expenditures to address this
issue. However, there can be no assurance that the Company will identify all
Year 2000 problems in its computer and other systems in advance of their
occurrence or that the Company will be able to successfully remedy any problems
that are discovered. The expenses of the Company's efforts to address such
problems, or the expenses or liabilities to which the Company may become subject
as a result of such problems, could have a material adverse effect on the
Company's business, results of operations and financial condition. In addition,
the revenue stream and financial stability of existing customers may be
adversely impacted by Year 2000 problems, which could cause fluctuations in the
Company's revenues and operating profitability and which could have a material
adverse effect on the Company's business, results of operations and financial
condition.

     If key systems, or a significant number of systems were to fail as a 
result of Y2K problems, the Company could incur substantial costs and 
disruption of its business, which would potentially have a material adverse 
effect on the Company's business and results of operations.  In addition, 
because the Company purchases many critical components from single or 
sole-source suppliers, failure of any such supplier to adequately address 
issues relating to the Y2K problem in its own products or internal systems 
may have a material adverse affect on the Company's business, financial 
condition and results of operations. In certain circumstances, the Company 
has warranted to customers that the use or occurrence of dates on or after 
January 1, 2000 will not adversely affect the performance of the Company's 
products with respect to the ability to create, store, process and output 
information related to such date data.  If any of these customers experience 
Y2K problems, such customers could assert claims for damages against the 
Company.  To the extent the Company has not adequately assessed its Y2K 
compliance, additional or significant Company resources may be spent on 
investigating and remedying Y2K issues and the expenditure of such resources 
may have a material adverse effect on the Company's business, financial 
condition and results of operations in the future.

         Dependence on Relationships with Application Developers, OEMs and
Systems Integrators. The Company sells a significant amount of its products to,
and maintains strategic relationships with, application developers, original
equipment manufacturers and systems integrators which incorporate the Company's
products into their service and product offerings. As a result, sales of the
Company's products are dependent upon the continued market acceptance of the
service and product offerings of the Company's customers. Although the Company
maintains contractual relationships with a substantial number of its customers,
such contracts do not provide for minimum purchase requirements, nor do they
contain provisions requiring the exclusive purchase of the Company's products.
The development of an application or service for the telecommunications market
can involve a substantial amount of time and expense. The delay or failure of a
customer's application development program incorporating the Company's products
could delay or prevent expected sales of the Company's products. The inability
or cessation of customers to integrate the Company's products into their service
and product offerings, product development delays by application developers and
other customers, lack of market acceptance of the service and product offerings
of the Company's customers or a customer's decision to market products
manufactured by a competitor of the Company, or the manufacture of such products
themselves, would have a material adverse effect on the Company's business,
financial condition and results of operations.

         Additionally, selling through indirect channels may limit the Company's
information concerning the volume of products sold by the Company's customers to
end users and the Company's contact with its end users. As a result, the
Company's ability to forecast revenues accurately (notwithstanding the forecasts
of its customers), evaluate end-user satisfaction and recognize emerging
end-user requirements may be hindered.


         Risks Related to Lease Financing. In March 1999, the Company entered
into an arrangement with a leasing entity to enable the Company's customers to
finance the purchase of Excel equipment. Under the terms of this arrangement,
the Company has a recourse obligation in the amount of the greater of $2,000,000
or 20% of the aggregate net book value of annual equipment sales financed. In
addition, the Company has a 100% recourse obligation for contracts funded for
customers with certain credit ratings, as determined by the leasing entity. It
is not certain that financing alternative provided by this relationship will be
on terms that are competitive with the financial offerings of the Company's
competitors. It is not certain the


                                       18


<PAGE>


Company will continue to offer such financing alternatives in the future. Since
Excel is obligated to guarantee the payments to the leasing entity, the default
by one or more customers of their payment obligations to the leasing entity
under this program may have a material adverse impact on the Company's business,
financial condition and results of operations. In addition, such default may
have an adverse impact on the Company's ability to continue to offer such
alternative financing to its customers.


          Dependence on Single and Sole Source Suppliers and Third-Party
Manufacturers. The Company purchases many critical component from single or sole
source vendors and relies upon a limited number of independent manufacturers,
some of which are small, privately-held companies, to provide certain components
and assemblies made to the Company's specifications. In addition, from time to
time Company relies upon certain third-party software application vendors to
supply certain software applications used with the Company's switching products.
The inability to develop alternative sources for these products or to obtain
sufficient quantities of these products could result in delays or reductions in
product shipments which could materially adversely affect the Company's
business, financial condition and results of operations. In the event of a
reduction or interruption of supply, a significant amount of time, in some cases
as much as three to four months, could be required before the Company would
begin receiving adequate supplies from such alternative suppliers. Further, in
such event, the Company's business, financial condition and results of
operations would be materially adversely affected. In addition, the manufacture
of certain of these single or sole source components is extremely complex, and
the Company's reliance on the suppliers of these components exposes the Company
to potential production difficulties and quality variations, which could
negatively impact cost and timely delivery of the Company's products. Certain
components and applications are available from only one supplier, for which
there is no substitute at this time. If supply of these components should cease,
the Company would be required to redesign its products or stop providing such
applications with its products. It is not certain that supply problems will not
occur or, if such problems do occur, that satisfactory solutions would be
available. The Company does not have long-term contracts with its suppliers and
therefore it is not certain that these suppliers will continue to be able to
produce these components or to meet the Company's requirements. Any significant
interruption in the supply, or degradation in the quality, of any such component
could have a material adverse effect on the Company's business, financial
condition and results of operations.

         Although the Company generally requires its customers to submit
quarterly forecasts of their needs, the Company's customers frequently require
rapid delivery after placement of a purchase order. Because the Company does not
maintain significant component inventories, a delay in shipment by a supplier
could lead to lost sales. Lead times for materials and components may vary
significantly and depend on factors such as specific supplier performance,
contract terms and general market demand for components. If orders vary from
forecasts, the Company may experience excess or inadequate inventory of certain
materials and components. While the Company has not experienced shortages and
allocations of these components to date, any shortages in the future, including
those occasioned by increased sales, could result in delays in fulfillment of
customer orders. Such delays, shortages and allocations could have a material
adverse effect on the Company's business, financial condition and results of
operations.

         Evolving Market for Telecommunications Services and Rapid Technological
Change. The Company's future success will depend on continued growth in the
market for telecommunications services. The global telecommunications
marketplace is evolving and it is difficult to predict its potential size or
future growth rate. It is not known whether deregulation 


                                       19


<PAGE>


and continued improvements and expansions of infrastructure will continue to
cause this market to grow or that increased regulation will not present barriers
to the sales of existing or future products. In addition, telecommunications
applications and infrastructure needs may emerge for which the Company's
products are not designed. If this market fails to grow or grows more slowly or
in a different direction than the Company currently anticipates, the Company's
business, financial condition and results of operations could be materially
adversely affected.

         The telecommunications equipment market is also subject to rapid
technological change, evolving industry standards and frequent new product
introductions and enhancements that may render existing products obsolete. As a
result, the Company's position in this market could erode rapidly due to
unforeseen changes in product features and functions of competing products. The
Company's growth and future results of operations will depend in part on its
ability to respond to these changes by enhancing its existing products and
developing and introducing, on a timely and cost-effective basis, new products
and features to meet or exceed technological advances in the marketplace. The
failure of the Company to respond to rapidly changing technologies could have a
material adverse effect on the Company's business, financial condition and
results of operations.

         Risks Relating to Acquisitions. In May 1999, the Company acquired 
RAScom, Inc. During the fourth quarter of 1998, the Company acquired Quantum 
Telecom Solutions, Inc. and XNT Systems, Inc. The Company may also, from time 
to time, pursue the acquisition of other companies, assets, products and 
technologies. Acquisitions involve a number of operating risks that could 
materially adversely affect the Company's results of operations, including 
the diversion of management's attention to assimilate the operations, 
products and personnel of the acquired companies, the acquired company's 
existing customer and support obligations, the amortization of acquired 
intangible assets and the potential loss of key employees of the acquired 
companies. Furthermore, acquisitions may involve businesses in which the 
Company lacks experience. Because management and the Company have limited 
experience in acquisitions and integrating acquired companies or technologies 
into its operations, it is not certain that the Company will be able to 
manage present and future acquisitions successfully, or that the Company will 
be able to integrate the operations, products or personnel gained through any 
such acquisitions without a material adverse effect on the Company's 
business, financial condition and results of operations.

         Difficulty of Integrating Two Companies. In connection with the 
Company's recent acquisition of RAScom, Inc., the successful integration of 
the operations, personnel and product lines of the two companies is important 
to the future financial performance of the combined enterprise. The 
anticipated benefits of the acquisition may not be achieved unless, among 
other things, the operations of RAScom are successfully combined with those 
of the Company in a timely manner. The diversion of the attention of 
management, and any difficulties encountered in the transition process, could 
have an adverse impact on the revenues, financial condition and results of 
operation of the combined enterprise. Excel may not be able to successfully 
integrate RAScom and its services and products into the Company's operations. 
The inability of management to successfully integrate the operations of the 
companies could have a material adverse effect upon the business, financial 
condition and results of operations of the Company.

         Difficulty of Integrating RAScom Product Lines. As part of its product
plans following the acquisition of RAScom, Excel expects to be integrating
RAScom's remote access technology with Excel's programmable switching technology
for the enhanced services and wireless and 


                                       20


<PAGE>


infrastructure markets, as well as for small- and medium-sized Internet Service
Providers. The integration by Excel of RAScom's product offerings can be costly,
and result in unanticipated delays or difficulties with product integration, and
require further development expenses and further expenditures for sales and
marketing campaigns associated with advertising the new, complementary product
offerings. There is no assurance that the RAScom research and development team
can be successfully assimilated with Excel's engineering personnel, or that the
RAScom engineering personnel will continue to remain at Excel following the
acquistion. Excel has no assurance that its existing customers will purchase the
new RAScom product lines, once integrated, or that Excel will be able to attract
new customers with added the RAScom product capabilities. While management
believes that RAScom's technology enhances Excel's existing product offerings
and expands its addressable markets, delays or difficulties associated with this
product integration or the loss of RAScom engineering personnel could have a
material adverse effect on Excel's business and results of operations.

         Uncertainties Relating to Integration of Operations. The Company
believes that the acquisition of RAScom will result in long-term strategic
benefits. However, the realization of these benefits will depend on whether
management can integrate the operations of the Company and RAScom in an
efficient and effective manner. Among other things, the Company must integrate
the respective companies' products, technologies, distribution channels and key
personnel. Furthermore, the Company must coordinate the sales, marketing and
research and development efforts of RAScom. The difficulties of integrating
RAScom may be increased by the need to coordinate organizations with distinct
cultures and widely dispersed operations. The effective integration of the
various operations will depend on the ability of the Company to attract and
retain key management, sales, marketing and research and development personnel.
The integration of operations following the acquisition will require significant
attention of management and thus may distract attention from other day-to-day
operations of the Company.

         Need to Integrate and Retain Key Employees of RAScom. The successful
integration of RAScom, Inc. is dependent on the retention and integration of the
key management, sales, marketing, engineering and other technical employees of
RAScom. Competition for qualified personnel in the industries in which the
Company and RAScom compete is very intense, and competitors may use aggressive
tactics to recruit key employees of the Company and RAScom during the
integration phase following the acquisition which could result in the loss of
key employees. The loss of these key personnel could have a material adverse
effect on Excel's business, financial condition and results of operations.

         Risks Related to Sales to End-Users. The Company intends to increase 
the volume of sales to end-users over the next several periods. Although the 
Company's products have been distributed through indirect channels to 
end-users, the Company has limited experience in distributing directly to and 
directly supporting end-users.  Sales to en-users are subject to a variety of 

                                     21

<PAGE>

risks, including increased costs to promote and market the products; to 
install and integrate products and support the customer base; increased 
warranty obligations and a longer sales cycle. Sales to end-users may also 
involve significant acceptance, performance and other milestone criteria, 
which may impact the timing of the revenue recognition. The installation of a 
complete system involves the integration of the Company's product with 
various third-party equipment and applications. Difficulties or delays in 
integration may result in delays in market acceptance and sales, diversion of 
development and management resources, injury to the Company's reputation or 
increased service and warranty costs, any of which could have a material 
adverse affect on the Company's business, financial condition and results of 
operations.

     Sales to end-users may require the Company to provide additional 
third-party components and software applications.  The inability to obtain 
sufficient supplies of these components and applications could result in 
delays or reductions in product shipments which could materially adversely 
affect the Company's business, financial condition and results of operations. 
 In order to meet the needs of network providers, the Company may be required 
to further develop or enhance its existing product offerings or acquire 
additional products and technologies from third parties.  Such new products 
or enhancements may require the Company to obtain additional technical 
certification in telecom networks.  Delays in product development and 
certification could materially adversely affect the Company's business, 
financial condition and results of operations.

         Concentrated Product Family and Risk of New Product Introductions. The
Company currently derives substantially all of its revenues from its family of
open, programmable switching platforms and expects that this concentration will
continue in the foreseeable future. As a result, any decrease in the overall
level of sales of, or the prices for, open, programmable switching platforms due
to product enhancements, introductions or announcements by the Company's
competitors, a decline in the demand for open, programmable switches, product
obsolescence, price competition, technological change or any other reason could
have a material adverse effect on the Company's business, financial condition
and results of operations.

         In addition, the Company intends to continue to invest in product and
technology development, including increasing port capacity and performance, the
development of additional related software applications and tools, the
improvement of third-party application integration and the continued provision
of updated product features and enhancements. The Company may experience
difficulties that could delay or prevent the successful development,
introduction or marketing of such new products and enhancements. It is not known
whether the Company's new products and enhancements will adequately meet the
requirements of the marketplace and achieve market acceptance. Announcements of
currently planned or other new product offerings by the Company or its
competitors may cause customers to defer or cancel the purchase of existing
Company products. The Company's inability to develop on a timely basis new
products or enhancements to existing products, or the failure of such new
products or enhancements to achieve market acceptance, could have a material
adverse effect on the Company's business, financial condition and results of
operations.

         The development of new, technologically advanced products is a complex
and uncertain process requiring the accurate anticipation of technological and
market trends. The introduction of new or enhanced products also requires the
Company to manage the transition from older products in order to minimize
disruption in customer ordering patterns, avoid excessive levels of older
product inventories and ensure that adequate supplies of new products can be
delivered to meet anticipated customer demand. It is not certain that the
Company will successfully develop, introduce or manage the transition to new
products. Furthermore, products such as those offered by the Company may contain
undetected or unresolved errors when they are first introduced or as new
versions are released. Despite extensive testing by the Company, errors may be
found in new products or upgrades after commencement of commercial shipments,
resulting in delays in or loss of market acceptance and sales, diversion of
development resources, injury to the Company's reputation or increased service
and warranty costs, any of which could have a material adverse effect on the
Company's business, financial condition and results of operations.

         Management of Growth, Hiring of Additional Personnel and Dependence on
Key Personnel. The Company has experienced growth in revenues and expansion of
its operations which have placed significant demands on the Company's
management, engineering staff and facilities. In May 1999, the Company completed
an acquisition of an existing corporation. During 1998, the Company completed
the acquisitions of two existing corporations and 


                                       22


<PAGE>


established operations internationally. The Company continues to implement
additional financial and management procedures that the Company believes will
address increasing demands on resources. However, the Company believes that
further improvements in management and operational controls are needed, and will
continue to be needed, to manage any future growth. Continued growth will also
require the Company to hire more engineering, selling and marketing and
administrative personnel, expand customer support capabilities, expand the
infrastructure of its international operations, expand management information
systems and improve its inventory management practices. The Company has at times
experienced, and continues to experience, difficulty in recruiting qualified
personnel. Recruiting qualified personnel is an intensely competitive and
time-consuming process. It is not certain whether the Company will be able to
attract and retain the necessary personnel to accomplish its growth strategies
or that it will not experience constraints that will adversely affect its
ability to satisfy customer demand in a timely fashion or to support
satisfactorily its customers and operations. If the Company's management is
unable to manage growth effectively, the Company's business, financial condition
and results of operations could be materially adversely affected.

         While the Company believes its current and planned facilities are
adequate to meet its needs through the next 12 months, future growth may require
the Company to obtain additional or alternative facilities. Due to the limited
supply of suitable additional or alternative office and manufacturing space in
the Cape Cod, Massachusetts area, there can be no assurance that such space can
be leased or acquired without substantial required renovations. Relocation of
any segment of the Company's operations may disrupt business and have a material
adverse effect on the Company's business, financial condition and results of
operations. In addition, the local permitting and variance procedures for the
renovation or construction of buildings in the Cape Cod area is more onerous
than found in metropolitan areas. Accordingly, it is not certain that the
Company will not be required in the future to devote significant resources to
the permitting and renovation of additional facilities or in relocating some or
all of the Company's facilities.

         The Company's success depends to a significant degree upon the
continued contributions of its President, Chief Executive Officer and principal
stockholder, Robert P. Madonna, and its key management, engineering, selling and
marketing and manufacturing personnel, many of whom would be difficult to
replace. The Company does not have employment contracts with its key personnel.
The loss of the services of any key personnel, the inability to attract or
retain qualified personnel in the future or delays in hiring required personnel,
particularly software engineers, could have a material adverse effect on the
Company's business, financial condition and results of operations.

         Risks Associated with International Sales. In the first quarter of
1999, direct sales to customers located outside of the United States accounted
for approximately 30% of the Company's revenues. However, the Company sells a
majority of its products to application developers, OEMs and systems integrators
located within the United States which market products and services based on the
Company's products worldwide. The Company intends to further expand its
operations outside the United States and enter additional international markets,
which will require significant management attention and financial resources.
International sales are subject to a variety of risks, including difficulties in
establishing and managing international distribution channels, in servicing and
supporting products sold outside the United States and in translating products
and related materials into foreign languages. International operations are also
subject to difficulties in collecting accounts receivable, staffing and managing
personnel and enforcing intellectual property rights. Other factors that can
adversely affect international 


                                       23


<PAGE>


operations include fluctuations in the value of foreign currencies and currency
exchange rates, changes in import/export duties and quotas, introduction of
tariff or non-tariff barriers and economic or political changes in international
markets. Any inability to obtain foreign regulatory approvals on a timely basis
could have a material adverse effect on the Company's business, financial
condition and results of operations. If the Company's international sales
increase, its revenues may also be affected to a greater extent by seasonal
fluctuations resulting from lower levels of sales which typically occur during
the summer months in Europe and other parts of the world. It is not certain that
these factors will not have a material adverse effect on the Company's future
international sales and, consequently, on the Company's business, financial
condition and results of operations.

         Risks Associated With Litigation. The Company is currently involved in
litigation with Cisco Systems, Inc. ("Cisco") where the Company has alleged
infringement of certain of its patents and Cisco has filed counterclaims
alleging breach of a certain confidentiality agreement and infringement of
certain of its patents. The litigation is in the early stages of discovery.
There can be no assurance that this litigation will ultimately be resolved in
favor of the Company or on terms that are favorable to the Company. The Company
could incur substantial costs, product shipment delays or restrictions, and
diversion of management resources in defending, pursuing and resolving these
claims and counterclaims. Cisco has substantially greater financial resources to
underwrite the cost of litigation and is in a better position to underwrite
protracted litigation. The Company might also be subject to injunctive or other
equitable relief, or might be required to pay substantial damages awards or
enter into licensing or royalty arrangements to resolve these claims and
counterclaims, or might be prevented from selling or delivering its products.
Any of the foregoing could have a material adverse effect on the Company's
business, results of operations and financial condition.

         Length of Sales Cycle. The time between the date of initial contact
with a potential customer and large-scale commercialization of a new customer
application or system based on the Company's products is often lengthy,
typically ranging from 12 to 24 months or more, and is subject to delays over
which the Company has little or no control, including customers' budgetary
constraints, customers' internal acceptance reviews, the success and continued
internal support of customers' own development efforts, and the possibility of
cancellation of projects by customers. Although the Company attempts to develop
its products with the goal of shortening the time to market of its customers'
products, the timing of the commercialization of a new customer application or
service based on the Company's products is primarily dependent on the success
and timing of a customer's own internal development program. Delays can also be
caused by late deliveries by other vendors, changes in implementation priorities
and slower than anticipated growth in demand for the services that the Company's
products support. A delay in, or cancellation of, the sale of the Company's
products could have a material adverse effect on the Company's business,
financial condition and results of operations and cause the Company's results of
operations to vary significantly from quarter to quarter.

         Dependence on Proprietary Rights. The Company's success and its ability
to compete are dependent, in part, upon its proprietary rights. The Company
relies primarily on a combination of patent, copyright, trademark and trade
secret laws, as well as confidentiality procedures and contractual restrictions
to establish and protect its proprietary rights. It is not known whether such
measures will be adequate to protect the Company's proprietary rights. Further,
the Company may be subject to additional risks as it enters into transactions in
countries where intellectual property laws are not well developed or are
difficult to enforce. Legal protections of the Company's proprietary rights may
be ineffective in such countries. Litigation to defend and enforce the Company's
intellectual property rights could result in substantial costs and diversion of
resources and could have a material adverse effect on the Company's business,
financial condition and results of operations, regardless of the final outcome
of such litigation. Despite the Company's efforts to safeguard and maintain its
proprietary rights both in the United States and abroad, it is not known whether
the Company will be successful in doing so or that the steps taken by the
Company in this regard will be adequate to deter misappropriation or independent
third-party development of the Company's technology or to prevent an
unauthorized third party from copying or otherwise obtaining and using the
Company's products or technology. There also can be no guarantees that others
will not independently develop similar technologies or duplicate any technology
developed by the Company. Any such events could have a material adverse effect
on the Company's business, financial condition and results of operations.


                                       24


<PAGE>


         The Company has entered into agreements with a small number of its
customers requiring the Company to deposit its source code and, on occasion,
manufacturing blueprints, tooling diagrams and production specifications, in
escrow with a third party. These escrow agreements typically provide that these
customers have a non-exclusive, limited right to use such code and other
materials in the event that there is a bankruptcy proceeding by or against the
Company, if the Company ceases to conduct business or if the Company defaults on
its support obligations. The use of such agreements may increase the likelihood
of misappropriation by third parties.

         As the number of entrants to the Company's markets increases and the
functionality of the Company's products increases and overlaps with the products
of other companies, the Company may become subject to claims of infringement or
misappropriation of the intellectual property rights of others. In its
distribution agreements, the Company agrees to indemnify its customers for any
expenses or liabilities resulting from claimed infringements of patents,
trademarks or copyrights of third parties. In certain limited instances, the
amount of such indemnities may be greater than the revenues the Company may have
received from the customer. There can be no guarantee that third parties will
not assert infringement or misappropriation claims against the Company in the
future with respect to current or future products. Any claims or litigation,
with or without merit, could be time-consuming, result in costly litigation,
cause product shipment delays or require the Company to enter into royalty or
licensing arrangements. Such royalty or licensing arrangements, if required, may
not be available on terms acceptable to the Company, if at all, which could have
a material adverse effect on the Company's business, financial condition and
results of operations. In addition, the Company changed its name from Excel Inc.
to Excel Switching Corporation in September 1997. Searches performed on the term
Excel have revealed several registrations and numerous uses of that term, and
terms substantially similar to it, alone and in combination with other terms and
designs. Accordingly, there can be no guarantee that third parties will not
assert trademark infringement claims relating to the name Excel in the future.

         Compliance with Regulations and Evolving Industry Standards. The market
for the Company's products is characterized by the need to meet a significant
number of communications regulations and standards, some of which are evolving
as new technologies are deployed. In the United States, the Company's products
must comply with various regulations including those promulgated by the Federal
Communications Commission and standards established by Underwriters Laboratories
and Bell Communications Research. Furthermore, there are regulations and
standards imposed by various foreign countries where the Company's products are
installed. The failure of the Company's products to comply, or delays in
compliance, with the various existing and evolving industry regulations and
standards could delay the introduction of the Company's products. Moreover, the
enactment by federal, state or foreign governments of new laws or regulations,
changes in the interpretation of existing laws or regulations or a reversal of
the trend toward deregulation in the telecommunications industry could
materially adversely affect the Company's customers, and thereby materially
adversely affect the Company's business, financial condition and results of
operations.


                                       25


<PAGE>


ITEM 3.  Quantitative and Qualitative Disclosures about Market Risk.

         Reference is also being made to the disclosure in Part II, Item 7A,
entitled QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK of the
Company's Annual report on Form 10K for the fiscal year ended December 31, 1998.

         The Company, in the normal course of business, is subject to the risks
associated with fluctuations in interest rates and changes in foreign currency
exchange rates.

         Interest and Market Risk. The Company maintains a portfolio of
marketable, primarily fixed income, available-for-sale securities of various
issuers, types and maturities. The Company has not used derivative financial
instruments in its investment portfolio. The Company attempts to limits its
exposure to interest rate and credit risk by placing its investments with
high-quality financial institutions and has established investment guidelines
relative to diversification and maturities designed to maintain safety and
liquidation.


         Investments in both fixed rate and floating rate interest earning
instruments carry a degree of interest rate risk. Fixed rate securities may have
their fair market value adversely impacted due to a rise in interest rates,
while floating rate securities may produce less income than expected if interest
rates decline. Due in part to these factors, the Company's future investment
income may fall short of expectations due to changes in interest rates or the
Company may suffer losses in principal if forced to sell securities which have
seen a decline in market value due to changes in interest rates. The fair market
value of investment securities held at March 31, 1999 was $125.7 million,
including unrealized gains of approximately $51,000.

         The Company's investment portfolio has not changed significantly since
December 31, 1999. The weighted average interest rate of the investment
portfolio at December 31, 1998 and March 31, 1999 was approximately 5.1% and
4.9%, respectively.


         The Company's existing debt obligations are at fixed interest rates and
therefore will not be affected by changes in market interest rates. Under the
Company's line-of-credit arrangement with a bank, borrowings may bear interest
at either the bank's base rate or the Eurodollar rate plus 1.75%. At March 31,
1998, no amounts were outstanding under this line. Any interest which may in the
future become payable on the line-of-credit will be based upon variable interest
rates and will therefore be affected by changes in market interest rates.

         Foreign Currency Risk. To date, the Company's exposure to foreign 
currency fluctuations has been minimal. All sales transactions are denominated
in US dollars. Letters of credit are utilized when warranted. The Company funds
its international operations from US dollar bank accounts on an as-needed basis
and, accordingly, does not maintain a significant amount of funds in foreign
currencies. Presently, the Company does not hedge foreign currency exposure for
its non-US dollar denominated operating expenses as such amounts have not been
material in relation to the Company's domestic operating expenses.


                                       26


<PAGE>


PART II. OTHER INFORMATION

ITEM 1. Legal Proceedings


         In 1998, the Company filed suit in the U.S. District Court for the
District of Massachusetts alleging certain of Summa Four, Inc.'s ("Summa Four")
telecommunication equipment infringes three patents owned by the Company and
seeking a finding of infringement of each of the three patents, an injunction
against further infringement, and damages. Summa Four filed a counterclaim
asserting the breach of a certain confidentiality agreement, and seeking
unspecified damages. The Company filed an answer denying the counterclaim for
breach of the confidentiality agreement and raising several defenses to that
counterclaim. Summa Four served additional counterclaims, including one alleging
that certain of the Company's telecommunication equipment infringes a Summa Four
patent and seeking an injunction against further infringement and unspecified
damages. The additional counterclaims further allege fraud, breach of duty of
good faith and fair dealing, intentional misrepresentation and/or inducement,
and unfair competition, and seek unspecified damages. The Company filed an
answer denying the additional counterclaims and raising several defenses to the
additional counterclaims. On March 20, 1999, the Court substituted Cisco
Systems, Inc. ("Cisco") for Summa Four as defendant and counterclaimant, as a
result of Cisco's acquisition of Summa Four. The case remains in the early
stages of litigation and although the Company intends vigorously to pursue its
claims against Cisco and defend against Cisco's counterclaims, there can be no
assurance that this litigation will ultimately be resolved on terms that are
favorable to the Company.



ITEM 2. Changes in Securities and Use of Proceeds

(d) Use of Proceeds of Initial Public Offering - On November 4, 1997 the
Securities and Exchange Commission declared effective the Company's Registration
Statement on Form S-1, Commission file number 333-35791, relating to the initial
public offering of the Company's Common Stock. The offering commenced on
November 4, 1997 and all shares covered by the Registration Statement were sold.
The following sets forth certain information regarding the Company's application
of the net proceeds therefrom through March 31, 1999.


<TABLE>
      <S>                                                                      <C>
      Remaining offering proceeds, December 31, 1998                           $31,570,000
      Less:
            Purchases of property and equipment                                  3,128,000
            Payments on long-term obligations                                       46,000
            Payments related to acquisitions                                            --
            Payments related to payroll                                         10,413,000
            Interest payments on debt obligations                                  210,000
            Payments related to vendor purchases or taxes                       17,773,000
                                                                               -----------
      Remaining offering proceeds, March 31, 1999                              $        --
                                                                               ===========
</TABLE>


         The Company has invested the net proceeds from the initial public
offering in November 1997 in investment grade, interest-bearing securities. None
of the net proceeds from the IPO were used to pay, directly or indirectly,
directors, officers, persons owning ten percent or more of the Company's equity
securities, or affiliates of the Company, with the exception of compensation
related payments to officers made in the normal course of business.


                                       27


<PAGE>


ITEM 3.  Defaults Upon Senior Securities

         None

ITEM 4.  Submission of Matters to a Vote of Security Holders

         None

ITEM 5.  Other Information

         None

ITEM 6.  Exhibits and Reports on Form 8-K

(a)      Exhibits

         Exhibit 10.8 - Vendor Program Agreement dated March
                        1999 between the Company and NationsCredit
                        Commercial Corporation dated March 30, 1999.

         Exhibit 27   - Financial Data Schedule.


         (b)   Reports on Form 8-K

               None





                                       28


<PAGE>


SIGNATURES

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

                                Excel Switching Corporation
                                    (Registrant)




Dated:   May 18, 1999           /s/ Robert P. Madonna
                                ---------------------

                                Robert P. Madonna
                                President, Chief Executive Officer and
                                Chairman of the Board of Directors (Principal
                                Executive Officer)



Dated:   May 18, 1999           /s/ Stephen S. Galliker
                                -----------------------

                                Stephen S. Galliker
                                Vice President, Finance and Administration and
                                Chief Financial Officer (Principal Financial and
                                Accounting Officer)



                                       29


<PAGE>



   EXHIBIT INDEX

<TABLE>
<CAPTION>
--------------------- ------------------------------------------------------------------------------------
Exhibit No.                                               Description
--------------------- ------------------------------------------------------------------------------------
<S>                   <C>                                        
10.8                  Vendor Program Agreement dated March 1999 between the Company and NationsCredit
                      Commercial Corporation dated March 30, 1999.
--------------------- ------------------------------------------------------------------------------------
27.0                  Financial Data Schedule (EDGAR)
--------------------- ------------------------------------------------------------------------------------
</TABLE>