<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 September 26,1998
[ ]  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 October 29, 1998, there were 33,554,432 shares of the Registrant's
Common Stock, $.01 par value, outstanding.
<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 27,1997  and
              September 26, 1998                                                                 3
  
              Consolidated Condensed Statements of Income for the three and nine months
              ended September 27, 1997 and September 26, 1998                                    4
  
              Consolidated Condensed Statements of Cash Flows for the nine months ended
              September 27, 1997 and September 26, 1998                                          5
  
              Notes to Consolidated Condensed Financial Statements                               6
 
ITEM 2.       Management's Discussion and Analysis of  Financial Condition and Results
              of Operations                                                                      9
 
ITEM 3.       Quantitative and Qualitative Disclosures About Market Risk                        21
 
PART II.      OTHER INFORMATION
 
ITEM 1.       Legal Proceedings                                                                 21
 
ITEM 2.       Changes in Securities and Use of Proceeds                                         22
 
ITEM 3.       Defaults Upon Senior Securities                                                   22
 
ITEM 4.       Submission of Matters to a Vote of Security Holders                               22
 
ITEM 5.       Other Information                                                                 22
 
ITEM 6.       Exhibits and Reports on Form 8-K                                                  22
 
              SIGNATURES                                                                        23
 
              EXHIBIT INDEX                                                                     24
</TABLE>

                                       2


<PAGE>
 
                           EXCEL SWITCHING CORPORATION
                     CONSOLIDATED CONDENSED BALANCE SHEETS
                (IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)

<TABLE>
<CAPTION>
                                    ASSETS
                                                                  DECEMBER 27,        SEPTEMBER 26,
                                                                     1997                1998
                                                                                       (UNAUDITED)
<S>                                                              <C>                 <C>
CURRENT ASSETS:
 Cash and cash equivalents                                        $ 47,968             $ 64,581
 Marketable securities                                              66,929               64,635
 Accounts receivable, net of reserves                               12,843               21,528
 Inventories                                                         4,740                5,742
 Prepaid taxes                                                         122                    -
 Deferred tax asset                                                  5,626                6,077
 Other current assets                                                1,298                1,582
                                                                  --------             --------
   Total current assets                                            139,526              164,145
PROPERTY AND EQUIPMENT, NET                                         10,168               16,529
                                                                  --------             --------
                                                                  $149,694             $180,674
                                                                  ========             ========

                     LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
 Current maturities of long-term obligations                      $  4,213             $  1,021
 Accounts payable                                                    4,177                4,575
 Accrued expenses                                                   11,156               17,786
 Accrued income taxes                                                3,606                3,461
                                                                  --------             --------
   Total current liabilities                                        23,152               26,843
                                                                  --------             --------
DEFERRED INCOME TAXES                                                  519                  349
                                                                  --------             --------
LONG-TERM OBLIGATIONS, LESS CURRENT MATURITIES                         108                    -
                                                                  --------             --------
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 outstanding32,592,000 and 33,531,234 shares at
   dec. 27, 1997 and sep. 26, 1998                                     326                  335
 Additional paid-in capital                                         88,134               96,158
 Deferred compensation                                                (491)                (577)
 Unrealized gain (loss) on investments                                 (20)                 110
 Retained earnings                                                  37,966               57,456
                                                                  --------             --------
   Total stockholders' equity                                      125,915              153,482
                                                                  --------             --------
                                                                  $149,694             $180,674
                                                                  ========             ========
</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             NINE MONTHS ENDED
                                                   SEP. 27,       SEP. 26,         SEP. 27,     SEP. 26,
                                                     1997           1998             1997         1998
<S>                                                <C>            <C>             <C>           <C>
REVENUES                                            $23,570        $32,067         $62,625       $86,362
                                                                                            
COST OF REVENUES                                      6,821          8,674          18,854        24,762
                                                    -------        -------         -------       -------
                                                                                            
   Gross profit                                      16,749         23,393          43,771        61,600
                                                    -------        -------         -------       -------
OPERATING EXPENSES:                                                                         
 Engineering, research and development                3,418          5,680           9,435        15,423
 Selling and marketing                                2,870          4,158           7,752        11,840
 General and administrative                           2,163          2,831           6,014         7,825
                                                    -------        -------         -------       -------
                                                                                            
   Total operating expenses                           8,451         12,669          23,201        35,088
                                                    -------        -------         -------       -------
                                                                                            
   Income from operations                             8,298         10,724          20,570        26,512
                                                                                            
OTHER INCOME, NET                                       288          1,564             382         4,671
                                                    -------        -------         -------       -------
   Income before provision                                                                  
     for income taxes                                 8,586         12,288          20,952        31,183
                                                                                            
PROVISION FOR INCOME TAXES                            3,435          4,608           8,381        11,694
                                                    -------        -------         -------       -------
                                                                                            
NET INCOME                                          $ 5,151        $ 7,680         $12,571       $19,489
                                                    =======        =======         =======       =======
                                                                                            
BASIC EARNINGS PER SHARE                               $.18           $.23            $.45          $.59
                                                    =======        =======         =======       =======
                                                                                            
DILUTED EARNINGS PER SHARE                             $.15           $.20            $.37          $.50
                                                    =======        =======         =======       =======
                                                                                            
BASIC SHARES OUTSTANDING                             28,090         33,343          28,090        32,991
                                                                                            
DILUTED  SHARES OUTSTANDING                          33,843         39,260          33,545        39,092
</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>
                                                                        NINE MONTHS ENDED
                                                                     SEP. 27,       Sep. 26,
                                                                       1997           1998
<S>                                                                  <C>            <C>
 CASH FLOWS FROM OPERATING ACTIVITIES:                                          
 Net income                                                           $ 12,571       $19,489
 Adjustments to reconcile net income to net cash provided by                    
  operating activities                                                          
 Depreciation and amortization                                           1,620         2,317
 Unrealized gain on investments                                              -           130
 Deferred income taxes                                                    (568)         (621)
 Compensation expense associated with the grant of      stock                    
  options, net of forfeitures                                               83           139
                                                                                 
 Changes in assets and liabilities                                               
   Accounts receivable                                                     235        (8,685)
   Inventories                                                           2,059        (1,002)
   Prepaid taxes                                                             -           122
   Other current assets                                                   (309)         (284)
   Accounts payable                                                      1,642           398
   Accrued expenses                                                      4,895         6,630
   Accrued income taxes                                                   (692)        6,845
                                                                      --------       -------
                                                                                 
              Net cash provided by operating activities                 21,536        25,478
                                                                      --------       -------
                                                                                 
 CASH FLOWS FROM INVESTING ACTIVITIES:                                           
 Purchases of property and equipment                                    (2,331)       (8,678)
 Purchases of marketable securities, net                               (14,451)        2,294
                                                                      --------       -------
                                                                                 
             Net cash used in investing activities                     (16,782)       (6,384)
                                                                      --------       -------
                                                                                 
 CASH FLOWS FROM FINANCING ACTIVITIES:                                           
 Payments on long-term obligations, net                                     90        (3,300)
 Proceeds from the exercise of stock options                                 -           819
                                                                      --------       -------
                                                                                 
             Net cash used in financing activities                          90        (2,481)
                                                                      --------       -------
                                                                                 
 NET INCREASE IN CASH AND CASH EQUIVALENTS                               4,844        16,613
                                                                                 
 CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD                          4,069        47,968
                                                                      --------       -------
                                                                                 
 CASH AND CASH EQUIVALENTS, END OF PERIOD                             $  8,913       $64,581
                                                                      ========       =======
                                                                                 
 SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:                               
 Cash paid during the period for Interest                             $    284       $    61
                                                                      ========       =======
                                                                                 
   Taxes                                                              $  9,586       $ 5,358
                                                                      ========       =======
</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 27, 1997 as reported in the Company's
Annual Report on Form 10-K, as amended.  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 27, 1997 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
period ended September 26, 1998 may not be indicative of the results that may be
expected for the year ended December 26, 1998, or for any other period.

Note 2 - Earnings Per Share

     In March 1997, the Financial Accounting Standards Board (FASB) issued
SFAS No. 128, Earnings Per Share.  This statement established standards for
computing and presenting earnings per share and applies to entities with
publicly traded common stock or potential common stock.  This statement is
effective for fiscal years ending after December 15, 1997.  In February 1998,
the Securities and Exchange Commission  (SEC) issued Staff Accounting Bulletin
(SAB) No. 98.  This bulletin revises the SEC's guidance for calculating earnings
per share with respect to equity security issuances before an initial public
offering (IPO) and is effective for fiscal years ending after December 15, 1997.
The prior periods' earnings per share have been retroactively restated to
reflect the adoption of SFAS No. 128 and SAB No. 98.

     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.

                                       6
<PAGE>
 
     The calculations of basic and diluted weighted average shares outstanding
are as follows (in thousands):

<TABLE>
<CAPTION>
                                                THREE MONTHS ENDED               NINE MONTHS ENDED
                                              SEP. 27,       SEP. 26,          SEP. 27,      SEP. 26,
                                                1997           1998              1997          1998
 
<S>                                          <C>            <C>               <C>           <C>
Basic weighted average common
   shares outstanding                          28,090         33,343            28,090        32,991
 
Weighted average common
   equivalent shares                            5,753          5,917             5,455         6,101
                                               ------         ------            ------        ------
Diluted weighted average
  shares outstanding                           33,843         39,260            33,545        39,092
                                               ======         ======            ======        ======
</TABLE>

Note 3 - Comprehensive Income

     Comprehensive income for the three and nine month periods ended September
26, 1998 is approximately $7,744 and $19,570, respectively.  The difference
between comprehensive income and net income relates to unrealized gains on
marketable securities.  There were no differences between comprehensive income
and net income for the three and nine month periods ended September 27, 1997.

Note 4 - Significant Customers

     Sales to significant customers as a percentage of the Company's total
revenues were as follows:

<TABLE>
<CAPTION>
                                             THREE MONTHS ENDED                NINE MONTHS ENDED
                                          SEP. 27,       SEP. 26,           SEP. 27,       SEP. 26,
                                            1997           1998               1997           1998
<S>                                     <C>            <C>                <C>            <C>
Significant Customer A                       *          14%                    *          22%
 
Significant Customer B                      25%          *                    31%          *
</TABLE>
                                        
* Sales derived from these customers were less than 10% of the Company's total
 revenues for the period.
 
Note 5 - Acquisitions

     On September 30, 1998 the Company acquired all of the outstanding capital
stock of Quantum Telecom Solutions, Inc., a New Jersey based provider of switch-
configuration software. Total consideration of $9.0 million consisted of
approximately $5.4 million of cash plus the issuance of promissory notes
totaling $3.6 million. The promissory notes are payable over a two year period
at an annual interest rate of 10%. The Company will account for the

                                       7
<PAGE>
 
acquisition as a purchase transaction and, accordingly, will allocate the
purchase price to the fair value of assets acquired and liabilities assumed.
Principal assets acquired include cash, accounts receivable, property and
equipment, existing technology and in-process research and development for which
the Company will record a one-time charge in the fourth quarter. The Company is
still in the process of completing the valuation of Quantum's business for
purposes of purchase accounting with the assistance of an independent valuation
consultant.

     On September 30, 1998 the Company acquired all of the outstanding capital
stock of XNT Systems, Inc., a New Hampshire based supplier of intelligent switch
control and comprehensive call-processing and control software.  Total
consideration of $8.25 million consisted of cash payments of approximately $2.2
million plus the issuance of promissory notes totaling $4.8 million. The
promissory notes are payable over a three year period at an annual interest rate
of 10%.   In October 1998, the Company paid approximately $1.9 million to settle
certain assumed liabilities of XNT.  The Company will account for the
acquisition as a purchase transaction and, accordingly, will allocate the
purchase price to the fair value of assets acquired and liabilities assumed.
Principal assets acquired include cash, accounts receivable, inventory, property
and equipment, existing technology and in-process research and development for
which the Company will record a one-time charge in the fourth quarter.  The
Company is still in the process of completing the valuation of Quantum's
business for purposes of purchase accounting with the assistance of an
independent valuation consultant.

                                       8
<PAGE>
 
ITEM 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS

     The following discussions contain statements which are "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 sustainability of gross margins, the
anticipated adequacy of cash resources to meet the Company's working capital and
facility construction requirements, the anticipated purchase accounting for the
Company's recent acquisitions, the Year 2000 issue and statements regarding the
anticipated proportion of revenues to be derived from a limited number of
customers, 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;
delayed or lengthy sales cycle; concentration of customers; dependence on single
and sole source suppliers; dependence on third-party manufacturers; demands on
resources due to the Company's management of growth and difficulty in hiring of
additional personnel; and risks relating to acquisitions. 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; dependence on key personnel; highly
competitive market; compliance with regulations and evolving industry standards;
dependence on proprietary rights; risks associated with international sales; 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 27, 1997 on
Form 10-K, as amended.

OVERVIEW

     Excel Switching Corporation (the "Company" or "Excel") 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.  The Company sells
to a variety of customers in the worldwide telecommunications market, including
application developers, original equipment manufacturers ("OEMs") and systems
integrators.

     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 switching, mobile switching centers and
intelligent base station controllers.

                                       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                 NINE MONTHS ENDED
                                         SEP. 27,        SEP. 26,          SEP. 27,        SEP. 26,
                                           1997            1998              1997            1998
<S>                                   <C>             <C>                <C>            <C>
Revenues                                 100.0%          100.0%             100.0%         100.0%
Cost of revenues                          28.9            27.1               30.1           28.7
                                         -----           -----              -----          -----
         Gross profit                     71.1            72.9               69.9           71.3
                                         -----           -----              -----          -----
Operating expenses:                    
    Engineering, research and          
         development                      14.5            17.7               15.0           17.9
    Selling and marketing                 12.2            13.0               12.4           13.7
    General and administrative             9.2             8.8                9.6            9.0
                                         -----           -----              -----          -----
         Total operating expenses         35.9            39.5               37.0           40.6
                                         -----           -----              -----          -----
         Income from operations           35.2            33.4               32.9           30.7
Other income, net                          1.2             4.9                 .6            5.4
                                         -----           -----              -----          -----
         Income before provision for   
           income  taxes                  36.4            38.3               33.5           36.1
Provision for income taxes                14.5            14.4               13.4           13.5
                                         -----           -----              -----          -----
Net income                                21.9%           23.9%              20.1%          22.6%
                                         =====           =====              =====          =====
</TABLE>
                                        

THREE MONTHS ENDED SEPTEMBER 27, 1997 AND SEPTEMBER 26, 1998

     Revenues.  The Company's revenues consist of sales, primarily in the United
States, of its open, programmable switching platforms and related components.
Revenues increased 36% from $23.6 million in the three months ended September
27, 1997 to $32.1 million for the comparable period in 1998.  This increase
resulted from the introduction of new or expanded offerings by existing
customers incorporating the Company's products, the expansion of customers'
existing markets and the introduction of applications by new customers.  In
addition, revenues increased due to increased market penetration resulting from
the efforts of the Company's expanded selling and marketing organizations.

     Revenues from the Company's five largest customers represented
approximately 54% and 43% of the Company's revenues for the third quarters of
1997 and 1998, respectively.  During the third quarter of 1998 Qualcomm
Incorporated represented approximately 14% of the Company's revenue.  During the
third quarter of 1997 Comverse Network Systems (Comverse) (formerly Boston
Technology, Inc.) represented approximately 25% of the 

                                       10
<PAGE>
 
Company's revenue. Although the Company's largest customers have varied from
period to period, the Company believes that revenues derived from current and
potential large customers will continue to represent a significant portion 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.
There can be no assurance that the Company's principal customers will continue
to purchase products at current levels, if at all. Further, there can be no
assurance that the Company will be able to increase its revenues in future
periods or be able to sustain its level of revenues or its rate of growth on a
quarterly or annual basis.

     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 27% from
$6.8 million in the three months ended September 27, 1997 to $8.7 million for
the comparable period in 1998.  Gross margin increased from 71.1% in the third
quarter of 1997 to 72.9% in the comparable period of 1998.  The increase in
gross margins is primarily attributable to manufacturing efficiencies producing
larger volumes of product, lower component prices and changes in product mix.
Management believes that the current levels of gross margin may not be
sustainable in future quarterly periods.

     Engineering, Research and Development.  Engineering, research and
development costs consist primarily of compensation and 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 66% from $3.4 million in the third
quarter of 1997 to $5.7 million for the comparable period in 1998.  As a
percentage of revenues, these costs were 14.5% and 17.7%, 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 and related compensation and benefit costs.

     Selling and Marketing.  Selling and marketing costs consist primarily of
compensation and related costs for sales, marketing and customer support
personnel, related facility costs, travel and advertising, trade show and other
promotional activities. Selling and marketing costs increased 45% from $2.9
million in the third quarter of 1997 to $4.2 million for the comparable period
of 1998.  As a percentage of revenues, these costs were 12.2% and 13.0%,
respectively, in such periods.  The increase in selling and marketing costs in
absolute dollars was primarily attributable to an increase in sales, marketing
and customer support personnel and related compensation and benefit costs.  In
addition, trade show and promotional activities during 1998 contributed to this
increase.

     General and Administrative.  General and administrative costs include
compensation and related costs of management, finance and administrative
personnel, professional services, costs to maintain manufacturing and management
information systems and other general corporate expenses.  General and
administrative costs increased 31% from $2.2 million in the third quarter of
1997 to $2.8 million for the comparable period in 1998.  As a 

                                       11
<PAGE>
 
percentage of revenues, these costs were 9.2% and 8.8%, respectively, in such
periods. The increase in general and administrative costs in absolute dollars
was primarily attributable to increases in administrative, finance and
information technology personnel. In addition, corporate professional expenses
relating to litigation and acquisition activities contributed to the increase.

     Other Income.  Other income is primarily composed of interest income.
Other income increased 443% from $288,000 in the third quarter of 1997 to $1.6
million for the comparable period in 1998.  This increase was primarily
attributable to the accumulation of approximately $105.9 million in cash and
marketable securities since the third quarter of 1997 from operations and an
initial public offering.

     Provision For Income Taxes.  The Company's effective rate for Federal and
state income taxes was approximately 40.0% and 37.5% for the third quarters of
1997 and 1998, respectively.  The decrease in effective tax rates is primarily
attributable to a decrease in the effective state income tax rate and the
utilization of certain tax credits.

NINE MONTHS ENDED SEPTEMBER 27, 1997 AND SEPTEMBER 26, 1998

     Revenues.  Revenues increased 38% from $62.6 million in the nine months
ended September 27, 1997 to $86.4 million for the comparable period in 1998.
This increase resulted from the introduction of new or expanded offerings by
existing customers incorporating the Company's products, the expansion of
customers' existing markets and the introduction of applications by new and
existing customers.  In addition, revenues increased due to increased market
penetration resulting from the efforts of the Company's expanded selling and
marketing organizations.

      Revenues from the Company's five largest customers represented
approximately 57% and 49% of the Company's revenues for the first nine months of
1997 and 1998, respectively.  During the first nine months of 1998 Qualcomm
Incorporated represented approximately 22% of the Company's revenue.  During the
first nine months 1997 Comverse represented approximately 31% of the Company's
revenue.  Although the Company's largest customers have varied from period to
period, the Company believes that revenues derived from current and potential
large customers will continue to represent a significant portion 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.  There can
be no assurance that the Company's principal customers will continue to purchase
products at current levels, if at all.  Further, there can be no assurance that
the Company will be able to increase its revenues in future periods or be able
to sustain its level of revenues or its rate of growth on a quarterly or annual
basis.

     Gross Profit. Cost of revenues increased 31% from $18.9 million in the nine
months ended September 27, 1997 to $24.8 million for the comparable period in
1998.  Gross margin increased from 69.9% in the first nine months of 1997 to
71.3% in the comparable period of 1998.  The increase in gross margins is
primarily attributable to manufacturing efficiencies producing larger volumes of
product, lower component prices and changes in product mix.  Management believes
that the current levels of gross margin may not be sustainable in future
periods.

                                       12
<PAGE>
 
     Engineering, Research and Development. Engineering, research and
development costs increased 63% from $9.4 million in the first nine months of
1997 to $15.4 million for the comparable period in 1998.  As a percentage of
revenues, these costs were 15.0% and 17.9%, 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 and
related compensation and benefit costs.  In addition, the Company consumed a
greater amount of materials and supplies in the first nine months 1998 then in
the comparable period of 1997.

     Selling and Marketing. Selling and marketing costs increased 53% from $7.8
million in the first nine months of 1997 to $11.8 million for the comparable
period of 1998.  As a percentage of revenues, these costs were 12.4% and 13.7%,
respectively, in such periods.  The increase in selling and marketing costs in
absolute dollars was primarily attributable to an increase in sales, marketing
and customer support personnel and related compensation and benefit costs.  In
addition, trade show and promotional activities during 1998 contributed to this
increase..

     General and Administrative. General and administrative costs increased 30%
from $6.0 million in the first nine months of 1997 to $7.8 million for the
comparable period in 1998.  As a percentage of revenues, these costs were 9.6%
and 9.0%, respectively, in such periods.  The increase in general and
administrative costs in absolute dollars was primarily attributable to increases
in administrative, finance and information technology personnel as well as
increases in corporate professional expenses.

     Other Income.  Other income increased 1,123% from $382,000 in the first
nine months of 1997 to $4.7 million for the comparable period in 1998. This
increase was primarily attributable to the accumulation of approximately $105.9
million in cash and marketable securities since the third quarter of 1997.

     Provision For Income Taxes.  The Company's effective rate for Federal and
state income taxes was approximately 40.0% and 37.5% for the first nine months
of 1997 and 1998, respectively.  The decrease in 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 September 26, 1998, the Company's principal sources of liquidity
consisted of cash, cash equivalents and marketable securities of approximately
$129.2 million, working capital of approximately $137.3 million and $15.0
million of funds available under a bank line of credit.  At December 27, 1997,
the Company had $114.9 million invested in cash, cash equivalents and marketable
securities.

                                       13
<PAGE>
 
     Net cash provided by operations for the nine months ended September 27,
1997 and September 26,1998 totaled $21.5 million and $25.5 million,
respectively.  The increase in 1998 was primarily the result of increases
profitability and accrued income taxes offset by an increase in accounts
receivable.  At September 26, 1998, the Company's accrued income tax and
additional paid-in capital accounts reflect an approximately $7.0 million tax
benefit relating to the exercise of stock options.  Partially as a result of
this benefit, tax payments made during the first nine months of 1998 were
approximately $5.4 million compared to $9.6 million for the same period of 1997.
Accounts receivable increased approximately 68% from December 27, 1997 largely
as a result of increased revenue and the timing of order placement, shipment and
collection.

     Net cash used in investing activities for the nine months ended September
27, 1997 and September 26, 1998 totaled $16.8 million and $6.4 million,
respectively.  The decrease primarily relates to a decrease in the dollar amount
of investments purchased in 1998 with maturity dates of ninety-one days or
greater.

     In September 1998, the Company exercised an option for $875,000 to
purchase a building under an existing capital lease arrangement.   In October
1998, the Company began construction of a 56,000 square foot addition to two
existing buildings.  Construction is expected to be completed by the end of the
third quarter of 1999 at an estimated cost of approximately $5.0 million.  The
total construction costs will be funded by available cash resources.

     On September 30, 1998 the Company acquired all of the outstanding capital
stock of Quantum Telecom Solutions, Inc., a New Jersey based provider of switch-
configuration software. Total consideration of $9.0 million consisted of
approximately $5.4 million of cash plus the issuance of promissory notes
totaling $3.6 million. The promissory notes are payable over a two year period
at an annual interest rate of 10%. The Company will account for the acquisition
as a purchase transaction and, accordingly, will allocate the purchase price to
the fair value of assets acquired and liabilities assumed. Principal assets
acquired include cash, accounts receivable, property and equipment, existing
technology and in-process research and development for which the Company will
record a one-time charge in the fourth quarter. The Company is still in the
process of completing the valuation of Quantum's business for purposes of
purchase accounting with the assistance of an independent valuation consultant.

     On September 30, 1998 the Company acquired all of the outstanding capital
stock of XNT Systems, Inc., a New Hampshire based supplier of intelligent switch
control and comprehensive call-processing and control software.  Total
consideration of $8.25 million consisted of cash payments of approximately $2.2
million plus the issuance of promissory notes totaling $4.8 million. The
promissory notes are payable over a three year period at an annual interest rate
of 10%.   In October 1998, the Company paid approximately $1.9 million to settle
certain assumed liabilities of XNT.  The Company will account for the
acquisition as a purchase transaction and, accordingly, will allocate the
purchase price to the fair value of assets acquired and liabilities assumed.
Principal assets acquired include cash, accounts receivable, inventory, property
and equipment, existing technology and in-process research 

                                       14
<PAGE>
 
and development for which the Company will record a one-time charge in the
fourth quarter. The Company is still in the process of completing the valuation
of Quantum's business for purposes of purchase accounting with the assistance of
an independent valuation consultant.

     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 ISSUE

     Many currently installed computer systems and software products are coded
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 two
years, 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 software industry concerning the potential effects
associated with the Year 2000 issue.

     In 1997, the Company commenced 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 providers, are being contacted in the
Company's Y2K assessment as well.

     The Company has fully integrated Y2K testing into the development process
for all its products. The Company believes that its entire EXS family of
products, which includes the EXS, LNX and CSN systems, 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
manufactures 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. Excel has thus far reviewed all its current products
for Year 2000 compliance.  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
6.2 and beyond.  This belief is based on internal test results and an
engineering review of the PCX product line. In July 1998, Excel received
ITAA*2000 certification from ITAA (Information Technology Association of
America).  ITAA's review program examined eleven discrete process areas deemed
necessary to 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. Through discussions with suppliers and or
reviews of publicly disclosed information, Excel also believes that its primary
internal information systems used to support its operations (specifically, its
ERP system, individual servers and workstations and common office applications)
are Y2K compatible.

                                       15
<PAGE>
 
     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 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 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 and engineering departments, and are
not expected to be material to the Company's results of operations or financial
position. Management will develop a contingency plan in the first 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.

                                       16
<PAGE>
 
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 27, 1997 on Form 10-K, as
amended.

     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 27, 1997 on Form 10-K, as amended.  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 publications 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 telecommunications
infrastructure, which could result in delays or cancellations of orders for the
Company's products. The Company's expense levels have been 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 

                                       17
<PAGE>
 
Company's business, financial condition and results of operations would be
materially adversely affected. The Company has historically operated with little
backlog because its products are generally shipped 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 also believes that the purchase of its own 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.
There can be no assurance that the Company will be able to increase its revenues
in future periods or be able to sustain its level of revenues or its rate of
growth on a quarterly or annual basis.

     Due to all 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.

     Dependence on Relationships with Application Developers, OEMs and Systems
Integrators.  The Company sells substantially all of its products to, and
maintains strategic relationships with, application developers, original
equipment manufacturers ("OEMs") 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 manufacture such products themselves, would have a material adverse
effect on the Company's business, financial condition and results of operations.

                                       18
<PAGE>
 
     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), elevate end-user satisfaction and recognize emerging end-user
requirements may be hindered.

     Delayed or Lengthy 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, acceptance reviews, 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 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 operation
to vary significantly from quarter to quarter.

     Concentration of Customers. During the three and nine month periods ended
September 26, 1998 Qualcomm Incorporated represented approximately 14% and 22%,
respectively, of the Company's revenue.  In these same periods, the Company's
five largest customers accounted for approximately 43% and 49%, respectively, of
the Company's revenues.  Although the Company's largest customers have varied
from period to period, 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.  None of the Company's customers have entered into a
long-term supply agreement requiring them to purchase a minimum amount of
product from the Company.  There can be no assurance that the Company's
principal customers will continue to purchase product from the Company at
current levels, if at all, or that 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.

     Dependence on Single and Sole Source Suppliers. The Company purchases many
critical components from single or sole source vendors. The inability to develop
alternative sources for these components or to obtain sufficient quantities of
these components 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

                                       19
<PAGE>
 
months, could be required before the Company would begin receiving adequate
supplies from such alternative suppliers.  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 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. No assurance can be given 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 there can be no
assurance 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.

     Dependence on Third-Party Manufacturers.   The Company relies on 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. These manufacturers substantially complete production of the
Company's products, which are then shipped to the Company for final assembly and
quality control. In the event that any of the Company's subcontractors were to
experience financial, operational, production or quality assurance difficulties
or a catastrophic event that resulted in a reduction or interruption in supply
to the Company, the Company's business, financial condition and results of
operations would be materially adversely affected until the Company was able to
establish sufficient manufacturing capabilities from alternative sources. There
can be no assurance that alternative manufacturing sources will be able to meet
the Company's future requirements or that existing or alternative sources will
continue to be available to the Company at favorable prices.

                                       20
<PAGE>
 
     Risks Relating to Acquisitions.   The Company recently 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 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 has limited experience in acquisitions in
integrating acquired companies or technologies into its operations, the Company
may not be able to manage one or more acquisitions successfully, or 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.

     Demands on Resources due to Company's Management of Growth and Difficulty
in Hiring of Additional Personnel.   The Company has experienced growth in
revenues and expansion of its operations which have placed significant demands
on the Company's management, engineering and administration staff and
facilities.  The Company has recently hired additional engineering, sales and
other personnel.  The Company is also implementing additional financial and
management procedures which 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 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.  There can be no assurance that 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.

ITEM 3.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

         Not applicable.

PART II. OTHER INFORMATION

ITEM 1.  LEGAL PROCEEDINGS
 
         None

                                       21
<PAGE>
 
ITEM 2.  CHANGES IN SECURITIES AND USE OF PROCEEDS

     (d) Use of Proceeds

     The Company has invested the net proceeds from the initial public offering
in November 1997 in investment grade, interest-bearing securities.

To date, the Company has utilized the net proceeds from the initial public
offering as follows:


Remaining offering proceeds, June 27, 1998         $76,882,000
Purchases of property and equipment                 (1,633,000)
                                                   ----------- 
Remaining offering proceeds, September 26, 1998    $75,249,000
                                                   ===========

     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.

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 27 - Financial Data Schedule

         (b)   Reports on Form 8-K

               None

                                       22
<PAGE>
 
SIGNATURES

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

                              Excel Switching Corporation
                                      (Registrant)



Dated:   November 10, 1998    /s/ Robert P. Madonna
                              ---------------------
                              Robert P. Madonna
                              President, Chief Executive Officer and
                              Chairman of the Board of Directors (Principal
                              Executive Officer)


Dated:   November 10, 1998    /s/ Stephen S. Galliker
                              -----------------------
                              Stephen S. Galliker
                              Vice President, Finance and Administration and
                              Chief Financial Officer (Principal Financial and
                              Accounting Officer)

                                       23
<PAGE>
 
EXHIBIT INDEX
-------------



EXHIBIT NO.                       DESCRIPTION
-----------                       -----------

     27               Financial Data Schedule (EDGAR)