SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                    Form 10-K
(Mark One)
   [X]   ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
                     EXCHANGE ACT OF 1934 [NO FEE REQUIRED]

                    For the Fiscal Year Ended March 31, 1999

                                       OR

  [_]  TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
                     EXCHANGE ACT OF 1934 [NO FEE REQUIRED]

         For the transition period from ______________ to ______________

                         Commission File Number 0-15323

                      NETWORK EQUIPMENT TECHNOLOGIES, INC.
             (Exact name of registrant as specified in its charter)

            Delaware                                      94-2904044
 (State or other jurisdiction of                       (I.R.S. Employer
  incorporation or organization)                      Identification No.)

                            6500 Paseo Padre Parkway
                            Fremont, California 94555
                                 (510) 713-7300
          (Address of principal executive offices, including zip code,
                        area code, and telephone number)

           Securities registered pursuant to Section 12(b) of the Act:

Common Stock, $0.01 Par Value                 New York Stock Exchange
-----------------------------       -------------------------------------------
   (Title of each class)            (Name of each exchange on which registered)

           Securities registered pursuant to Section 12(g) of the Act:

                   7 1/4% Convertible Subordinated Debentures
                                (Title of Class)

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

     Indicate by check mark if disclosure of delinquent  filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's  knowledge,  in definitive proxy or information  statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [X]

     The aggregate  market value of the voting stock held by  non-affiliates  of
the registrant on May 30, 1999 was $222,579,108.

     The number of shares  outstanding of the Common Stock,  $0.01 par value, on
May 30, 1999 was 21,648,711.

                      DOCUMENTS INCORPORATED BY REFERENCE:

     The  registrant's  Annual Report to Stockholders  for the fiscal year ended
March 31, 1999 is  incorporated  by reference in Parts I, II and IV of this Form
10-K to the extent stated herein.  The  registrant's  definitive Proxy Statement
for  the  Annual  Meeting  of  Stockholders  to be held on  August  10,  1999 is
incorporated  by  reference  in Part III of this Form 10-K to the extent  stated
herein.

<PAGE>
                                     PART I

Item 1.  Business

General

     Network  Equipment  Technologies,  Inc.  ("N.E.T."  or "the  Company")  was
incorporated  in  California  in 1983 and  reincorporated  in  Delaware in 1986.
N.E.T.'s  initial  public  offering was in 1987 and its Common Stock is publicly
traded on the New York Stock Exchange under the symbol NWK. The Company  employs
over 1,200 people  globally  and is now  headquartered  in Fremont,  California,
having relocated in May 1998 to a new,  custom-built campus. N.E.T. is a leading
designer,  developer,  manufacturer and supplier of wide area networks  ("WANs")
and associated services to service providers, enterprises and governments around
the world.  More than 1,500 N.E.T.  customers  have installed over 20,000 N.E.T.
switches in more than 70 countries worldwide.

     The  Company  provides  a  range  of  solutions  for  mission-critical  WAN
applications,  primarily  through  sales of  networking  hardware and  software,
complemented by expertise in systems integration,  network design, installation,
implementation and ongoing service and support. N.E.T.'s products are based on a
range of  technologies  and standards  used  throughout the industry and provide
support such as switching, adaptation and aggregation for packet-, frame-, cell-
and  circuit-based  applications.  They allow  customers  to  integrate  diverse
applications including voice, data, video,  multimedia and imaging across single
network infrastructures.  They provide efficient,  cost effective and manageable
backbones  for WANs,  along  with a range of  access  capabilities.  They  allow
service providers to provide a wide range of competitive  service offerings such
as native  frame relay and  Asynchronous  Transfer  Mode  ("ATM")  services  and
enterprise customers to access those services or build their own networks.

     The Company  operates in one  industry  segment:  the design,  development,
manufacture  and sale of  multiservice  WANs  and  associated  services  used by
enterprise service providers and government organizations worldwide. For further
information,  please  see Note  Eleven in the "Notes to  Consolidated  Financial
Statements"  in the Company's  1999 Annual  Report  ("Annual  Report")  filed as
Exhibit  13  to  this  Report,  which  information  is  incorporated  herein  by
reference.

Forward-Looking Statements

     All   statements   in  this  Form  10-K   that  are  not   historical   are
forward-looking  statements that involve risks and uncertainties  including, but
not limited to, the risks and  uncertainties  discussed in this Form 10-K and in
the  Company's  other  filings with the  Securities  and Exchange  Commission or
available  at the  Company's  worldwide  Web site  (http://www.net.com).  Actual
results may differ materially from those projected.

Networking Industry

     The networking  industry continues its rapid growth,  particularly in North
America and Europe.  In  comparison  to growth in these two  regions,  growth in
other  markets,  for example Asia,  South America and Eastern  Europe,  has been
slowed  by  economic  constraints.  Industry  growth  is at both the  local  and
national  levels  as well as in the  expansion  of  global  economic  trade  and
business  activity.  In response to these economic  drivers,  and to the related
increases  in levels of business  and consumer  demands,  governments  and other
entities  such  as the  World  Trade  Organization  are  encouraging  the  rapid
development of communications infrastructure, primarily through deregulation and
liberalization of markets.


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<PAGE>


Deregulation and Liberalization

     In the United  States (the  "U.S."),  the  telecommunications  industry has
moved from a  monopolistic,  primarily  voice-oriented  environment in the early
1980s to largely liberalized and competitive  networking markets defined by wide
ranges of products,  new services and solutions for the communications  needs of
businesses and consumers.

     In  Europe,   deregulation   and  the  resulting   liberalization   of  the
communications  markets  started  several  years ago in the United  Kingdom.  In
January  1998,  the voice  segment of the  developed  European  markets was also
deregulated.  This  latter  development  in  particular  is  expected  to be the
catalyst for the emergence of similar competitive trends to those experienced in
the U.S. In other markets around the world,  similar  developments are under way
allowing increased  competition and fueling market growth albeit not at the rate
seen in the U.S. and Europe.

     In most markets,  deregulation  and  liberalization  has tended to occur in
waves.  Newer market segments such as mobile  communications  or Internet access
tend to be  liberalized  early  in the  cycle.  Such  segments  are not  already
dominated by an entrenched  monopolistic carrier or, if they require significant
new  infrastructure   development,   the  liberalization  process  attracts  the
necessary  capital  investment.  More established  market segments such as basic
voice services, have historically tended to be highly regulated and dominated by
monopolistic or government-controlled  service providers, usually Post Telephone
and Telegraph ("PTT") organizations. In these market segments, political factors
tend to be very  significant in the  deregulation  and  liberalization  process.
Other  trends  encouraging  the  ongoing   liberalization  process  include  the
emergence of alternative  service  providers who deliver voice services based on
an arbitrage of international calling tariff differences between many countries.

     The ongoing global deregulation and liberalization  trends have contributed
to  significant  new  market  dynamics,   considerably  greater  competition,  a
proliferation of expanded services, increased customer choices and alternatives,
and a general decline in prices and an improvement in quality.

Growth of Networking and Convergence

     In the U.S.,  major new networks are being deployed by established  service
providers at the national,  state and city level which,  along with  competition
from new service providers such as Internet service providers, competitive local
carriers,  new long distance suppliers,  cable operators and wireless providers,
is leading to an  explosion  in  bandwidth  supply.  Already  inexpensive  voice
services  will likely  become even more so, and new  bandwidth is also  becoming
available for the growth of data and other services  based on Internet  Protocol
("IP")  technology.   In  the  U.S.  and  other  developed  voice  markets,  the
deregulation  trend  mentioned  above  has  resulted  in  significantly  greater
competition,  merger activity,  service provider diversification,  technological
and service innovation,  and more. However, in many emerging countries,  much of
the investment in voice communications is still in the stages of providing basic
services to large  proportions of the population or alternatives to basic leased
services via mobile or other technologies.

     International  traffic  has  traditionally  been an  area  of high  cost to
consumers versus prices for local or long distance services.  Liberalization has
led  to  the  emergence  of  service  providers  specializing  in  callback  and
international  voice resale and, along with  increasingly  available  bandwidth,
will likely lead to a market with steadily declining - and, ultimately, leveling
- prices.

     In markets such as the U.S., a major trend is the growth of data networking
and its anticipated  convergence with established voice networking.  Convergence
brings  together  voice,  data and video onto a single  network  using IP.  Data
networking  services  have grown from a fraction of the  overall  communications
market  to the  point  where  they are  generally  expected  to  equal  and then
substantially exceed the voice market segment.  Significant among the drivers of
this growth are:

     o    the explosive  global expansion and use of the Internet for commercial
          and consumer purposes;

     o    the development of corporate intranets - the use of IP-based solutions
          for internal communications (for example, employee-to-employee) within
          a particular business;


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<PAGE>


     o    the emerging areas of electronic commerce and its close relative,  the
          extranet - IP-based  networks  linking  companies and their  employees
          with partners, vendors, other enterprises, franchisees and customers;

     o    the  development  of  Virtual  Private  Networks  ("VPNs")  - a single
          network that can be apportioned securely between different companies;

     o    the  emergence  of  new  bandwidth  intensive   applications  such  as
          multimedia, telemedicine and distance learning; and

     o    the further  deployment of business  applications  built on the client
          server and local area computing  infrastructures developed in the last
          decade or so.

     For N.E.T.,  the emergence of VPNs is a logical  extension of the solutions
and applications the Company has always provided. N.E.T.'s networking experience
helps service providers and enterprises migrate to this next generation of WANs,
principally based upon IP overlaid on a packet network fabric such as ATM.

     Convergence of traditionally separate voice, video and data environments is
another key trend and may occur at different  levels  throughout  a network.  In
WANs,  convergence  will be driven by  emerging  customer  applications  such as
universal messaging (e-mail and voice mail integration),  the development of new
revenue-generating  services,  business efficiencies such as cost and management
savings,  and the  merging of multiple  traffic  types  across the same  network
infrastructure.

Network Architectures and Characteristics

     The  Company  competes  primarily  in the WAN market  space.  This  segment
provides the infrastructure and capability to link local area networks ("LANs"),
campus networks,  voice traffic,  video and other applications to each other via
service provider  transmission  facilities or services.  In WANs, the center, or
core, is the high-capacity backbone or transmission infrastructure developed and
maintained by a network service provider. This is typically based on high-speed,
high-capacity  links  built on switches  characterized  by high  capacity,  high
reliability  and other  considerations.  Beyond  and  around the core is an edge
layer that defines the area at the boundary  between a service  provider and its
media used to connect to  enterprise  customers or other user access.  These two
access  areas  on  the  service  provider  and  enterprise  edge  offer  product
opportunities that help to manage traffic,  service levels,  concentration,  and
the support of traffic from multiple  interfaces.  Products in this space may be
located at the service provider or deployed at the enterprise. The edge layer is
an  access  layer  characterized  by  products  with  high  port  densities  and
correspondingly low price per port, by devices such as access  concentrators and
by technology or service  specific  products such as ATM access  devices.  These
products allow access from the enterprise core to the service provider edge.

Company Strategy

     N.E.T.  focuses its strategy and  expertise on the edge and access  layers,
and on providing  products,  services and  solutions  encompassing  the range of
technologies  used in these spaces.  The Company  targets  three major  vertical
markets or industries: (i) service providers, (ii) enterprises such as financial
institutions,  manufacturers,  utilities and retailers,  and (iii)  governmental
agencies.

Service Providers

     Service  providers are the entities  providing  communications  services of
various kinds to the public, both consumers and enterprises.  They range in size
and scope from major global and national  corporations  to small local telephone
companies.  They may specialize in certain types of traffic or services, such as
cellular services or Internet service  provisioning,  or they may have developed
an integrated range of services or geographical coverage in an effort to provide
"one stop shopping" for clients.


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<PAGE>


     N.E.T.  provides a range of  solutions  designed to meet  service  provider
requirements.  These  solutions  typically  consist of  hardware  platforms  and
related  software,  network  management  tools,  expertise  and support.  N.E.T.
customers  in this segment  include  global  consortia,  PTTs in markets such as
China,  major  country and  regional  service  providers,  International  Simple
Resellers  ("ISRs"),  callback service  providers,  Internet  Service  Providers
("ISPs"),  cellular and wireless service providers,  and more. Applications that
can be  enabled  by N.E.T.  service  provider  solutions  include  Digital  Data
Networks  ("DDNs")  providing  basic data  services in emerging  markets and the
provisioning of voice compression and switching capabilities to ISRs.

Enterprises

     Commercial  enterprises  face many  challenges in networking.  Networks are
growing and becoming more complex. Support and management of different platforms
running  different   applications  is  expensive  and  companies  must  maximize
bandwidth  use in the  infrastructure  to  operate  at peak  efficiency.  And in
increasingly  complex global  environments,  multinational  enterprises face the
continued  challenge of lack of availability of certain services in some markets
and skilled employee availability.

     N.E.T.'s enterprise strategy is to provide an integrated range of solutions
and alternatives with which to address such challenges.

Governments

     N.E.T.'s strategy includes addressing the needs of government agencies with
a range of reliable  communications  solutions.  For example,  military services
around  the  world  require  rapidly  deployable,  secure  and  reliable  mobile
communications  systems for success in a variety of  operations.  Personnel  are
often deployed at a moment's notice to a remote location for combat  operations,
peacekeeping,  or  humanitarian  missions and must be able to  communicate  with
other  remotely  located  resources,  as well as with  strategic  communications
networks that support the command structure.  For numerous emergency  management
agencies, access to reliable mobile communications is vital.

N.E.T. Products and Solutions

     The Company's products provide a range of solutions addressing the needs of
service  providers,  enterprises  and  governments  in the WAN  access  and edge
layers.   These   systems  offer   superior   applications   availability   with
sophisticated   bandwidth  and  traffic  management  as  well  as  connectivity,
broadband  transmission and unified network management across the WAN. The major
product groups in the Company's range of solutions now include:

     o    multiservice access platforms providing solutions designed to optimize
          use of  packet-based  networks  such as frame relay,  IP or ATM leased
          lines  and  other  services,  and  incorporate  a range of  integrated
          products for switching,  LAN  internetworking,  voice  compression and
          other options;

     o    broadband  switches  providing  high bandwidth  solutions  targeted at
          service  providers for  consolidation  and management of  multiservice
          traffic across high-speed backbone networks;

     o    access and  lower-end  networking  products  providing  cost-effective
          connectivity from smaller locations; and

     o    network management systems.

     Historically,  the great majority of product  revenue has been generated by
the Company's IDNX(R)  Multiservice  Bandwidth  Managers.  In fiscal years 1997,
1998  and  1999,  IDNX  accounted  for  87%,  79%  and 16% of  product  revenue,
respectively.  As of April 30, 1999,  the IDNX  products  have been  replaced by
N.E.T.'s  Promina(R) product line and PanaVue(TM)  network  management  systems.
N.E.T.'s  Promina  product line consists of access  multiplexers  in three major
groups: the Promina 800 Series  Multiservice  Access Platform,  the Promina 2000
and the Promina 4000


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<PAGE>


ATM switches. The Promina 800 series was not available for shipment until fiscal
year 1998.  Since then,  in fiscal  years 1998 and 1999,  the Promina 800 series
accounted for 10% and 72% of product revenue, respectively.

     Introduced in 1997,  the Promina 800 Series  Multiservice  Access  Platform
provides integrated, single-platform access to ATM, frame relay, and leased line
services.  Support is provided for a wide range of applications including voice,
video,  data,  fax,  modem,  LAN, IP, ISDN and frame relay  traffic.  It is also
designed to be a high availability platform,  with distributed  intelligence for
mission-critical  applications.  The  Promina  800  series is  complemented  and
enhanced by a range of optional  products  providing a "mix and match"  range of
capabilities depending on the customers' specific requirements. For example:

     o    The  PrimeVoice(TM)  Plus  Compression  Module  offers  a  significant
          increase in call capacity and supports toll quality voice compression.

     o    The LAN/WAN  Exchange(TM)  ("LWX") Edge Router  routes and bridges LAN
          traffic  over the WAN. The LWX  incorporates  Cisco(R) IOS source code
          and offers performance,  availability and serviceability  features for
          remote access internetworking.

     o    The PrimeVoice ISDN Switching Module supports switched ISDN services.

     o    The FrameXpress(TM) Switching Module enables provisioning of or access
          to standards-based frame relay services.

     o    The   CellXpress(TM)   ATM  Module  provides  an  efficient   industry
          standards-based  solution  with the  operating  advantages of ATM. The
          CellXpress  Module  consolidates  internodal  trunk  connections  to a
          service  provider  network at a single  access  point  with  resulting
          traffic aggregation.

     o    Data Port Modules offer optimum support for packet- and  circuit-based
          data traffic using industry-standard interfaces.

     The  Promina  2000 ATM Network  Multiplexer  adapts and  aggregates  legacy
traffic such as frame relay and circuit emulation services onto an ATM backbone.

     The Promina 4000 ATM Switch is a service  provider-edge switch designed for
the  consolidation  of  multiservice  traffic for reduced  management  expenses,
superior  bandwidth  utilization,  support for a wide range of applications  and
quality  of  service  ("QoS")  requirements  and is  engineered  for  very  high
availability. Its SwiftCell(TM) Advanced Traffic Management provides fair access
to  network  resources  while  balancing  use of those  resources  with  service
integrity. It employs a scalable ATM network architecture through a "switch on a
card"  approach.  Configurations  can be tailored to  application  requirements,
avoiding  overprovisioning  and allowing  solutions to match requirements with a
great degree of precision and flexibility.

     The  PrimeSwitch(TM)  100  Series   Multiprotocol  Access  System  provides
low-cost  access  solutions for voice and data traffic,  with the ability to use
ISDN or leased lines for cost-effective connectivity.

     The  SONET(TM)  Transmission  Manager  ("STM") is designed for  intelligent
broadband  networking.  The STM  platform  adds  value  to  bandwidth-intensive,
mission-critical applications in both carrier and enterprise environments.

     The growth and scale of today's  networks,  the convergence trend discussed
above,  and the  presence of equipment  from  multiple  vendors  within the same
network  combine  to  increase  complexity  and  the  requirements  for  network
management.   To  address  these  evolving  needs,  N.E.T.  offers  the  PanaVue
Management  Platform.  Its open  design  which is based on  industry  standards,
provides  scalability.  The platform's user interface lowers the cost of network
ownership  by  reducing   training  time,   improving  access  and  streamlining
operations  throughout  the network.  The  platform  supports the main family of
N.E.T.  products and,  additionally,  the platform's  Advanced Fault  Management
System ("AFMS")  provides unified fault  management plus integrated  service and
network  management  for  devices  in the  network  including  those  from other
vendors.  It delivers Web-based network



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<PAGE>


management  enabling access to real-time  network  information from any computer
with a Web browser and the proper security clearance.

New Product Introduction

     Given the dynamic  characteristics of its markets,  N.E.T. must continue to
develop  and  enhance  its  product  lines to add  value  and meet the  needs of
strategic markets as they evolve, through internal development,  the acquisition
of  technology,  or  association  with entities  whose  technologies  or product
offerings  complement  its  own.  The  Company  has  entered  into a  number  of
agreements  relating to the  development,  license or purchase of  technology to
extend the reach and  functionality  of the Company's  product  lines,  and will
continue to do so as deemed appropriate by management.

     Many products  designed and  manufactured by N.E.T.  contain  components or
intellectual  property  obtained from third  parties.  The Company's  ability to
maintain  and enhance the value of its  intellectual  property,  technology  and
third-party licenses will affect future product and service offerings. Moreover,
the  Company   believes  that  operating   results  will  depend  on  successful
development  and  introduction  of new  products  and  enhancements  to existing
products and service offerings.  There can be no assurance that the Company will
succeed in these  efforts.  Customers  may not accept new or  enhanced  existing
products and services in quantities and at prices that are  consistent  with the
Company's  expectations.  Changes in the  Company's  distribution,  product  and
technology  relationships with a number of entities could have a material impact
on  competitive  and other  factors  described in this  document,  including the
Company's operating results.

     The timely  commercial  availability  of all of the Company's  products and
services and their  acceptance by customers are crucial to the future success of
the Company.  The Company has invested and will  continue to invest in designing
and  delivering  products  that  will  function  effectively  well into the next
century.  The Company expects these  investments to be successful but, given the
nature and complexity of the products  offered by the Company and the complexity
and mixed vendor  nature of equipment  used in WANs,  it is possible  that these
development  efforts may not be successful or that  customers may not accept the
products or services developed. Substantial delays in availability or acceptance
of the Company's products and services would materially and adversely affect the
Company's operating results and financial condition.

Restructuring

     In March 1999,  the Company  instituted a worldwide  restructuring  plan to
align its operations with its new line of business  operating model discussed in
the "Marketing,  Distribution and Customers" section below and to bring expenses
in line with projected  revenue.  The Company closed several offices and reduced
its work force by approximately  10%. The goal of the  restructuring was to make
N.E.T. a more competitive company. There can be no guarantee,  however, that the
restructuring  will have the  desired  positive  long term  effect.  For further
information,  please refer to the "Business Environment and Risk Factors" in the
"Management's   Discussion  and  Analysis"  and  Note  Four  in  the  "Notes  to
Consolidated  Financial  Statements"  in the  Company's  1999  Annual  Report to
Stockholders  ("Annual  Report"),  filed as  Exhibit  13 to this  Report,  which
information is incorporated herein by reference.

Marketing, Distribution and Customers

     As discussed  above,  the Company  focuses  primarily on  information-  and
communications-intensive  organizations in the service provider,  enterprise and
governmental  vertical  markets.   These  customers  may  be  local,   national,
multinational or global in their operations,  either as suppliers of services or
as end users.  Although  originally  focused on the U.S.,  N.E.T.'s  presence in
markets  in  Europe,  Asia,  Latin  America  and  other  regions  has  increased
substantially  over the years.  Growth in Asia, Latin America and Eastern Europe
markets has been stymied,  however, due to the economic difficulties experienced
in these regions.

     In the U.S. and Europe,  N.E.T.  employs a highly skilled sales and support
organization  that develops close direct  relationships  with  customers.  These
relationships  may  include  pre-sales  activities  such as  network  design and
consultation,  sale  of  products  and  solutions,  post-sales  support  of  the
installed  base and other  value-added  services.



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<PAGE>


In addition,  the Company has developed a substantial  network of  distributors,
systems integrators,  value-added  resellers and others to represent and support
the  N.E.T.  product  line in other  vertical  or  geographical  markets.  These
relationships are supported by N.E.T.  subsidiaries and offices around the world
and  staffed by skilled  N.E.T.  employees,  who  provide  expertise,  marketing
support, network design and other assistance.

     N.E.T.'s field sales and support  structure was recently  reorganized  into
five lines of business based upon N.E.T.'s four major market segments:  Emerging
Global Carriers ("EGC"), Global Network Service Providers ("GNSP"),  Governments
(federal,  state,  local),  Enterprise  and  Services.  Each line of business is
responsible for all vertical market customer and partner relationships worldwide
within that line of business.  These lines of business are in turn  supported by
regional and corporate  marketing,  sales support,  technical training and other
resources.

     International  sales  represented 32%, 37% and 35% of the Company's revenue
in fiscal 1999, 1998 and 1997, respectively.  Government ownership or control of
the  telecommunications  industries  and  regulatory  standards  in some foreign
countries  could be a substantial  barrier to the  introduction of the Company's
wide-area  communications products for use in private or hybrid networks in such
countries.  Financial  information regarding foreign operations and export sales
is discussed in Note Eleven in the "Notes to Consolidated  Financial Statements"
in the Annual Report, which information is incorporated herein by reference.

     In  December  1989,  the Company  entered  into a systems  integration  and
distribution   agreement   with   Ericsson   Business   Networks  AB  of  Sweden
("Ericsson").  Under this agreement,  as amended, and additional agreements with
certain Ericsson subsidiaries, Ericsson has the non-exclusive right to purchase,
resell,  distribute and license various of the Company's  products.  Ericsson is
responsible  for  providing  service  and  support  for the N.E.T.  products  it
markets. Starting in 1993, N.E.T. has entered into a distribution agreement with
Datacraft  Asia Ltd.  and its  subsidiaries  which was  renewed in fiscal  1998.
Datacraft  Asia Ltd.  accounts for a  significant  proportion  of the  Company's
distribution  sales  in  mainland  China.  During  the  Company's  fiscal  1998,
Dimension Data Holdings Limited  ("Dimension Data"), a South African information
technology  group,  acquired  Datacraft  Asia Ltd.  along  with  several  of its
affiliates.  The Company has not  experienced  and does not anticipate  material
changes in its operating  results as a result of this  acquisition.  The Company
recently  signed  an  agreement  with  Dimension  Data for  distribution  of the
Company's  products in Africa.  The Company also has an agreement with Datacraft
Technologies  Pty. Ltd., a former  affiliate of Datacraft Asia Ltd., to resell a
jointly  developed INTU product.  The Company did not renew its master agreement
with  International  Business  Machines  Corporation  ("IBM")  in  fiscal  1998.
However,  the  Company's  products  continue  to be  sold  through  distribution
agreements with various IBM subsidiaries and operations in individual countries.

     As  discussed  above,  the Company  targets the service  provider  vertical
markets as a key element of its strategy.  A number of these  service  providers
also act as distribution  channels for the Company's products to enterprises and
other service providers worldwide.  These relationships include joint marketing,
systems integration,  resale and other agreements with service providers such as
Concert,  GlobalOne, MCI WorldCom, Bell Atlantic, US West, Bell South, Unisource
Business Networks, Tele Danmark and Hanwha Corporation.  The terms of agreements
with these service providers  require their periodic  renegotiation and renewal.
While failure to renew any one of these service provider agreements likely would
not  materially  impact the Company,  failure to renew a  significant  number of
these  agreements on terms and conditions  favorable to the Company could have a
material impact on N.E.T.'s financial condition and results of operations.

Sales to Significant Customers

     N.E.T.'s wholly-owned  subsidiary,  N.E.T. Federal,  Inc., which is part of
the Company's  North America  business unit,  markets the Company's  products to
U.S.  government  entities  both directly and through  collaborative  government
contracting  and  subcontracting  arrangements.  It  has  entered  into  several
contracts  under  which  it  provides  its  products  and  services  to  various
government  agencies (the  "Government  Contracts").  The  Government  Contracts
encompass  varying  periods,  but  most  may be  terminated  by such  government
agencies  at  their  convenience  or at  annual  intervals.  Sales  to the  U.S.
government  and its agencies  amounted to 37%, 33% and 29% of revenue for fiscal
years 1999,  1998 and 1997,  respectively.  These amounts  include sales,  which
amounted to 24%, 29% and 27% of N.E.T.  revenue for fiscal years 1999,  1998 and
1997, respectively, under contracts with the Department of Defense ("DoD") under
which various government  agencies can order products,  installation and service
from the Company.  Discontinuance  of orders from,  or  disqualification  of the
Company by, the DoD or other



                                       7
<PAGE>


significant  Federal customers would materially  affect the Company's  operating
results  and  financial  condition.  Apart  from  the  U.S.  government  and its
agencies,  no other single  customer  account was responsible for ten percent or
more of the Company's revenue during fiscal 1999, 1998 or 1997.

     Historically,  the Company has experienced  customer ordering patterns that
have resulted in the majority of the Company's  revenues in each quarter  coming
from orders  received and shipped in that quarter,  including a large portion of
orders  received  and  filled  in the last  month of the  quarter.  For  further
information,  please refer to the  "Business  Environment  and Risk  Factors" in
"Management's  Discussion  and  Analysis"  on pages 13  through 20 of the Annual
Report, which information is incorporated herein by reference.

Customer Service and Support

     The markets,  customers and complex  challenges of the networking  industry
described earlier require not only hardware- and software-based  solutions,  but
also  significant  support,  service  and other  value-added  assistance  in the
development,  operation  and  expansion  of  the  related  networks.  Since  its
inception,  N.E.T.  has viewed customer  service and support as a key element of
its overall strategy, a competitive differentiator,  and a critical component of
its long-term relationships with customers.

     The Company's  SourcePoint(TM)  Services  offerings provide a wide range of
service and support options to customers and  distributors  of N.E.T.  products.
These offerings include product installation, a choice of different hardware and
software  maintenance  programs,  upgrades,  repairs,  technical  assistance and
training.  In  addition  to these  and  other  traditional  support  activities,
including  field service and the Company's  investments in Technical  Assistance
Centers  ("TACs"),  the Company continues to introduce new programs and tools to
enhance value and customer  satisfaction in this area. For example,  the Company
has  introduced  an  Electronic  Support  Center.  This is a  Web-based  service
offering first-line troubleshooting  information for major N.E.T. product lines.
Technical information provided includes  Troubleshooting Guides, Hints and Tips,
Cabling Diagrams, Frequently Asked Questions and other product-specific details.
A Web-based  interface with N.E.T.'s TAC is also available  using an Online Case
Management tool.  Online Case Management  enables clients to open trouble cases,
query case status and add Notes to existing  cases.  Clients can also use Online
Case  Management  to track case  status from  opening to closing,  all via their
local Web browser.  The Company has also  recently  introduced  Managed  Network
Services  wherein  N.E.T.,  for  a  fee,  provides  the  resources  and  support
capability required to manage customer networks on an ongoing basis.

     TAC support is fee-based under  contracts or on a time basis.  The TACs are
staffed 24 hours a day and are  available on a year-round  basis.  TAC engineers
provide assistance to N.E.T.  customers or resellers over the telephone or, when
authorized, by accessing customers' networks directly. TAC engineers have access
to  facilities  to  replicate  customer  problems  and test  solutions  prior to
implementation.  The Company  continues to invest in its TAC operations,  adding
tools and capabilities to enhance its support role.

     The Company provides educational services to its resellers and customers at
a number of  facilities  in the U.S.,  Latin  America  and  Europe.  Through its
resellers and via traveling facilities in other locations,  N.E.T.'s educational
services can be customized to meet the unique requirements of its customers.

     The  Company  has also  developed  expertise  in  systems  integration  and
services provided globally as N.E.T.  SourcePoint  Professional Services.  These
high  value  services   include   helping   customers   optimize  their  network
investments,  outsourcing  selected network  operations to N.E.T.,  or providing
additional expertise on a project basis.  N.E.T.'s  Professional Services can be
utilized  throughout  the various phases in the network life cycle from planning
to design through implementation.

     In the case of the Company's  international  and  multinational  customers,
services  are  provided  by  either  N.E.T.  or by  its  integrated  network  of
authorized service agents trained and supported by N.E.T.'s  headquarters,  TACs
and field operations.

     A significant amount of the Company's revenues and profits are generated by
its service and support  offerings.  In fiscal 1999, 1998 and 1997,  service and
support offerings accounted for 40%, 35% and 34% of N.E.T. revenue,



                                       8
<PAGE>


respectively.  The Company cannot guarantee that customer  acceptance of current
and future  offerings  will be  maintained  or  achieved.  Competition,  product
reliability,   remote   diagnostic  and  repair   capabilities,   sales  through
distribution  and other  factors may impact  service and  support  revenues  and
profitability.

Research and Development

     The Company believes that product and technology  leadership is critical to
long-term   success  in  the  highly  dynamic  markets  in  which  it  competes.
Furthermore, it believes that the Company's future operating results will depend
on its ability to continue to enhance its Promina and PanaVue  product  lines as
well as to  develop  and  bring to market on a timely  basis  new  products  and
services that meet market and customer requirements. N.E.T. continually monitors
markets,  its  customers'  businesses and  technology  developments  in order to
develop  solutions that  proactively  address customer needs. As a result of its
monitoring  efforts,  N.E.T.  engages in research and development ("R&D") of new
products and  enhancements  to existing  products and services as technology and
the Company's  performance  permits.  The  Company's R&D spending  totaled $45.8
million,  $43.4 million and $41.0 million for the fiscal years ended 1999,  1998
and 1997, respectively.

     The  Company's  development  efforts  are focused on its  strategic  market
segments  and the key  technologies  involved in providing  solutions  for these
markets.  Product development priorities include those intended to enable N.E.T.
to occupy a  prominent  position  in the WAN  solutions  market;  to enhance the
carrier-compatibility of certain products; and to introduce product enhancements
which meet the  evolving  requirements  of  specific  markets  and  distribution
channels.  While most development activity is undertaken  in-house,  the Company
uses external  development  organizations  to  complement  its own resources and
shorten time to market for resulting products and enhancements. The scalable and
modular  architecture  employed  by the Company  for its main  product  families
allows not only  greater  efficiency  in the  development  and  delivery  of new
products and enhancements,  but also benefits customers who can  "mix-and-match"
modules  according to their  networking  needs and use the same  modules  within
different switch chassis.

     For additional discussion of the Company's R&D expenditures in fiscal 1999,
1998 and 1997, see "Management's Discussion and Analysis" on pages 10 through 20
of the Annual  Report which is  incorporated  herein by  reference.  The Company
plans to continue  funding R&D efforts at levels  necessary  to advance  product
programs.

Manufacturing

     The N.E.T.  manufacturing  process consists of the production of mechanical
and  electrical  subassemblies  as well as custom  system  assembly and testing.
N.E.T.  purchases various components from outside suppliers  including,  but not
limited to, custom fabricated printed circuit boards and subassemblies, standard
and custom  integrated  circuits,  power supplies and mechanical  hardware.  The
Company's  products also include  components,  assemblies and subassemblies that
are currently  available  from single  sources and, in some cases,  are in short
supply.  Although N.E.T. believes alternative sources or substitutes for most of
such single-sourced items are available or, in most cases, could be developed if
necessary,  any  delay  or  difficulties  in  developing  such  alternatives  or
substitutes could result in shipment delays and could adversely affect operating
results. Testing and manufacturing of products designed by N.E.T. have generally
been outsourced to third parties.  Final  assembly,  quality control and testing
are  generally  performed at the  Company's  manufacturing  facility in Fremont,
California.  Availability  limitations,  performance of outside vendors, quality
control issues,  price  increases,  or business  interruptions  could materially
impact the Company's financial performance.

     N.E.T. products are manufactured from components and assemblies designed to
meet the  Company's  quality and  reliability  requirements.  The  Company  also
resells certain complementary products that are manufactured by outside vendors.
The Company  relies to a  significant  degree on such third  parties for quality
control,  support of their products and for order  fulfillment.  To date, N.E.T.
has not  experienced  any  significant  delays in the  delivery  of  material or
products from either subcontractors or vendors, but limits on availability could
adversely affect operating results.



                                       9
<PAGE>


     The Company has entered into software escrow  arrangements  and has granted
to certain customers  manufacturing  rights that are exercisable by the customer
in limited  circumstances,  such as upon material  default by the Company of its
obligations under its agreement with such customers.

     The Company seeks to maintain  inventory in  quantities  sufficient to ship
product  quickly  (normally  within 15 to 60 days)  after  receipt of order.  It
schedules  some  production  and  supply of  products  based on  internal  sales
forecasts.  Many of N.E.T.'s customer agreements provide that delivery dates may
be rescheduled or orders  canceled,  although in certain  circumstances a charge
may be assessed upon  rescheduling or  cancellation.  Because of these and other
factors, there are risks of excess or inadequate inventory that could materially
impact expenses, revenue and, to a greater degree, net earnings.

Quality

     The  Company  has a Total  Quality  Management  process  and is  focused on
continually  enhancing  the  quality  of  products  and  services  delivered  to
customers worldwide. This includes activities to improve the quality of supplied
components,  subassemblies and internal Company processes. The Company's quality
system,  which  includes its business  processes and  procedures  worldwide,  is
certified to ISO 9000 international  standards.  N.E.T. is also certified to ISO
9001,  which covers quality  standards for design and  development,  production,
installation   and  servicing.   In  addition,   N.E.T.   has  received   TickIT
certification for complying with quality standards for software development.

     The  Company  has been  working  to make its  internal  systems  Year  2000
compliant  by January 1, 2000.  In  addition,  the Company has assessed the Year
2000  compliance  of its  products  and has  been in the  process  of  informing
customers  and  resellers   accordingly.   Finally,   N.E.T.  has  assessed  its
obligations to customers and resellers for products  purchased and is working on
steps to  reduce  any  potential  liability  for  Year  2000  product  failures.
Nevertheless,  if certain  internal  systems,  Company  products and third-party
products  are not Year 2000  compliant,  or if  customers  do not upgrade  their
equipment to become Year 2000 compliant, the Company could experience a material
negative impact on its business,  financial  position and results of operations.
For  further  discussion,  please  refer  to the  Year  2000  discussion  in the
"Business  Environment  and  Risk  Factors"  in  "Management's   Discussion  and
Analysis"  on pages 15 through  19 of the Annual  Report,  which  discussion  is
incorporated herein by reference.

Competition

     The  communications  industry in general,  including the specific  segments
within which N.E.T.  competes,  is intensely competitive and is characterized by
advances  in  technology  that  frequently  result  in the  introduction  of new
products and services with improved performance  characteristics.  Recently, the
industry has experienced  consolidation  resulting in a significant  increase in
the size and capabilities of many companies that compete with N.E.T. The Company
believes  that the  principal  competitive  factors  in its target  markets  are
experience, product capabilities,  standards compliance,  technical services and
support, quality, technical and other reliability, vendor reputation,  stability
and long-term prospects, distribution capabilities and value propositions.

     The Company believes that it currently  competes  favorably with respect to
many of these  factors.  However,  many of the  Company's  current and potential
competitors have greater name recognition, a larger installed base of networking
products, more extensive engineering, manufacturing, marketing, distribution and
support  capabilities  in  addition  to  greater  financial,  technological  and
personnel resources. Actual or perceived failure to keep pace with technological
advances or other  competitive  factors  would  adversely  affect the  Company's
competitive  position and could adversely  affect N.E.T.'s future revenue levels
and operating results.

     In the Company's selected markets it competes with other WAN communications
equipment  vendors.  These  include  products and services  from vendors such as
Ascend  Communications,  Cisco  Systems,  General  DataComm  Industries,  Lucent
Technologies,  Newbridge Networks  Corporation and Northern Telecom  ("Nortel").
Consolidation  in  the  networking  industry  continues  to  accelerate  through
strategic alliances, mergers and acquisitions and joint technology and marketing
agreements.  Continued  or  successful  consolidation  could  result in stronger
competitors  and may  adversely  affect the Company's  competitive  position and
operations.  In addition,  new



                                       10
<PAGE>


vendors  continually  emerge as competitors in the Company's  selected  markets.
Many of these competitors enjoy  substantially  greater marketing  resources and
customer recognition than the Company.

     The Company's  agreements  with Ericsson and Datacraft  Technologies do not
prohibit them from  manufacturing,  marketing or servicing products that compete
directly with N.E.T.'s  products.  N.E.T.'s operating results could be adversely
affected  if  these  or  other  companies  announced  the  availability  of,  or
successfully introduced, such products or services.

     As  discussed  below  under  "Government  Regulation,"  in  the  U.S.,  the
Telecommunications  Act of 1996 (the "1996  Legislation")  removed  restrictions
that had been imposed on Regional Bell Operating Companies ("RBOCs") by the AT&T
divestiture decree thus allowing them, under certain conditions,  to manufacture
telecommunications  equipment or customer premises  equipment.  Competition from
service providers that decide to manufacture such equipment,  with their greater
resources  and large  customer  bases,  or from other  competitors  as discussed
above,  could  cause a  severe  reduction  in  selling  prices  or  volumes  for
multiservice platforms and other communications  products or services. This type
of competition  could have a material adverse affect on the Company's  operating
results and financial condition.

Government Regulation

     As  discussed  above,  the  telecommunications  industry  is  regulated  by
governments and other agencies around the world.  Government regulatory policies
are likely to continue to have a major impact on N.E.T.'s  business by affecting
the availability of voice and data  communications  services and equipment,  the
prices and terms of service providers'  competitive offerings and the ability of
companies directly to manufacture and market equipment and services that compete
with N.E.T.'s offerings.

     The 1996  Legislation  enacted in February of that year was the first major
change in U.S. telecommunications law since the Communications Act of 1934. This
far-reaching  legislation has influenced and will continue to influence the U.S.
telecommunications  industry in many ways.  Certain  changes could have a direct
impact  on  N.E.T.'s  business.   For  example,  the  1996  Legislation  removed
restrictions on RBOC activities such that, under certain  conditions,  the RBOCs
may  be  permitted  to  manufacture  telecommunications  equipment  or  customer
premises  equipment.  If any RBOCs  manufacture  or form  alliances  with  other
manufacturers  to  develop  such  equipment,  N.E.T.  could  be  materially  and
adversely affected by direct competition with the RBOCs.

     In addition,  N.E.T. customers usually are service providers or use service
provider network  services,  the rates and terms of which are subject to varying
degrees of public utility-type government regulation.  For example, in the U.S.,
decisions  at the  federal and state level  have,  in some  instances,  provided
certain service providers with increased  flexibility in structuring and pricing
their services.  Similar impact of regulation or deregulation may occur in other
N.E.T. markets, such as in Europe, as mentioned earlier. Changes in the rates or
terms of service  provider-provided  service  offerings may adversely affect the
demand for, or limit the usability of, network  products and services  including
those provided by N.E.T. to service providers, enterprises and other customers.

     The  Federal  Communications  Commission  ("FCC") in the U.S.  and  similar
agencies in many foreign  governments require that N.E.T.'s products comply with
certain rules and  regulations,  including  technical  rules designed to prevent
harm  to  the  telephone   network  and  avoid   interference  with  radio-based
communications.  The Company  believes it complies  with, or is exempt from, all
applicable  rules  and  regulations  with  respect  to the sale of its  existing
products in the U.S. and in certain  foreign  countries.  Failure to comply with
FCC or similar  governmental  requirements  may result in the  disconnection  of
installed equipment from common service  provider-provided  circuits. Any delays
in complying  with FCC or foreign  requirements  with respect to products  could
delay their  introduction or affect the Company's  ability to produce and market
its  products.  Sales to the U.S.  government  are  subject to  compliance  with
applicable regulations (e.g., Federal Acquisition Regulations).

Proprietary Rights and Licenses

     N.E.T.  has obtained  patents in the U.S. and other countries on inventions
relating  to its  products  and has  applied for  others.  While  possession  of
patents,  copyrights  and trade secrets could affect the ability of companies to



                                       11
<PAGE>


introduce products competitive with the Company's products, N.E.T. believes that
its success does not depend primarily on the ownership of intellectual  property
rights,  but  on its  innovative  skills,  technical  competence  and  marketing
abilities, and, accordingly, that patents, copyrights and trade secrets will not
constitute an assurance of N.E.T.'s  future  success.  N.E.T.  is aware that the
laws of some  other  countries  do not  protect  proprietary  rights to the same
extent as the laws of the U.S.

     Because of the  existence of a large number of  third-party  patents in the
telecommunications  field and the rapid rate of issuance of new patents, some of
the  Company's  products,  or the  use of  these  products,  could  infringe  on
third-party patents. If any such infringement exists, the Company believes that,
based upon historical  industry practice,  it or its customers should be able to
obtain any  necessary  licenses or rights under such patents on terms that would
not be materially adverse to the Company. It is possible,  however,  that in the
future,  actual or alleged  infringement  could materially  affect the Company's
operating results or financial condition.

     The Company regards elements of its software and engineering as proprietary
and  relies  upon  non-disclosure  obligations,   copyright  laws  and  software
licensing agreements for protection.  Despite these restrictions, it is possible
that competitors may obtain information that N.E.T. regards as proprietary. Some
of the technology  incorporated in certain of the Company's products is licensed
from third  parties.  In the event of termination or expiration of the licensing
agreements for such technology,  the Company's  ability to market those products
could be adversely affected, which in turn could materially affect the Company's
operating results and financial condition.

Employees

     As of  March  31,  1999,  the  Company  had  1,237  employees.  None of the
Company's  domestic  employees  are  represented  by  a  collective   bargaining
agreement.  National collective  bargaining or similar agreements govern certain
of the Company's  employees  outside the U.S. The Company has never  experienced
any work stoppage and believes that its employee relations are good.

Item 2. Properties

     N.E.T.  currently leases approximately  290,000 square feet of office, R&D,
and manufacturing space in a modern industrial park in Fremont, California under
a 12-year  lease  agreement  beginning  April 1, 1998 for three  buildings.  The
custom-built Fremont facility includes two buildings configured for office space
and R&D, and one designed for  manufacturing and support  functions.  N.E.T. and
its subsidiaries  also lease sales and service offices at other locations in the
U.S., China, France, Germany, Mexico, Singapore, Uruguay, the United Kingdom and
other countries.  In June 1998, the Company vacated approximately 287,000 square
feet of space in Redwood City,  California  under a lease agreement that expired
in October 1998.  The Company  believes that its current and planned  facilities
are, in all material respects, suitable and adequate for its anticipated needs.

Item 3. Legal Proceedings

     The  Company  is not aware of any  material  legal  proceedings  pending or
threatened against it at this time.

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

     Not applicable.



                                       12
<PAGE>



                                     PART II

Item 5. Market for the Company's Common Equity and Related Stockholder Matters

     Note Eight in the "Notes to Consolidated  Financial Statements" on pages 30
through  32 and the  section  captioned  "Stock  Information"  on page 37 of the
Company's  Annual  Report are  incorporated  herein by reference and included in
this filing as Exhibit 13. At March 31,  1999,  there were 636  stockholders  of
record of the Company.

Item 6. Selected Financial Data

     The  section  captioned  "Five  Year  Financial  Summary"  on page 9 of the
Company's Annual Report is incorporated herein by reference and included in this
filing as Exhibit 13.

Item 7. Management's  Discussion and Analysis of Financial Condition and Results
of Operations

     The  section  captioned  "Management's  Discussion  and  Analysis"  of  the
Company's Annual Report is incorporated herein by reference and included in this
filing as Exhibit 13.


Item 7A. Quantitative and Qualitative Disclosures About Market Risk

     Disclosures  regarding market risk in the section  captioned  "Quantitative
and  Qualitative  Disclosures"  contained in the  "Management's  Discussion  and
Analysis" on pages 19 and 20 of the  Company's  Annual  Report are  incorporated
herein by reference and included in this filing as Exhibit 13.


Item 8. Financial Statements and Supplementary Data

     The  sections  captioned   "Quarterly  Financial  Data"  and  "Consolidated
Financial  Statements"  together  with  the  Notes  to  these  sections  and the
"Independent  Auditors' Report" of the Company's Annual Report, are incorporated
herein by reference and included in this filing as Exhibit 13.


Item  9.  Changes  in and  Disagreements  with  Accountants  on  Accounting  and
Financial Disclosure

     Not applicable.



                                       13
<PAGE>



                                    PART III

     Certain  information  required  by Part III is omitted  from this Form 10-K
because  the  Company  will file its  definitive  proxy  statement  (the  "Proxy
Statement")  pursuant  to  Regulation  14A  within 120 days after the end of its
fiscal year  covered by this  Report,  and certain  information  included in the
Proxy Statement is incorporated by reference into this Part III.


Item 10. Directors and Executive Officers of the Company

     The information with respect to Directors is incorporated by reference from
the section captioned "Election of Directors" in the Proxy Statement.

Executive Officers of the Company

     The Executive  Officers (or "Corporate  Officers") of the Company and their
ages at June 1, 1999, are as follows:

          Name                     Age                 Position
          ----                     ---                 --------

     Roger A. Barney               59        Senior Vice President, Corporate
                                             Services and Assistant Corporate
                                             Secretary

     Robert P. Bowe                51        Acting Chief Financial Officer

     David P. Owen                 58        Vice President, Strategy and
                                             Technology

     Raymond E. Peverell           51        Senior Vice President,
                                             International

     G. Michael Schumacher         60        Senior Vice President, Product
                                             Operations

     Charles S. Shiverick          55        Vice President, Information
                                             Services and Process Management

     Robert T. Warstler            56        Senior Vice President, North
                                             America

     Hubert A.J. Whyte             48        President and Chief Executive
                                             Officer

     Roger A. Barney  joined the Company in October  1987 as Vice  President  of
Human  Resources,  and in 1992  became Vice  President  of Human  Resources  and
Corporate  Services.  More recently,  in January,  Mr. Barney became Senior Vice
President of Corporate  Services and  Assistant  Corporate  Secretary.  Prior to
joining the Company,  Mr. Barney held numerous management  positions,  including
Director of Human  Resources for Verbatim  Corporation.  He also founded his own
management consulting business which he ran from 1983 to 1987.

     Robert P. Bowe joined the Company in 1993 as Corporate  Controller,  and in
1999 was named Acting Chief Financial Officer. Prior to joining the Company, Mr.
Bowe served in various senior  financial  positions in companies  located in the
Santa Clara Valley. Some of these companies include Software Publishing,  Cooper
Vision, California Microwave and Arthur Young and Company.

     David P. Owen joined the Company in April 1990 as  Director,  Strategy  and
Marketing.  In 1992 he became Vice President of Corporate Marketing and in 1994,
he became Vice President of Corporate  Development and Strategy.  More recently,
in 1997,  Mr. Owen became Vice  President,  Strategy  and  Technology.  Prior to
joining the Company, Mr. Owen was Director of Product Marketing at StrataCom. In
1983,   he  founded  the  fast  packet



                                       14
<PAGE>


development   organization  at  Packet  Technologies,   StrataCom's  predecessor
company.  Prior to that, Mr. Owen spent 15 years at Control Data in a variety of
product strategy, architecture and software development positions.

     Raymond E. Peverell  joined the Company in 1993 as Senior Vice President of
Worldwide  Sales, and in 1996 became Senior Vice President of Sales and Support.
More  recently,   in  January,   Mr.  Peverell  became  Senior  Vice  President,
International. From 1983 to 1992, Mr. Peverell was employed by Tandem Computers,
Inc.  holding  various  positions,  his last  being  Vice  President,  Strategic
Partnership Development. Prior to 1983, Mr. Peverell held several positions over
a 12 year span with Burroughs Corporation.

     G.  Michael  Schumacher  joined the Company in January  1995 as Senior Vice
President  of  Engineering  and  Operations,  and in  1996  became  Senior  Vice
President of Product  Operations.  Prior to joining the Company,  Mr. Schumacher
was Vice  President and General  Manager of the UNIX Systems  Division of Unisys
Corporation  from 1993 to 1994.  He also  served at Mentor  Graphics  as General
Manager of front-end CAE Tools from 1991 to 1993, and at Solbourne  Computers as
the Vice President of Engineering from 1989 through 1990.

     Charles S.  Shiverick  joined the  Company  in 1989.  Earlier  this year he
became Vice  President  of  Information  Services  and Process  Management.  Mr.
Shiverick has held various other senior  management  positions with the Company,
including Senior Director of Corporate Quality, Vice President of Operations and
Vice President of  Information  Services and  Reengineering.  Prior to 1989, Mr.
Shiverick  spent  22  years  at  IBM  Corporation  in a  variety  of  management
positions.

     Robert T.  Warstler  joined the Company in 1997 as Vice  President of North
America, and in 1999 became Senior Vice President,  North America.  From 1992 to
1997,  Mr.  Warstler was employed by Hitachi Data Systems as Vice  President and
General  Manager.  Prior to 1992, Mr.  Warstler held several sales and marketing
positions with U.S. West, Northern Telecom, AT&T, IBM and General Motors.

     Hubert A.J. Whyte joined the Company on June 1, 1999 as President and Chief
Executive  Officer.  From 1994 until he joined the Company,  Mr. Whyte served as
President and CEO of Advanced Computer  Communications ("ACC"). Prior to joining
ACC,  Mr.  Whyte  served as Vice  President  and  General  Manager of the Access
Products  unit of Newbridge  Networks  Corporation.  Earlier in his career,  Mr.
Whyte gained industry  experience  with British  Telecom,  Ericsson,  Shell Oil,
Business Intelligence Services, Mitel and Siemens.

     The  information  required by Item 405 of Regulation S-K is incorporated by
reference  from the section  captioned  "Compliance  with  Section  16(a) of the
Securities Exchange Act of 1934" in the Proxy Statement.

Item 11. Executive and Director Compensation

     Information regarding compensation of the Company's Directors and Executive
Officers is contained in the sections  captioned  "Election of Directors:  Board
Committees,  Meetings, and Remuneration" and "Executive Compensation and Related
Information" in the Proxy Statement,  which sections are incorporated  herein by
reference.

Item 12. Security Ownership of Certain Beneficial Owners and Management

     Information  regarding  security ownership of certain beneficial owners and
management  from  the  section   captioned  "Stock  Ownership  of  Five  Percent
Stockholders,  Directors,  and  Corporate  Officers"  in the Proxy  Statement is
incorporated herein by reference.



                                       15
<PAGE>


Item 13. Certain Relationships and Related Transactions

     Information  regarding   transactions  with  the  Company's  Directors  and
Executive  Officers from the sections  captioned  "Election of Directors:  Board
Committees,  Meetings,  and  Remuneration" in the Proxy Statement and "Executive
Compensation  and Related  Information"  in the Proxy  Statement is incorporated
herein by reference.



                                       16
<PAGE>



                                     PART IV


Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K

     (a)  (1)  Financial  Statements  - See "Index to Financial  Statements  and
               Financial  Statement Schedule" at page 22 of the Annual Report on
               Form 10-K.

          (2)  Financial Statement Schedule - See "Index to Financial Statements
               and Financial Statement Schedule" at page 22 of the Annual Report
               on Form 10-K.

          (3)  Exhibits - See "Exhibit Index" at page 18 of this Form 10-K.

     (b)  The Company filed no reports on Form 8-K during the fourth  quarter of
          the fiscal year ended March 31, 1999.



                                       17
<PAGE>


                                  EXHIBIT INDEX


Exhibit
No.                           Description                                   Note
-------                       -----------                                   ----

3.1       Registrant's  Restated  Certificate  of  Incorporation,   as
          amended.                                                            1

3.2       Registrant's Bylaws, as amended.                                    1

4.1       Indenture  dated as of May 15, 1989 between  Registrant  and        2
          Morgan Guaranty Trust Company of New York.

4.2       Rights  Agreement  dated  as  of  August  15,  1989  between        3
          Registrant  and  The  First  National  Bank  of  Boston,  as
          amended.

4.3       Certificate of Designations of Series A Junior Participating        4
          Preferred  Stock  filed  with  the  Secretary  of  State  of
          Delaware on August 24, 1989 (Exhibit 4.1 in the Registrant's
          Form S-8 Registration Statement).

10.1      Headquarters  Facilities  Lease  Agreements  between Sobrato        5
          Interests III and Network Equipment Technologies, Inc. dated
          April 9, 1997.

10.2      Officer   Employment  and  Continuation   Agreement  between
          Registrant and Joseph J. Francesconi.*

10.3      Officer   Employment  and  Continuation   Agreement  between
          Registrant and G. Michael Schumacher.*

10.4      Officer   Employment  and  Continuation   Agreement  between
          Registrant and Raymond E. Peverell.*

10.5      Officer   Employment  and  Continuation   Agreement  between
          Registrant and Robert T. Warstler.*

10.6      Officer   Employment  and  Continuation   Agreement  between
          Registrant and Roger A. Barney.*

10.7      Officer   Employment  and  Continuation   Agreement  between
          Registrant and Samuel H. Ezekiel.*

10.8      Officer   Employment  and  Continuation   Agreement  between
          Registrant and Hubert A. Whyte.*

10.9      General  Release of All  Claims,  Covenant  Not to Sue,  and
          Confidentiality  Agreement between  Registrant and Joseph J.
          Francesconi.*

10.10     General  Release of All  Claims,  Covenant  Not to Sue,  and
          Confidentiality  Agreement between  Registrant and Samuel H.
          Ezekiel.*

10.11     Employment Agreement between Registrant and Walter J. Gill.*        6



                                       18
<PAGE>


10.12     Form of Officer  Employment  and  Continuation  Agreement as        6
          signed by all other Executive Officers and Registrant.*

10.13     Form of Director Indemnification  Agreement as signed by all        6
          Directors of the Company.

10.14     Form of Officer  Indemnification  Agreement as signed by all        6
          Executive Officers of the Company.*

10.15     Corporate  Director  Compensation  Deferral Election Program        6
          and 1996 Deferral Form.

10.16     Corporate Officer Compensation Deferral Election Program and        6
          1996 Deferral Form.*

10.17     Corporate Officers Long-Term Variable Compensation Program.*        6

13        Portions of 1999 Annual Report to Stockholders.

21.1      Subsidiaries of Registrant as of June 29, 1999.

23.1      Independent Auditors' Consent.

27        Financial Data Schedule.

99.1      Registrant's 1983 Stock Option Plan, as amended.*                   7

99.2      Registrant's 1988 Restricted Stock Award Plan.*                     8

99.3      Rules of Registrant's 1988 U.K. Stock Option Scheme.*               9

99.4      Registrant's 1989 U.K. Stock Option Plan.*                          8

99.5      Registrant's 1990 Employee Stock Purchase Plan, as amended.*        10

99.6      Registrant's  1993 Stock  Option Plan,  as amended  (Exhibit        11
          99.3).*

99.7      Registrant's 1997 Stock Option Program,  as amended (Exhibit        11
          99.2).*

99.8      Registrant's  1998  Employee  Stock  Purchase  Plan (Exhibit        11
          99.1).


--------
*    A  management  contract  or  compensatory  plan  required to be filed as an
     Exhibit to Form 10-K.



                                       19
<PAGE>


                                      NOTES

(1)  Incorporated  by reference from the  corresponding  Exhibit (or the Exhibit
     identified  in  parentheses)   previously   filed  as  an  Exhibit  in  the
     Registrant's Form 10-Q (Commission File No. 0-15323) for the fiscal quarter
     ended December 24, 1995,  originally filed with the Securities and Exchange
     Commission on February 7, 1996.

(2)  Incorporated  by reference from the  corresponding  Exhibit (or the Exhibit
     identified  in  parentheses)   previously   filed  as  an  Exhibit  in  the
     Registrant's  Form  8  Amendment  No.  1 to  Annual  Report  on  Form  10-K
     (Commission  File No.  0-15323)  for the fiscal year ended March 31,  1989,
     filed with the Securities and Exchange Commission on July 25, 1989.

(3)  Incorporated  by reference from the  corresponding  Exhibit (or the Exhibit
     identified  in  parentheses)   previously   filed  as  an  Exhibit  in  the
     Registrant's  Annual Report on Form 10-K  (Commission File No. 0-15323) for
     the fiscal  year  ended  March 31,  1990,  filed  with the  Securities  and
     Exchange Commission on June 29, 1990.

(4)  Incorporated  by reference from the  corresponding  Exhibit (or the Exhibit
     identified  in  parentheses)   previously   filed  as  an  Exhibit  in  the
     Registrant's   Registration  Statement  on  Form  S-8  (Nos.  33-33013  and
     33-33063), filed with the Securities and Exchange Commission on January 19,
     1990.

(5)  Incorporated  by reference from the  corresponding  Exhibit (or the Exhibit
     identified  in  parentheses)   previously   filed  as  an  Exhibit  in  the
     Registrant's  Registration  Statement  on Form  10-K  (Commission  File No.
     0-15323)  for the fiscal year ended March 31, 1997,  originally  filed with
     the Securities and Exchange Commission on June 23, 1997.

(6)  Incorporated  by reference from the  corresponding  Exhibit (or the Exhibit
     identified  in  parentheses)   previously   filed  as  an  Exhibit  in  the
     Registrant's  Annual Report on Form 10-K  (Commission File No. 0-15323) for
     the fiscal  year  ended  March 31,  1996,  filed  with the  Securities  and
     Exchange Commission on June 21, 1996.

(7)  Incorporated  by reference from the  corresponding  Exhibit (or the Exhibit
     identified  in  parentheses)   previously   filed  as  an  Exhibit  in  the
     Registrant's  Annual Report on Form 10-K  (Commission File No. 0-15323) for
     the fiscal  year  ended  March 31,  1993,  filed  with the  Securities  and
     Exchange Commission on June 25, 1993.

(8)  Incorporated  by reference from the  corresponding  Exhibit (or the Exhibit
     identified  in  parentheses)   previously   filed  as  an  Exhibit  in  the
     Registrant's  Annual Report on Form 10-K  (Commission File No. 0-15323) for
     the fiscal  year  ended  March 31,  1991,  filed  with the  Securities  and
     Exchange Commission on June 28, 1991.

(9)  Incorporated  by reference from the  corresponding  Exhibit (or the Exhibit
     identified  in  parentheses)   previously   filed  as  an  Exhibit  in  the
     Registrant's  Annual Report on Form 10-K  (Commission File No. 0-15323) for
     the fiscal year ended March 31, 1989,  originally filed with the Securities
     and Exchange Commission on May 1, 1989.

(10) Incorporated  by reference from the  corresponding  Exhibit (or the Exhibit
     identified  in  parentheses)   previously   filed  as  an  Exhibit  in  the
     Registrant's Registration Statement on Form S-8 (No. 33-68860),  filed with
     the Securities and Exchange Commission on September 15, 1993.

(11) Incorporated  by reference from the  corresponding  Exhibit (or the Exhibit
     identified  in  parentheses)   previously   filed  as  an  Exhibit  in  the
     Registrant's Registration Statement on Form S-8 (No. 333-49837), filed with
     the Securities and Exchange Commission on April 10, 1998.



                                       20
<PAGE>




                                   SIGNATURES

     Pursuant to the  requirements  of Section 15(d) of the Securities  Exchange
Act of 1934,  the  Registrant  has duly  caused  this report to be signed on its
behalf by the undersigned, thereunto duly authorized.


                                   NETWORK EQUIPMENT TECHNOLOGIES, INC.
                                               (Registrant)


Date: June 29, 1999                By: /s/ Hubert A.J. Whyte
                                       ----------------------------------------
                                       Hubert A.J. Whyte
                                       President, Chief Executive
                                       Officer and Director

     Pursuant to the  requirements of the Securities  Exchange Act of 1934, this
report  has  been  signed  below  by the  following  persons  on  behalf  of the
Registrant and in the capacities and on the dates indicated.

      Signature                          Title                          Date
      ---------                          -----                          ----

/s/ Robert P. Bowe            Acting Chief Financial Officer       June 29, 1999
---------------------         (Principal Financial Officer and
Robert P. Bowe                Principal Accounting Officer)



/s/ Dixon R. Doll             Director                             June 29, 1999
---------------------
Dixon R. Doll


/s/ James K. Dutton           Director                             June 29, 1999
---------------------
James K. Dutton


/s/ Walter J. Gill            Director                             June 29, 1999
---------------------
Walter J. Gill


/s/ George M. Scalise         Director                             June 29, 1999
---------------------
George M. Scalise


/s/ Hubert A.J. Whyte         President, Chief Executive           June 29, 1999
---------------------         Officer and Director
Hubert A.J. Whyte             (Principal Executive Officer)



/s/ Hans A. Wolf              Chairman of the Board                June 29, 1999
---------------------
Hans A. Wolf


                                       21
<PAGE>


                          INDEX TO FINANCIAL STATEMENTS
                        AND FINANCIAL STATEMENT SCHEDULE


FINANCIAL STATEMENTS

<TABLE>
<CAPTION>
                                                               Page in 1999 Annual Report*
                                                               ---------------------------
<S>                                                                        <C>
Consolidated Balance Sheets as of March 31, 1999 and 1998                  21
Consolidated Statements of Operations for the years ended
     March 31, 1999, 1998 and 1997                                         22
Consolidated Statements of Comprehensive Income (Loss) for
     the years ended March 31, 1999, 1998 and 1997                         22
Consolidated Statements of Cash Flows for the years ended
     March 31, 1999, 1998 and 1997                                         23
Consolidated Statements of Stockholders' Equity for the years
     ended March 31, 1999, 1998 and 1997                                   24
Notes to Consolidated Financial Statements                                 25
Independent Auditors' Report                                               36
</TABLE>

----------
*    Incorporated herein by reference and included in this filing as Exhibit 13.



FINANCIAL STATEMENT SCHEDULE

<TABLE>
<CAPTION>
                                                                 Page in 1999 Form 10-K
                                                                 ----------------------
 <S>                                                                       <C>
Independent Auditors' Report                                               23
Schedule II - Valuation and Qualifying Accounts                            24
</TABLE>


     All other  schedules  are omitted  because they are not  required,  are not
applicable,  or  the  information  is  included  in the  Consolidated  Financial
Statements or Notes thereto.

     Separate  financial  statements of the Registrant  are omitted  because the
Registrant is primarily an operating  company and all  subsidiaries  included in
the Consolidated  Financial  Statements  filed, in the aggregate,  do not have a
minority equity interest and/or long-term indebtedness to any person outside the
consolidated  group in an amount which together exceeds 5% of total consolidated
assets at March 31, 1999.



                                       22
<PAGE>


                          INDEPENDENT AUDITORS' REPORT


To the Board of Directors and Stockholders of
Network Equipment Technologies, Inc.:

     We have audited the consolidated  financial statements of Network Equipment
Technologies,  Inc. and subsidiaries as of March 31, 1999 and 1998, and for each
of the three  years in the period  ended  March 31,  1999,  and have  issued our
report  thereon  dated April 19, 1999 (May 24, 1999 as to Note  Fourteen),  such
financial  statements  and report are  included  in your 1999  Annual  Report to
Stockholders and are incorporated herein by reference.  Our audits also included
the financial statement schedule of Network Equipment Technologies,  Inc. listed
in the  accompanying  index to  financial  statements  and  financial  statement
schedule.  The  financial  statement  schedule  is  the  responsibility  of  the
Company's  management.  Our responsibility is to express an opinion based on our
audits. In our opinion,  such financial statement  schedule,  when considered in
relation  to the  basic  consolidated  financial  statements  taken  as a whole,
presents fairly in all material respects the information set forth therein.



DELOITTE & TOUCHE LLP

San Jose, California
April 19, 1999


                                       23
<PAGE>


                      NETWORK EQUIPMENT TECHNOLOGIES, INC.

                                   SCHEDULE II

                        Valuation and Qualifying Accounts
                                 (in thousands)


<TABLE>
<CAPTION>
                           Balance at       Charged to         Charged                          Balance
                            beginning       costs and          to other        Deduction/        at end
Description                 of period        expenses          accounts         write off       of period
-----------                ----------       ---------          --------        ----------       ---------
<S>                           <C>               <C>            <C>              <C>              <C>
For the year ended
March 31, 1997:

  Accounts receivable
           allowances         $4,533            --             $1,237 (1)       $(1,860)         $3,910



For the year ended
March 31, 1998:

  Accounts receivable
           allowances         $3,910            --             $2,082 (1)       $(2,066)         $3,926



For the year ended
March 31, 1999:

  Accounts receivable
           allowances         $3,926            --             $4,679 (1)       $(5,230)         $3,375
</TABLE>


----------
(1)  Amount represents  additions to accounts  receivable  allowances which were
     charged primarily to revenue.


                                       24