EXHIBIT 13

                            Data General Corporation
                               1997 Annual Report
<PAGE>
              Servers       Storage       Services       Growth

<PAGE>
                                   www.dg.com
                                www.clariion.com
                                 www.thiin.com
<PAGE>
Data General was built on technology leadership and innovation. Our objective is
to be a  worldwide  leader in open  server  and  storage  products.  We  deliver
computing  solutions  through  multiple   distribution  channels  and  strategic
alliances.  We provide superior customer service and support. Since our founding
in 1968,  we have  installed  more than  500,000  servers  and  storage  systems
worldwide.
<PAGE>

                             Positioned for Growth
                             ---------------------

Highlights of the past year:

     o Achieved  revenues  of $1.53  billion,  highest  annual  revenues in our
  29-year history

     o Achieved record quarterly revenues in each of the last three quarters of
  fiscal 1997

     o Extended  profit trend to nine  consecutive  quarters

     o Completed the sale of $212,750,000 of 6 percent  convertible  subordinate
  notes

     o Completed the redemption  of  $125,000,000 of  7 3/4  percent convertible
 subordinated  notes

     o Introduced AViiON(R) NT Cluster-in-a-Box(TM)--the first Microsoft Windows
 NT  Server  clustering   solution  in  a  pre-installed,   pre-tested,   single
 rack-mounted system

     o Introduced  high-end  AViiON AV 20000  servers based on the ccNUMA (cache
 coherent Non-Uniform Memory Access) architecture

     o Achieved  record-breaking  benchmarks with AViiON servers
  
     o Introduced  the  CLARiiON (R)  TeleStor(TM)  disk array,  which offers a
complete storage solution for the telecommunications industry

     o Announced a revolutionary  family of CLARiiON fibre storage products

     o Introduced  the  THiiN(TM)  Line  SiteStak(TM)  web host,  the first in a
family of  single-purpose,  specialized  Internet  appliances  designed to bring
economy, simplicity, and utility to web publishing and administration



     Open  Systems  Revenue  Trend  ($M):

     Open systems  revenues  from AViiON  servers,  CLARiiON  storage,  PCs, and
Services have grown at a compound  growth rate of 33 percent,  and now represent
93 percent of total revenues.

                                       
                                       1
<PAGE>    

To Our Stockholders, Customers, And Employees:
Fiscal  1997 was a good year for Data  General by many  measures.  It marked the
company's  second  consecutive  year of  increased  profits and revenue  growth.
Record revenue levels were reached.  Product  revenues  increased 24 percent and
total  revenues  increased  16 percent  over fiscal  1996.  We also  established
market share  leadership in segments of the  fast-growing  Microsoft  Windows NT
Server  market,  and  continued  our  leadership  in the OEM segment of the disk
storage market.
                                       2
<PAGE>

Data General has followed a focused  strategy of providing a scalable  family of
servers  and  storage  products  which  meets  our  customers'  needs  for  high
availability,  data integrity, and high performance,  while adding value through
superior customer services.  To ensure our ability to deliver high-end solutions
which meet emerging  standards,  we built and  strengthened  relationships  with
industry  leaders,  including Intel,  Microsoft,  and Oracle.  Implementing this
strategy  over several  years has enabled Data General to grow  revenues,  build
profitability, and establish a strong presence in the server and storage markets
According  to the most  recent  International  Data  Corporation  reports,  Data
General has gained  leadership in key market  sectors,  including the number one
position for 1996 in the $50,000 to $100,000 segment of the Microsoft Windows NT
Server market,  and the number two position for systems priced between  $100,000
and $250,000.  CLARiiON  disk arrays  enabled Data General to achieve the number
one position in the OEM storage market for 1996.

We have  targeted the  enterprise  level of the  Microsoft NT Server  market and
provide clear added value for customers  with  award-winning  AViiON NT Cluster-
in-a-Box,  the industry's first Microsoft Windows NT Server clustering  solution
that comes completely  pre-configured  and pre-tested and with the software pre-
installed,  allowing  for quick  deployment;  NTerprise  Manager(TM),  the first
product to provide  integrated server management of hardware,  systems software,
and  applications  for the NT  environment; and NTAlert(SM), the industry's most
comprehensive  NT-based  remote  service for early  identification  of potential
problems.  According  to  International  Data  Corporation,  the high end of the
Microsoft  Windows  NT Server  market  grew at over 100  percent  in 1996 and is
projected  to continue  growing at compound  annual  growth  rates  exceeding 50
percent for several years.

The high-end  UNIX market which we have  targeted grew at 26 percent in 1996 and
is projected to be growing at between 10 and 15 percent in 1997.  In a September
1997 Merrill Lynch Corporate Buyers' Survey, 73 percent of customers indicated a
continuing or increasing  commitment to UNIX. Our ccNUMA-bas ed AV 20000 servers
provide  high  performance  and  scalability  for UNIX  applications,  including
on-line transaction processing,  enterprise resource planning, data warehousing,
server consolidation, and mainframe migration. To support the growing market for
AV 20000 servers, we are continuing to invest in the DG/UX operating system, our
industry-leading UNIX implementation,  adding larger file support and additional
clustering and performance  features to provide increasing levels of scalability
and high availability.

Initial demand for AV 20000 servers has exceeded our plans and expectations. Two
major  establishments in the United Kingdom,  J Sainsbury PLC and Booker Belmont
Wholesale,  are among more than 50  organizations  that have  installed AV 20000
servers since the products were introduced in June.
                                       3
<PAGE>


A Growing Customer Base
-----------------------
Our worldwide  AViiON customer base now includes  several of the world's largest
petrochemical  firms;  the U.S.  State  Department,  which is installing  AViiON
servers in consular offices around the world;  Bloomberg Financial Markets,  the
fastest  growing  supplier of  financial  data,  which uses our  largest  AViiON
servers and over 30 terabytes of CLARiiON  storage;  a large  telecommunications
company  in the United  States,  which is basing its new  Internet  services  on
AViiON servers,  CLARiiON storage,  and Data General network control and network
management;  and nearly 30 percent of the  hospitals in the United  States which
use AViiON servers for healthcare information processing.

The worldwide  CLARiiON  installed base continues to grow, with more than 60,000
systems and two  petabytes of protected  storage  shipped.  Each petabyte is the
equivalent of 400 billion typed pages.  Among CLARiiON's  end-user customers are
EDS, Motorola,  Sallie Mae, Vastar Resources,  and the Kansas City Chiefs of the
National  Football League.  CLARiiON SCSI and fibre channel storage is supported
on leading open systems platforms  including Bull,  Convex,  Cray, Data General,
Digital Equipment,  Hewlett Packard , IBM, Motorola, NCR, SCO, Sequent,  Silicon
Graphics,  and Sun  Microsystems,  and  Intel PC  servers  running  Windows  NT,
IntranetWare,  and OS/2. CLARiiON storage is sold through major computer systems
manufacturers,  value-added storage resellers, and system integrators around the
world.


Data General Fellow Program
---------------------------
Our company's current success in AViiON servers and CLARiiON storage is directly
related to our  continuing  investments in new  technology.  The AViiON line has
evolved  through several  generations  since 1989, and CLARiiON has grown from a
startup venture in 1991 to a half-billion dollar business today .

Chart: Total Revenue ($M)
Q4 FY95 ........................ 313
Q1 FY96 ........................ 328
Q2 FY96 ........................ 335
Q3 FY96 ........................ 323
Q4 FY96 ........................ 336
Q1 FY97 ........................ 349
Q2 FY97 ........................ 389
Q3 FY97 ........................ 391
Q4 FY97 ........................ 404

                                       4
<PAGE>

Data General has a strong track record of innovation and providing opportunities
for the  development  and  growth  of new  business  ventures.  Continuing  this
entrepreneurial  process is essential  for us. The Data General  Fellow  Program
will provide a process for formalizing our strategic  technology direction while
recognizing  our senior  technologists.  Named as the first  three Data  General
Fellows are: Roy Clark, NUMALiiNE(TM) Systems Architect; Eric Hamilton, Software
Systems  Architect;  and Robert  Solomon,  vice  president of CLARiiON  Advanced
Development.  J.  Thomas  West,  who  will  assume  a new  role as a  technology
consultant  for Data  General in  January  1998,  will  assist in  managing  the
program. Mr. West has led the development of generations of new products and has
nurtured  generations of technology leaders over his 25 years with Data General.
We are pleased that he is continuing an exclusive relationship with us.


Financial  Strength
-------------------
I believe  Data  General has the people,  products,  services,  and  strategy to
succeed.  We are also well financed to pursue our growth  strategy.  In the past
year,  our total  capitalization  has  increased by over 50 percent and cash and
marketable  securities,  which  totaled  $368 million at the end of fiscal 1997,
increased  by  80  percent.  Our  inventory  turns  and  receivable  days  sales
outstanding rank among the best in the information technology industry.

The  success  we  achieved  during  fiscal  1997 is solid  affirmation  that our
strategy and products are on target for the needs of the enterprise marketplace.
Going forward,  with our growing AViiON server and CLARiiON storage  businesses,
and the  potential we see for THiiN Line Internet  Appliances,  we are confident
that we are on a course for continued revenue growth and profitability.


Respectfully submitted,


Ronald L. Skates
President and Chief Executive Officer
December 17, 1997



Chart: Earnings Per Share ($)
Q4 FY95 ...................... 0.04
Q1 FY96 ...................... 0.12
Q2 FY96 ...................... 0.15
Q3 FY96 ...................... 0.17
Q4 FY96 ...................... 0.24
Q1 FY97 ...................... 0.25
Q2 FY97 ...................... 0.32
Q3 FY97 ...................... 0.34
Q4 FY97 ...................... 0.35
                                       5
<PAGE>


Technology
----------
Technology  excellence has been the sustaining  factor in Data General's  growth
since the company's founding in 1968.  Technology continues to be at the core of
our strategy to deliver  industry-leading open servers and storage products, and
provide our customers with complete business solutions and premier services.
                                       6
<PAGE>

Over the past three  years,  Data General has taken a number of steps to provide
the company with new growth opportunities. These include:
     o Adopting the Intel  architecture,  the world's leading computer platform,
 for our AViiON server  family to ensure that our  customers  have access to the
 broadest range of applications

     o Focusing on high-availability and clustering  technologies which  enable
 AViiON  servers  and  CLARiiON  storage  to run  mission-critical applications

     o  Developing  a new  line of  high-performance  servers  based  on  ccNUMA
 architecture  which opens new markets,  such as data  warehousing and mainframe
 migrations, to Data General

     o Expanding  the  market for our CLARiiON  storage products by establishing
 strong OEM and reseller  alliances

     o Pioneering  fibre channel  technology  for CLARiiON  storage,  and
 delivering the first full fibre channel disk arrays

     o Exploring  new  technology  for the Internet with THiiN Line, a family of
 appliances  designed  specifically  for the way  computing is done on the World
 Wide Web

     o Continuing  our strong focus on UNIX while  dedicating  new  resources to
 Microsoft Windows NT Server, the fastest growing operating system

     o Supporting our UNIX and NT server  strategies with premier  services,
 including networking,  integration,  migration,  and education

     o Helping our customers fully utilize their computing assets by becoming an
 Authorized Microsoft Support Center, Authorized Microsoft Technical
 Education Center,  and SCO Authorized Support  Center

     o Providing complete business solutions by strengthening relationships with
 Microsoft,  Oracle,  SAP,  Baan,  PeopleSoft,  and other  leading  suppliers of
 databases and applications

     o  Extending  our   manufacturing   expertise  to  VALiiANT(R)   electronic
 manufacturing and design services,  a new business which takes advantage of our
 ISO 9000-certified manufacturing resources

     o Using the World Wide Web to expand Data General's market presence through
our  www.dg.com,  www.clariion.com,  and  www.thiin.com  web sites which include
e-commerce product ordering features
                                       7
<PAGE>

AViiON Servers
--------------
Data General's AViiON family uses the power of the Intel architecture to provide
customers with a broad and scalable family of  high-performance  systems ranging
from  departmental  servers  to  enterprise  systems.   AViiON  servers  feature
comprehensive security, reliability, high availability, and serviceability.  Our
top-of-the-line  AV  20000  servers  are  based  on  ccNUMA  technology.  ccNUMA
technology  redefines  price/performance  levels and extends the capabilities of
symmetric  multiprocessing (SMP) systems, all without requiring modifications to
existing SMP applications.

AViiON servers provide an excellent platform for such strategic  applications as
data  warehousing  and secure  Internet  commerce.  AViiON  supported  operating
systems include  Microsoft  Windows NT Server;  Data General's own DG/UX, one of
the most  technically  advanced UNIX  operating  systems in the market;  the SCO
UnixWare System; SCO Open Server; Novell IntranetWare; and Citrix
WinFrame/Enterprise Server.

Data General's clustering  solutions for NT and UNIX provide  reliability,  high
availability and data protection for critical applications.  NT Cluster-in-a-Box
combines two powerful AViiON NT servers with NTerprise Manager server management
software,  NTAlert automatic diagnostics, a CLARiiON disk array, and a choice of
clustering  software--either  FirstWatch for NT or Microsoft Cluster Server. Our
UNIX clustering solution--DG/UX Clusters--includes two or more AViiON servers, a
CLARiiON RAID array, and a PC with cluster-management software.

For Internet and intranet  applications,  we offer comprehensive  services which
combine our AViiON  server and CLARiiON  storage  platforms  with  products from
leading providers of security software, including BDM International, CyberGuard,
Microsoft, and Raptor Systems.

Our award-winning family of AV Image(R) products,  available for AViiON systems,
provides  imaging   solutions   targeted  at  efficient,   affordable   document
management.

With our AViiON  servers,  we also offer the  DG/ViiSION(R)  family of  personal
computers,  which includes desktop,  minitower,  and notebook products featuring
Intel processors.

Data General works  closely with leading  software and services  suppliers  that
understand  specific customer  problems and provide  efficient,  effective,  and
affordable  computing solutions.  Their complementary  products and services add
significant  value to Data  General's  products,  and allow us to bring complete
business solutions to customers in diverse markets.
                                       8
<PAGE>

Data General  teams with a multitude of solution  suppliers to offer a portfolio
of tens of thousands of  applications  for a variety of industries  and markets,
including   healthcare,   manufacturing,   distribution,   financial   services,
telecommunications, and government.


                                   www.dg.com
<PAGE>

THiiN Line Internet Appliances
------------------------------
Over the last few years,  the Internet has catapulted into the  mainstream,  and
defined a new form of computing driven by the need for information  access. Data
General's  THiiN  Line  business  unit  is  exploring  new  technology  designed
explicitly  for  the Internet,  and is  capitalizing  on our existing server and
storage expertise to develop a new line of computing appliances for the Internet
model.

The potential of this emerging market is not yet clear.  Our ultimate success in
this area depends on how the Internet  appliance  market evolves.  As we explore
this  opportunity,  we are  designing  THiiN Line  servers  to  perform  two key
functions:

Web Server  Appliances--These are single-function  devices optimized to dispatch
web pages. Web servers reside at content-host sites; they are fast, inexpensive,
simple to manage, and stackable,  for easy expansion.  Our first web server, the
SiteStak  TW-500,  began shipping to customers in October 1997 . It is available
through Data General's worldwide sales channel and also through THiiN Line's web
site at www.thiin.com..  The SiteStak TW-500 is a zero-administration web server
that is simple to install,  configure,  operate, and grow, and fits in less than
two inches of rack space.

Thin  Servers--These  devices are being  designed  to  function as  connectivity
gateways and file servers for groups of clients--laptops, PCs , thin clients, or
other  Internet  appliances--for  use in homes,  businesses,  and schools.  Thin
servers are expected to be available in 1998.


                                 www.thiin.com
 
                                      9
<PAGE>

CLARiiON Storage Systems
------------------------

Our market-leading  CLARiiON disk arrays are innovative,  fault-tolerant storage
subsystems  based  on  RAID  technology.  Powerful,  competitively  priced,  and
compact,  the CLARiiON family offers a wide range of storage systems,  from disk
arrays for servers on local area  networks to  high-capacity,  high-availability
arrays for enterprise  servers with applications  needing multiple  terabytes of
storage.

The  CLARiiON  family  continues  to  grow by  taking  advantage  of the  latest
developments  in  information  systems  technology.  The  newest  members of the
CLARiiON  storage  family offer fibre  channel  technology--the  next-generation
serial interface.

From   mainframes  to  PC  servers,   CLARiiON  disk  arrays  provide  the  high
availability  and  performance   customers  require  for  their  most  demanding
applications.  Redundant  subsystems--drives,  storage control processors, power
supplies,  and  fans--eliminate  single  points  of  failure.  In the event of a
problem, on-line maintenance allows replacement or repair of the component while
under power and fully operational.

CLARiiON disk arrays allow concurrent multi-RAID configurations to maximize each
application's performance. In addition, CLARiiON disk arrays offer an innovative
mirrored cache feature that actually improves data integrity while  dramatically
improving performance.

The  CLARiiON  TeleStor  disk array,  a  specialized  storage  solution  for the
telecommunications industry, provides users with a complete storage solution for
paging,   multimedia,   voice  messaging   systems,   billing,   and  operations
administration maintenance and provisioning systems.

Multidimensional  Storage  Architecture (TM) (MSA)  is  the  CLARiiON  strategic
framework for deploying  open systems  storage  throughout  an  enterprise.  MSA
provides virtually unlimited  flexibility to configure centrally managed storage
pools   via    storage    networks    that   scale    independently    in   five
dimensions--capacity,  transaction performance,  data throughput,  connectivity,
and availability of business information.

CLARiiON   supplies   advanced  storage   solutions  to  major  computer  system
manufacturers,  value-added storage resellers, and system integrators around the
world.


                                www.clariion.com
  
                                     10
<PAGE>
Opportunity
------------
AViiON NT Cluster-in-a-Box,  AV 20000 NUMA systems,  CLARiiON fibre channel, and
THiiN Line SiteStak, all represent  opportunities to scale Data General's assets
to generate new business and profitability.  The incremental marketing effort we
are making in the OEM channel has the potential to deliver significant  returns.
Our VALiiANT  contract  manufacturing  operation  makes  optimal use of existing
manufacturing  facilities  and  provides  opportunities  to realize  incremental
revenues and profits.

                                       11
<PAGE>
Services
---------
Data General's  worldwide Customer Service network is ready to provide our users
with service and support  whenever and wherever they need it. With more than 200
U.S. field offices, 130 international service locations,  three primary Customer
Support  Centers,   and  numerous  secondary   customer  support   organizations
worldwide, our service is always available--seven days a week, 24 hours a day.

Data  General was the first major  computer  vendor in the  industry to have its
entire U.S.  Service and Support  Organization  registered with the Underwriters
Laboratories (UL) and certified to the ISO 9001 Standard.

Whether a customer  needs full on-site  service from a  knowledgeable  engineer,
on-line  telephone  support from our Customer  Support  Centers,  or  customized
support  services,  we have a ready-to-go  solution.  As a Microsoft  Authorized
Support Center (ASC), the Data General Customer Support Center provides software
support  services  for  Microsoft  Windows NT for  Workstations  and  Windows NT
Advanced Server, the full set of Microsoft desktop and BackOffice  products,  as
well  as  hundreds  of  other  software  products.  Data  General  is also a SCO
Authorized  Support  Center,  and has been certified to support SCO's  operating
system and client-integration products and customers in North America.

Our Business Practices  services are focused on NT Solutions,  Database and Data
Warehousing,  Migrations,  and Imaging,  essential areas where customers benefit
from our in-depth expertise and comprehensive service offerings.  To ensure that
mission-critical  and general-purpose  business  applications  function smoothly
across  the  enterprise,  we  provide  packaged  Professional  Services  to help
customers  implement,  integrate,  and manage their system solutions quickly and
easily.

Educational   Services   provides   lecture/lab   courses,   on-site   training,
computer-based  training,  and  video-based  training for many  mission-critical
components,  including the operating system,  network,  database,  off-the-shelf
applications,  and custom  programs.  In  addition,  Educational  Services  is a
Microsoft  Authorized  Technical  Education  Center  and  offers  the  Microsoft
Certified  Professional  Program,  which  certifies  a  computer  professional's
ability to design,  develop,  implement,  and support  solutions  with Microsoft
products.

We also offer our  manufacturing  expertise  to  customers  through our VALiiANT
electronic  manufacturing and design services  business.  With facilities in the
U.S. and Asia, VALiiANT is a full-service supplier, offering design services for
printed wiring board layout and metal fabrication,  quick-turn  prototype runs ,
volume manufacturing, and repair/engineering change services.

For customers with special  equipment or application  requirements,  our Special
Systems team  integrates  third-party  products  into Data  General  systems and
adapts  standard Data General  products to exact  customer  specifications.  One
example is our handheld  computer family,  which is designed for data collection
environments  where long battery life,  rugged design,  and ease of use are at a
premium.   Such  markets  include   warehousing  and  distribution,   utilities,
healthcare, route sales and management, and retail.


                                   www.dg.com
                                       12
<PAGE>

Product Revenues (Millions of dollars)
1993 ......................... 672
1994 ......................... 722
1995 ......................... 757
1996 ......................... 924
1997 ......................... 1143

Revenue per Employee (Thousands of dollars)
1993 ........................   166
1994 ........................   193
1995 ........................   232
1996 ........................   272
1997 ........................   301

Selling, General, & Administrative expenses (Percentage of Total Revenues)
1993 ........................   32%
1994 ........................   30%
1995 ........................   29%
1996 ........................   23%
1997 ........................   22%


FINANCIAL REVIEW

FIVE-YEAR SUMMARY OF SELECTED FINANCIAL DATA ............................... 14
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS ................................................................. 15
CONSOLIDATED STATEMENTS OF OPERATIONS ...................................... 20
CONSOLIDATED BALANCE SHEETS ................................................ 21
CONSOLIDATED STATEMENTS OF CASH FLOWS ...................................... 22
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY ............................ 23
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ................................. 24
REPORT OF INDEPENDENT ACCOUNTANTS .......................................... 34
SUPPLEMENTAL FINANCIAL INFORMATION ......................................... 34
FACILITIES ................................................................. 35
OFFICERS AND DIRECTORS ..................................................... 36
CORPORATE INFORMATION ...................................................... 37
                                       13
<PAGE>

<TABLE>
DATA GENERAL CORPORATION
FIVE-YEAR SUMMARY OF SELECTED FINANCIAL DATA
<CAPTION>

                                                                                   YEAR ENDED
                                        -------------------------------------------------------------------------------------------
                                              SEPT. 27,          SEPT. 28,          SEPT. 30,          SEPT. 24,         SEPT. 25,
IN THOUSANDS, EXCEPT PER SHARE AMOUNTS          1997               1996               1995               1994              1993
-----------------------------------------------------------------------------------------------------------------------------------
<S>                                         <C>                 <C>               <C>                 <C>              <C>
Total revenues........................      $ 1,533,169         $1,322,250        $ 1,159,316         $1,120,505       $ 1,077,869
                                            -----------         ----------        -----------         ----------       -----------  
Total cost of revenues................        1,021,569            877,692            772,047            733,114           654,718
Research and development..............          109,984             98,022             85,886             90,826           100,172
Selling, general, and administrative..          338,443            309,259            334,337            341,343           346,740
Restructuring charge..................                -                  -             43,000             35,000            25,000
                                            -----------         ----------        -----------         ----------      ------------

  Total costs and expenses............        1,469,996          1,284,973          1,235,270          1,200,283         1,126,630
                                            -----------         ----------        -----------         ----------      ------------


Income (loss) from operations.........           63,173             37,277            (75,954)           (79,778)          (48,761)
Interest expense, net.................            4,873              5,632              4,116              8,168             6,734
Other income, net.....................                -                  -             41,972              2,353               416
                                            -----------         ----------        -----------         ----------       -----------

Income (loss) before income taxes.....           58,300             31,645            (38,098)           (85,593)          (55,079)
Income tax provision..................            2,400              3,500              8,605              2,100             5,400
                                            -----------         ----------        -----------         ----------       ------------

Net income (loss).....................      $    55,900         $   28,145        $   (46,703)       $  (87,693)       $   (60,479)
                                            ===========         ==========        ===========        ==========        ===========


Primary net income (loss) per share...      $      1.26         $     0.68        $     (1.23)       $    (2.45)    $        (1.73)

<CAPTION>

                                                                                     AS OF
                                            ----------------------------------------------------------------------------------------
                                               SEPT. 27,         SEPT. 28,          SEPT 30,           SEPT. 24,         SEPT.25
DOLLARS IN THOUSANDS                             1997              1996               1995               1994              1993
------------------------------------------------------------------------------------------------------------------------------------
<S>                                         <C>                 <C>               <C>                 <C>              <C>
Current assets.......................       $    858,236        $  616,812        $    591,485        $   598,076      $    611,660
Current liabilities..................            391,822           366,184             370,226            326,865           302,908
                                            ------------        ----------        ------------        -----------      ------------

Working capital......................       $    466,414        $  250,628        $    221,259        $   271,211      $    308,752
                                            ============       ===========        ============        ===========      ============

Total assets.........................       $ 1,134,868         $  860,443        $    832,018        $   821,864      $    866,329
Annual expenditures for property,
  plant, and equipment..............        $   110,505         $   94,670        $     96,471        $    92,955      $     94,968
Long-term debt......................        $   212,750         $  149,971        $    153,457        $   156,942      $    158,352
Other liabilities...................        $    11,516         $   15,224        $     28,791        $    29,445      $     27,992
Stockholders' equity................        $   518,780         $  329,064        $    279,544        $   308,612      $    377,077
Employees...........................              5,100              4,900               5,000              5,800             6,500

 <FN>

Results of operations are for 52-week periods except for 1995 which is a 53-week
period.
The company has not declared or paid cash dividends since inception.
</FN>
</TABLE>

                                       14
<PAGE>

Data General Corporation
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS


RESULTS OF OPERATIONS

The Company reported net income of $56 million for fiscal 1997 compared with net
income of $28  million  for fiscal 1996 and a net loss of $47 million for fiscal
1995. Included in the net loss of fiscal year 1995 were restructuring charges of
$43 million as well as other  income of $44.5  million  from the  settlement  of
litigation with Northrop Grumman Corporation.

Revenues (in millions)
===============================================================================
                                  1997     Change     1996     Change     1995
                                  ---------------------------------------------
Product                           $1,142     24%      $924       22%      $757
  % of Total Revenues                74%               70%                 65%

Service                              391     (2%)      398       (1%)      402
  % of Total Revenues                26%               30%                 35%

Total                             $1,533     16%    $1,322       14%    $1,159
===============================================================================

Revenues in fiscal year 1997 grew 16%  compared to the prior  fiscal  year.  The
growth came  primarily  from domestic  product  revenues in the CLARiiON line of
mass storage devices and the AViiON server business.

In fiscal 1997, revenues from the AViiON family were approximately $527 million,
a 14%  increase  over  fiscal  1996.  AViiON  systems  revenues  in fiscal  1996
increased  9% over fiscal  1995.  Since 1989,  the  Company  has  established  a
customer base of nearly 46,000 AViiON installations, with a total sales value of
approximately $3 billion. In fiscal 1996, the Company introduced its Intel-based
AViiON  systems.  These  systems  represented  64% of total  fiscal  1997 AViiON
revenues and 31% of total fiscal 1996 AViiON revenues.  In fiscal 1997, revenues
from the Company's  Intel-based  AViiON systems more than doubled while revenues
from the  Motorola-based  AViiON  systems  declined by 40% compared to the prior
fiscal year.  The Company  anticipates  that the  percentage  of server  product
revenues  generated by the Intel-based AViiON products will continue to increase
in fiscal 1998 while the  Motorola-based  AViiON system revenues are expected to
continue to decline.  In fiscal 1997, the CLARiiON line of mass storage  systems
grew by 41% and represented 44% of the overall product revenues, compared to 38%
of  total  product  revenues  in the  previous  fiscal  year.  CLARiiON  is sold
primarily  through the Company's  Original  Equipment  Manufacturer  ("OEM") and
distributor channels; thus sales in any given period are subject to sales cycles
and inventory levels of the Company's customers.  CLARiiON product revenues have
been concentrated in a limited number of customers,  with a significant  portion
of the Company's  CLARiiON product sold to a single OEM. In fiscal 1997, product
revenues from personal  computer and other  peripheral  equipment  increased 31%
from fiscal 1996,  and in fiscal 1996  decreased  22% when  compared with fiscal
1995.  ECLIPSE MV ("MV") revenues decreased 34% during fiscal 1997 compared to a
36% decline in fiscal 1996.  MV revenues in fiscal 1997  represented  only 2% of
the Company's total product revenues.

                                       15
<PAGE>

Revenues by Geographic Marketplace
===============================================================================

                                Percentage of            Percentage Change of $
                            Consolidated Revenues              of Revenues
                          -----------------------------------------------------
                           1997     1996      1995        1997-96      1996-95
                          -----------------------------------------------------
Domestic

Product                     64%      61%      55%           30%          35%
Service                     59%      57%      56%            -            -
Total                       63%      60%      55%           22%          23%

Europe

Product                     22%      24%      28%           11%           4%
Service                     31%      32%      33%           (4%)         (4%)
Total                       24%      26%      30%            5%           1%

Other International

Product                     14%      15%      17%           18%          10%
Service                     10%      11%      11%           (6%)          -
Total                       13%      14%      15%           12%           8%

===============================================================================


In fiscal 1997,  domestic  marketplace  revenues from the CLARiiON  product line
increased  52%,  the  AViiON  product  revenues  increased  14%,  and PC product
revenues  increased  53%,  partly  offset by a continued  decrease in MV product
revenues.  In the prior year,  the  CLARiiON  product  line  revenues  more than
doubled in this  marketplace  and the AViiON  product  revenues  increased  22%,
partly offset by a 25% decrease in MV product  revenues and a 43% decrease in PC
product  revenues.  The increase in European  product  revenues,  including U.S.
direct export sales, in fiscal year 1997, was  attributable to a 16% increase in
both the AViiON and PC  product  revenues,  and a 5%  increase  in the  CLARiiON
product  line,  partially  offset by a decline in MV product  revenues.  The 11%
increase in product revenues in the European  marketplace was partly offset by a
3% unfavorable  foreign  exchange  effect due to the  strengthening  of the U.S.
dollar in relation to European  currencies.  The increase in other international
product revenues,  including U.S. direct export sales, was primarily driven by a
42% growth in  CLARiiON  product  revenues,  a 10%  increase  in AViiON  product
revenues,  and a 5%  increase in PC product  revenues  in fiscal year 1997.  The
fiscal 1996 increase in other international  product revenues was largely due to
the increase in CLARiiON and PC product revenues, which was partly offset by the
decrease in AViiON and MV product revenues.

In the  service  business,  the  Company  experienced  a 3% decline in  contract
maintenance revenues in fiscal 1997 and a 2% decrease in fiscal 1996 as compared
with the previous year.  These  declines were the result of the continued  shift
from proprietary to open system service maintenance  contracts.  The decline was
partially  offset by modest growth in professional  service  revenues during the
same periods.  In Europe,  the effect of foreign  exchange  accounted for the 4%
decrease in fiscal 1997 and less than 1% of the total 4% decrease in fiscal 1996
service revenues.


Cost of Revenues  (in millions)
===============================================================================
                                    1997    Change    1996     Change   1995
                                  ----------------------------------------------
Product                             $773      25%     $619       20%    $514
  % of Product Revenues              68%               67%               68%

Service                              249      (4%)     259        -      258
  % of Service Revenues              64%               65%               64%

Total                             $1,022      16%     $878       14%    $772
  % of Total Revenues                67%               66%               67%
===============================================================================
                                       16
<PAGE>

The increase in the product cost as a percentage of product  revenues for fiscal
1997 was primarily  caused by the increased  proportion of CLARiiON  revenues in
the Company's  product revenue mix.  Generally,  CLARiiON revenues yield a lower
product margin than the Company's AViiON revenues.

The decrease in the cost as a percentage of service revenues for fiscal 1997 was
the result of  improvements  in spare parts  inventory  management  and improved
gross margins in the professional services business.


Operating Expenses  (in millions)
===============================================================================
                                    1997    Change    1996    Change    1995
                                    -------------------------------------------
Research & Development              $110      12%      $98      14%      $86
  % of Total Revenues                 7%                7%                7%

Selling, general, & administrative  $338       9%     $309      (7%)    $334
  % of Total Revenues                22%               23%               29%

Restructuring charges                  -        -        -    (100%)     $43
  % of Total Revenues                  -                 -                4%


The Company continues to focus its research and development  efforts on its core
business  technology:  multi-user  computer systems,  servers,  and mass storage
devices. Gross expenditures on research and development and software development
in fiscal 1997,  before  capitalization,  increased 14% compared to fiscal 1996.
The increase in the level of expenditures  was primarily driven by investment in
the next  generation of CLARiiON  fibre  products,  in the Company's Non Uniform
Memory Access  ("NUMA")  architecture  for high-end  servers,  and in THiiN Line
products for the Internet.

The increase in selling,  general, and administrative expenses was the result of
increased  sales and  marketing  efforts in the server and  storage  businesses.
Management  believes  that in the future,  increases  of selling,  general,  and
administrative  expenses will be required to support business  growth.  However,
the Company's  objective is to have the ratio of these  expenses as a proportion
of total revenues continue to decline.

Results of  operations  for fiscal  1995  included  charges of $43  million  for
estimated costs associated with a worldwide workforce reduction along with other
cost reduction  programs,  primarily related to real estate.  There have been no
material  changes in the Company's  original  estimates of the costs  associated
with the  previously  announced  restructuring  actions.  At the close of fiscal
1997, the total number of employees was  approximately  5,100, a net increase of
200 employees from September 28, 1996.  During fiscal year 1996, there was a net
reduction of 100 employees from the 5,000 employed as of September 30, 1995.


Net Income (Loss) (in millions)
===============================================================================
                                       1997            1996            1995
                                     --------        --------        --------
Income (loss) from operations           $63             $37            $(76)

Interest and other Income                (5)             (5)             38

Tax provision                            (2)             (4)             (9)
                                     --------        --------        --------

Net income (loss)                       $56             $28            ($47)
===============================================================================


Income  from  operations  for fiscal  1997 of $63  million  was  composed of $73
million  from  the  domestic  marketplace,   partially  offset  by  losses  from
operations of $5 million each from Europe and other international locations. The
income  from  operations  for fiscal  1996 of $37  million  was  composed of $44
million domestically and $3 million in Europe,  offset by a loss from operations
of $10 million from other international markets. The losses from operations were
$45  million,  $15  million,  and $16  million in fiscal  1995 for the  domestic
marketplace,  Europe, and other  international  locations,  respectively.  These
losses in fiscal 1995 included  restructuring charges of $19 million in both the
domestic  marketplace and Europe, as well as $5 million for other  international
locations.

Interest income for fiscal 1997 increased 42% from fiscal 1996,  following a 23%
decrease  from  fiscal  1995 to fiscal  1996.  The  current  year  increase  was
primarily due to higher levels of invested cash and longer  investment  maturity
terms which  resulted in higher  interest  yields.  The prior year  decrease was
primarily  due to lower  levels of  invested  cash and an overall  reduction  in
market  interest  rates.  Interest  expense for fiscal 1997 was $15 million,  an
increase  from  $13  million  for  fiscal  1996.   The  increase  was  primarily
attributable to the interest expense related to the 6% Convertible  Subordinated
Notes due 2004,  which were issued during fiscal 1997.  The fiscal 1997 increase
was partially  offset by the  conversion  of $125 million of 7 3/4%  Convertible
Subordinated  Debentures  due 2001 and the early  retirement of $27 million of 8
3/8% Sinking Fund Debentures due 2002. Interest expense for fiscal 1996 remained
relatively unchanged from fiscal 1995.

                                     17

<PAGE>

Included in other income in the fiscal 1995 Statements of Operations is a pretax
gain,  net of related legal fees and other  expenses,  of $44.5 million from the
settlement  with Northrop  Grumman  Corporation  in  connection  with a six-year
software  copyright  infringement  and trade secrets  litigation  brought by the
Company against Grumman Systems Support Corporation ("Grumman"). Under the terms
of the settlement, Grumman paid the Company $53 million.

The  provision  for income  taxes in both  fiscal  years  1997 and 1996  related
primarily to foreign,  state,  and federal  alternative  minimum taxes. The 1995
provision  resulted  primarily  from  the  settlement  of the  Grumman  lawsuit,
deferred taxes on undistributed  earnings for certain foreign subsidiaries,  and
foreign and state taxes.  The Company  continues to have  significant  operating
loss  carryforwards  and unused tax credits  available  to  minimize  future tax
liabilities.  The Company has a valuation allowance which offsets  substantially
all deferred  tax assets  existing as of September  27, 1997 and  September  28,
1996. The amount of the deferred tax asset  considered  realizable is subject to
change based on  estimates  of future  taxable  income  during the  carryforward
period.  The Company  will assess the need for the  valuation  allowance at each
balance sheet date based on all available evidence.

In the first quarter of fiscal 1997, the Company  adopted SFAS 121,  "Accounting
for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed
Of".  In the second  quarter  of fiscal  1997,  the  Company  adopted  SFAS 125,
"Accounting for Transfer and Servicing of Financial  Assets and  Extinguishments
of  Liabilities".  SFAS 121  requires  that  long-lived  assets be reviewed  for
impairment  whenever  events  or  changes  in  circumstances  indicate  that the
carrying amount of an asset may not be recoverable. SFAS 125 provides consistent
standards for  distinguishing  transfers of financial assets that are sales from
transfers that are secured  borrowings.  The implementation of SFAS 121 and SFAS
125 did not have a  material  effect  on the  Company's  consolidated  financial
position or results of operations.

In October 1995, the Financial  Accounting  Standards Board ("FASB") issued SFAS
123,  "Accounting for Stock-Based  Compensation".  As permitted by SFAS 123, the
Company  continues to measure  compensation  cost in accordance with APB opinion
Number 25 and related Interpretations in accounting for its plans. Note 9 to the
Consolidated Financial Statements contains a summary of the pro forma effects to
reported  net income and net income per share for fiscal  years 1997 and 1996 as
if the  Company  had elected to  recognize  compensation  cost based on the fair
value of the options granted at grant date as prescribed by SFAS 123.

In  February  1997,  the FASB issued SFAS 128,  "Earnings  per Share".  SFAS 128
specifies modifications to the calculation of earnings per share from the method
currently  used by the  Company  as  prescribed  by APB  Opinion  Number 15. The
Company is required by the  Securities  and Exchange  Commission to disclose pro
forma earnings per share amounts computed in accordance with the SFAS 128 in the
notes to the Consolidated Financial Statements prior to required adoption.

In July 1997,  the FASB issued SFAS 130,  "Reporting  Comprehensive  Income" and
SFAS 131, "Disclosures About Segments of an Enterprise and Related Information".
In October  1997,  the  Accounting  Standards  Executive  Committee  of American
Institute of Certified Public  Accountants  issued Statement of Position ("SOP")
97-2,  "Software  Revenue  Recognition".  All these statements are effective for
fiscal years beginning after December 15, 1997. The Company will implement these
statements as required.  The future adoption of SFAS 130, SFAS 131, and SOP 97-2
is not  expected  to  have a  material  effect  on  the  Company's  consolidated
financial position or results of operations.

In January  1997,  the  Securities  and  Exchange  Commission  issued  Financial
Reporting Release No. 48, which expands the disclosure  requirements for certain
derivative  and  other  financial  instruments.   See  Notes  2  and  7  to  the
Consolidated  Financial  Statements  for a  description  of the Company's use of
derivative and other financial instruments and related market risk.


LIQUIDITY AND CAPITAL RESOURCES

Cash and temporary cash  investments as of September 27, 1997 were $217 million,
an increase of $38 million over fiscal 1996. At the same date,  the Company held
$151 million in marketable  securities,  a net increase of $126 million from the
prior fiscal year. In total,  cash and  temporary  cash  investments  along with
marketable  securities increased $164 million over fiscal 1996. The increase was
mainly  attributable  to the net  proceeds  received  from  the  issuance  of 6%
Convertible  Subordinated  Notes  due  2004,  which  were  partly  offset by the
retirement  of $27 million of 8 3/8% Sinking Fund  Debentures  and  purchases of
inventory   required  for  the  growth  of  the  Company's  server  and  storage
businesses.  The marketable securities held, which supplement cash and temporary
cash  investments,  include United States  Treasury bills and notes,  commercial
paper,  and  notes  issued  by U.S.  government  agencies,  as well as an equity
security  recorded  at  fair  market  value  of $4  million  and  classified  as
available-for-sale.  The unrealized gain on marketable  securities of $3 million
is recorded as a separate  component of stockholders'  equity. Net cash provided
from  operations  in fiscal 1997 was $127  million.  Expenditures  for property,
plant, and equipment were $111 million,  capitalized  software development costs
totaled $36 million, and cash provided from stock plans equaled $17 million. The
effect of currency  fluctuations  on cash and temporary cash  investments  was a
decrease of $4 million for fiscal year 1997.

                                       18
<PAGE>

Net  receivables  increased  $39 million to $296 million at September  27, 1997,
primarily as a result of increased revenues. The Company's worldwide days' sales
outstanding  decreased  three  days  when  compared  to the prior  fiscal  year,
primarily  as a  result  of  increased  collection  activity.  Inventory  levels
increased  $36 million  during  fiscal 1997,  primarily as a result of increased
end-of-year  procurement  required  to support the growth in both the server and
storage  businesses.  Net property,  plant, and equipment increased $13 million,
principally  due to the  purchases of  equipment  and capital  expenditures  for
developing both operating and financial  systems to support the future growth of
the Company.  Accounts payable increased $33 million,  primarily attributable to
the increase in  end-of-year  inventory  procurements.  Other  current and other
liabilities,  excluding  the current  portion of  long-term  debt,  decreased $7
million,  primarily as a result of payments made relating to previously recorded
restructuring accruals.

For the  three-year  period ending  September 27, 1997,  cash and temporary cash
investments  increased $74 million.  Net cash provided from  operations was $349
million,  including $53 million from the Grumman litigation settlement. The sale
of non-operating facilities and investments provided $13 million.  Proceeds from
the Company's employee stock plans provided $34 million.  Net cash provided from
long-term debt was $173 million as a result of the Company  issuing $213 million
of 6% Convertible Subordinated Notes due 2004, which was partially offset by the
retirement of $34 million of 8 3/8% Sinking Fund  Debentures  due 2002,  and the
payment of $6 million debt  issuance  costs on the 6%  Convertible  Subordinated
Notes due 2004. Net cash used for the purchase of marketable  securities was $91
million.  Expenditures for property,  plant, and equipment  totaled $302 million
and the Company's  investment in capitalized  software development costs was $95
million.  Notes  payable  were paid in the  amount  of $2  million  during  this
three-year  period. The effect of foreign exchange on this three-year period was
$3 million increase to cash.

Operations  have generally been the primary source of the Company's  cash.  Cash
provided from  operations has been augmented by proceeds from the issuance of 6%
Convertible  Subordinated Notes, sales of stock under the Company's stock plans,
from sales of facilities and other  non-operating  assets, and the settlement of
the  Grumman  litigation.  The  Company  has not paid cash  dividends  since its
inception in order to reinvest available cash in operations.

At September 27, 1997, the Company had a $30 million  unsecured letter of credit
and  reimbursement  facility with a group of banks.  On September 30, 1997, this
facility was replaced  with a $110 million  unsecured  senior  revolving  credit
facility  with a group of banks.  This latter  facility is available for working
capital,  capital  expenditures,  permitted  acquisitions,  and  to  secure  the
issuance  of  letters  of  credit.  It  contains  certain  covenants,  including
restrictions on particular liens, other indebtedness,  and certain  investments.
The interest  rate for  borrowings  under the revolving  credit  facility is the
lower of 1.25% per annum above LIBOR or the prime rate plus .5%. Commitment fees
paid on  available  funds during  fiscal years 1997 and 1996 were not  material.
There  were $5 million  and $8  million of letters of credit  secured by the $30
million  letter of credit and  reimbursement  facility at September 27, 1997 and
September 28, 1996,  respectively.  At September 30, 1997, those same $5 million
of letters of credit became secured by the $110 million credit facility.  During
fiscal  years 1997 and 1996,  there  were no  borrowings  under  either of these
facilities.  The current  facility  has a duration of three years and expires on
September 30, 2000.

The  Company  believes  it is  important  to  maintain  a  conservative  capital
structure  and a strong  cash  position.  Cash is  primarily  invested in liquid
temporary  investments pending its utilization.  The Company's investment policy
is to minimize risk while maximizing return on cash, and to keep uninvested cash
at a minimum. Cash is generally centralized domestically,  although some cash is
also held at  various  subsidiaries  around  the world to meet  local  operating
funding requirements. All cash is freely remittable to the United States.

Although the actual level of spending will be  influenced  by many factors,  the
Company  anticipates that  expenditures for property,  plant, and equipment will
continue to be the primary  non-operating  use of cash during  fiscal year 1998.
Most of the  expenditures  will be for capital  assets  directly  related to the
Company's open systems product sales, marketing,  support, and development.  The
net book value of fixed asset  disposals  during fiscal 1997 totaled $9 million,
primarily  as a  result  of  sales  of  demonstration  equipment  to  end-users.
Management expects that sales of demonstration  equipment will continue.  During
fiscal  1998,  cash  totaling  $5 million is  expected  to be utilized to settle
liabilities arising from the Company's restructuring programs.

The Company  believes  it has  sufficient  resources  to provide for its current
operations and to continue to invest in the future.

The Company has started to replace many of its business and  operating  computer
systems.  The new  systems,  based  on  software  from  Oracle  Corporation  and
PeopleSoft  Inc.,  will  replace  older  legacy  systems and allow  employees at
different   locations  to  share  financial  and  operating   information   more
efficiently.  The first major use of the new software  commenced  April 1995, in
certain areas of the Company.  Remaining business units and staffs are scheduled
for implementation in phases, with project completion targeted for mid-1999. The
Company  believes  that the new systems and software are  Year-2000  compatible,
thus  handling  the  major  portion  of  the  Company's   Year-2000   conversion
requirements.  The  Company  is  currently  implementing  changes  to  make  the
remaining legacy systems Year-2000  compatible.  The Company does not anticipate
the cost of implementing these changes to be significant.

                                       19
<PAGE>

<TABLE>
DATA GENERAL CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
<CAPTION>

                                                       YEAR ENDED
                                         --------------------------------------
                                          SEPT. 27,     SEPT. 28,     SEPT. 30,
IN THOUSANDS, EXCEPT PER SHARE AMOUNTS      1997          1996          1995
-------------------------------------------------------------------------------
<S>                                   <C>             <C>          <C>
REVENUES
Product.............................. $  1,142,561    $  924,140   $   757,338
Service..............................      390,608       398,110       401,978
                                      ------------    ----------   ------------
    Total revenues...................   1,533,169     1,322,250     1,159,316
                                      ------------    ----------   ------------
COSTS AND EXPENSES
Cost of product revenues.............      772,721       618,351       514,049
Cost of service revenues.............      248,848       259,341       257,998
Research and development.............      109,984        98,022        85,886
Selling, general, and administrative       338,443       309,259       334,337
Restructuring charge.................            -             -        43,000
                                      ------------    ----------   ------------

    Total costs and expenses.........    1,469,996     1,284,973     1,235,270
                                      ------------    ----------   ------------

Income (loss) from operation.........       63,173        37,277       (75,954)
Interest income......................       10,549         7,440         9,710
Interest expense.....................       15,422        13,072        13,826
Other income, net....................            -             -        41,972
                                      ------------    ----------   ------------

Income (loss) before income taxes...        58,300        31,645       (38,098)
Income tax provision................         2,400         3,500         8,605
                                      ------------    ----------   ------------
Net income (loss)                     $     55,900    $   28,145   $   (46,703)
                                      ============    ==========   ============

PRIMARY NET INCOME (LOSS) PER SHARE
  Net income (loss) per share         $       1.26    $     0.68   $     (1.23)
  Weighted average shares outstanding       44,199        41,081        37,866


<FN>

Results of operations are for 52-week periods except for 1995 which is a 53-week
period.  
The accompanying Notes to Consolidated Financial Statements are an integral part
of these financial statements.

</FN>
</TABLE>

                                       20
<PAGE>

DATA GENERAL CORPORATION
CONSOLIDATED BALANCE SHEETS

<TABLE>
<CAPTION>

                                                              AS OF
                                                  ----------------------------
                                                     SEPT. 27,       SEPT. 28,
DOLLARS IN THOUSANDS, EXCEPT PAR VALUE                  1997            1996
------------------------------------------------------------------------------
<S>                                                <C>              <C>
ASSETS
Current assets:
  Cash and temporary cash investments............. $   216,814      $  178,997
  Marketable securities...........................     151,455          25,624
  Receivables, less allowances of $16,588 at
   Sept. 27, 1997 and $14,480 at Sept. 28, 1996...     296,375         257,815
  Inventories.....................................     166,008         129,783
  Other current assets............................      27,584          24,593
                                                   ------------     ----------
    Total current assets..........................     858,236         616,812

Property, plant, and equipment, net...............     180,410         167,672
Other assets......................................      96,222          75,959
                                                   ------------     ----------
                                                   $ 1,134,868      $  860,443
                                                   ============     ==========

LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
  Notes payable................................... $         -      $    1,943
  Accounts payable................................     154,624         121,625
  Other current liabilities.......................     237,198         242,616
                                                   -----------      ----------
    Total current liabilities.....................     391,822         366,184
                                                   -----------      ----------

Long-term debt....................................     212,750         149,971
                                                   -----------      ----------
Other liabilities.................................      11,516          15,224
                                                   -----------      ----------

Commitments and Contingencies

Stockholders' equity
  Common Stock, $.01 par value
  Outstanding -- 48,588,000 shares at Sept. 27, 1997
   and 39,601,000 shares at Sept. 28, 1996 (net of
   deferred compensation of $14,157 at Sept. 27, 1997
   and $7,812 at Sept. 28, 1996)..................     607,130         460,312
  Accumulated deficit.............................     (79,581)       (135,481)
  Unrealized gains on marketable securities.......       2,812           9,708
  Cumulative translation adjustment...............     (11,581)         (5,475)
                                                   ------------     -----------
    Total stockholders' equity....................     518,780         329,064
                                                   ------------     -----------
                                                   $ 1,134,868      $  860,443
                                                   ===========      ==========
<FN>

The accompanying Notes to Consolidated Financial Statements are an integral part
of these financial statements.
</FN>
</TABLE>

                                       21
<PAGE>

<TABLE>

DATA GENERAL CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
<CAPTION>

                                                                                 YEAR ENDED
                                                              ----------------------------------------------
                                                                 SEPT. 27,       SEPT. 28,       SEPT. 30,
IN THOUSANDS                                                       1997            1996            1995
------------------------------------------------------------------------------------------------------------
<S>                                                             <C>             <C>             <C>
CASH FLOWS FROM OPERATING ACTIVITIES
  Net Income (loss)............................................ $  55,900       $  28,145       $ (46,703)
  Adjustments to reconcile net income (loss) to net cash
  provided from operating activities
    Depreciation...............................................    79,203          82,330          74,842
    Amortization of capitalized software development costs.....    20,180          19,130          17,545
    Amortization of deferred compensation......................     4,669           3,866           4,265
    Decrease in other liabilities..............................    (3,708)         (8,263)           (656)
    Net book value of fixed asset disposals....................     8,858           6,399           6,791
    Other non-cash items, net..................................     2,368            (299)          7,232
    Changes in  operating  assets and  liabilities,  net of effects
    from sale of facilities and other assets
      (Increase) decrease in receivables.......................   (46,514)         (9,268)         11,267
      (Increase) decrease in inventories.......................   (28,876)          1,567          (2,946)
      (Increase) decrease in other current assets..............    (4,313)          2,080           3,761
      Increase in accounts payable.............................    36,389           6,627          23,897
      Increase (decrease) in other current liabilities,
        excluding debt.........................................     2,484         (27,191)         17,810
                                                                ----------      ----------      ---------

    Net cash provided from operating activities................   126,640         105,123         117,105
                                                                ----------      ----------      ---------

CASH FLOWS FROM INVESTING ACTIVITIES
  Expenditures for property, plant, and equipment..............  (110,505)        (94,670)        (96,471)
  Purchase of marketable securities............................  (221,859)        (84,224)       (240,507)
  Proceeds from sales and maturity of marketable securities....    89,131         150,080         216,755
  Capitalized software development costs.......................   (36,283)        (30,714)        (27,493)
  Net proceeds from sale of facilities and other assets........         -          12,797               -
  Investment in equity securities..............................         -          (2,000)           (600)
                                                                ----------      ----------      ----------

    Net cash used by investing activities......................  (279,516)        (48,731)       (148,316)
                                                                ----------      ----------      ----------

CASH FLOWS FROM FINANCING ACTIVITIES
  Cash provided from stock plans, net..........................    17,049           9,684           7,740
  Repayment of notes payable...................................    (1,794)              -            (607)
  Repayment of long-term debt..................................   (27,177)         (3,000)         (3,500)
  Proceeds from long-term debt, net............................   206,853               -               -
                                                                ----------      ----------      ----------

    Net cash provided from financing activities................   194,931           6,684           3,633
                                                                ----------      ----------      ----------
Effect of foreign currency rate fluctuations on cash and
  temporary cash investments...................................    (4,238)         (1,280)          2,331
                                                                ----------      ----------      ----------

Increase (decrease) in cash and temporary cash
  investments..................................................    37,817          61,796         (25,247)
Cash and temporary cash investments - beginning
  of the period................................................   178,997         117,201         142,448
                                                                ----------      ----------      ----------
Cash and temporary cash investments - end
  of the period...............................................  $ 216,814       $ 178,997      $  117,201
                                                                ==========      ==========      ==========

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
    Interest paid.............................................  $  11,772       $  12,797      $   12,762
    Income taxes paid.........................................  $   5,951       $   1,716      $    1,696

<FN>

Results of operations are for 52-week periods except for 1995 which is a 53-week
period. 
The accompanying Notes to Consolidated Financial Statements are an integral part
of these financial statements.
</FN>
</TABLE>
                                       22
<PAGE>

DATA GENERAL CORPORATION
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

<TABLE>
<CAPTION>

                                                        YEAR ENDED
                                          -------------------------------------
                                           SEPT. 27,    SEPT. 28,     SEPT. 30,
IN THOUSANDS                                 1997         1996          1995
-------------------------------------------------------------------------------
<S>                                       <C>          <C>           <C>
COMMON STOCK

   Beginning balance..................... $ 460,312    $ 446,762     $ 434,757
   Shares issued under stock plans, net..    17,049        9,684         7,740
   Amortization of deferred compensation.     4,669        3,866         4,265
   Debt conversion to Common Stock.......   125,100            -             -
                                          ---------    ----------     ---------

   Ending balance........................   607,130      460,312       446,762
                                          ---------    ----------     ---------

ACCUMULATED DEFICIT

   Beginning balance.....................  (135,481)    (163,626)     (116,923)
   Net income (loss) for year............    55,900       28,145       (46,703)
                                          ----------   ----------     ---------

   Ending balance........................   (79,581)    (135,481)     (163,626)
                                          ----------   ----------     ---------

UNREALIZED GAINS ON MARKETABLE SECURITIES

   Beginning balance.....................     9,708            -             -
   Net adjustment for year...............    (6,896)       9,708             -
                                          ----------   ----------     ---------

   Ending balance........................      2,812       9,708             -
                                          ----------   ----------     ---------

CUMULATIVE TRANSLATION ADJUSTMENT

   Beginning balance.....................    (5,475)      (3,592)       (9,222)
   Net translation adjustment for year...    (6,106)      (1,883)        5,630
                                          ----------   ----------     ---------

   Ending balance........................   (11,581)      (5,475)       (3,592)
                                          ----------   ----------     ---------

Total stockholders' equity............... $ 518,780    $ 329,064     $ 279,544
                                          ==========   ==========    ==========

<FN>
Results of operations are for 52-week periods except for 1995 which is a 53-week
period. 
The accompanying Notes to Consolidated Financial Statements are an integral part
of these financial statements.
</FN>
</TABLE>
                                       23
<PAGE>

DATA GENERAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


NOTE 1.  NATURE OF BUSINESS

        Data General Corporation (the "Company") designs, manufactures, markets,
and  supports  a family of open  computer  systems  including  servers  and mass
storage products.  The Company's products provide solutions for high-performance
customer  applications  such as  database  management,  transaction  processing,
decision  support,  accounting  and  finance,  healthcare  information  systems,
telecommunications and video storage,  manufacturing planning and control, human
resources  management,  and data  warehousing.  The Company focuses on providing
enterprise-level solutions for businesses of all sizes, healthcare providers and
government agencies, and has a worldwide sales, service, and support network.
The principal markets are North America and Europe.


NOTE 2.  ACCOUNTING POLICIES

        FISCAL YEAR.  The Company's fiscal year ends on the last Saturday in
September. Fiscal year 1997 consisted of 52 weeks.  Fiscal years 1996 and 1995
consisted of  52 and 53 weeks, respectively.

        PRINCIPLES  OF  CONSOLIDATION.  The  consolidated  financial  statements
include the  accounts of Data General  Corporation  and its domestic and foreign
subsidiaries. All significant intercompany transactions have been eliminated.

        USE OF ESTIMATES.  The preparation of financial statements in conformity
with  generally  accepted  accounting  principles  requires  management  to make
estimates  and  assumptions  that  affect  the  reported  amounts  of assets and
liabilities  and disclosure of contingent  assets and liabilities at the date of
the financial  statements and reported  amounts of revenues and expenses  during
the reporting period. Actual results could differ from those estimates.

        FOREIGN  CURRENCY  TRANSACTIONS.   The  functional  currencies  for  the
Company's operations in Australia,  Canada,  Europe,  Japan, and New Zealand are
the local currencies.  Assets and liabilities of these operations are translated
into U.S. dollars at exchange rates in effect at the balance sheet date.  Income
and  expense  items are  translated  at average  exchange  rates for the period.
Translation  adjustments are reported as a separate  component of  stockholders'
equity.

        For the  Company's  other  foreign  operations,  the U.S.  dollar is the
functional  currency.  Assets and liabilities of these operations are remeasured
into U.S. dollars at exchange rates in effect at the balance sheet date,  except
for  inventories  and property,  plant,  and equipment,  which are remeasured at
historical  exchange  rates.  Income and expense items are remeasured at average
rates  for the  period,  except  for cost of sales and  depreciation,  which are
remeasured  at  historical  exchange  rates.  Gains and  losses  resulting  from
remeasurement,   not  material  in  amount,  are  included  in  the  results  of
operations.

        The Company  enters into foreign  exchange  contracts as a hedge against
exposure to fluctuations in exchange rates associated with certain  transactions
denominated in foreign currencies, principally intercompany accounts receivable.
Market  value  gains or losses on these  contracts  are included  in the cost of
product  revenues and generally  offset  exchange gains or losses on the related
transactions.

        Foreign exchange  transaction  gains and losses,  not material in amount
for the periods ended September 27, 1997,  September 28, 1996, and September 30,
1995, are included in the cost of product revenues.

        Cash flows from foreign  exchange  contracts  that are  accounted for as
hedges of  identifiable  foreign  exchange  transactions  are classified as cash
flows  from  operating   activities  in  accordance   with  the  nature  of  the
transactions being hedged.

        TEMPORARY CASH  INVESTMENTS  AND MARKETABLE  SECURITIES.  Temporary cash
investments  consist of highly liquid time deposits,  commercial paper, and U.S.
Treasury bills and notes with original maturities of 90 days or less. Marketable
securities consist of U.S. Treasury bills and notes, commercial paper, and notes
issued by U.S.  government  agencies with original maturities of 91 to 365 days,
as well as an equity security.

        All of the  Company's  investments  in U.S.  Treasury  bills and  notes,
commercial paper, and notes issued by U.S.  government  agencies have maturities
of less  than one year,  and have been  classified  as  held-to-maturity.  These
investments are recorded at amortized cost, which approximates  market value. In
March  1996,  an  equity  security  held by the  Company  as an  investment  and
previously  accounted for under the cost method, began trading on a public stock
exchange. In accordance with SFAS 115, this security is considered to be readily
marketable and is classified as available-for-sale. This investment is accounted
for at fair market  value at  September  27, 1997 and  September  28, 1996 which
totaled $4 million  and $10.9  million,  respectively.  The  unrealized  gain on
marketable securities of $2.8 million and $9.7 million is recorded as a separate
component of stockholders'  equity at September 27, 1997 and September 28, 1996,
respectively.

        INVENTORIES. Inventories are stated at the lower of cost or market. Cost
is  determined  using  the  first-in,   first-out  method.  Inventories  consist
primarily of components and  subassemblies  and finished products held for sale.
Rapid technological change and new product  introductions and enhancements could
result in excess or  obsolete  inventory.  To  minimize  this risk,  the Company
evaluates  inventory  levels and expected  usage on a periodic basis and records
adjustments as required.

        Certain components and products that meet the Company's requirements are
available only from a single  supplier or a limited  number of suppliers.  Among
those  components  are disk  drives,  microprocessors,  and certain  proprietary
integrated circuits. The rapid rate of technological change and the necessity of
developing and manufacturing products with short life-cycles may intensify these
risks.  The  inability to obtain  components  and  products as  required,  or to
develop alternative  sources, if and as required in the future,  could result in
delays or reductions in product  shipments,  which in turn could have a material
adverse effect on the Company's business,  financial  condition,  and results of
operations.

        PROPERTY, PLANT, AND EQUIPMENT. Property, plant, and equipment is stated
at cost,  less  accumulated  depreciation.  Depreciation  is computed  using the
straight-line  method,  based on the  following  estimated  useful  lives:  land
improvements,  10-12 years;  buildings  and building  improvements,  3-25 years;
equipment,  3-10 years;  application software, 5-10 years. Included in property,
plant,  and equipment are computer  equipment spares which are not available for
resale.  These  spares are used to support  systems  the  Company has sold or is
using internally. Spares are depreciated over a 3-year estimated useful life.

                                       24

<PAGE>

        REVENUE RECOGNITION AND MAJOR CUSTOMERS. Product revenues are recognized
at the time of shipment,  provided that there are no  significant  uncertainties
regarding  customer's  acceptance  and  collection of the related  receivable is
probable.  Service  revenues,  including  post-contract  customer  support,  are
recognized  ratably  over  applicable  contractual  periods or as  services  are
performed.  The costs of these  service  revenues  are  charged to expense  when
incurred.

        During  the year  ended  September  27,  1997 and  September  28,  1996,
revenues  from a single  customer  totaled  $238  million and $201  million,  or
approximately 16% and 15% of total revenues,  respectively.  The Company did not
have any customers with revenues  exceeding 10% of the Company's  total revenues
during fiscal 1995.

        RESEARCH  &  DEVELOPMENT,  SOFTWARE  DEVELOPMENT,  AND  WARRANTY  COSTS.
Research,  engineering,  and product development costs are expensed as incurred.
Software development costs incurred after reaching technological feasibility and
prior to first  customer  shipment  are  capitalized  and  amortized  to cost of
product  revenues  over a period  not to  exceed 4 years  for  operating  system
software and 3 years for application software,  which approximates the estimated
economic lives of these software  products.  On a quarterly  basis,  the Company
evaluates the  recoverability  of capitalized  software costs. In performing its
evaluation, the Company must make estimates of anticipated future gross revenues
as well as the remaining economic life of the product. It is reasonably possible
that the estimates of the remaining  estimated  economic lives of these software
products may be reduced.  As a result,  the carrying  amount of the  capitalized
software  costs for a particular  software  product may be reduced.  Unamortized
software  development  costs were $76.8  million at September 27, 1997 and $60.7
million  at  September  28,  1996.  Writeoffs  of certain  capitalized  software
development costs totaled  approximately  $0.5 million,  $2.7 million,  and $1.3
million for fiscal years 1997,  1996, and 1995,  respectively.  Estimated direct
on-line diagnostic support and warranty costs are accrued at the time of product
shipment.

        ADVERTISING.  Advertising costs are charged to operations when incurred.
The  Company  has  not  incurred  any  costs  associated  with   direct-response
advertising  during  fiscal  years  1997,  1996,  and 1995,  and  there  were no
capitalized  advertising  costs at  September  27, 1997 or  September  28, 1996.
Advertising  expenses for fiscal 1997, 1996, and 1995 were $14.7 million,  $12.6
million, and $21.0 million, respectively.

        RETIREMENT/POST-EMPLOYMENT  BENEFITS. Net pension cost for the Company's
domestic  defined benefit pension plan is funded as accrued,  to the extent that
current  pension cost is deductible for U.S.  Federal tax purposes and to comply
with the General Agreement on Tariff and Trade Bureau (GATT) additional  minimum
funding  requirements  for the plan year  beginning  October 1, 1995. The plan's
transition  surplus  is  amortized  over 18  years.  Net  pension  cost  for the
Company's  international  defined benefit  pension plans is generally  funded as
accrued.  The net transition  surplus or obligation for these plans is amortized
over periods ranging from 15 to 20 years.

        Net   post-retirement   benefit   costs  for  the   Company's   domestic
post-retirement  benefits  plan are generally  funded as accrued,  to the extent
that  current  cost  is  deductible  for  U.S.  Federal  tax  purposes.  The net
transition obligation for the plan is amortized over 18 years.

        IMPAIRMENT  OF  LONG-LIVED  ASSETS.  The Company  periodically  assesses
whether any events or changes in circumstances have occurred that would indicate
that the carrying amount of a long-lived  asset may not be recoverable.  If such
an event or change in circumstance  occurs,  the Company  evaluates  whether the
carrying  amount of such asset is recoverable by comparing the net book value of
the asset to  estimated  future  undiscounted  cash  flows,  excluding  interest
charges,  attributable  to such asset.  If it is  determined  that the  carrying
amount is not  recoverable,  the Company will recognize an impairment loss equal
to the excess of the carrying  amount of the asset over its estimated fair value
of such asset.

        INCOME TAXES.  The Company  utilizes the asset and  liability  method of
accounting for income taxes,  as set forth in SFAS 109,  "Accounting  for Income
Taxes".  Under this method,  deferred tax assets and  liabilities are recognized
for the expected future tax  consequences of events that have been recognized in
the  Company's  Financial  Statements  or  tax  returns.  Deferred  tax  expense
represents  the change in the net deferred tax asset or  liability  balance.  In
estimating  future tax consequences,  SFAS 109 generally  considers all expected
future events other than enactments of changes in the tax law or rates.

        STOCK-BASED   COMPENSATION   PLANS.   In  October  1995,  the  Financial
Accounting Standards Board ("FASB") issued SFAS 123, "Accounting for Stock-Based
Compensation".  In accordance  with  provisions of SFAS 123, the Company applies
Accounting  Principles  Board Opinion Number 25 and related  Interpretations  in
accounting for its stock option and purchase plans.  Note 9 to the  Consolidated
Financial Statements contains a summary of the pro forma effects to reported net
income and net income per share for fiscal years 1997 and 1996 as if the Company
had  elected  to  recognize  compensation  cost  based on the fair  value of the
options granted at grant date as prescribed by SFAS 123.

        EARNINGS  PER SHARE.  Primary net income  (loss) per share is based upon
the weighted  average number of common shares  outstanding,  including  dilutive
common stock equivalents.  Common stock equivalents represent the net additional
shares  resulting  from the assumed  exercise of options  outstanding  under the
Company's  stock option plans,  using the "treasury  stock"  method.  Net income
(loss) per share  assuming  full  dilution  is based upon the  weighted  average
number of common shares outstanding, including dilutive common stock equivalents
and assumed conversion of the Company's convertible debentures, if dilutive. For
fiscal 1997, 1996, and 1995, these  debentures are  anti-dilutive  and have been
excluded from the calculation.

During  fiscal  1997,  6.5  million  shares of Common  Stock  were  issued  upon
conversion of $124.8 million of 7 3/4% Convertible  Subordinated  Debentures due
2001. Had this conversion  occurred on September 29, 1996,  primary earnings per
share would have been $1.28 for fiscal year 1997.

                                       25

<PAGE>

        OTHER  RECENT  PRONOUNCEMENTS.  In July 1997,  the FASB issued SFAS 130,
"Reporting Comprehensive Income" and SFAS 131, "Disclosures About Segments of an
Enterprise and Related  Information".  In October 1997, the Accounting Standards
Executive Committee of American Institute of Certified Public Accountants issued
Statement of Position ("SOP") 97-2,  "Software Revenue  Recognition".  All these
statements are effective for fiscal years beginning after December 15, 1997. The
Company will implement these statements as required. The future adoption of SFAS
130,  SFAS 131,  and SOP 97-2 is not  expected to have a material  effect on the
Company's consolidated financial position or results of operations.


NOTE 3.  RESTRUCTURING

        During fiscal year 1995, the Company recorded restructuring provisions
of $43 million.  The amounts accrued and charged against the established
provisions were as follows:
<TABLE>

<CAPTION>

                                                    BEGINNING       CURRENT YEAR     ENDING
IN MILLIONS                                          BALANCE          CHARGES        BALANCE
--------------------------------------------------------------------------------------------
<S>
                                                    <C>             <C>             <C>
FISCAL 1997 ACTIVITY
Provision related to terminated employees........   $  2.5          $  (1.7)        $  0.8
Provisions for leases............................     10.0             (4.4)           5.6
Writedown of assets to be sold or discarded
and other........................................      2.0             (0.8)           1.2
                                                    ------          --------        ------
   Total.........................................   $ 14.5          $  (6.9)        $  7.6
                                                    ------          --------        ------

FISCAL 1996 ACTIVITY
Provision related to terminated employees........   $ 12.4          $  (9.9)        $  2.5
Provisions for leases............................     17.4             (7.4)          10.0
Writedown of assets to be sold or discarded
and other........................................      7.1             (5.1)           2.0
                                                    ------          --------        ------
   Total.........................................   $ 36.9          $ (22.4)        $ 14.5
                                                    ------          --------        ------
</TABLE>

        The 1995 restructuring charge included provisions for the termination of
approximately  520 employees as part of the Company's  continuing cost reduction
programs and  realignment  of the Company's  various sales,  manufacturing,  and
administrative  operations.  The fiscal 1995  provision for leases was primarily
for costs  associated with vacated leased  properties,  mainly in Western Europe
and  Australia,  as  a  result  of  the  Company's  ongoing  centralization  and
downsizing of its international  operations.  At September 27, 1997, the Company
had  substantially  completed  the  employee  terminations  related  to the 1995
restructuring.  The  remaining  reserves  at  September  27,  1997  are  for the
remaining  severance  payments  due to employees  impacted by the  restructuring
actions  and for leases for various  domestic  branch  sales  offices and excess
vacant  rental  properties,  primarily  located  in  Europe.  There have been no
material changes in the Company's previously announced restructuring actions.


NOTE 4.  CONSOLIDATED BALANCE SHEET DETAILS

<TABLE>
<CAPTION>
                                                               AS OF
                                                   ----------------------------
                                                      SEPT. 27,      SEPT. 28,
IN THOUSANDS                                             1997           1996
--------------------------------------------------------------------------------
<S>                                                  <C>              <C>
INVENTORIES
Raw materials...................................     $  16,169        $   4,560
Work in process.................................        78,335           50,769
Finished systems................................        44,349           43,710
Field engineering parts and components..........        27,155           30,744
                                                     ---------        ----------
     Total inventories..........................     $ 166,008        $ 129,783
                                                     ---------        ----------
PROPERTY, PLANT, AND EQUIPMENT
Land............................................     $   3,512        $   2,997
Buildings and improvement.......................        75,819           78,493
Manufacturing and design equipment..............        95,931           91,180
Data processing, office, and other equipment....       399,812          374,962
Computer equipment spares.......................        82,277           91,340
                                                     ---------        ----------
     Total property, plant, and equipment.......       657,351          638,972
Accumulated depreciation........................      (476,941)        (471,300)
                                                     ---------        ----------
     Total property, plant, and equipment, net..     $ 180,410        $ 167,672
                                                     ---------        ----------

OTHER CURRENT LIABILITIES
Accrued employee compensation and benefits.....      $  86,268        $  77,223
Deferred revenues..............................         50,574           44,621
Accrued restructuring charges..................          7,649           14,543
Other accrued expenses.........................         92,707          104,309
Current portion of long-term debt..............              -            1,920
                                                     ---------        ----------
     Total other current liabilities...........      $ 237,198        $ 242,616
                                                     ---------        ----------
</TABLE>

        During the current  fiscal year, the Company  retired fully  depreciated
computer equipment spares with an original cost of $20.3 million.

NOTE 5.  INCOME TAXES

        Domestic and foreign  income  (loss)  before  taxes,  and details of the
income tax provision (benefit) are as follows:
<TABLE>
<CAPTION>

                                                      YEAR ENDED
                                       -----------------------------------------
                                         SEPT. 27,     SEPT. 28,    SEPT. 30,
IN THOUSANDS                               1997          1996          1995
--------------------------------------------------------------------------------
<S>                                      <C>           <C>          <C>
INCOME (LOSS) BEFORE TAXES
     Domestic......................      $62,125       $32,200      $(13,336)
     Foreign.......................       (3,825)         (555)      (24,762)
                                         --------      --------     ---------
                                         $58,300       $31,645      $(38,098)
                                         --------      --------     ---------

INCOME TAX PROVISION (BENEFIT)
Current
     Federal.......................      $   250       $   650      $   1,000
     Foreign.......................        1,091         1,076          1,175
     State.........................          800           800          2,000
                                         --------      --------     ----------
          Total Current............        2,141         2,526          4,175
                                         --------      --------     ----------

Deferred
     Federal.......................            -         1,350          2,500
     Foreign.......................          259          (376)         1,930
                                         --------      --------     ----------
          Total Deferred...........          259           974          4,430
                                         --------      --------     ----------
                                         $ 2,400       $ 3,500      $   8,605
                                         --------      --------     ----------
</TABLE>
                                       26

<PAGE>

        Deferred  income taxes  reflect the tax impact of temporary  differences
between the amount of assets and  liabilities for financial  reporting  purposes
and such  amounts as measured by tax laws and  regulations.  Under SFAS 109, the
benefit associated with future deductible temporary differences is recognized if
it is more  likely  than not that a benefit  will be  realized.  The Company has
recorded a valuation  allowance  that  offsets  substantially  all  deferred tax
assets as of the end of each related year.  The amount of the deferred tax asset
considered  realizable is subject to change based on estimates of future taxable
income during the carryforward  period. The Company will assess the need for the
valuation  allowance at each balance sheet date based on all available evidence.
Principal  components of the deferred tax assets and liabilities included on the
balance sheet at September 27, 1997 and September 28, 1996 were as follows:

<TABLE>
<CAPTION>

                                                               AS OF
                                                   -----------------------------
                                                      SEPT. 27,      SEPT. 28,
IN THOUSANDS                                            1997           1996
--------------------------------------------------------------------------------
<S>                                                  <C>            <C>
DEFERRED TAX ASSETS
Inventory........................................    $   10,618     $    9,040
Operating expense................................        54,218         58,563
Intercompany profit in inventory and fixed assets         7,334          5,693
Depreciation.....................................         5,933          4,597
Restructuring....................................         1,403          5,817
Stock option plans...............................         6,026          5,527
Interest on convertible debentures...............         1,842          1,292
Net operating losses.............................       116,043        122,684
Tax credits......................................        17,696         11,796
                                                     ----------     ----------
     Gross deferred tax assets...................       221,113        225,009
Less: Valuation allowances.......................       195,071        204,017
                                                     ----------     ----------
     Total deferred tax assets...................        26,042         20,992
                                                     ----------     ----------

DEFERRED TAX LIABILITIES
Capitalized software development costs..........        (28,695)       (24,280)
Other...........................................         (2,748)        (1,854)
                                                     -----------    -----------
     Total deferred tax liabilities.............        (31,443)       (26,134)
                                                     -----------    -----------
     Net deferred tax liabilities...............     $   (5,401)    $   (5,142)
                                                     -----------    -----------
          
</TABLE>

Reconciliation of the U.S. Federal statutory rate to the Company's effective tax
rate is as follows:

<TABLE>
<CAPTION>

                                                      YEAR ENDED
                                       -----------------------------------------
                                            SEPT. 27,     SEPT. 28,    SEPT. 30,
                                              1997          1996         1995
--------------------------------------------------------------------------------
<S>                                         <C>          <C>          <C>
U.S. Federal statutory rate..............   35.0%        35.0%        (35.0%)
State income taxes.......................    1.4          2.5           5.2
Net domestic and foreign
     losses without tax benefits.........    3.7         15.0          55.5
Net operating loss carryforwards utilized  (36.8)       (42.1)        (10.2)
Foreign income taxed at different rates..    0.4         (1.5)          4.4
Alternative minimum tax..................    0.4          2.1           2.6
Other....................................      -          0.1           0.1
                                           ------       ------        ------
Effective tax rate.......................    4.1%        11.1%         22.6%
                                           ------       ------        ------

</TABLE>

        The Company has U.S. Federal and foreign operating loss carryforwards of
approximately  $311 million and tax credit  carryforwards of  approximately  $18
million. The operating loss carryforwards expire in the years 1998 through 2010.
The operating loss carryforward  expiring in 1998 is an immaterial  amount.  The
tax credit carryforwards expire in the years 2000 through 2004.

        Provision  has not been made for U.S.  or  additional  foreign  taxes on
approximately $86 million of undistributed earnings of foreign subsidiaries,  as
those earnings are considered to be permanently reinvested.  Such earnings would
become  taxable upon the sale or liquidation  of these foreign  subsidiaries  or
upon the remittance of dividends.  It is not  practicable to estimate the amount
of the deferred tax liability on such earnings. Upon remittance, certain foreign
countries impose  withholding taxes that are then available,  subject to certain
limitations,  for use as credits  against the Company's U.S. tax  liability,  if
any. The amount of withholding  tax that would be payable upon remittance of the
entire amount of undistributed earnings would approximate $0.9 million.


NOTE 6.  DEBT

<TABLE>
<CAPTION>
                                                                  AS OF
                                                       -------------------------
                                                         SEPT. 27,    SEPT. 28,
IN THOUSANDS                                               1997         1996
--------------------------------------------------------------------------------
<S>                                                      <C>          <C>
6% Convertible Subordinated Notes due 2004............   $212,750     $      -
7 3/4% Convertible Subordinated Debentures due 2001...          -      125,000
8 3/8% Sinking Fund Debentures due 2002...............          -       26,891
                                                         --------     --------
                                                          212,750      151,891
Less: current portion.................................          -       (1,920)
                                                         --------     --------
                                                         $212,750     $149,971
                                                         --------     --------
</TABLE>


        The 6% Convertible  Subordinated  Notes are convertible at the option of
the holder,  at any time prior to  maturity,  into shares of Common Stock of the
Company at a conversion  price of $26.194 per share,  subject to adjustment  for
certain  events.  The Notes are  subordinated  to all  Senior  Indebtedness  (as
defined in an indenture  under which the Notes were  issued).  At any time on or
after May 18, 2000,  the Company may redeem the Notes at  decreasing  redemption
prices;  and they may be  redeemed  at the  option  of the  holder if there is a
Fundamental  Change (as defined in the  indenture) in the Company's  operations.
The indenture does not contain any financial  covenants or any  restrictions  on
the payment of dividends or the repurchase of the Company's securities. Deferred
debt issuance costs at September 27, 1997 of $5.6 million are being amortized to
interest expense over the life of the Notes.

        On October 10,  1996,  the  Company  acquired a $3.9  million  principal
amount of the 8 3/8%  Sinking Fund  Debentures  at a discount.  The  transaction
resulted in an  immaterial  gain.  On May 21,  1997,  the Company  redeemed  the
remaining  Sinking  Fund  Debentures.  The Company  paid a premium to  debenture
holders, and the transaction resulted in an immaterial loss. The debentures were
retired  using a portion  of the  proceeds  of the  issuance  of 6%  Convertible
Subordinated Notes due 2004.

<PAGE>

        On August 18,  1997,  the Company  redeemed  $125  million of its 7 3/4%
Convertible  Subordinated Debentures due 2001 at a redemption price of 103.1% of
the  principal  face value plus accrued  interest to the  redemption  date.  The
debentures  provided  for  conversion  into  Common  Stock of Data  General at a
conversion  price of $19.20 any time before the redemption date. Prior to August
18, 1997,  $124.8 million of debentures  were  converted,  which resulted in the
issuance of 6.5 million shares of Common Stock.

        The Company does not have any maturity  requirements  for long-term debt
for the next five fiscal years.

        At September 27, 1997, the Company had a $30 million unsecured letter of
credit and reimbursement  facility with a group of banks. On September 30, 1997,
this facility was replaced with a $110 million unsecured senior revolving credit
facility  with a group of banks.  This latter  facility is available for working
capital,  capital  expenditures,  permitted  acquisitions,  and  to  secure  the
issuance  of  letters  of  credit.  It  contains  certain  covenants,  including
restrictions on particular liens, other indebtedness,  and certain  investments.
The interest  rate for  borrowings  under the revolving  credit  facility is the
lower of 1.25% per annum above LIBOR or the prime rate plus .5%. Commitment fees
paid on  available  funds during  fiscal years 1997 and 1996 were not  material.
There  were $5 million  and $8  million of letters of credit  secured by the $30
million  letter of credit and  reimbursement  facility at September 27, 1997 and
September 28, 1996,  respectively.  At September 30, 1997, those same $5 million
of letters of credit became secured by the $110 million credit facility.  During
fiscal  years 1997 and 1996,  there  were no  borrowings  under  either of these
facilities.  The current  facility  has a duration of three years and expires on
September 30, 2000.


NOTE 7.  FINANCIAL INSTRUMENTS, COMMITMENTS, AND CONTINGENCIES

        FINANCIAL  INSTRUMENTS.   The  Company  enters  into  various  types  of
financial instruments in the normal course of business.  Fair values for certain
financial  instruments  are based on quoted market prices.  For other  financial
instruments,  fair values are  estimated  based on  assumptions  concerning  the
amount and timing of  estimated  future  cash flows and assumed  discount  rates
reflecting varying degrees of perceived risk.  Accordingly,  the fair values may
not represent  actual values of the financial  instruments  that could have been
realized as of year end or that will be realized in the future.

        Fair values for cash and temporary  cash  investments,  marketable  debt
securities,  accounts receivable,  notes payable,  accounts payable, and accrued
expenses  approximate  carrying  value at September  27, 1997 and  September 28,
1996, due to the relatively  short maturity of these financial  instruments.  In
fiscal year 1996, an equity  security,  held by the Company as an investment and
previously  accounted for under the cost method, began trading on a public stock
exchange  and is  classified  as  available-for-sale.  The  fair  value  of this
marketable equity security totaled $4 million and $10.9 million at September 27,
1997 and September 28, 1996,  respectively.  The fair value of  investments  and
notes receivable,  included in other assets,  was $4 million and $4.2 million at
the year-end September 27, 1997 and September 28, 1996,  respectively,  which is
equal to their carrying values in both years.  The fair value of long-term debt,
including debt due within one year, at September 27, 1997 and September 28, 1996
was $267.8 million and $151.1 million, respectively, compared to carrying values
of $212.8 million and $151.9 million, respectively.

        The Company enters into various forward  contracts to limit its exposure
to fluctuations in foreign currency exchange rates. As of September 27, 1997, in
connection with the Company's foreign exchange hedging programs, the Company had
entered into forward  exchange  contracts to purchase  $88.6 million and to sell
$172.9 million in various foreign  currencies.  The Company's exposure to credit
risk is  believed to be minimal  since the  counterparties  are major  financial
institutions.  The market risk  exposure is limited to risk  related to currency
rate  movements.  As  substantially  all of these  contracts  were  entered into
shortly  before year end, the fair value of  outstanding  contracts at September
27, 1997, not material in amount, approximates the original value of the forward
contracts.  Between the end of this fiscal year and September 30, 1997,  forward
exchange  contracts  to  purchase  $88.6  million  and to sell $92.4  million in
various foreign  currencies  matured and were settled.  The remaining  contracts
mature at various dates through January 27, 1998.

<PAGE>

        The Company's  temporary cash investments,  marketable  securities,  and
accounts receivable are subject to potential  concentrations of credit risk. The
Company's  investment  policies  limit  the  amount of  investments  in a single
institution  and restrict  investments  to low-risk,  highly liquid  securities.
Portions  of the  Company's  trade  receivables  are  concentrated  in the  U.S.
government and in the healthcare industry.  Management does not believe that the
Company is subject to any unusual risk beyond the normal  credit risk  attendant
to operating its business.  Ongoing credit  evaluations of customers'  financial
condition are performed and generally,  collateral is not required.  The Company
maintains  reserves  for  potential  credit  losses  and  such  losses,  in  the
aggregate, have not exceeded management's expectations.

        In the normal  course of  business,  the  Company  enters  into  certain
sales-type lease arrangements with customers. These leases are generally sold to
third party financing  institutions.  A portion of these  arrangements  contains
certain  recourse  provisions  under  which  the  Company  remains  liable.  The
Company's maximum exposure under the recourse provisions was approximately $13.6
million,  net of related  reserves.  A portion of this contingent  obligation is
collateralized by security interests in the related equipment. The fair value of
the recourse  obligation at September 27, 1997 was not determinable as no market
exists for these obligations.

        LEASE COMMITMENTS.  Lease agreements are primarily for sales and service
offices and the Company's corporate  headquarters.  The leases expire at various
dates  through  2017 and some  contain  options  for  renewal.  Rental  expense,
including amounts charged against previously established  restructuring reserves
for vacant and sublet properties,  was $29.9 million,  $32.2 million,  and $32.3
million for fiscal years 1997, 1996, and 1995, respectively.

        Future minimum rental payments under existing  non-cancelable  operating
leases as of September 27, 1997 are as follows:

FISCAL YEAR       IN  MILLIONS
------------------------------
1998....................  25.9
1999....................  19.5
2000....................  16.1
2001....................  13.7
2002....................  12.0
Subsequent to 2002......  72.4
                       -------
                       $ 159.6
                       -------

        A majority of the leases  contain  escalation  clauses which provide for
increases in base rentals to recover  increases in future  operating  costs. The
future  minimum rental  payments shown above include base rentals,  exclusive of
any future escalation.  Approximately $55 million,  prior to amounts expected to
be recovered  through  subleases,  of the future minimum  rental  payments shown
above relate to  facilities  which have been closed or are expected to be closed
as the result of the  Company's  restructuring  and cost  reduction  program.  A
portion of the future rental  obligations for these  facilities,  net of amounts
expected to be recovered through existing and future subleases, has been accrued
as part of the restructuring charges.

<PAGE>

        LITIGATION.  In fiscal 1995, the Company  settled with Northrop  Grumman
Corporation its six-year  copyright  infringement  and trade secrets  litigation
against Grumman Support Systems Corporation ("Grumman"). Under the terms of this
settlement,  Grumman paid the Company $53 million and the parties  dismissed all
pending litigation.  The Company recognized a pre-tax gain, net of related legal
fees and other expenses,  of $44.5 million resulting from the settlement,  which
is included in other income, net, in the Consolidated Statements of Operations.

        The Company has been engaged in patent  infringement  litigation against
IBM Corporation since November 1994. Two lawsuits, both in the discovery stages,
are  pending  in  the  United  States   District   Court  for  the  District  of
Massachusetts  in  Worcester.  The Company  alleges that  several IBM  products,
including the AS/400 midrange systems and the AS/400 RISC-based computer product
line, infringe various Company's patents.  Both suits seek compensatory  damages
and, where appropriate, injunctive relief. IBM has answered both complaints, has
denied the  Company's  infringement  claims,  and has  interposed  counterclaims
alleging that the Company's  AViiON and CLARiiON  computer  systems infringe IBM
patents.

        Although the Company  believes its claims are valid,  it cannot  predict
the  outcome  of  the  litigation.  In  the  opinion  of  management,  based  on
preliminary  evaluation  of the IBM  patents  covered in the  counterclaim,  and
subject to the risks of litigation,  the  counterclaims  are without merit,  the
Company  will  prevail  thereon and the  counterclaims  will not have a material
adverse  impact on the results of operations  or the  financial  position of the
Company.

        The  Company  and certain of its  subsidiaries  are  involved in various
other patent  infringement,  contractual,  and proprietary  rights suits. In the
opinion of  management,  the  conclusion of these suits will not have a material
adverse effect on the financial position or results of operations and cash flows
of the Company and its subsidiaries.


NOTE 8.  STOCKHOLDERS' EQUITY

        The Company has  100,000,000  authorized  shares of Common Stock.  As of
September 27, 1997, 48,808,000 shares of Common Stock have been issued, of which
220,000  shares with a cost of $6.5  million are held by the Company as treasury
shares.  As of September  28, 1996,  39,821,000  shares of Common Stock had been
issued,  of which  220,000  shares with a cost of $6.5  million were held by the
Company as treasury shares.

        The Company has 1,000,000  authorized shares of $.01 par value preferred
stock.  The  Company's  Board of Directors  (the "Board") is authorized to issue
shares of preferred  stock in such series and with such terms and  conditions as
the Board may  determine.  In  connection  with the  adoption  of the  Company's
Stockholder Rights Plan (see below), as of September 27, 1997, 400,000 shares of
preferred stock had been designated as Series A Junior  Participating  Preferred
Stock. On November 5, 1997, an additional 200,000 shares of preferred stock were
designated  as  Series A Junior  Participating  Preferred  Stock.  No  shares of
preferred stock have been issued as of September 27, 1997.

        Under the  Stockholder  Rights  Plan  adopted  in 1986,  as  amended,  a
dividend of Stock  Purchase  Rights (the  "Rights") was paid.  The Rights enable
common  stockholders  to  purchase  from the  Company  shares of Series A Junior
Participating   Preferred  Stock  under  certain  circumstances   following  the
acquisition of, or attempt to acquire, 20% or more of the Company's Common Stock
or a  determination  that an "adverse  person" has  purchased 15% or more of the
Common Stock. The Rights also entitle common  stockholders to purchase shares of
the  Company's or an  acquirer's  Common Stock at one-half of market value under
circumstances  which  include  certain  transactions  by  or  with  a  potential
acquirer,  including "adverse persons", and mergers and certain asset sales. The
Rights may be redeemed by the Company under certain circumstances.

<PAGE>

NOTE 9.  STOCK PLANS

        The Company adopted SFAS 123, "Accounting for Stock-Based  Compensation"
in fiscal  1997.  As  permitted  by SFAS 123,  the Company  continues to measure
compensation cost in accordance with APB Opinion 25 and related  Interpretations
in accounting for its plans. Had compensation cost for the Company's stock-based
compensation plans,  including the employee stock purchase plan, been determined
based  on the fair  value at the  grant  dates  for  awards  under  these  plans
consistent  with the method of SFAS 123, the  Company's  net income and earnings
per share would have been reduced to the pro forma amounts indicated below:

<TABLE>
                                                            YEAR ENDED
                                                    ----------------------------
                                                      SEPT. 27,     SEPT. 28,
                                                        1997          1996
--------------------------------------------------------------------------------
<S>                                                   <C>           <C>
Net income (in thousands)
          As reported............................     $55,900        $28,145
          Pro forma..............................      52,473         26,161

Primary earnings per share
          As reported............................       $1.26          $0.68
          Pro forma..............................       $1.19          $0.64

</TABLE>

        The effect on net income and  earnings  per share is not  expected to be
indicative  of the effects on net income and earnings per share in future years.
The fair value of each option  grant is estimated on the date of grant using the
Black-Scholes option-pricing model with the following assumptions:

<TABLE>

                                                            YEAR ENDED 
                                                   -----------------------------
                                                      SEPT. 27,     SEPT. 28,
                                                        1997          1996
--------------------------------------------------------------------------------
<S>                                                   <C>           <C>
Expected volatility..............................     38.75%        42.91%
Risk-free interest rate..........................      5.9%          5.6%
Expected life of options in years................      4.2           4.2
Expected dividend yield..........................       -             -

</TABLE>

        During fiscal years 1997 and 1996, the weighted average  grant-date fair
value of options granted was $10.73 and $6.09 per share,  respectively,  and the
exercise price of options granted was $11.70 and $8.65 per share, respectively.

        EMPLOYEE  STOCK OPTION  PLANS.  The Company has three stock option plans
that  authorize the grant of either  incentive  stock  options or  non-qualified
stock options to key  employees,  to purchase up to 21,500,000  shares of Common
Stock.  For incentive  options,  the purchase  price is equal to the fair market
value on the date of grant.  For  non-qualified  options,  the purchase price is
determined  by the plan  committees  within  limits as set  forth in the  plans.
Options  granted  under the plans  generally  are  immediately  exercisable  and
include restrictions  against disposition of the shares and a requirement,  upon
termination of employment, to offer unvested shares for resale to the Company at
their original  purchase price.  The periods over which  restrictions  lapse are
determined by the plan committees. Options may expire up to ten years after date
of grant. During fiscal 1997,  3,500,000  additional shares of Common Stock were
authorized for issuance under the plans.

<PAGE>

        A summary of the status of these stock option plans as of September  27,
1997,  September 28, 1996,  and September 30, 1995 and changes  during the years
ending on those dates is presented as follows:

<TABLE>

                                               NO. OF OPTIONS WTD. AVG. PRICE
                                                 (000's)          PER SHARE
--------------------------------------------------------------------------------
<S>                                               <C>               <C>
Outstanding, September 24, 1994.............      4,950             $5.51
     Options granted........................      1,632             $5.37
     Options exercised......................       (675)            $3.82
     Options canceled.......................       (465)            $7.66
                                                  -----
Outstanding, September 30, 1995.............      5,442             $5.49

     Options granted........................        624             $6.43
     Options exercised......................       (958)            $4.25
     Options canceled.......................       (298)            $5.63
                                                  -----
Outstanding, September 28, 1996.............      4,810             $5.88

     Options granted........................      1,274             $9.40
     Options exercised......................     (1,900)            $5.39
     Options canceled.......................       (151)            $6.14
                                                  -----
Outstanding, September 27, 1997.............      4,033             $7.22
                                                  =====

Exercisable, September 27, 1997.............      1,274             $6.96

Options reserved for future grants,
September 27, 1997..........................      4,902

</TABLE>

        The  following  table  summarizes   information  about  these  plans  at
September 27, 1997:

<TABLE>
<CAPTION>
                                                                                   Options
                                Options Outstanding                          Currently Exercisable
               ======================================================   ==============================
                                  Wtd. Avg.
Exercise          No. of         Contractual            Wtd Avg.          No. of          Wtd. Avg.
Price Range       Options       Life(in Years)       Exercise Price       Options       Exercise Price
-----------       -------       --------------       --------------       -------       --------------
                  (000's)                                                 (000's)
<S>               <C>               <C>                  <C>                <C>             <C>
$1.06 - $3.97       453             6.76                 $ 3.27             161             $ 2.89
$4.00 - $7.94     2,106             7.30                 $ 5.52             574             $ 5.03
$8.00 - $18.88    1,474             7.79                 $10.86             539             $10.22

</TABLE>


        EMPLOYEE  QUALIFIED STOCK PURCHASE PLAN. This plan covers  substantially
all employees and authorizes  the issuance of a maximum of 11,100,000  shares of
Common Stock upon exercise of nontransferable options granted semiannually.  The
options are  exercisable  six months after grant,  at the lower of 85% of market
value at the beginning or end of the six-month period,  through  accumulation of
payroll  deductions of up to 10% of each  participating  employee's regular base
pay at the beginning of each period.  During fiscal 1997,  2,500,000  additional
shares of Common Stock were  authorized for issuance under the plan, and options
were  exercised  to purchase  579,000  shares at an average  price of $11.63 per
share.  Unissued  shares of Common Stock reserved for future issuance under this
plan were 2,280,000 shares at September 27, 1997 and 359,000 shares at September
28, 1996.

        NON-EMPLOYEE  DIRECTOR STOCK OPTION PLAN. This plan authorizes the grant
of an option to  purchase  4,000  shares  of Common  Stock to each  non-employee
director  on the  date of the  director's  annual  election(s)  to the  Board of
Directors.  The exercise  price of options  granted is 100% of the closing price
per share of Common Stock on the date of grant.  An aggregate of 150,000  shares
of Common Stock may be issued under the plan.  Options  granted are  immediately
exercisable and include restrictions  against disposition of the shares.  Should
the optionee cease to serve as a director,  except under certain  circumstances,
any restricted  shares must be offered to the Company at their original purchase
price. Restrictions lapse cumulatively to the extent of 25% of the grant on each
anniversary of the date of grant.

<PAGE>

        During fiscal 1997, 1996, and 1995,  28,000,  24,000, and 24,000 options
were granted at a weighted average price of $20.30, $15.75, and $8.38 per share,
respectively.  During  fiscal 1997,  options were  exercised to purchase  11,000
shares at a weighted  average  price of $9.12 per  share.  There were no options
exercised during both fiscal years 1996 and 1995. There were no options canceled
during fiscal years 1997, 1996, and 1995. Options to purchase 81,000, 64000, and
40,000  shares at a  weighted  average  price of $14.61,  $11.17,  and $8.43 per
share, respectively, were outstanding at the end of fiscal 1997, 1996, and 1995.
As of  September  27, 1997,  the 81,000  options  outstanding  in this plan have
exercise  prices  between $8.38 and $33.32  with a  weighted  average  remaining
contractual  life of 8.2 years, and 19,000 shares were exercisable at a weighted
average price of $10.36 per share.  There were 58,000 shares reserved for future
grants at September 27, 1997.

        NON-EMPLOYEE DIRECTOR RESTRICTED STOCK OPTION PLAN. This plan authorized
the  grant of an  option  to  purchase  4,000  shares  of  Common  Stock to each
non-employee  director upon his initial election to the Board of Directors.  The
exercise  price of  options  granted  is the lesser of 50% of the book value per
share of Common Stock at the end of the fiscal year  preceding the date of grant
or 25% of the fair market value per share on the date of grant.  An aggregate of
32,000 shares of Common Stock may be issued under the plan.  Options granted are
immediately  exercisable  and include  restrictions  against  disposition of the
shares.  Should the optionee cease to serve as a director,  except under certain
circumstances,  any  restricted  shares  must be offered to the Company at their
original purchase price. Restrictions lapse cumulatively to the extent of 25% of
the grant on each anniversary of the date of grant.

        During  fiscal  1995,  options to  purchase  4,000  shares at a weighted
average  price of $2.66 per share were issued.  There were no options  exercised
during fiscal 1997.  During fiscal years 1996 and 1995,  4,000 and 2,000 options
were  exercised  at a  weighted  average  price of $10.50  and $4.38 per  share,
respectively. There were no options canceled during fiscal years 1997, 1996, and
1995.  At September  27,  1997,  options to purchase  10,000  shares at exercise
prices between $1.81 and $4.38,  with a weighted average  remaining  contractual
life of 5.8 years were  outstanding,  and 7,000  shares  were  exercisable  at a
weighted average price of $2.79 per share.  This plan terminated on December 31,
1994.  Outstanding  options can be exercised until their expiration date. No new
options can be issued.


NOTE 10.  BENEFIT PLANS

        The Company has a  noncontributory  defined  benefit  pension plan which
covers  substantially  all U.S.  employees.  The Company also has a supplemental
retirement benefit plan, which covers certain U.S. employees. Benefits under the
plans  are  based on an  employee's  regular  base pay and  creditable  years of
service, as defined in the plans.  Certain of the Company's foreign subsidiaries
also  have  retirement  plans  covering  substantially  all of their  employees.
Benefits under these plans are generally based on either career average or final
average salaries and creditable  years of service,  as defined in the plans. The
annual  cost for these  plans is  determined  using the  projected  unit  credit
actuarial  cost method which  includes  significant  actuarial  assumptions  and
estimates  which are subject to change in the near term.  Prior  service cost is
amortized over the average  remaining  service  period of employees  expected to
receive  benefits  under the plan.  Funds  contributed to the plans are invested
primarily in common stocks, mutual funds, global bond funds, and cash equivalent
securities.

<PAGE>

The components of net pension expense are as follows:
<TABLE>
<CAPTION>

                                                        YEAR ENDED
                                           -------------------------------------
                                            SEPT. 27,    SEPT. 28,    SEPT. 30,
IN THOUSANDS                                  1997         1996         1995
--------------------------------------------------------------------------------
<S>                                         <C>          <C>          <C>
Service cost............................... $  7,886     $  7,468     $  7,806
Interest on projected benefit obligation...   14,127       12,736       11,504
Actual return on plan assets...............  (32,325)     (14,362)     (17,460)
Deferral of net actuarial gains and
  amortization of transition surplus and
  prior service cost.......................   17,261        2,283        7,850
Curtailment loss, net of settlement gain...      316          (50)         817
                                            --------     --------     --------
Net pension expense........................ $  7,265     $  8,075     $ 10,517
                                            --------     --------     --------
</TABLE>

The funded status of the plans is as follows:

<TABLE>
<CAPTION>
                                                                AS OF
                                                       -------------------------
                                                        SEPT. 27,    SEPT. 28,
IN THOUSANDS                                              1997         1996
--------------------------------------------------------------------------------
<S>                                                      <C>          <C>
ACTUARIAL PRESENT VALUE OF BENEFIT OBLIGATIONS
     Vested benefit obligation.........................  $174,673     $150,779
                                                         --------     --------
     Accumulated benefit obligation....................  $183,164     $158,683
                                                         --------     --------
     Projected benefit obligation......................  $203,070     $178,353

Market value of plan assets............................   192,424      150,096
                                                         --------     --------
Excess of projected benefit obligation over plan assets    10,646       28,257
Unrecognized actuarial gain............................    15,560        5,871
Unrecognized prior service cost........................   (16,561)     (17,995)
Unrecognized transition surplus, net...................     6,236        7,062
                                                         --------     --------
Net pension liability included in current
  and other liabilities...............................   $ 15,881     $ 23,195
                                                         --------     --------

ASSUMPTIONS USED IN COMPUTING THE FUNDED
STATUS OF THE PLANS
     Weighted average discount rate...................      7.63%        8.00%
     Expected  long-term  weighted  average rate
       of return of assets............................      9.41%        9.65%
     Weighted average rate of increase in
       compensation levels............................      4.16%        4.31%

</TABLE>

        As of October 1, 1997,  the U.S.  plan was amended to change the benefit
for  creditable  service  prior to October 1, 1997 to 1 1/2% of a  participant's
average base pay on October 1, 1997. The benefit  formula for future service did
not  change.   The  update  will  generally  result  in  increased  benefits  to
participants  with  creditable  service prior to October 1, 1997.  The amendment
resulted in increases of approximately  $11.8 million,  $13.1 million,  and $7.8
million  in the fiscal  1998  vested  benefit  obligation,  accumulated  benefit
obligation, and projected benefit obligation, respectively.

        As  a  result  of  the  Company's  restructuring  and  cost  containment
programs,  pension  curtailment losses of $0.9 million were recognized in fiscal
1995.  This amount was  previously  reserved as part of the fiscal 1994 and 1993
restructuring charges.

        The Company also has foreign defined  contribution  pension plans. Total
pension  cost charged to expense for these plans was $1.6 million in both fiscal
years 1997 and 1996, and $1.7 million in fiscal 1995.

<PAGE>

        The Company's  post-retirement benefit plan provides certain medical and
life insurance benefits for retired employees.  Substantially all U.S. employees
of the Company may become  eligible for these  benefits if they remain  employed
until  normal  retirement  age and fulfill  other  eligibility  requirements  as
specified by the plan.  With the exception of certain  participants  who retired
prior to 1986,  the medical  benefit  plan  requires  monthly  contributions  by
retired  participants in amounts equal to insured  equivalent costs less a fixed
Company  contribution which is dependent on the participant's  length of service
and Medicare  eligibility.  Benefits are  continued  to  dependents  of eligible
retiree  participants  for 39 weeks  after  the death of the  retiree.  The life
insurance  benefit plan is  noncontributory.  Funds  contributed to the plan are
invested  primarily  in  common  stocks,   mutual  funds,  and  cash  equivalent
securities.

The components of net periodic post-retirement benefit cost are as follows:

<TABLE>

                                                        YEAR ENDED
                                             -----------------------------------
                                             SEPT. 27,   SEPT. 28,    SEPT. 30,
IN THOUSANDS                                   1997        1996         1995
--------------------------------------------------------------------------------
 <S>                                         <C>         <C>          <C>
Service cost...............................  $   296     $   293      $   308
Interest on projected benefit obligation...      687         655          657
Actual return on plan assets...............      (26)        (56)        (150)
Deferral of net actuarial gains and
  amortization of transition surplus and
  prior service cost.......................      247         282          344
                                             -------     -------      -------
Net pension expense                          $ 1,204     $ 1,174      $ 1,159

</TABLE>

The funded status of the plan is as follows:
<TABLE>
                                                                 AS OF
                                                     ---------------------------
                                                         SEPT. 27,    SEPT. 28,
IN THOUSANDS                                               1997         1996
-------------------------------------------------------------------------------
<S>                                                      <C>         <C>
ACCUMULATED POST-RETIREMENT BENEFIT OBLIGATION
     Retirees.........................................   $ 4,273     $ 3,989
     Fully eligible active plan participants..........     1,206       1,088
     Other active plan participants...................     4,085       3,683
                                                         -------     -------
Total accumulated post-retirement benefit obligation..     9,564       8,760
Market value of plan assets...........................        88          66
                                                         -------     -------
Excess of accumulated post-retirement benefit
  obligation over plan assets.........................     9,476       8,694
Unrecognized transition obligation....................    (2,292)     (2,468)
Unrecognized prior service cost.......................      (719)       (791)
Unrecognized actuarial gain...........................     1,293       1,118
                                                         -------     -------
Net post-retirement benefit liability included
  in current and other liabilities....................   $ 7,758     $ 6,553
                                                         -------     -------
ASSUMPTIONS USED IN COMPUTING THE FUNDED
STATUS OF THE PLAN
     Weighted average discount rate...................     7.75%       8.00%
     Expected long-term weighted average rate
       of return of assets............................    10.00%      10.00%

</TABLE>

        For participants who receive full retiree medical benefits,  the medical
premium rates were assumed to increase at 7% for fiscal 1997 and  thereafter.  A
1% increase in the medical trend rate would not have a significant impact on the
accumulated post-retirement benefit obligation as of September 28, 1997.

<PAGE>

NOTE 11.  EARNINGS PER SHARE

        In February 1997, the FASB issued SFAS 128,  "Earnings per Share".  SFAS
128 specifies  modifications  to the calculation of earnings per share from that
currently used by the Company. SFAS 128 is effective for both interim and annual
periods  ending  after  December  15, 1997.  As required by the  Securities  and
Exchange Commission,  the Company discloses pro forma earnings per share amounts
computed  in  accordance  with  the SFAS  128 in the  notes to the  Consolidated
Financial Statements prior to required adoption.

<TABLE>
<CAPTION>
                                                                       YEAR ENDED
                               ----------------------------------------------------------------------------------------
                                           SEP. 27, 1997                                     SEP 28, 1996
                               --------------------------------------          ----------------------------------------
in thousands,                    Income        Shares       Per-Share            Income         Shares       Per-Share
except per share amounts       (Numerator)  (Denominator)    Amount            (Numerator)   (Denominator)     Amount
-------------------------      -----------  -------------   ---------          -----------   -------------   ----------
<S>                             <C>            <C>           <C>                 <C>            <C>           <C>
BASIC EARNINGS PER SHARE
Net income available to
  common stockholders           $55,900        41,347        $1.35               $28,145        38,769         $0.73

EFFECT OF DILUTIVE SECURITIES
Stock Options                        --         2,868                                 --         2,326
                                -------        ------                            -------        ------

DILUTED EARNINGS PER SHARE
Net income available to common
  stockholders and assumed
  conversions                   $55,900        44,215        $1.26               $28,145        41,095         $0.68
                                =======        ======        =====               =======        ======         =====

</TABLE>

        For the years ended  September  27, 1997 and  September  28,  1996,  the
assumed conversion of convertible  debentures,  giving effect to the incremental
shares and the adjustment to reduce interest  expense,  is anti-dilutive and has
therefore been excluded from the computation.


NOTE 12.  GEOGRAPHIC SEGMENT DATA

The  Company's  operations  involve  a single  industry  segment  - the  design,
manufacture,  sale and support of multi-user computer systems, servers, and mass
storage devices.

Financial information, summarized by geographic area, is presented below.

<TABLE>
<CAPTION>

                                                                             OTHER
IN THOUSANDS                           UNITED STATES        EUROPE        INTERNATIONAL        ELIMINATIONS        CONSOLIDATED
------------------------------------------------------------------------------------------------------------------------------------
<S>                                     <C>                 <C>               <C>               <C>                <C>
YEAR ENDED SEPTEMBER  27, 1997

Total revenues
     Unaffiliated customers..........   $1,133,230          $273,838          $126,101                             $1,533,169
     Inter-area transfers............      115,620                 -            29,608          $(145,228)                  -
                                        ----------          --------          --------          ---------          ----------
          Total......................   $1,248,850          $273,838          $155,709          $(145,228)         $1,533,169
                                        ----------          --------          --------          ---------          ----------
Income (loss) from operations........   $   70,274          $ (5,031)         $ (4,563)         $   2,493          $   63,173
                                        ----------          --------          --------          ---------          ----------
Identifiable assets..................   $  684,899          $184,554          $ 94,684          $(129,523)         $  834,614
                                        ----------          --------          --------          ---------
Corporate assets.....................                                                                                 300,254
                                                                                                                   ----------
          Total assets...............                                                                              $1,134,868
                                                                                                                   ==========

YEAR ENDED SEPTEMBER  28, 1996
Total revenues
     Unaffiliated customers..........   $  941,916          $263,461          $116,873                             $1,322,250
     Inter-area transfers............      120,810                 -            26,497          $(147,307)                  -
                                        ----------          --------          --------          ---------          ----------
          Total......................   $1,062,726          $263,461          $143,370          $(147,307)         $1,322,250
                                        ----------          --------          --------          ---------          ----------
Income (loss) from operations........   $   42,277          $  3,054         $  (9,613)         $   1,559          $   37,277
                                        ----------          --------          --------          ---------          ----------
Identifiable assets..................   $  562,845          $177,903          $ 88,614          $(106,897)         $  722,465
                                        ----------          --------          --------          ---------
Corporate assets.....................                                                                                 137,978
                                                                                                                   ----------
          Total assets...............                                                                              $  860,443
                                                                                                                   ==========


YEAR ENDED SEPTEMBER  30, 1995
Total revenues
     Unaffiliated customers..........   $  744,762          $295,357          $119,197                             $1,159,316
     Inter-area transfers............      117,811                 -            20,416          $(138,227)                  -
                                        ----------          --------          --------          ---------          ----------
          Total......................   $  862,573          $295,357          $139,613          $(138,227)         $1,159,316
                                        ----------          --------          --------          ---------          ----------
Restructure charge...................   $   19,168          $ 18,901          $  4,931                             $   43,000
                                        ----------          --------          --------                             ----------
Income (loss) from operations........   $  (51,686)         $(15,108)         $(16,050)         $   6,890          $  (75,954)
                                        ----------          --------          --------          ---------          ----------
Identifiable assets..................   $  548,503          $193,971          $ 87,746          $(104,248)         $  725,972
                                        ----------          --------          --------          ---------
Corporate assets.....................                                                                                 106,046
                                                                                                                   ----------
          Total assets...............                                                                              $  832,018
                                                                                                                   ==========
</TABLE>


        United States  inter-area  transfers  primarily  represent  shipments of
equipment  and  parts  to  international   subsidiaries.   Other   international
inter-area  transfers  primarily  represent  shipments  of work in  process  and
finished goods inventory from manufacturing  facilities to domestic  operations.
These inter-area  shipments are made at transfer prices which approximate prices
charged to unaffiliated customers and have been eliminated from consolidated net
revenues.  United States  revenues from  unaffiliated  customers  include direct
export sales.  Corporate assets consist  primarily of temporary cash investments
and marketable securities.

        Total  liabilities of international  subsidiaries,  before  intercompany
eliminations,  were $247.2  million at September 27, 1997 and $223.1  million at
September 28, 1996.  Cumulative retained earnings of international  subsidiaries
were $87.7 million at September 27, 1997 and $74.6 million at September 28, 1996

<PAGE>

DATA GENERAL CORPORATION
REPORT OF INDEPENDENT ACCOUNTANTS


TO THE BOARD OF DIRECTORS AND STOCKHOLDERS
OF DATA GENERAL CORPORATION

In our opinion,  the  accompanying  consolidated  balance sheets and the related
consolidated  statements  of  operations,  of cash flows,  and of  stockholders'
equity present fairly, in all material respects,  the financial position of Data
General Corporation and its subsidiaries at September 27, 1997 and September 28,
1996,  and the results of their  operations and their cash flows for each of the
three years in the period ended September 27, 1997, in conformity with generally
accepted   accounting   principles.   These   financial   statements   are   the
responsibility of the Company's management;  our responsibility is to express an
opinion on these  financial  statements  based on our audits.  We conducted  our
audits of these  statements  in  accordance  with  generally  accepted  auditing
standards which require that we plan and perform the audit to obtain  reasonable
assurance   about  whether  the  financial   statements  are  free  of  material
misstatement.  An audit includes examining, on a test basis, evidence supporting
the  amounts  and  disclosures  in  the  financial  statements,   assessing  the
accounting  principles  used and significant  estimates made by management,  and
evaluating the overall  financial  statement  presentation.  We believe that our
audits provide a reasonable basis for the opinion expressed above.


/s/ Price Waterhouse LLP

Boston, Massachusetts
October 29, 1997


SUPPLEMENTAL FINANCIAL INFORMATION


QUARTERLY FINANCIAL DATA (UNAUDITED)

<TABLE>
<CAPTION>
                                               FIRST         SECOND          THIRD         FOURTH         FISCAL
IN MILLIONS, EXCEPT PER SHARE AMOUNTS         QUARTER        QUARTER        QUARTER        QUARTER         YEAR
 -----------------------------------------------------------------------------------------------------------------------
<S>                                            <C>            <C>            <C>            <C>            <C>

FISCAL 1997:
Total revenues.......................          $348.5          $389.3         $391.3         $404.1         $1,533.2
Total cost of revenues...............           229.5           260.8          260.9          270.4          1,021.6
Net income...........................            10.4            13.8           14.7           17.0             55.9
Net income per share.................          $ 0.25          $ 0.32         $ 0.34         $ 0.35         $   1.26

FISCAL 1996
Total revenues.......................          $327.6          $335.2         $323.2         $336.3         $1,322.3
Total cost of revenues...............           221.7           224.2          211.2          220.6            877.7
Net income...........................             4.7             6.3            7.2            9.9             28.1
Net income per share.................          $ 0.12          $ 0.15         $ 0.17         $ 0.24         $   0.68

</TABLE>

<PAGE>

STOCK PRICE RANGE

The principal  markets on which the  Company's  stock is traded are the New York
Stock Exchange  ("NYSE") under the symbol "DGN",  and the London Stock Exchange.
The table below shows the range of reported last sale prices on the NYSE for the
Company's  Common  Stock  during each  quarterly  period for the last two fiscal
years.

<TABLE>
<CAPTION>
                                        FISCAL 1997               FISCAL 1996
                                     ----------------          ----------------
                                     HIGH        LOW           HIGH        LOW
--------------------------------------------------------------------------------
<S>                                  <C>         <C>           <C>         <C>
First quarter..................      15 5/8      13            14 3/4      9 1/4
Second quarter.................      20 3/8      14 1/2        19 1/8     11 3/4
Third quarter.................       26 1/2      15 5/8        17 1/8     12 1/4
Fourth quarter................       37 1/4      25 3/4        14          9 1/4

</TABLE>



DATA GENERAL CORPORATION

FACILITIES

Data  General  does  business in more than 70 countries  through  direct  sales,
subsidiaries,  distributors, and representatives.  The company has approximately
250 sales and service offices. Major administrative,development,  manufacturing,
and support  facilities,  and  subsidiaries'  headquarters  locations are listed
below.

FACILITY LOCATION
(Approximate Square Feet)

Westborough, Massachusetts
(512,000/Leased)             corporate headquarters; administration; product
                             development; special systems

Southborough, Massachusetts
(545,000)                    manufacturing service division;  software
                             reproduction; distribution center;   equipment
                             refurbishment;  major unit  repair; custom  product
                             manufacturing;  field  engineering  services  and
                             logistics;  and the CLARiiON Business  Unit

Apex,  North  Carolina
(388,000)                    assembly,  test  and  systems integration  facility

Research Triangle Park,
North Carolina
(174,000)                    advanced systems research and development

Norcross, Georgia
(105,000/Leased)             customer support  center

Mississauga, Ontario,
Canada
(32,000/Leased)              sales;  field engineering; administration

Etobicoke, Ontario, Canada
(18,000/Leased)              product repair  center

Chihuahua, Mexico
(55,000/Leased)              product  repair  center

Schwalbach, Germany
(48,000/Leased)              sales;  customer  education;   services

Brentford, England
(120,000/Leased)*            sales; services; administration; customer education

Manila,   Philippines
(68,000)                     power   supply  and   transformer manufacturing;
                             communications  products assembly and test

Melbourne, Australia
(31,000/Leased)              product repair center; logistics and equipment
                             refurbishment

* Includes 30,000 square-feet of sub-leased space.

<PAGE>

SUBSIDIARY HEADQUARTERS

Canada                          Toronto/Mississauga

ASIA/PACIFIC
Australia                       Sydney
Hong Kong
Japan                           Tokyo
Korea                           Seoul
Malaysia                        Kuala Lumpur
New Zealand                     Wellington
Singapore
Thailand                        Bangkok

EUROPE
Austria                         Vienna
Belgium                         Brussels
Denmark                         Copenhagen/Smedeholm
France                          Paris/Velizy
Germany                         Frankfurt/Schwalbach
Italy                           Milan
Netherlands                     Amsterdam
Norway                          Oslo/Voyenenga
Portugal                        Lisbon
Spain                           Madrid
Sweden                          Stockholm/Kista
Switzerland                     Zurich
United Kingdom and Ireland      London/Brentford

LATIN AMERICA
Argentina                       Buenos Aires
Brazil                          Sao Paulo
Chile                           Santiago
Mexico                          Monterrey
Peru                            Lima
Puerto Rico                     San Juan
Venezuela                       Caracas



<PAGE>


DATA GENERAL CORPORATION

OFFICERS AND DIRECTORS

Frederick R. Adler             Director, Chairman of the Executive Committee;
                               of counsel to Fulbright & Jaworski L.L.P.
                               Attorneys at Law, New York, New York

Ethan Allen Jr.                Vice President, Services

Stephen P. Baxter              Vice President, Europe

Ferdinand Colloredo-Mansfeld   Director; Chairman of the Board, Cabot Partners
                               Limited Partnership, Boston, Massachusetts

Jeffrey M. Cunningham*         Director; Group Publisher, Forbes, Inc.,
                               New York, New York

William J. Cunningham          Senior Vice President, Manufacturing and Product
                               Development

Arthur W. DeMelle              Senior Vice President; Chief Financial Officer

David J. Ellenberger           Vice President, NT Business Unit

Jacob Frank                    Vice President and General Counsel

John J. Gavin Jr.              Vice President; Controller

Larry D. Hemmerich             Vice President, CLARiiON Business Unit

Carl E. Kaplan                 Secretary; Senior Partner, Fulbright & Jaworski
                               L.L.P. Attorneys at Law, New York, New York

Robert C. McBride              Vice President; Treasurer

Anthony C. Nicoletti           Vice President, Asia and CLARiiON Asia/Pacific

James J. Ryan                  Vice President, Information Management Group

Joel Schwartz                  Senior Vice President, Worldwide Sales

Ronald L. Skates               President and Chief Executive Officer; Director

W. Nicholas Thorndike          Director; Corporate Director and Trustee

Donald H. Trautlein            Director; Retired Chairman, Bethlehem Steel
                               Corporation, Bethlehem, Pennsylvania

Richard L. Tucker              Director; Managing Director, Trinity Investment
                               Management Corporation, Boston, Massachusetts

J. Thomas West                 Senior Vice President, Advanced Development

William L. Wilson              Senior Vice President, Marketing

*  Elected during 1997

<PAGE>

DATA GENERAL CORPORATION

CORPORATE INFORMATION

CORPORATE HEADQUARTERS          Data General Corporation
                                4400 Computer Drive
                                Westborough, Mass. 01580
                                (508) 898-5000

LEGAL COUNSEL                   Fulbright & Jaworski L.L.P.
                                New York, New York

INDEPENDENT ACCOUNTANTS         Price Waterhouse LLP
                                Boston, Mass.

DEBENTURE TRUSTEE               The Bank of New York
                                Corporate Trust Office
                                101 Barclay St., Floor 21 West
                                New York, New York 10286

TRANSFER AGENT AND REGISTRAR
                                The Bank of New York
                                800-524-4458

                                Address Shareholder Inquiries to:
                                The Bank of New York
                                Shareholder Relations Department - 11E
                                Post Office Box 11258
                                Church Street Station
                                New York, NY 10286

                                Send Certificates For Transfer and Address
                                Changes to:
                                The Bank of New York
                                Receive and Deliver Department - 11W
                                Post Office Box 11002
                                Church Street Station
                                New York, NY 10286

STOCK EXCHANGE LISTING          New York Stock Exchange
                                London Stock Exchange
                                Unlisted trading privileges on Boston, Midwest,
                                Philadelphia, Pacific, and Cincinnati exchanges

TRADING SYMBOL                  DGN

ANNUAL MEETING                  The Annual Meeting of Stockholders  will be held
                                at   1:00   p.m.,   January   28,  1998  in  the
                                Enterprise Room, State Street Bank Building, 225
                                Franklin Street, Boston, Mass.


NUMBER OF STOCKHOLDERS          As   of   September   27,   1997,   there   were
                                approximately  10,600  stockholders  of  record.
                                This  number  excludes  individual  stockholders
                                holding  stock under nominee  security  position
                                listings.

DIVIDEND POLICY                 No cash  dividends have been declared or paid by
                                the  company  since  its  inception.  It is  the
                                policy of the  company  to retain  any cash flow
                                for  future  business  expansion.   The  company
                                anticipates  no  change  in this  policy  in the
                                foreseeable future.

PUBLISHED INFORMATION           The company's  Annual Report,  Interim  Reports,
                                Form 10-K, and Quarterly Reports on Form 10-Q as
                                filed   with   the   Securities   and   Exchange
                                Commission,  and other published  information is
                                available on request to:

                                        Investor Relations Department
                                        Data General Corporation
                                        4400 Computer Drive, Mail Stop 9S
                                        Westborough, Massachusetts 01580

                                Published  information,  as  well as  mailed  or
                                faxed  copies  of  quarterly   financial   press
                                releases,    can   be    obtained   by   calling
                                1-800-941-2382.

                                All information is available on Data General's
                                internet website at www.dg.com. In the section
                                titled "About Data General," select  "Financial
                                Information for Investors."

                                Investors may also choose to:

                                o  Request information using e-mail to
                                   info@dg.com
                                o  Dial  the   Company's   FAX-back   system  at
                                   1-800-99-DGFAX (North America only) and press
                                   411 to  receive  a menu  of  publications  by
                                   facsimile
                                o Call Data General Corporation at 1-800-DATAGEN



This report  contains  forward-looking  statements  under the  captions  "To Our
Stockholders,   Customers,  and  Employees"  and  "Management's  Discussion  and
Analysis  of  Financial  Condition  and  Results of  Operations"  which  reflect
Management's  current views of future events and  financial  performance.  These
forward-looking  statements involve risks and uncertainties,  and are based upon
many  assumptions  and  factors,   including  the  effects  of  period-to-period
fluctuations,   OEM  inventory  positions,   and  new  product  development  and
marketing.  Many of these factors are discussed in the Company's  Securities and
Exchange  Commission  filings,  including its annual report on Form 10-K for the
year ended  September  27, 1997.  Any changes in  assumptions  or factors  could
produce significantly different results.

<PAGE>


                                  Data General
               An Equal Opportunity / Affirmative Action Employer
                   Making a Commitment to Workforce Diversity

AViiON, AV Image, CLARiiON, DataGenie, DG/UX, DG/ViiSION,  ECLIPSE, and VALiiANT
     are registered trademarks; Cluster-in-a-Box, Multidimensional Storage
 Architecture, NTerprise Manager, NUMALiiNE, SiteStak, TeleStor, and THiiN are
 trademarks; and NTAlert is a service mark of Data General Corporation. Intel,
  the Intel Inside logo, Pentium, and Pentium Pro are registered trademarks of
     Intel Corporation. All other brand and product names are trademarks or
   registered trademarks of their respective holders. The materials contained
   herein are summary in nature, subject to change, and intended for general
 information only. Details and specifications regarding Data General equipment
 and software are included in the applicable technical manuals, available from
     local sales representatives. All rights reserved. Printed in the USA.

<PAGE>

(BACK COVER)
How to contact Data General

World Wide Web
www.dg.com

E-Mail
info@dg.com

Mail, Telephone, FAX

North American Headquarters
Data General Corporation
4400 Computer Drive
Westborough, MA 01580
Telephone: 508-898-5000
Literature Requests: 1-800-DATA-GEN
FAX: 508-898-1319

European Headquarters
Data General Europe
Data General Tower
Great West Road, Brentford
Middlesex TW8 9AN
United Kingdom
Telephone: +44 (0)181.758.6000
FAX: +44 (0)181.758.6950

Asia/Pacific Headquarters
Data General Ltd.
11/F Southwest Wing
Warwick House
Taikoo Place, 979 Kings Road
Quarry Bay, Hong Kong, China
Telephone: (852) 2599-6688
FAX: (852) 2506-0221


<PAGE>