EXHIBIT 13

Data General Corporation
1998 Annual Report

Delivering storage and high-end computing solutions

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                                   www.dg.com
                                www.clariion.com

Data General was built on technology leadership and innovation. Our objective is
to be a leader in delivering open server and storage  solutions through multiple
distribution  channels and strategic  alliances.  We provide  superior  customer
service and support.  We have shipped  more than  500,000  computers  and 75,000
storage subsystems worldwide.

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                           Highlights of the past year

AViiON Enterprise Server Division
o    Consolidated all AViiON(R)  sales,  marketing,  product  development,   and
     professional  services  into a single  organization  focused on  enterprise
     solutions
o    Achieved  market  share leadership in  systems running Microsoft(R) Windows
     NT(R) Server  priced  between   $100,000 and  $1,000,000, according to 1997
     revenue figures from International Data Corporation
o    Established,   in  conjunction  with  Microsoft   Corporation,   the  first
     Healthcare  Competency  Center  to  provide  technology  labs  for  testing
     interoperability  of  applications  that conform to ActiveX for  Healthcare
     standards
o    Introduced  NTerprise Total Care services, featuring  OMNiiCARE(SM), a 99.9
     percent uptime guarantee for businesses running Microsoft Windows NT Server
     as their enterprise  operating system on AViiON systems,  and extended this
     guarantee to SQL Server 7.0, an industry first
o    Continued  to expand  our  AViiON  family of  high-availability  "In-a-Box"
     solutions for Windows NT with new systems  based on Intel(R)  Pentium(R) II
     Xeon(R) processors
o    Strengthened  the AViiON  NUMA  (Non-Uniform  Memory  Access)  family  with
     shipments  of  the AV  25000;  unveiled  AVFlex(TM)  services  that  enable
     customers to partition an AV 25000 server into multiple systems running the
     DG/UX(R) operating system as well as Microsoft Windows NT Server



CLARiiON Advanced Storage Division
o    Reached new milestones with more than 75,000 disk arrays and five Petabytes
     (equivalent to two trillion typed pages) of RAID-protected storage shipped;
     listed as the year's top OEM RAID  supplier in revenues by Gartner  Group's
     Dataquest
o    Became  the first  major  storage  vendor to ship full Fibre  Channel  disk
     arrays,  a  revolutionary   family  of  storage  subsystems  that  provides
     significantly greater performance,  scalability, and flexibility than prior
     generation products
o    Announced a strategic worldwide OEM agreement with Dell Computer
     Corporation to deliver enterprise  storage  products  based  on  Data  
     General's  proven CLARiiON(R) Fibre Channel RAID technology
o    Introduced  Navisphere(R),  the industry's most advanced enterprise storage
     management  software,  which allows system  administrators  to manage their
     storage installations from a single management platform located anywhere in
     the world
o    Announced,  with  3Com  Corporation,  the  formation  of  a  cross-industry
     alliance to deliver Fibre Channel  Storage Area Network (SAN) solutions for
     Windows NT server platforms
o    Began expansion of the sales and marketing force and transferred more than
     100 engineers to CLARiiON to take advantage of storage market growth 
     opportunities

The CLARiiON division of Data General was the first major storage vendor to ship
full Fibre Channel subsystems.

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To Our Stockholders, Customers, and Employees:

         Throughout the 1990s,  Data General has been building its  capabilities
to deliver storage and high-end  computing  solutions.  High-performance  AViiON
servers  have  enabled  Data  General  to  achieve  market-share  leadership  in
healthcare  information  systems  technology and in segments of the fast-growing
market for solutions based on the Microsoft  Windows NT Server operating system.
AViiON NUMA servers  have enabled Data General to maintain  momentum in the UNIX
market.  Our advanced CLARiiON storage systems have made Data General the leader
in the OEM segment of the disk storage market.
         Fiscal 1998 was a  transitional  year for Data  General,  following two
years of solid  growth and  profitability.  After ten  consecutive  quarters  of
profitability  extending  into  the  first  quarter  of this  fiscal  year,  our
financial  results were affected at mid-year by a delay in the  transition  from
SCSI to Fibre Channel technology in the storage business. We, nonetheless,  made
significant   progress  by  focusing   additional   resources   on   high-growth
opportunities in key market segments and by restructuring  operations to achieve
greater  efficiency.  These actions helped us to return to  profitability in the
fourth quarter.
         For the full 1998 fiscal year, Data General reported a net loss of $152
million or $3.11 per share on revenues of $1.5 billion. The 1998 results include
a charge of $135 million,  or $2.76 per share related to the mid-year  corporate
restructuring.  For fiscal 1997, the company reported net income of $56 million,
or $1.26 per share on a diluted basis on revenues of $1.5 billion.
         As part of the June  restructuring,  we transferred  approximately  100
people to the CLARiiON Advanced Storage Division where additional resources were
deployed to capitalize on the growth opportunities for Fibre Channel storage. In
our  AViiON  Enterprise  Server  Division,  we  consolidated  sales,  marketing,
development,  and professional  services to more efficiently meet our customers'
needs  for   comprehensive   solutions.   Our   manufacturing,   services,   and
administrative  operations were also  streamlined.  Overall,  the  restructuring
resulted  in  a  net  reduction  in  force  of  approximately  400  people,  the
consolidation of certain facilities,  and the write-off of non-strategic assets.
As a result of this restructuring,  we expect net annual savings in the range of
$40 to $45 million.

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         AViiON Business

         Our objective in the AViiON  Enterprise  Server  Division is to deliver
high-end computing  solutions based on  industry-leading  Intel  processor-based
servers,  storage,  and  services.  We  focus  on the  enterprise  level  of the
Microsoft  Windows NT Server market and high-end UNIX  solutions  using our NUMA
technology.  We have a strong vertical market focus in healthcare and a vertical
sales focus, in conjunction  with software  partners,  in several other markets,
including  financial  services,  telecommunications,   retail/distribution,  and
government.  We are  increasingly  using a  "consultative  selling"  approach to
ensure that we meet our customers'  business  needs with  solutions  emphasizing
software  and  integration  partners  and the services we deliver as part of the
sale, such as networking and implementation, as well as maintenance.
         Our Windows NT business  grew nearly 65 percent in fiscal 1998 -- twice
the industry Windows NT growth rate -- and now represents  nearly  two-thirds of
our  Intel  processor-based  AViiON  revenues.  Data  General  is the  worldwide
market-share  leader in midrange  systems  running  Microsoft  Windows NT Server
priced between $100,000 and $1,000,000,  according to the latest revenue figures
from International Data Corporation.
         Data General provides  innovative  "In-a-Box" Windows NT configurations
that  include two AViiON  servers,  a highly  available  CLARiiON  RAID  storage
system,  and our NTerprise  Manager(TM)  server  management  software,  all in a
single rack-mounted system that is pre-loaded and pre-tested with the customer's
software.   Our  "In-a-Box"   system  packaging  has  received  strong  customer
acceptance and industry accolades.
         Part of our  customers'  attraction  to Microsoft  Windows NT Server is
that it is an established operating system standard that enables systems vendors
like  Data  General  to  add  value  in  services,   systems   packaging,   high
availability,  and other  areas.  There is no  standard  for the UNIX  operating
system.  While several recent attempts by industry  consortiums hold the promise
of delivering a UNIX standard in the next few years, many versions of UNIX exist
today,  including  our  sophisticated  DG/UX  implementation.  We have added new
features and enhancements to DG/UX to increase the performance and functionality
of our solutions.
         High-end  NUMA-based  AViiON  servers  drive the  majority  of our UNIX
revenues.  Our NUMA-based  servers provide high  performance and scalability for
UNIX applications, including on-line transaction processing, enterprise resource
planning,  data warehousing,  server consolidation,  and mainframe migration. At
fiscal year-end,  we further  strengthened the AViiON NUMA family with shipments
of the AV 25000 -- a new generation of high-end  servers which supports up to 64
Intel Pentium II Xeon processors.  We also unveiled the AVFlex architecture that
includes  services  and products  that allow  customers to partition an AV 25000
server into multiple independent DG/UX and Windows NT Server systems.
         Our worldwide  AViiON customer base now includes:  more than 30 percent
of the  hospitals  in the United  States,  including  Columbia/HCA,  the largest
healthcare  operation  in the  U.S.;  Bloomberg  Financial  Markets,  one of the
fastest-growing  suppliers of financial data; Canadian-based Creo Products Inc.,
the world's leading supplier of computer-to-plate solutions for the graphic arts
industry;  European-based  Baan,  one of the market  leaders in  enterprise-wide
software  applications,  which chose AViiON servers and CLARiiON storage for its
European Demo Centre;  more than one thousand retail firms  including,  Jordan's
Furniture,  a  trendsetter  in the marketing of retail home  furnishings  in the
U.S.;  many of the world's  largest  petrochemical  firms;  and  departments  of
numerous national and local governments around the world.

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CLARiiON Business

         Since 1992 when Data  General  created a business  unit to focus on OEM
opportunities  in the storage  market,  the  CLARiiON  product line has grown by
taking advantage of the  latest  developments  in  storage   systems technology.
Over the past year, we have been  transitioning from SCSI-based storage to a new
generation  of CLARiiON  systems based on  end-to-end  Fibre Channel  technology
(full fibre connect to full fibre disks).  CLARiiON revenues decreased in fiscal
1998 during the  transition,  but by  year-end,  total  CLARiiON  revenues  were
increasing quarter to quarter,  and full Fibre Channel based systems represented
over 40 percent of our storage business.
         Data General was the first major vendor to ship full  end-to-end  Fibre
Channel storage  systems.  Our goal is to be the Fibre Channel storage vendor of
choice in the open  systems  market.  We believe  Fibre  Channel will become the
dominant  technology for disk array subsystems for the foreseeable  future,  and
that it is a requisite for implementation of Storage Area Networks (SANs). SANs,
which allow users the flexibility to choose  best-of-breed  storage to attach to
their servers, are predicted by industry analysts to be a $5.5 billion market by
2001. We believe that our early lead in this technology provides us a meaningful
opportunity to play a significant role in the growth of SANs.
         Data  General's  Fibre  Channel   technology   received  a  significant
endorsement  when Dell  Computer  Corporation,  the  industry's  fastest-growing
server  company,  unveiled  its  high-end  enterprise  storage  system this past
summer.  The  PowerVault  650F,  the first in Dell's  family of  server-attached
storage systems, is based on CLARiiON Fibre Channel technology.
         We will  increase  our  investment  in  CLARiiON  during  fiscal  1999,
primarily  through the hiring of additional  research and  development and sales
and marketing professionals. Part of this investment will allow us to expand our
channel  coverage  beyond the OEM market to include  support of new and existing
resellers as well as the  implementation of a direct sales operation.  While the
increased investment will impact growth in near-term  profitability,  we believe
that investing in CLARiiON is imperative if we are to take full advantage of the
market opportunity before us.
         The worldwide CLARiiON installed base continues to grow, with more than
75,000  disk array  subsystems  and five  Petabytes  of  RAID-protected  storage
shipped.  CLARiiON  SCSI and Fibre  Channel  storage  solutions are supported on
leading open systems platforms,  including  Hewlett-Packard,  IBM AIX, Microsoft
Windows NT, and Sun  Microsystems.  CLARiiON is supported through OEM agreements
with companies such as ASC, Avid Technologies,  Bull, Data General AViiON, DELL,
Hewlett-Packard,  ICL, NEC, Samsung,  Sequent, Silicon Graphics,  Tektronix, and
others.  CLARiiON  storage is also sold around the world by value-added  storage
resellers such as Storage Technology, Omron in Japan, and BIC Electronics, which
serves  Tecnologica  Informatica  in  Brazil  and  other  distributors  in Latin
America.
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Outlook

         We believe that we have the people, products, services, and strategy to
succeed in the enterprise market. We are also well financed to pursue our growth
strategy,  with  cash  and  marketable  securities  of $319  million  and  total
capitalization of nearly $600 million at the end of fiscal 1998.
         Our AViiON  enterprise  server  business  should benefit from continued
strong growth in the Microsoft  Windows NT Server market and from our ability to
leverage AViiON NUMA servers.  Our CLARiiON storage business should benefit from
increasing market  acceptance of Fibre Channel  technology where we are the only
major storage vendor currently  shipping full fibre RAID disk arrays. We are the
leader in this advanced  technology,  which many industry  analysts believe will
soon become the dominant storage  architecture.  The growth  opportunity that we
see for the next several years with our full Fibre Channel  CLARiiON disk arrays
may be the best since we launched the product family in the early 1990s.
         Going forward, we believe we are well positioned  for continued  growth
and profitability.

Respectfully submitted,


Ronald L. Skates
President and Chief Executive Officer
December 16, 1998

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Data  General  AViiON  servers  and  CLARiiON  storage  are at the heart of many
critical applications at some of the world's largest petrochemical firms.

                                       6
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Meeting Customer Needs for Solutions

         Technology  excellence and innovation have been the sustaining  factors
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.  Over the past several years,  Data General has
taken a number of steps to deliver the type of solutions our customers  need and
to provide the company with new growth opportunities.  These include:
o Adopting the Intel  architecture,  the world's leading computer  platform, in
  our AViiON server family to ensure that our customers have access to the 
  broadest range of software  applications and solutions
o Pioneering Fibre Channel technology for CLARiiON storage,  and being the first
  to deliver full Fibre  Channel disk arrays 
o Focusing on  high-availability and clustering technologies which enable AViiON
  servers and CLARiiON storage to run mission-critical applications
o Developing  highly scalable servers based on the NUMA  architecture,  which
  opens new opportunities such as data warehousing and server consolidation
o Pioneering the pre-loaded,  pre-tested  "In-a-Box" system packaging for the
  Microsoft  Windows NT Server market,  which  expedites  implementation  and
  minimizes deployment risk
o Expanding the market for our CLARiiON storage products by establishing  strong
  OEM and reseller  alliances
o Continuing our focus on UNIX while  dedicating new resources to Microsoft 
  Windows NT Server, the fastest-growing operating system
o Supporting  UNIX and Windows NT server  strategies  with premier  services,
  including   networking,   data   warehousing,    integration,    migration,
  installation, and life-cycle support
o Helping customers better utilize their computing assets by becoming a
  Microsoft Authorized Support Center, Microsoft Authorized Technical Education
  Center, and SCO Authorized Support Center
o Providing   complete   business   solutions  by   strengthening   strategic
  partnerships  with  Microsoft,  other  leading  suppliers of databases  and
  applications,  major vendors of enterprise  resource  planning  (ERP),  and
  other applications
o Delivering the industry's first uptime guarantee for the Microsoft  Windows
  NT Server operating system and Microsoft SQL Server 7.0 database
o Extending our manufacturing  expertise to third parties through VALiiANT(R)
  contract manufacturing and design services, and REPAIRiiON(SM) product repair
  and  logistics  services,  businesses  which  take  advantage  of  our  ISO
  9000-certified operations
o Using the World Wide Web to expand Data General's  market presence  through
  our www.dg.com and  www.clariion.com  web sites,  which include  e-commerce
  product ordering features

                                       7

<PAGE>

Among Data General's AViiON  customers,  are over 30 percent of the hospitals in
the  United  States.   These  critical  operations  count  on  the  unparalleled
performance, security, and high availability of AViiON enterprise servers.


                                       8

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AViiON Solutions

Delivering   high-end   computing   solutions  begins  with  understanding  each
customer's  unique business  problem;  then,  assembling the hardware  platform,
software partners,  services, and system integration to implement and deploy the
solution.  Accomplishing  this requires Data General to provide an ever-changing
variety of services,  systems,  and software from a wide range of sources,  both
internal and external.

Services

Data  General's  portfolio of services  covers the  spectrum of customer  needs,
including consulting,  implementation,  integration,  networking, migration, and
training, as well as 24-hour-a-day, 7-day-a-week, life-cycle support. We provide
our customers with  significant  value through our services.  One example is our
NTerprise  Total Care services,  featuring a 99.9 percent  uptime  guarantee for
businesses  running  Microsoft  Windows NT Server as their enterprise  operating
system on AViiON  systems.  We are also the first company to make this guarantee
available for Microsoft SQL Server 7.0 users.

Our Business  Practices  services are focused on Windows NT solutions,  database
and data warehousing, and migrations, essential areas in which 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.

Our  Open  Systems  Training  business  provides  lecture/lab  courses,  on-site
training,  and  computer-  and  video-based  training for many  mission-critical
components,  including the operating system,  network,  database,  off-the-shelf
applications,  and custom  programs.  In  addition,  our Open  Systems  Training
organization 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.

In fiscal 1998, Data General continued to expand its family of "In-a-Box" system
packaging with  TermServer-in-a-Box  and Exchange-in-a-Box and new systems based
on the latest technologies including Intel Pentium II Xeon processors.

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Systems

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.

AViiON servers provide an excellent platform for deploying  business  solutions.
Operating  systems  supported on AViiON  servers  include  Microsoft  Windows NT
Server;  Data  General's own DG/UX,  one of the most  technically  advanced UNIX
operating systems on the market; and Citrix WinFrame/Enterprise Server.

Our top-of-the-line AV 25000 servers, with support for up to 64 processors,  are
based on NUMA technology. NUMA technology redefines price/performance levels and
extends the  capabilities of symmetric  multiprocessing  (SMP) systems,  without
requiring  modifications to existing SMP applications.  AVFlex,  based on the AV
25000  server,  is a  comprehensive  set of  services  and  products  that eases
long-range  IT planning  with  cost-effective  system  growth and the ability to
adapt to changing business or application conditions.

Data General's  clustering  solutions for Microsoft  Windows NT Server and DG/UX
provide  reliability,   high  availability  and  data  protection  for  critical
applications.   Introduced  in  1997,  AViiON  NT  Cluster-in-a-Box(R)  was  the
industry's  first  Microsoft  Windows  NT  Server   clustering   solution  in  a
pre-installed, pre-tested, single rack-mounted system. Cluster-in-a-Box combines
two powerful AViiON Windows NT servers with NTerprise Manager  server-management
software, NTAlert(SM)automatic diagnostics, a CLARiiON disk array, and Microsoft
Cluster Server clustering  software.  In fiscal 1998, we continued to expand our
family  of  "In-a-Box"   system  packaging  with   TermServer-in-a-Box(TM)   and
Exchange-in-a-Box(TM) and new systems based on the latest technologies including
Intel  Pentium  II Xeon  processors.  The  AViiON  servers  that are used in our
In-a-Box  configurations are also available as stand-alone servers for thousands
of Windows NT and UNIX applications.

Our UNIX clustering solution -- DG/UX Cluster(TM) -- includes two or more AViiON
servers,   a  full  Fibre   Channel   CLARiiON   disk  array,   and  a  PC  with
cluster-management  software.  This year, Data General expanded  clustering with
Disaster Recovery Clusters,  enabling customers to have widely dispersed back-up
systems that keep  businesses  going even if their main data center is down.  We
also offer Failover Clusters and QuickClusters(TM), which provide customers with
quick deployment and dedicated functionality in a single site.

Introduced  in  1997,  AViiON  NT  Cluster-in-a-Box  was  the  industry's  first
Microsoft Windows NT Server clustering solution in a pre-installed,  pre-tested,
single rack-mounted system.

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<PAGE>

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

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  in which long battery  life,  rugged  design,  and ease of use are
critical features.

Strategic Business Partners

Data  General  works  closely with leading  software  and  integration  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.

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

Delivering  high-end computing solutions begins by understanding each customer's
unique  business  problem;  then,  assembling  the hardware  platform,  business
partners, services, and system integration to implement and deploy the solution.

                                       11

<PAGE>

CLARiiON  advanced storage systems provide the high availability and performance
customers  require  for  their  most  demanding  applications  in such  areas as
financial services and government.

Used with permission of NYSE

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CLARiiON Storage Solutions

Our market-leading CLARiiON disk arrays are innovative, highly available 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.  CLARiiON was the first to ship
full Fibre Channel technology -- the next-generation serial interface.  Industry
analysts expect the Fibre Channel storage market to grow  exponentially over the
next few years.

Staying ahead of the next storage trend,  Data General  CLARiiON,  together with
3Com  Corporation,  announced  the  formation  of a  cross-industry  alliance to
deliver Fibre Channel Storage Area Network (SAN) solutions for Windows NT server
platforms. The cross-industry alliance represents a commitment between CLARiiON,
the  leader  in Fibre  Channel  storage  technology,  and  3Com,  the  leader in
enterprise  networking  products,  to work  together  to develop,  qualify,  and
support  total  solutions  for  Storage  Area  Networks  and we  expect  further
penetration  of the SAN  market  through  new  partnerships  we will form in the
coming year.

From mainframes to two-processor servers,  CLARiiON disk arrays provide the high
availability  and  performance   customers  require  for  their  most  demanding
applications. Redundant subsystems within the CLARiiON arrays -- drives, storage
control processors,  power supplies, and fans -- eliminate many 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.

In 1998,  CLARiiON introduced  Navisphere,  the industry's most advanced storage
management software,  which allows system administrators to manage their storage
installations  from a single management  platform located anywhere in the world.
This Navisphere  capability is a requisite for the successful  implementation of
SANs.

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  through SANs that scale  independently  in five  dimensions  -- capacity,
transaction  performance,  data  throughput,  connectivity,  and availability of
business  information.

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<PAGE>

Services

CLARiiON  delivers expert  technical  support,  warranty and material  programs,
training,  and professional  services to our customers  around the world.  These
same  services  support  our  strategic  partners,  enabling  them to  provide a
complete set of services to their end customers.

As Storage  Area  Networks  grow and  become  more  distributed  geographically,
professional service providers increasingly must deliver sophisticated levels of
support for these complex configurations.  Tools to gather and analyze data more
quickly and efficiently are required.

CLARiiON offers a comprehensive collection of storage maintenance and diagnostic
software, including CLARalert(R), an enterprise-wide,   network-based  service  
solution.  CLARalert  delivers early notification of service events and provides
remote diagnostic  capabilities, 24 hours a day, 7 days a week, 365 days a year.

CLARiiON  Service  Powertools,  packaged on a single CD-ROM,  provides tools for
support  diagnostics,  performance  monitoring,  event logging and notification,
advanced  scripting,  disk array  management,  remote  access,  and serial  port
access. CLARiiON Service Powertools runs on an Windows NT platform, and delivers
faster,  more  flexible  service  functionality,  maximizing  a  support  team's
efficiency. Using Powertools results in more efficient disk array support, lower
overall service costs, and higher user satisfaction.

Business Partners

CLARiiON disk arrays are installed in enterprises  around the globe. Some of the
world's  leading server vendors and storage  suppliers  offer CLARiiON arrays in
their products  under their own labels.  In addition to our growing direct sales
operation, a variety of resellers and independent distributors offer our storage
systems under the CLARiiON label.

Each CLARiiON  partner has its own unique set of benefits.  For example,  server
vendors  (OEMs) offer direct  support for their host  platforms,  as well as the
CLARiiON disk array connect,  while private  labelers offer multiple CPU support
and service.  Value-added  Resellers offer industry expertise,  enabling them to
recommend the best CLARiiON storage solution that meets the application's needs.
Our  distributors  have  chosen  CLARiiON  as  their  high-availability  storage
solution of choice,  as part of the set of diverse  products and  services  that
they sell.

                                       14

<PAGE>

Data General teams with a multitude of solutions  suppliers to offer a portfolio
of  applications  for  a  variety  of  industries,  including  distribution  and
manufacturing.

                                       15

<PAGE>
Customer Services and Manufacturing

Data General's Customer Services and Manufacturing groups support our AViiON and
CLARiiON businesses.  Our worldwide Customer Service network is ready to provide
our customers 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.

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
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.

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.

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
layout and metal fabrication,  quick-turn prototype runs, volume  manufacturing,
and repair/engineering change services.

Data  General  also  recently  formed the  REPAIRiiON  business  unit to provide
product  repair  and  logistics  services  for  companies  worldwide.  This unit
provides a one-stop  source for  customized  repair and logistics  solutions for
businesses  that wish to offer their  customers  quality  service and extend the
life of their key products while reducing their costs.

The company's manufacturing  organization received two major awards in 1998. The
Manufacturing  Services  operation  received an "Excellence in Logistics"  award
from  Transportation  and Distribution  Magazine,  based on high marks in supply
chain  programs,  inventory  management,  technology,  strategic  planning,  and
logistics  activities.  The company's Manila operations  received the Philippine
Quality Award. Based on Malcolm Baldridge award criteria, it is the highest form
of  national  recognition  accorded to  organizations  for  outstanding  quality
performance in the Philippines.

                                       16

<PAGE>
Five-Year Summary of Selected Financial Data .................................18
Management's Discussion and Analysis of Financial Condition and Results of 
Operations ...................................................................19
Consolidated Statements of Operations ........................................27
Consolidated Balance Sheets ..................................................28
Consolidated Statements of Cash Flows ........................................29
Consolidated Statements of Stockholders' Equity ..............................30
Notes to Consolidated Financial Statements ...................................31
Report of Independent Accountants ............................................41
Supplemental Financial Information ...........................................41
Directors and Senior Management ..............................................42
Facilities ...................................................................42
Corporate Information ........................................................43

                                       17

<PAGE>
<TABLE>
DATA GENERAL CORPORATION
FIVE-YEAR SUMMARY OF SELECTED FINANCIAL DATA
<CAPTION>
                                                                      YEAR ENDED
                                         -------------------------------------------------------------------
                                         SEPT. 26,       SEPT. 27,     SEPT. 28,     SEPT. 30,    SEPT. 24,
IN THOUSANDS, EXCEPT PER SHARE AMOUNTS     1998            1997          1996          1995          1994
------------------------------------------------------------------------------------------------------------
<S>                                     <C>             <C>           <C>           <C>          <C>
Total revenues                          $1,462,109      $1,533,169    $1,322,250    $1,159,316   $1,120,505
                                        ----------      ----------    ----------    ----------   ----------

Total cost of revenues                   1,071,491       1,021,569       877,692       772,047      733,114
Research and development                   118,731         109,984        98,022        85,886       90,826
Selling, general, and administrative       338,108         338,443       309,259       334,337      341,343 
Restructuring charge                        82,400               -             -        43,000       35,000
                                       -------------   -------------  ------------  ------------ ------------
  Total costs and expenses               1,610,730       1,469,996     1,284,973     1,235,270    1,200,283
                                       -------------   -------------  ------------  ------------ ------------

Income (loss) from operations             (148,621)         63,173        37,277       (75,954)     (79,778)
Interest expense, net                        1,014           4,873         5,632         4,116        8,168
Other income, net                              240               -             -        41,972        2,353
                                       -------------   -------------  ------------  ------------ ------------
                           
Income (loss) before income taxes         (149,395)         58,300        31,645       (38,098)     (85,593)
Income tax provision                         3,000           2,400         3,500         8,605        2,100
                                       -------------   -------------  ------------  ------------ ------------
Net income (loss)                        $(152,395)       $ 55,900      $ 28,145     $ (46,703)   $ (87,693)
                                       =============   =============  ============  ============ ============

Basic net income (loss) per share           $(3.11)          $1.35         $0.73        $(1.26)      $(2.45)

Diluted net income (loss) per share         $(3.11)          $1.26         $0.68        $(1.26)      $(2.45)

<CAPTION>
                                                                         AS OF
                                         ----------------------------------------------------------------------
                                            SEPT. 26,     SEPT. 27,     SEPT. 28,     SEPT. 30,    SEPT. 24,
DOLLARS IN THOUSANDS                          1998          1997          1996          1995          1994
---------------------------------------------------------------------------------------------------------------
Current assets                              $ 795,961     $ 858,236      $616,812     $ 591,485    $ 598,076
Current liabilities                           430,714       391,822       366,184       370,226      326,865
                                         -------------- ------------- ------------- ------------- -------------

Working capital                             $ 365,247     $ 466,414      $250,628     $ 221,259    $ 271,211
                                         ============== ============= ============= ============= =============

Total assets                               $1,065,064    $1,134,868      $860,443     $ 832,018    $ 821,864
Annual expenditures for property,
  plant, and equipment                      $ 114,247     $ 110,505      $ 94,670      $ 96,471     $ 92,955
Long-term debt                              $ 212,750     $ 212,750      $149,971     $ 153,457    $ 156,942
Other liabilities                            $ 36,645      $ 11,516      $ 15,224      $ 28,791     $ 29,445
Stockholders' equity                        $ 384,955     $ 518,780      $329,064     $ 279,544    $ 308,612
Employees                                       4,700         5,100         4,900         5,000        5,800

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

                                       18

<PAGE>

Data General Corporation

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS


RESULTS OF OPERATIONS

The Company  reported a net loss of $152 million for fiscal 1998  compared  with
net  income of $56  million  and $28  million  for  fiscal  years 1997 and 1996,
respectively. Included in the net loss for fiscal year 1998 was a charge of $135
million  related  to a  restructuring  program  and  certain  asset  write-downs
resulting from the program.

Revenues (in millions)
===============================================================================
                          1998       Change       1997       Change        1996
                         ------------------------------------------------------
                                     
Product                  $1,068       (6%)       $1,142        24%        $ 924
 % of Total Revenues        73%                     74%                     70%

Service                     394        1%           391        (2%)         398
 % of Total Revenues        27%                     26%                     30%

Total                    $1,462       (5%)       $1,533        16%        $1,322
================================================================================

In fiscal 1998,  product  revenues were $542 million from the  Company's  AViiON
family of open systems products, a 3% increase over fiscal 1997. Since 1989, the
Company  has  established  a  customer  base  of  approximately   56,000  AViiON
installations,  with a total sales value of over $3.5  billion.  In fiscal 1996,
the Company introduced its Intel processor-based  AViiON systems.  These systems
represented  86% of total  fiscal 1998 AViiON  revenues  and 64% of total fiscal
1997  AViiON  revenues.  In  fiscal  1998,  revenues  from the  Company's  Intel
processor-based  AViiON  systems  increased  by  38%  while  revenues  from  the
Motorola-based AViiON systems declined by 60% compared to the prior fiscal year.
The Company anticipates that the percentage of server product revenues generated
by the Intel processor-based AViiON products will continue to increase in fiscal
1999 while the Motorola-based AViiON system revenues are expected to continue to
decline.  Product revenues from the Company's CLARiiON storage systems decreased
19% compared to the prior  fiscal year and  accounted  for 38% of total  product
revenues in the current year. This decline is primarily the result of the longer
than  anticipated  product  transition  from  SCSI-based  storage systems to the
Company's newer fibre-based storage products. CLARiiON is sold primarily through
the Company's original equipment  manufacturer ("OEM") and distributor channels;
thus sales in any given  period are  subject to the 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 sales to a single OEM customer. Product revenues from
personal computers and other equipment  decreased 21% from the prior fiscal year
and  represented  8% of total  product  revenues  compared  to 10% for the prior
fiscal year. In fiscal 1996,  the Company  formed the VALiiANT  Business Unit, a
contract   manufacturing   operation,   to  take   advantage  of  the  Company's
manufacturing  expertise  and  facilities.  VALiiANT  product  revenues  for the
current fiscal year represented 3% of total product revenues.

                                       19

<PAGE>

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

                           Percentage of                   Percentage Change of
                      Consolidated Revenues                   $ of Revenues
                  --------------------------------------------------------------
                   1998        1997        1996           1998-97        1997-96
                  --------------------------------------------------------------
Domestic

Product              63%         64%         61%              (7%)          30%
Service              60%         59%         57%               3%            -
Total                62%         63%         60%              (5%)          22%

Europe

Product              22%         22%         24%              (4%)          11%
Service              31%         31%         32%               1%           (4%)
Total                25%         24%         26%              (3%)           5%

Other International

Product              15%         14%         15%              (6%)          18%
Service               9%         10%         11%             (11%)          (6%)
Total                13%         13%         14%              (7%)          12%
================================================================================

In fiscal 1998,  domestic  marketplace  revenues from the CLARiiON  product line
decreased 21% and personal  computer and other equipment  decreased 29% from the
prior  year.  This was  offset,  in part,  by a 2%  increase  in AViiON  product
revenues and an increase in VALiiANT  product  revenues.  The increase in AViiON
product  revenues  in the  current  year  resulted  from an  increase  in  Intel
processor-based AViiON systems, offset, in part, by a decrease in Motorola-based
AViiON systems.  In the prior year, domestic product revenues from the CLARiiON,
AViiON,  and PC and other equipment product lines had increased by 52%, 14%, and
5%,  respectively.  The decrease in European  product  revenues,  including U.S.
direct  export sales,  for the current  fiscal year was mainly  attributable  to
decreases  in  CLARiiON  and  personal  computer  and  other  equipment  product
revenues,  which was partly offset by increases in Intel processor-based  AViiON
product  revenues.  In fiscal 1998,  total revenues in the European  marketplace
decreased by  approximately  3% due, in great part, to a stronger U.S. dollar in
relation to European  currencies.  In fiscal  1997,  European  product  revenues
increased 11% due to increases in AViiON and CLARiiON  product  revenues.  Other
international  product  revenues,  including U.S.  direct export sales,  for the
current  fiscal year decreased 6% as compared with the prior fiscal year, due to
a 9% decrease in AViiON product  revenues,  offset, in part, by a 4% increase in
CLARiiON  product  revenues.  The fiscal 1997  increase  in other  international
product  revenues was due to increases in the CLARiiON,  AViiON,  and PC product
revenues.

In the service business, the Company increased professional services revenues by
9% in fiscal 1998 as compared with fiscal 1997.  Professional  services revenues
experienced modest growth in fiscal 1997 as compared with the prior fiscal year.
These  increases  were  partially  offset  by a 1% and 3%  decline  in  contract
maintenance  revenue in fiscal  years 1998 and 1997,  respectively,  as compared
with prior  years.  These  declines are the result of the  continued  shift from
proprietary to open systems service maintenance  contracts.  In Europe,  foreign
exchange  negatively impacted current year service revenues by 3%, when compared
to fiscal 1997. In fiscal 1997,  foreign exchange  accounted for the 4% decrease
in service revenues over fiscal 1996.

Cost of Revenues (in millions)

================================================================================
                            1998     Change       1997       Change        1996
                          ------------------------------------------------------
Product                   $  826        7%        $  773        25%        $ 619
 % of Product Revenues       77%                     68%                     67%

Service                      246       (1%)          249        (4%)         259
 % of Service Revenues       62%                     64%                     65%

Total                     $1,072        5%        $1,022        16%        $ 878
 % of Total Revenues         73%                     67%                     66%
================================================================================

                                       20

<PAGE>

During fiscal year 1998, the Company recorded certain unusual charges, which are
included in product cost of revenues, of $52.6  million related to the Company's
restructuring  program. These charges are primarily related to the write-down of
capitalized  software  development  costs  associated  with  products  no longer
considered to be part of the Company's core strategy.  As a result of the change
in the Company's  strategic focus, the evaluation of the  recoverability  of the
capitalized  software development costs resulted in a write-down of its carrying
value to its net realizable value. Also included in the charge is the write-down
of certain  inventory associated with the Company's THiiN(TM) Line business unit
and the refocused server strategy.  Without these charges, the pro-forma product
cost of revenues as a  percentage  of product  revenues was 72%. The increase in
the pro-forma  product cost as a percentage  of product  revenues from the prior
fiscal year was primarily caused by competitive pricing pressures and a shift in
product  mix.  The  decrease  in the  service  cost as a  percentage  of service
revenues for the current fiscal year was the result of continued improvements in
spare parts inventory  management and improved gross margins in the professional
services  business  related to cost  savings  from the  Company's  restructuring
program.

Operating Expenses (in millions)
================================================================================
                                   1998    Change    1997      Change      1996
                                 -----------------------------------------------
Research & Development             $119      8%      $110        12%       $ 98
 % of Total Revenues                 8%                7%                    7%

Selling, general, & administrative $338       -      $338         9%       $309
 % of Total Revenues                23%               22%                   23%

Restructuring charge               $ 82       -         -          -          -
 % of Total Revenues                 6%                 -                     -
================================================================================

The Company continued to focus its research and development  efforts on its core
business  technology:  multi-user  computer systems and mass storage devices. In
the current fiscal year,  gross  expenditures  on research and  development  and
software development before  capitalization were $154 million, an increase of 5%
from $146  million for the prior  fiscal  year.  The  increase  in research  and
development  expenditures  was driven by  investment  in CLARiiON  Fibre Channel
products and in the NUMA architecture for high-end AViiON servers. Additionally,
in the current  fiscal year,  changes in the  strategic  focus for the Company's
server  products  resulted  in  expensing  software  development  costs that had
previously been capitalized.

For  fiscal  years  1998  and  1997,  the  increase  in  selling,  general,  and
administrative  expenses  was the result of increased  marketing  efforts in the
server and storage businesses. It is anticipated that savings as a result of the
Company's fiscal 1998  restructuring  program in the server business will result
in decreases in selling,  general,  and  administrative  expenses in fiscal year
1999, offset by increases arising from the continued  investment in the CLARiiON
storage  business.  It is the  Company's  objective  that the ratio of  selling,
general, and administrative expenses decline as a proportion of total revenues.

In fiscal year 1998,  the  Company  approved  and  implemented  a  restructuring
program  designed to strengthen  the Company's  focus on storage and  enterprise
computing  solutions and reduce costs in non-strategic  areas. The restructuring
was adopted in response to the increasing price competition  within the computer
hardware  industry.  The  program  included  a net  reduction  of the  Company's
worldwide workforce by approximately 400 employees,  which included 480 employee
terminations,  offset by  additional  employees  hired to support the  Company's
CLARiiON storage business.  The program also included the discontinuation of the
Company's   THiiN  Line  Internet   server  products  and  the  development  and
manufacturing  of certain low-end AViiON server  products;  a  restructuring  of
research and development activities; and the cancellation of certain development
and vendor  supply  agreements  with various third  parties.  As a result of the
employee terminations and other actions noted above, the Company will also close
certain offices related to sales and marketing activities.

Accordingly,  during the current fiscal year,  the Company  recorded a charge of
$135 million related to the restructuring  program and certain asset write-downs
resulting  from the program.  The charge  included  approximately  $82.4 million
related to employee  termination  benefits,  asset  write-downs,  and other exit
costs that the Company has recorded in  operating  expenses,  and  approximately
$52.6  million for  capitalized  software and inventory  write-downs,  which are
included in product  cost of  revenues.  A summary of the  restructuring  charge
included  in  operating  expense and the related  accrued  liability  balance at
September 26, 1998 is as follows:

                                       21

<PAGE>

<TABLE>
Restructuring Charge (in millions)
<CAPTION>

-----------------------------------------------------------------------------------------------
                               Restructuring               Less:
                                  Charge             Cash Payments and     September 26, 1998
                              Fiscal Year 1998        Asset Write-downs         Balance
-----------------------------------------------------------------------------------------------
                                             
<S>                              <C>                      <C>                   <C>  
Employee termination benefits    $ 43.7                   $ 16.7                $ 27.0
Asset write-downs                  19.9                     13.2                   6.7
Lease abandonments                 11.3                      0.7                  10.6
Other exit costs                    7.5                      3.8                   3.7
                                 ------                   ------                ------     
Total                            $ 82.4                   $ 34.4                $ 48.0
                                 ======                   ======                ======

-----------------------------------------------------------------------------------------------
</TABLE>

This provision includes  severance benefits for approximately 480 employees,  of
which  approximately  65% were based in the United  States and the  remainder in
Europe and Asia/Pacific. Of the 480 employees identified, approximately 345 were
terminated  during the fiscal year ended  September 26, 1998,  and the remaining
terminations  are expected to be  substantially  complete by the end of calendar
year 1998. Asset write-downs are composed  primarily of fixed assets,  including
leasehold improvements and demonstration equipment,  which are being disposed of
in  connection  with  the  restructuring   program.   The  provision  for  lease
abandonments relates to vacated lease properties, mainly in Europe and Asia, and
includes  a change in  estimate  of $1.3  million  for lease  abandonment  costs
accrued in prior years.

In addition,  the Company  recorded charges related to the write-down of certain
capitalized  software costs ($43 million) and inventory ($10 million) which have
been recorded in product cost of revenues.  Changes in the  Company's  focus for
its server  products  resulting  from the  restructuring  program  significantly
lowered the future gross revenue estimates for certain software-based solutions,
requiring  that  these  previously  capitalized  costs be  reduced  to their net
realizable  value.  Also, the Company disposed of inventory related to its THiiN
Line business and certain other discontinued products.

The Company expects cost savings of  approximately  $40 to $45 million  annually
from the restructuring  program. The Company does not expect to realize the full
benefit of the expense reductions until the first quarter of calendar year 1999.
The Company does not currently foresee any significant additional  restructuring
charges in the near future.

During  fiscal year 1995,  the Company  recorded a  restructuring  charge of $43
million.  As of September 26, 1998, the remaining  reserves of $3.9 million from
the  1995  restructuring  program  are  for  excess  vacant  rental  properties,
primarily located in Europe.

At September 26, 1998, the number of employees  totaled  approximately  4,700, a
net decrease of 400 employees from September 27, 1997.  During fiscal year 1997,
there  was a net  increase  of 200  employees  from  the  4,900  employed  as of
September 28, 1996.

Net Income (Loss) (in millions)
================================================================================
                                   1998                 1997               1996
                                  ------               ------             ------
Income (loss) from operations     $(149)                 $63                $37

Interest and other income             -                   (5)                (5)

Tax provision                        (3)                  (2)                (4)
                                  ------               ------              -----

Net income (loss)                 $(152)                 $56                $28
================================================================================

The loss from  operations  in fiscal 1998 of $149 million was composed of losses
of $120  million,  $24 million,  and $5 million  from the domestic  marketplace,
Europe, and other international locations, respectively. The loss in the current
fiscal  year  includes  a  charge  of  $135  million  related  to the  Company's
restructuring  program and certain asset write-downs resulting from the program.
The income from  operations  for fiscal 1997 of $63 million was  composed of $73
million  domestically,  partially offset by losses from operations of $5 million
each from Europe and other international  locations. In fiscal 1996, income from
operations was $44 million  domestically  and $3 million in Europe,  offset by a
loss from operations of $10 million from other international markets.

Interest income for fiscal 1998 increased 27% from fiscal 1997,  following a 42%
increase from fiscal 1996 to fiscal 1997.  The increases  were  primarily due to
higher levels of invested cash.  Interest expense was $14 million,  $15 million,
and $13  million  for fiscal  years  1998,  1997,  and 1996,  respectively.  The
interest expense for fiscal year 1998 relates  primarily to interest expense and
amortization  of issuance  costs  associated  with the Company's 6%  Convertible
Subordinated  Notes due 2004, which were issued during the second half of fiscal
1997.  In  fiscal  1997,  the  Company  converted  $125  million  of  the 7 3/4%
Convertible  Subordinated  Debentures  due 2001 and retired $27

                                       22

<PAGE>

million of the 8 3/8% Sinking Fund  Debentures  due 2002. In fiscal 1998,  other
income,  net, includes a gain on the sale of an equity security of $2.2 million,
offset,  in part, by the write-off of a $2 million equity  investment  which had
been previously carried at cost.

The  provision  for income  taxes in fiscal years 1998,  1997,  and 1996 related
primarily to foreign,  state, and federal alternative minimum taxes. The Company
has a valuation  allowance which  substantially  offsets all deferred tax assets
existing as of September  26, 1998 and  September  27,  1997.  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,  and may adjust the level of the  valuation  allowance,  if
appropriate.

In the first quarter of fiscal 1998, the Company adopted  Statement of Financial
Accounting  Standards  Number 128 ("SFAS  128"),  "Earnings per Share." SFAS 128
specifies modifications to the calculation of earnings per share from the method
previously  used by the  Company  as  prescribed  by APB  Opinion  Number 15. As
required by the Securities and Exchange Commission,  Note 11 to the Consolidated
Financial  Statements  discloses  earnings per share amounts in accordance  with
SFAS 128 for fiscal years 1998, 1997, and 1996.

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  February  1998,  the FASB  issued SFAS 132,  "Employers'  Disclosures  about
Pensions  and  Other  Postretirement  Benefits."  SFAS  132  revises  employers'
disclosures about pension and other  post-retirement  benefit plans. It does not
change  the  measurement  or  recognition  of those  plans.  This  Statement  is
effective for fiscal years  beginning  after December 15, 1997. The Company will
implement the Statement as required.

In June 1998, the FASB issued SFAS 133,  "Accounting for Derivative  Instruments
and Hedging  Activities." This statement is effective for all fiscal quarters of
all fiscal years  beginning after June 15, 1999. The Company will implement this
statement as required.  The Company is currently  evaluating the effect, if any,
the future adoption of SFAS 133 will have on the consolidated financial position
or results of operations.

LIQUIDITY AND CAPITAL RESOURCES

Cash and temporary cash  investments as of September 26, 1998 were $158 million,
a decrease of $59 million from fiscal 1997.  At the same date,  the Company held
$160  million in  marketable  securities,  a net increase of $9 million from the
prior fiscal year. In total,  cash and temporary  cash  investments,  along with
marketable  securities,  decreased $50 million in the current  fiscal year.  The
decrease was mainly  attributable to the purchases of equipment required for the
company's  server and storage  businesses,  payments  reducing  employee-related
accruals,  and payments related to the restructuring program implemented in June
of 1998. The marketable  securities  held,  which  supplement cash and temporary
cash investments,  include United States Treasury bills and notes,  notes issued
by U.S.  government  agencies,  commercial paper and certificates of deposit, as
well as equity  securities  recorded at their fair market  value of $9.8 million
and  classified  as  available-for-sale.   The  unrealized  gain  on  marketable
securities of $8.5 million is recorded as a separate  component of stockholders'
equity.  Net cash  provided  from  operations  in fiscal  1998 was $80  million.
Expenditures for property,  plant, and equipment were $114 million,  capitalized
software  development  costs  totaled $36 million,  and cash provided from stock
plans  equaled  $11  million.  The  effect of  foreign  currency  exchange  rate
fluctuations  on cash and  temporary  cash  investments  was an  increase  of $1
million for fiscal year 1998.

Net receivables  increased $11 million to $307 million as of September 26, 1998.
Total inventories as of September 26, 1998 were $142 million,  a decrease of $24
million  from  September  27, 1997,  primarily  as a result of the  reduction in
inventory  levels  related to the Company's  restructuring  program and improved
supply management.  Net property, plant, and equipment remained at $180 million.
The purchases of the  equipment and capital  expenditures  for  developing  both
operating and financial  systems and to support the new product  initiatives  in
the server and storage  businesses  were offset,  in part, by the  write-down of
non-strategic  assets,  which  are being disposed  of  in  connection  with  the
restructuring   program.  Fixed  asset  dispositions  related  to  the  sale  of
demonstration  equipment  totaled  $8.7  million  for the current  fiscal  year.
Management  expects that sales of demonstration  equipment will continue.  Other
long-term  assets  decreased  by  approximately  $8 million to $89 million as of
September 26, 1998.  This decrease was primarily the result of the write-down of
certain  capitalized  software  costs to the net  realizable  value,  due to the
Company's  restructuring program, partly offset by recording an intangible asset
of $20.4 million equal to the amount of  unrecognized  prior service cost of the
Company's  domestic  pension  plan.  The  amount  of  the  accumulated   benefit
obligation in excess of the  intangible  asset of $6.3 million has been recorded
as a separate component of stockholders' equity.

Accounts payable increased $6 million, partly due to an increase in the value of
unmatured  foreign  exchange  contracts as of September 26, 1998.  Other current
liabilities and other liabilities  increased $58 million,  primarily as a result
of charges  related to employee

                                       23

<PAGE>

termination  benefits and provisions for lease  abandonments  related to vacated
lease   properties   resulting   from  the  Company's   restructuring   program.
Additionally,  the Company  recorded a pension  liability of  approximately  $27
million  related to the excess of the  accumulated  benefit  obligation over the
pension plan assets.  Long-term debt of $212.8 million  remained  unchanged from
September 27, 1997.

For the  three-year  period ending  September 26, 1998,  cash and temporary cash
investments  increased $41 million.  Net cash provided from  operations was $312
million.  The sale of  non-operating  facilities  and other assets  provided $13
million.  Proceeds from the Company's employee stock plans provided $37 million.
Net cash  provided  from  long-term  debt was $177  million,  as a result of the
Company  issuing $213 million of 6% Convertible  Subordinated Notes due 2004, in
fiscal 1997,  which was partially  offset by the  retirement of $30 million of 8
3/8% Sinking  Fund  Debentures  due 2002,  and the payment of $6 million in debt
issuance costs on the 6% Convertible  Subordinated Notes due 2004. Net cash used
for the purchase of  marketable  securities  was $67 million.  Expenditures  for
property, plant, and equipment totaled $319 million and the Company's investment
in capitalized software  development costs was $103 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 a $4 million decrease 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,
and sales of facilities and other non-operating assets. The Company has not paid
cash  dividends  since its  inception  in order to  reinvest  available  cash in
operations.

At September 26, 1998, the Company had a $45 million  unsecured letter of credit
and reimbursement facility with a group of banks. This 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 letter of credit and  reimbursement
facility  is the lower of 1.375%  per annum  above  LIBOR or the prime rate plus
0.25%. Commitment fees paid on available funds during fiscal years 1998 and 1997
were not material. There were $4.7 million and $5.0 million of letters of credit
secured  by the $45  million  letter of credit  and  reimbursement  facility  at
September  26, 1998 and September  27, 1997,  respectively.  During fiscal years
1998 and 1997, there were no borrowings under this facility.  The 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 1999.
Most of the  expenditures  will be for capital  assets  directly  related to the
Company's  open systems  product sales,  marketing,  support,  and  development.
During  fiscal  1999,  cash  totaling  $40 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.

YEAR 2000 INFORMATION AND READINESS DISCLOSURE ACT

The "Year 2000 issue" arises because many computer hardware and software systems
use only two  digits to  represent  the year.  As a result,  these  systems  and
programs may not  correctly  handle  dates  beyond 1999,  resulting in errors in
information or program or systems failures. Assessments of the potential effects
of the Year 2000 issues vary markedly among  different  companies,  governments,
consultants,  economists  and  commentators.  It is not  possible to  accurately
predict what the actual impact may be. In this context,  the Company  offers the
following  statements  concerning the Year 2000 issues.  All statements made and
referred to here are Year 2000  Readiness  Disclosures  under the U.S. Year 2000
Readiness Disclosure Act.

1.       Product Readiness and Customer Communications

The Company is communicating  with its customers  concerning the Year 2000 issue
by letters to the  Company's  current  service  customers,  and creation of Data
General and CLARiiON Year 2000 Internet web sites at  http://www.dg.com/year2000
and   http://www.clariion.com/corporat/yr2000readiness.html   where   Year  2000
Readiness  Disclosures  concerning  various products and the Company's Year 2000
program are made available to customers and the general public.

The Company has established  teams to codify and confirm the Year 2000 readiness
of Data General's AViiON, CLARiiON, and 32-bit ECLIPSE(R) MV computer  products,
as well as Data General Pentium  processor-based  and later generation  personal
computers. Based on these efforts as of November 1, 1998, and subject to ongoing
investigation,  the Company has  identified  many products which are either Year
2000  Ready or may be made so by means of Year 2000  updates  which the  Company
intends  to make  available.  The  Company is making no  assurance  of Year 2000
Readiness for products not so  identified.  As well, the Company does not intend
to generally  address the Year 2000  readiness of  third-party  products  (i.e.,
products not marketed under the "Data General" brand name).

                                       24

<PAGE>
2.       Data General's Internal Systems, Manufacturing Processes and Facilities

With  regard to the  Company's  own  business  systems,  Data  General  has been
preparing for Year 2000 since mid-1996,  and has established teams to coordinate
solutions  to the Year 2000 issue for its own internal  information  systems and
applications across the Company's operations worldwide. As of October, 1998, the
Company's  assessment  was  that  a  significant  proportion  of  the  Company's
information system and applications have been rendered Year 2000 ready,  through
a combination of  re-engineering,  software  updates,  or  replacement  with new
technologies.  The Company is continuing its assessment and  remediation of Year
2000 issues. Based on existing plans and schedules,  and subject in any event to
the possibilities of delays, the Company plans to complete the process of making
all its significant internal information systems Year 2000 Ready in time to meet
the Company's specific business requirements. Although Data General's evaluation
of its information  management systems is still in process, the Company believes
that the impact of the Year 2000 issues on its business systems and applications
should not have a material adverse impact on future results.

The Company has also  undertaken an assessment of the Year 2000 issue as related
to its manufacturing facilities and processes. Although work remains to be done,
a significant  portion of this  evaluation has been completed and the Company is
not aware at November 1, 1998,  of any material  Year 2000 concerns with respect
to its manufacturing facilities and processes. The Company is also assessing the
possible  impact  of  Year  2000  issues  on the  operations  of its  facilities
(including such matters as security systems,  building equipment,  and potential
interruptions to utilities).  This evaluation is ongoing at this time. It is the
Company's  intention that all material Year 2000 issues  regarding the operation
of the Company's  facilities  will be addressed as the requisite  information is
received by the Company.

3.       Data General's Suppliers

The  Company's  procurement  organizations  are seeking to monitor the Year 2000
readiness of the Company's key suppliers. In 1997, the Company sought to contact
over 200 of its  significant  suppliers to determine  their Year 2000 readiness.
The Company is continuing  its efforts to monitor its suppliers  regarding  Year
2000 readiness  assessments.  Since the Company views Year 2000  preparations as
ongoing,  both within Data General and at our suppliers'  operations,  and since
suppliers'  reported  Year 2000  readiness  can  change,  efforts to monitor the
status of  suppliers  will be  continuing.  As Year 2000  readiness  issues  are
identified and as the Company gains more certain information concerning the Year
2000 readiness of its  suppliers,  the Company  intends to evaluate  contingency
plans as needed to address the Company's business requirements.

Since  determining  the Year 2000  readiness  of  suppliers  depends  upon their
cooperation   and  upon  their   disclosure  of  often  imprecise  or  estimated
information,  it is likely  that the  Company's  inquiries  will not be entirely
successful,  and it remains  possible  that  actual  results  may  deviate  from
assurances which were given to the Company. It is possible that  notwithstanding
the Company's efforts, interruptions of key components or services could have an
adverse impact on the Company's  operations and future  results.  If significant
exposures are identified, the Company expects during 1999 to assess the efficacy
and   reasonability  of  contingency   plans  to  mitigate  or  avoid  potential
interruptions to delivery of critical  supplies or services,  but alternatives -
particularly  for  single-sourced  components  or suppliers -- may not always be
readily  available  or  economically  reasonable.  It is  likely  that not every
potential Year 2000 exposure will be protected by a contingency  plan; a measure
of  reasonable  business  risk  will be  undertaken  relative  to the Year  2000
problem, both by Data General and by other companies.

4.       Risks of Claims

In addition,  there may be a potential  for claims  against the Company  arising
from products and services that were not Year 2000 ready. Because the Company is
in the business of selling computer system products, the Company's risk of being
subjected  to lawsuits  relating to Year 2000 issues with its products is likely
to be greater than that of companies  in other  industries.  The outcomes of any
Year  2000  claims  and the  impact  of such  claims  on the  Company  cannot be
determined   at  this  time;   such  outcomes  will  depend  on  the  facts  and
circumstances  of each  situation and an evolving state of law as these types of
claims are addressed by legal systems worldwide.

5.       Accounting Treatment of Year 2000 Expenses

The cost of  addressing  Year 2000  issues is  presently  being  funded  through
operating cash flows. During the fiscal year ended September,  1998, the Company
expensed  approximately  $840,000  in Year  2000  costs for  internal  labor and
outside   consultants  in  connection  with  internal  projects  supporting  the
Company's  critical  systems.  The Company is expensing  costs  associated  with
identification  and  resulting  changes to its systems,  but does not expect the
amounts  to have a  material  effect on its  financial  position  or  results of
operations.   As  of  November  1,  1998,  the  Company  believes  the  cost  of
administering  its Year 2000 readiness  program will not have a material adverse
impact on future earnings.


<PAGE>


6.       Certain Additional Risk Factors

It is unknown how the  Company's  sales may be impacted by Year 2000 issues.  As
the  Company's  customers  focus on preparing  their  businesses  for Year 2000,
capital budgets in the near term may be redirected toward  remediation  efforts,
potentially  delaying the purchase and  implementation  of new systems,  thereby
creating  less demand for the Company's  products and  services.  Alternatively,
sales of Year 2000 ready Data General  products  could be increased,  to replace
older  products.  As well, the Company's  sales during 1999 could be affected by
the customers'  perceptions of Data General's own state of Year 2000  readiness.
All these factors could affect the Company's future revenues.

                                       25

<PAGE>

Overriding any preparations  taken by the Company,  the Year 2000 issue presents
risks and uncertainties that could affect the Company;  these include unexpected
Year 2000 issues,  or  unexpected  problems  arising from plans  implemented  to
anticipate  Year  2000  problems;  extended  interruptions  to  power,  water or
telecommunications  utility  services;  potential  unavailability  of skilled or
critical  personnel;  delays  or  interruptions  in  national  or  international
transportation  systems;  and  potential  governments'  responses  to Year  2000
emergencies,  among others.  Further,  there can be no assurance that there will
not be delays in, or increased  costs  associated  with, the Company's Year 2000
readiness  efforts,  or that the  Company's  suppliers  and other  parties  will
adequately prepare for the Year 2000. The nature of these  uncertainties is such
that it remains  possible  that Year 2000 issues  could have a material  adverse
impact on the Company's operations and financial results. While the Company does
not currently  expect that this will be the case, and continues to  aggressively
pursue its  preparations  for the Year 2000,  the  Company  can offer no express
assurance whether or to what extent the Company may be affected by matters which
it has not  anticipated  or by matters  outside of the  Company's  control.  The
Company  recognizes the need to continue its analysis,  assessment,  monitoring,
and planning for the various Year 2000 issues,  across its businesses worldwide,
and to address Year 2000 issues as they are  identified.  Within that  uncertain
context,  however,  and  subject to the various  factors  discussed  above,  the
Company  believes that the impact of Year 2000 issues on its business should not
have a material adverse effect on the Company's financial position or results of
operations.


MARKET RISK

The Company is exposed to market risk primarily in its cash and foreign currency
transactions.  Because a  substantial  portion of the Company's  operations  and
revenue  occur  outside  the  United  States,   the  Company's  results  can  be
significantly  impacted  by changes  in foreign  currency  exchange  rates.  The
Company  manages its foreign  currency  risk through the use of forward  foreign
currency contracts. The Company does not hold or enter into derivative financial
instruments for trading  purposes.  At inception,  the forward foreign  currency
contracts  are  designated as hedges of  intercompany  accounts  receivable  and
foreign  sales  which  are  firmly  committed  or  forecasted.  These  contracts
generally  mature  within three  months.  Market value gains and losses on these
contracts  are  included in the cost of product  revenues and  generally  offset
exchange gains or losses on the related transactions.

See Note 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.

As of September 26, 1998, the Company had entered into forward foreign  currency
contracts to purchase $81.5 million and sell $153.7  million in various  foreign
currencies.  Between September 26, 1998, and September 30, 1998, forward foreign
currency  contracts  to purchase  $81.5  million and $78.0  million were settled
resulting in a net loss of approximately  $4.0 million.  This loss was partially
offset by exchange gains on the hedged transactions.  The potential gain or loss
for a hypothetical 10% beneficial or adverse change in foreign currency exchange
rates on the forward foreign  currency  contracts to sell $75.7 million maturing
after  September 30, 1998 would result in a gain or loss of  approximately  $8.0
million.  The  Company  expects  that this gain or loss  would be  substantially
offset by exchange gains or losses on the related hedged transactions

                                       26

<PAGE>


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

                                                                                YEAR ENDED
                                                          -------------------------------------------------------
IN THOUSANDS, EXCEPT PER SHARE AMOUNTS                     SEPT. 26, 1998     SEPT. 27, 1997      SEPT. 28, 1996
-----------------------------------------------------------------------------------------------------------------
<S>                                                           <C>                <C>                  <C>  
REVENUES
Product                                                       $ 1,067,888        $ 1,142,561          $  924,140
Service                                                           394,221            390,608             398,110          
                                                          -----------------   ---------------  ------------------
    Total revenues                                              1,462,109          1,533,169           1,322,250
                                                          -----------------   ---------------  ------------------

COSTS AND EXPENSES
Cost of product revenues                                          825,954            772,721             618,351           
Cost of service revenues                                          245,537            248,848             259,341           
Research and development                                          118,731            109,984              98,022
Selling, general, and administrative                              338,108            338,443             309,259          
Restructuring charge                                               82,400                  -                   -
                                                          -----------------   ---------------  ------------------
     Total costs and expenses                                   1,610,730          1,469,996           1,284,973
                                                          -----------------   ---------------  ------------------

Income (loss) from operations                                    (148,621)            63,173              37,277          
Interest income                                                    13,425             10,549               7,440         
Interest expense                                                   14,439             15,422              13,072         
Other income, net                                                     240                  -                   -     
                                                          -----------------   ---------------  ------------------

Income (loss) before income taxes                                (149,395)            58,300              31,645          
Income tax provision                                                3,000              2,400               3,500         
                                                          -----------------   ---------------  ------------------

Net income (loss)                                             $  (152,395)       $    55,900          $   28,145
                                                          =================   ===============  ==================

BASIC NET INCOME (LOSS) PER SHARE
Net income (loss) per share                                        $(3.11)             $1.35               $0.73
Weighted average shares outstanding                                49,038             41,347              38,769

DILUTED NET INCOME (LOSS) PER SHARE
Net income (loss) per share                                        $(3.11)             $1.26               $0.68
Weighted average shares outstanding, including
   common stock equivalents, where applicable                      49,038             44,215              41,095

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

                                       27

<PAGE>

DATA GENERAL CORPORATION
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
                                                                                 AS OF
                                                                  -------------------------------------
DOLLARS IN THOUSANDS, EXCEPT PAR VALUE                            SEPT. 26, 1998     SEPT. 27, 1997
-------------------------------------------------------------------------------------------------------
<S>                                                                  <C>               <C>
ASSETS
Current assets
  Cash and temporary cash investments                                $   158,220        $   216,814
  Marketable securities                                                  160,354            151,455
  Receivables, less allowances of $19,424 at
    Sept. 26, 1998 and $16,588 at Sept. 27, 1997                         307,428            296,375
Inventories                                                              141,639            166,008
Other current assets                                                      28,320             27,584
                                                                  -----------------  ------------------

    Total current assets                                                 795,961            858,236

Property, plant, and equipment, net                                      180,454            180,410

Other assets                                                              88,649             96,222
                                                                  -----------------  ------------------
            Total Assets                                             $ 1,065,064        $ 1,134,868
                                                                  =================  ==================

LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
  Accounts payable                                                   $   160,940        $   154,624
  Other current liabilities                                              269,774            237,198
                                                                  -----------------  ------------------

    Total current liabilities                                            430,714            391,822
                                                                  -----------------  ------------------

Long-term debt                                                           212,750            212,750
                                                                  -----------------  ------------------

Other liabilities                                                         36,645             11,516
                                                                  -----------------  ------------------

Commitments and Contingencies

Stockholders' equity
  Common Stock, $.01 par value
  Outstanding - 49,689,000 shares at Sept. 26, 1998
   and 48,588,000 shares at Sept. 27, 1997 (net of
   deferred compensation of $15,444 at Sept. 26, 1998                                
   and $14,157 at Sept. 27, 1997)                                        626,137            607,130
  Accumulated deficit                                                   (231,976)           (79,581)
  Unrealized gains on marketable securities                                8,513              2,812
  Equity adjustment for minimum pension liability                         (6,252)                 -
  Cumulative translation adjustment                                      (11,467)           (11,581)
                                                                  -----------------  ------------------

    Total stockholders' equity                                           384,955            518,780
                                                                  -----------------  ------------------
            Total Liabilities and Stockholders' Equity               $ 1,065,064        $ 1,134,868
                                                                  =================  ==================

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

                                       28

<PAGE>

<TABLE>

DATA GENERAL CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
<CAPTION>
                                                                                        YEAR ENDED
                                                                    ----------------------------------------------------
IN THOUSANDS                                                        SEPT. 26, 1998    SEPT. 27, 1997     SEPT. 28, 1996
------------------------------------------------------------------------------------------------------------------------
<S>                                                                    <C>                <C>                <C>
CASH FLOWS FROM OPERATING ACTIVITIES
  Net income (loss)                                                    $ (152,395)        $  55,900          $  28,145
  Adjustments to reconcile net income (loss) to net cash
    provided from operating activities
  Depreciation                                                             95,345            79,203             82,330              
  Amortization of capitalized software development costs                   60,881            20,180             19,130           
  Amortization of deferred compensation                                     8,461             4,669              3,866          
  Decrease in other liabilities                                            (1,507)           (3,708)            (8,263)          
  Net book value of fixed asset disposals                                   8,735             8,858              6,399         
  Gain on sale of marketable securities                                    (2,239)                -                  -
  Other non-cash items, net                                                 8,348             2,368               (299)         
  Changes in operating assets and liabilities, net of
  effects from sale of facilities and other assets
  (Increase) in receivables                                               (11,463)          (46,514)            (9,268)
  (Increase) decrease in inventories                                       33,363           (28,876)             1,567            
  (Increase) decrease in other current assets                                (655)           (4,313)             2,080          
  Increase in accounts payable                                              1,784            36,389              6,627           
  Increase (decrease) in other current liabilities, excluding debt         31,196             2,484            (27,191)
                                                                    ---------------   ---------------  -----------------

  Net cash provided from operating activities                              79,854           126,640            105,123            
                                                                    ---------------   ---------------  -----------------

CASH FLOWS FROM INVESTING ACTIVITIES
  Expenditures for property, plant, and equipment                        (114,247)         (110,505)           (94,670)
  Purchase of marketable securities                                      (302,798)         (221,859)           (84,224)
  Proceeds from sales and maturity of marketable securities               302,472            89,131            150,080          
  Capitalized software development costs                                  (35,554)          (36,283)           (30,714)
  Net proceeds from sale of facilities and other assets                         -                 -             12,797     
  Investment in equity securities                                               -                 -             (2,000)
                                                                    ---------------   ---------------  -----------------

  Net cash used by investing activities                                  (150,127)         (279,516)           (48,731)
                                                                    ---------------   ---------------  -----------------

CASH FLOWS FROM FINANCING ACTIVITIES
  Cash provided from stock plans, net                                      10,547            17,049              9,684          
  Repayment of notes payable                                                    -            (1,794)                 -          
  Repayment of long-term debt                                                   -           (27,177)            (3,000)
  Proceeds from long-term debt, net                                             -           206,853                  -           
                                                                      ---------------   ---------------  -----------------

  Net cash provided from financing activities                              10,547           194,931              6,684           
                                                                      ---------------   ---------------  -----------------

Effect of foreign currency rate fluctuations on cash
and temporary cash investments                                              1,132            (4,238)            (1,280)
                                                                      ---------------   ---------------  -----------------

Increase (decrease) in cash and temporary cash investments                (58,594)           37,817             61,796           
Cash and temporary cash investments - beginning
of the period                                                             216,814           178,997            117,201
                                                                      ===============   ===============  =================
Cash and temporary cash investments - end of the period                $  158,220         $ 216,814          $ 178,997
                                                                      ===============   ===============  =================

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
  Interest paid                                                        $   14,382         $  11,772          $  12,797
  Income taxes paid                                                    $    2,074         $   5,951          $   1,716

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

                                       29

<PAGE>



DATA GENERAL CORPORATION
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>

                                                                                 YEAR ENDED
                                                          ---------------------------------------------------------
IN THOUSANDS                                               SEPT. 26, 1998        SEPT. 27, 1997    SEPT. 28, 1996
-------------------------------------------------------------------------------------------------------------------
<S>                                                          <C>                   <C>                 <C>  
COMMON STOCK

   Beginning balance                                          $   607,130          $  460,312          $  446,762
   Shares issued under stock plans, net                            10,547              17,049               9,684            
   Amortization of deferred compensation                            8,460               4,669               3,866            
   Debt conversion to Common Stock                                      -             125,100                   -              
                                                         ----------------    ----------------    ----------------

   Ending balance                                                 626,137             607,130             460,312              
                                                         ----------------    ----------------    ----------------

ACCUMULATED DEFICIT

   Beginning balance                                              (79,581)           (135,481)           (163,626)               
   Net income (loss) for year                                    (152,395)             55,900              28,145               
                                                        -----------------    ----------------    ----------------

   Ending balance                                                (231,976)            (79,581)           (135,481)             
                                                        -----------------    ----------------    ----------------

UNREALIZED GAINS ON MARKETABLE SECURITIES

   Beginning balance                                                2,812               9,708                   -            
   Net adjustment for year                                          5,701              (6,896)              9,708            
                                                        -----------------    ----------------    ----------------

   Ending balance                                                   8,513               2,812               9,708           
                                                        -----------------    ----------------    ----------------


EQUITY ADJUSTMENT FOR MINIMUM PENSION LIABILITY

   Beginning balance                                                    -                   -                   -        
   Net adjustment for year                                         (6,252)                  -                   -   
                                                        -----------------    ----------------    ----------------

   Ending balance                                                  (6,252)                  -                   -        
                                                        -----------------    ----------------    ----------------

CUMULATIVE TRANSLATION ADJUSTMENT

   Beginning balance                                              (11,581)             (5,475)             (3,592)            
   Net translation adjustment for year                                114              (6,106)             (1,883)             
                                                        -----------------    -----------------    ----------------

   Ending balance                                                 (11,467)            (11,581)             (5,475)              
                                                        -----------------    ----------------    ----------------

Total stockholders' equity                                    $   384,955          $  518,780          $  329,064
                                                        =================    ================    ================


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

                                       30

<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.

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 for the periods ended September
26, 1998,  September 27, 1997,  and September 28, 1996, 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 equity securities.

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. The Company also
holds three publicly traded equity securities as part of its marketable security
portfolio.  These  securities  are  considered to be readily  marketable and are
classified as available-for-sale.  These investments, which are accounted for at
fair market  value at  September  26, 1998 and  September  27, 1997 totaled $9.8
million  and $4.0  million,  respectively.  The  unrealized  gain on  marketable
securities of $8.5 million and $2.8 million is recorded as a separate  component
of  stockholders'   equity  at  September  26,  1998  and  September  27,  1997,
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; 

                                     31

<PAGE>

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 three-year estimated useful life.

REVENUE RECOGNITION AND MAJOR CUSTOMERS.  Product revenues are recognized at the
time of shipment, provided that there are no significant uncertainties regarding
the 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 years ended September 26, 1998, September 27, 1997, and September 28,
1996,  revenues from a single customer totaled $192 million,  $238 million,  and
$201  million,   or   approximately   13%,  16%,  and  15%  of  total  revenues,
respectively.

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 four years for operating  system  software
and three 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.  As discussed further in
Note 3 to the Consolidated  Financial  Statements,  during fiscal year 1998, the
Company's   evaluation   of   anticipated   future  gross  revenue  for  certain
software-based  solutions  required  that the  previously  capitalized  costs be
reduced.  Unamortized software development costs were $51.5 million at September
26,  1998 and $76.8  million  at  September  27,  1997.  Write-offs  of  certain
capitalized software development costs totaled approximately $39.4 million, $0.5
million,  and $2.7 million for fiscal years 1998, 1997, and 1996,  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  1998,  1997,  and  1996,  and there  were no  capitalized
advertising  costs as of September 26, 1998 or September  27, 1997.  Advertising
expenses for fiscal 1998, 1997, and 1996 were $8.3 million,  $14.7 million,  and
$12.6 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.

STOCK-BASED  COMPENSATION PLANS. 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  (loss) and  earnings
(loss) per share for fiscal years 1998,  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  Statement  of  Financial  Accounting
Standards Number 123 ("SFAS 123"), "Accounting for Stock-Based Compensation".

EARNINGS PER SHARE.  In the first  quarter of fiscal 1998,  the Company  adopted
SFAS 128,  "Earnings per Share." Basic net income (loss) per share is based upon
the weighted  average  number of common shares  outstanding.  Diluted net income
(loss)  per share is based upon the  weighted  average  number of common  shares
outstanding,  including  dilutive  common  stock  equivalents  and  the  assumed
conversion of the Company's convertible  debentures,  if dilutive.  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. For fiscal 1998, 1997, and 1996, the debentures are
anti-dilutive and have been excluded from the calculation.

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 the  American  Institute of  Certified  Public  Accountants  issued
Statement  of Position  ("SOP")  97-2,  "Software  Revenue  Recognition."  These
statements are effective for fiscal years  beginning after December 31, 1997. In
February 1998, the FASB issued SFAS 132, "Employers'  Disclosures about Pensions
and Other Postretirement Benefits." This Statement is effective for fiscal years
beginning  after  December  15,  1997.  In June 1998,  the FASB issued SFAS 133,
"Accounting for Derivative  Instruments and Hedging  Activities." This statement
is effective for all fiscal  quarters of all fiscal years  beginning

                                     32
<PAGE>

after June 15, 1999.  The Company will implement  these  statements as required.
The  future  adoption  of SFAS  130,  SFAS 131,  SFAS  132,  and SOP 97-2 is not
expected  to have a  material  effect on the  Company's  consolidated  financial
position or results of operations. The Company is evaluating the effect, if any,
the future adoption of SFAS 133 will have on the consolidated financial position
or results of operations.


NOTE 3.  RESTRUCTURING

During fiscal year 1998, the Company  approved and  implemented a  restructuring
program  designed to strengthen  the Company's  focus on storage and  enterprise
computing  solutions and reduce costs in non-strategic  areas. The restructuring
program was adopted in response to the increasing price  competition  within the
computer  hardware  industry.  The  program  included  a net  reduction  of  the
Company's  worldwide  workforce by  approximately  400 employees  which included
approximately 480 employee terminations, offset by additional employees hired to
support the Company's  CLARiiON storage business.  The program also included the
discontinuation  of the Company's  THiiN Line Internet  server  products and the
development  and  manufacturing  of certain  low-end AViiON server  products,  a
restructuring  of research and development  activities,  and the cancellation of
certain  development and vendor supply agreements with various third parties. As
a result of the employee terminations and other actions noted above, the Company
will also close certain offices related to sales and marketing activities.

Accordingly,  during the current fiscal year,  the Company  recorded a charge of
$135 million related to the restructuring  program and certain asset write-downs
resulting  from the program.  The charge  included  approximately  $82.4 million
related to employee termination benefits, asset write-downs and other exit costs
which the Company has recorded in operating  expenses,  and approximately  $52.6
million for capitalized software and inventory write-downs which are included in
product cost of revenues.

This provision includes  severance benefits for approximately 480 employees,  of
whom  approximately  65% were based in the United  States and the  remainder  in
Europe and Asia/Pacific. Of the 480 employees identified, approximately 345 were
terminated   during  the  year  ended  September  26,  1998  and  the  remaining
terminations  are expected to be  substantially  complete by the end of calendar
year 1998. Asset write-downs are composed  primarily of fixed assets,  including
leasehold improvements and demonstration equipment, which will be disposed of in
connection with the restructuring  program. The provision for lease abandonments
relates to vacated lease  properties,  mainly in Europe and Asia, and includes a
change in estimate of $1.3 million for lease  abandonment costs accrued in prior
years.

In addition,  the Company  recorded charges related to the write-down of certain
capitalized  software costs ($43 million) and inventory ($10 million) which have
been recorded in product cost of revenues for the year ended September 26, 1998.
Changes  in the  Company's  focus for its  server  products  resulting  from the
restructuring  program  significantly lowered the future gross revenue estimates
for  certain   software-based   solutions,   requiring  that  these   previously
capitalized  costs be reduced to their net realizable  value.  Also, the Company
disposed of  inventory  related to its THiiN Line  business  and  certain  other
discontinued products.

During fiscal 1995, the Company recorded a restructuring  charge of $43 million.
As of September  26, 1998 the  remaining  reserves of $3.9 million from the 1995
restructuring program are for excess vacant rental properties, primarily located
in Europe.

The amounts  accrued and charged against the  established  provisions  described
above were as follows:
<TABLE>
<CAPTION>
                                                                                         
                                                              BEGINNING   CURRENT YEAR  CURRENT YEAR       ENDING
IN MILLIONS                                                     BALANCE      PROVISION       CHARGES      BALANCE
------------------------------------------------------------------------------------------------------------------
<S>                                                                <C>
FISCAL 1998 ACTIVITY
Employee termination benefits                                     $ 0.8         $ 43.7      $ (17.3)        $27.2
Lease abandonments                                                  5.6           11.3         (3.6)         13.3
Asset write-downs                                                     -           19.9        (13.4)          6.5
Other exit costs                                                    1.2            7.5         (3.8)          4.9
                                                                  ------        -------    ----------     --------  
  Total                                                            $7.6         $ 82.4      $ (38.1)        $51.9
                                                                  ------        -------    ----------     -------- 

FISCAL 1997 ACTIVITY
Employee termination benefits                                     $ 2.5              -        $(1.7)         $0.8
Lease abandonments                                                 10.0              -         (4.4)          5.6
Other exit costs                                                    2.0              -         (0.8)          1.2
                                                                 -------        -------    ----------     --------
  Total                                                           $14.5              -        $(6.9)        $ 7.6
                                                                 -------        -------    ----------     --------
</TABLE>

<PAGE>

NOTE 4.  CONSOLIDATED BALANCE SHEET DETAILS

<TABLE>
<CAPTION>
                                                                             AS OF
                                                       -------------------------------------------------
IN THOUSANDS                                                      SEPT. 26, 1998         SEPT. 27, 1997
--------------------------------------------------------------------------------------------------------
<S>                                                                    <C>                    <C>
INVENTORIES
Raw materials                                                          $  1,420              $ 16,169
Work in process                                                          64,200                78,335
Finished systems                                                         50,632                44,349
Field engineering parts and components                                   25,387                27,155
                                                                       --------              --------
  Total inventories                                                    $141,639              $166,008
                                                                       --------              --------

PROPERTY, PLANT, AND EQUIPMENT
Land                                                                   $  3,512               $ 3,512
Buildings and improvements                                               81,350                75,819
Manufacturing and design equipment                                      100,452                95,931
Data processing, office, and other equipment                            381,945               399,812
Computer equipment spares                                                74,353                82,277
                                                                       --------              --------      
  Total property, plant, and equipment                                  641,612               657,351
Accumulated depreciation                                               (461,158)             (476,941)
                                                                       --------              --------
  Total property, plant, and equipment, net                            $180,454              $180,410
                                                                       --------              --------

OTHER CURRENT LIABILITIES
Accrued employee compensation and benefits                             $ 62,279               $86,268
Deferred revenues                                                        56,321                50,574
Accrued restructuring charges                                            45,114                 7,649
Other accrued expenses                                                  106,060                92,707
                                                                       --------              --------  
  Total other current liabilities                                      $269,774              $237,198
                                                                       --------              --------
</TABLE>

During the current  fiscal year,  the Company  retired  fully  depreciated 
computer  equipment  spares with an original  cost of $19.4 million.

                                       33

<PAGE>

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
                                                       ----------------------------------------------------------
IN THOUSANDS                                               SEPT. 26, 1998      SEPT. 27, 1997     SEPT. 28, 1996
-----------------------------------------------------------------------------------------------------------------
<S>                                                            <C>                   <C>                <C> 
INCOME (LOSS) BEFORE TAXES
 Domestic                                                      $(124,886)            $62,125            $32,200
 Foreign                                                         (24,509)             (3,825)              (555)
                                                               ---------            --------           --------
                                                               $(149,395)            $58,300            $31,645
                                                               ---------            --------           --------

INCOME TAX PROVISION (BENEFIT)
Current
 Federal                                                       $       -             $   250              $ 650
 Foreign                                                           1,589               1,091              1,076
 State                                                               700                 800                800
                                                                  ------              ------             ------
  Total Current                                                    2,289               2,141              2,526
                                                                  ------              ------             ------ 
Deferred
 Federal                                                               -                   -              1,350
 Foreign                                                             711                 259               (376)
                                                                  ------              ------             ------
  Total Deferred                                                     711                 259                974
                                                                 -------              ------            -------
                 Total Tax Provision                           $   3,000             $ 2,400            $ 3,500
                                                                 -------              ------            -------
</TABLE>

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 26, 1998 and September 27, 1997 were as follows:



<PAGE>
<TABLE>
<CAPTION>



                                                                       AS OF
                                                       ---------------------------------------
IN THOUSANDS                                               SEPT. 26, 1998      SEPT. 27, 1997
----------------------------------------------------------------------------------------------
<S>                                                             <C>                 <C>
DEFERRED TAX ASSETS
Inventory                                                       $ 10,278            $ 10,618
Operating expenses                                                44,732              54,218
Intercompany profit in inventory and fixed assets                  6,345               7,334
Depreciation                                                      12,110               5,933
Restructuring                                                     40,663               1,403
Stock option plans                                                 7,503               6,026
Interest on convertible debentures                                 1,940               1,842
Net operating losses                                             150,129             116,043
Tax credits                                                       19,090              17,696
                                                                --------            --------
 Gross deferred tax assets                                       292,790             221,113
Less: Valuation allowances                                       260,235             195,071
                                                                --------            -------- 
 Total deferred tax assets                                        32,555              26,042
                                                                --------            --------
DEFERRED TAX LIABILITIES
Capitalized software development costs                           (35,132)            (28,695)
Other                                                             (3,535)             (2,748)
                                                                --------            --------
 Total deferred tax liabilities                                  (38,667)            (31,443)
                                                                --------            --------
 Net deferred tax liabilities                                   $ (6,112)           $ (5,401)
                                                                --------            --------
</TABLE>

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

                                                                               YEAR ENDED
                                                        ---------------------------------------------------------
                                                            SEPT. 26, 1998      SEPT. 27, 1997    SEPT. 28, 1996
-----------------------------------------------------------------------------------------------------------------
<S>                                                              <C>                 <C>               <C>
U.S. Federal statutory rate                                     (35.0%)              35.0%             35.0%
State income taxes                                                0.5                 1.4               2.5
Net domestic and foreign
 losses without tax benefits                                     37.9                 3.7              15.0
Net operating loss carryforwards utilized                        (0.2)              (36.8)            (42.1)
Foreign income taxed at different rates                          (1.1)                0.4              (1.5)
Alternative minimum tax                                             -                 0.4               2.1
Other                                                               -                   -               0.1
                                                                 -----              -----             -----  
Effective tax rate                                                2.1%               4.1%             11.1%
                                                                 -----   ---        -----             -----
</TABLE>
  
The  Company  has U.S.  Federal  and foreign  operating  loss  carryforwards  of
approximately  $395 million and tax credit  carryforwards of  approximately  $18
million. The operating loss carryforwards expire in the years 1999 through 2018.
The operating loss carryforward  expiring in 1999 is an immaterial  amount.  The
tax credit carryforwards expire in the years 2000 through 2017.

Provision  has  not  been  made  for  U.S.  or   additional   foreign  taxes  on
approximately $89 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 $1.0 million.


<PAGE>



NOTE 6.  DEBT
<TABLE>
<CAPTION>

                                                                                AS OF
                                                                --------------------------------------
IN THOUSANDS                                                         SEPT. 26, 1998    SEPT. 27, 1997
------------------------------------------------------------------------------------------------------
<S>                                                                        <C>               <C>
6% Convertible Subordinated Notes due 2004                                 $212,750         $212,750
                                                                          ---------         --------

</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  26, 1998 and  September 27, 1997 of $4.8 and
$5.6 million,  respectively,  are being  amortized to interest  expense over the
life of the Notes.  The  Company  does not have any  maturity  requirements  for
long-term debt for the next five fiscal years.

                                       34

<PAGE>

At September 26, 1998, the Company had a $45 million  unsecured letter of credit
and reimbursement facility with a group of banks. This 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 letter of credit and  reimbursement
facility  is the lower of 1.375%  per annum  above  LIBOR or the prime rate plus
0.25%. Commitment fees paid on available funds during fiscal years 1998 and 1997
were not material. There were $4.7 million and $5.0 million of letters of credit
secured  by the $45  million  letter of credit  and  reimbursement  facility  at
September  26, 1998 and September  27, 1997,  respectively.  During fiscal years
1998 and 1997, there were no borrowings under this facility.  The facility has a
duration of three years and expires on September 30, 2000.

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.

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.

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 26, 1998 and September 27, 1997, due to
the relatively short maturity of these financial instruments.  The Company holds
three publicly  traded equity  securities as part of its  marketable  securities
portfolio.  These  securities  are  considered to be readily  marketable and are
classified  as  available-for-sale.  The fair value of these  marketable  equity
securities  totaled  $9.8  million and $4.0  million at  September  26, 1998 and
September  27,  1997,  respectively.  The fair  value of  investments  and notes
receivable,  included in other  assets,  was $1.6  million  and $4.0  million at
September 26, 1998 and September 27, 1997, respectively, which is equal to their
carrying values. The fair value of long-term debt, including debt due within one
year, at September 26, 1998 and September 27, 1997 was $170.7 million and $267.8
million,  respectively,  compared to carrying  values of $212.8  million for the
years ended September 26, 1998 and September 27, 1997.

The Company  enters into  various  forward  contracts  to limit its  exposure to
fluctuations  in foreign  currency  exchange rates. As of September 26, 1998, in
connection with the Company's foreign exchange hedging programs, the Company had
entered into forward  exchange  contracts to purchase  $81.5 million and to sell
$153.7 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
26, 1998  approximates  the  original  value of the forward  contracts.  Between
September  26, 1998 and  September  30,  1998,  forward  exchange  contracts  to
purchase $81.5 million and to sell $78.0 million in various  foreign  currencies
matured  and were  settled.  The  remaining  contracts  mature at various  dates
through January 27, 1999 and are not concentrated in any one currency.

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 $15.3
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 26, 1998 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 2015 and some contain  options for renewal.  Rental  expense,  including
amounts charged against previously established restructuring reserves for vacant
and sublet properties,  was $28.9 million,  $29.9 million, and $32.2 million for
fiscal years 1998, 1997, and 1996, respectively.

                                       35

<PAGE>

Future minimum rental payments under existing non-cancelable operating leases as
of September 26, 1998 are as follows:

FISCAL YEAR                           IN MILLIONS
-------------------------------------------------
1999                                    $ 20.7
2000                                      18.2
2001                                      15.4
2002                                      12.7
2003                                       9.9
Subsequent to 2003                        73.6
                                     ---------
                                        $150.5
                                     ---------

The  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 $64.8 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  programs.  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.

LITIGATION.  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 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
26, 1998,  49,898,000  shares of Common Stock have been issued, of which 209,000
shares with a cost of $5.9  million are held by the Company as treasury  shares.
As of September 27, 1997,  48,808,000 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 26, 1998,  600,000 shares of preferred
stock had been designated as Series A Junior  Participating  Preferred Stock. No
shares of preferred stock have been issued as of September 26, 1998.

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.

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  Number  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  (loss)  and  earnings  (loss) per share  would have been  reduced to the
pro-forma amounts indicated below:

<TABLE>

                                                                                 YEAR ENDED
                                                      --- ---------------------------------- -----------------
                                                        SEPT. 26, 1998      SEPT. 27,1997     SEPT. 28, 1996
                                                      ------------------- ------------------ -----------------
<S>                                                         <C>                 <C>               <C>
Net income (loss) (in thousands)       As reported        $(152,395)           $55,900           $28,145
                                       Pro forma          $(158,790)           $52,473           $26,161

Diluted earnings (loss) per share      As reported         $(3.11)              $1.26              $0.68
                                       Pro forma           $(3.24)              $1.19              $0.64
</TABLE>


The effect on net income (loss) and earnings (loss) per share is not expected to
be  indicative  of the  effects 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. 26,1998      SEPT. 27, 1997     SEPT. 28, 1996
                                                      ------------------- ------------------ -----------------
<S>                                                         <C>                <C>                <C>
Expected volatility                                         41.22%             38.75%             42.91%
Risk-free interest rate                                       5.6%               5.9%               5.6%
Expected life of options in years                             3.9                4.2                4.2
Expected dividend yield                                         -                  -                  -

</TABLE>

During fiscal years 1998, 1997, and 1996, the weighted  average  grant-date fair
value of options granted was $8.31,  $10.73, and $6.09 per share,  respectively,
and the  exercise  price of options  granted was $11.46,  $11.70,  and $8.65 per
share, respectively.

                                       36

<PAGE>

EMPLOYEE  STOCK OPTION  PLANS.  As of  September  26, 1998 the Company had three
employee 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.


<PAGE>



A summary of the status of these stock option plans as of September 26, 1998, 
September 27, 1997, and September 28, 1996 and changes during the years ending
on those dates is presented as follows:

<TABLE>

                                                                            NUMBER                   WTD.
                                                                           OF OPTIONS             AVG. PRICE
                                                                             (000's)               PER SHARE
-------------------------------------------------------------------------------------------------------------
<S>                                                                           <C>                      <C>
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

  Options granted                                                             1,885                   $12.32
  Options exercised                                                            (390)                   $5.14
  Options canceled                                                             (334)                   $8.18
                                                                             ------
Outstanding, September 26, 1998                                               5,194                    $9.16

Exercisable, September 26, 1998                                               1,812                    $7.05

Options reserved for future grants, September 26, 1998                        3,351
</TABLE>


The following table summarizes information about these plans at September 26,
1998:
<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       Options     Exercise Price
                             (000's)                            Price           (000's)
----------------------- ------------- ----------------- ------------------ -- ---------- ------------------
<S>                              <C>              <C>               <C>             <C>             <C>
$1.06 - $3.97                    384              6.14              $3.27           255              $3.19
$4.00 - $7.94                  2,326              7.44              $6.09           785              $5.09
$8.00 - $20.00                 2,484              7.81             $12.96           772             $10.31

</TABLE>

1998  EMPLOYEE  STOCK OPTION PLAN.  On November 4, 1998,  the Board of Directors
established a fourth employee stock option plan (the "1998 Plan"). The 1998 Plan
is a broadly  based plan in which all  employees  of the Company are eligible to
participate. The 1998 Plan authorizes the grant of stock options to employees to
purchase up to 2,500,000 shares of Common Stock. The purchase price per share is
at the discretion of the 1998 Employee Stock Option Plan Committee  appointed by
the Board of Directors, but shall not be lower than 25% of the fair market value
of the Company's  Common Stock on the date of grant or 50% of the Company's book
value per share of the Common Stock as of the fiscal year end preceding the date
of grant. Options granted under the plan are generally  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 is determined by the Board of Directors or the 1998 Employee  Stock Option
Plan Committee. Options may expire up to ten years after date of grant.

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 1998, options were exercised
to purchase  682,000  shares at an average  price of $12.18 per share.  Unissued
shares of  Common  Stock  reserved  for  future  issuance  under  this plan were
1,598,000  shares at September  26, 1998 and  2,280,000  shares at September 27,
1997.

1994 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.

During fiscal 1998,  1997,  and 1996,  24,000,  28,000,  and 24,000 options were
granted at a weighted  average  price of $15.44,  $20.30,  and $15.75 per share,
respectively.  During fiscal 1998 and 1997,  options were  exercised to purchase
16,000 and 11,000  shares at a  weighted  average  price of $12.69 and $9.12 per
share,  respectively.  There were no options  exercised during fiscal year 1996.
There were no options canceled during fiscal years 1998, 1997, and 1996. Options
to purchase  89,000,  81,000,  and 64,000 shares at a weighted  average price of
$15.18, $14.61, and $11.17 per share, respectively,  were outstanding at the end
of fiscal 1998,  1997,  and 1996. As of September 26, 1998,  the 89,000  options
outstanding in this plan have exercise  prices between $8.39 and $33.31,  with a
weighted average remaining contractual life of 7.9 years, and 29,000 shares were
exercisable at a weighted  average price of $12.72 per share.  There were 34,000
shares reserved for future grants at September 26, 1998.

                                       37

<PAGE>

1998  NON-EMPLOYEE  DIRECTOR  STOCK OPTION PLAN.  On November 4, 1998,  the 1998
Non-Employee  Director Stock Option Plan was approved.  This plan authorizes the
grant of an option to  purchase  7,500  shares of Common  Stock  reduced  by the
number of shares  available  for purchase  under  options  granted from the 1994
Non-Employee  Director Stock Plan described  above 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.  The Board of Directors  has reserved  150,000 of the  Company's  treasury
shares to utilize under this 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.

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 the  director's  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 year 1998 and 1996,  options were  exercised to purchase 2,000 and
4,000  shares,  respectively,  at a weighted  average  price of $4.38 per share.
There were no options  exercised in fiscal 1997.  There were no options canceled
during fiscal years 1998,  1997,  and 1996.  At September  26, 1998,  options to
purchase  8,000  shares at  exercise  prices  between  $1.81 and  $2.66,  with a
weighted average remaining contractual life of 6.0 years, were outstanding,  and
7,000 shares were  exercisable  at a weighted  average price of $2.17 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.

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

                                                                      YEAR ENDED
                                              ------------------------------------------------------------
IN THOUSANDS                                       SEPT. 26, 1998      SEPT. 27, 1997      SEPT. 28, 1996
----------------------------------------------------------------------------------------------------------
<S>                                                      <C>                 <C>                 <C>
Service cost                                             $ 9,992             $ 7,886             $ 7,468
Interest on projected benefit obligation                  16,981              14,127              12,736
Actual return on plan assets                               4,080             (32,325)            (14,362)
Deferral of net actuarial gains/(loss) and
  amortization of transition surplus and
  prior service cost                                     (23,861)             17,261               2,283
Special termination benefit charge                         1,044                   -                   -            
Curtailment loss, net of settlement gain                   1,197                 316                 (50)
                                                         -------             -------             -------
Net pension expense                                      $ 9,433             $ 7,265             $ 8,075
                                                         -------             -------             -------
</TABLE>


The funded status of the plans is as follows:
<TABLE>
<CAPTION>

                                                                                     AS OF
                                                                      -------------------------------------
IN THOUSANDS                                                              SEPT. 26, 1998    SEPT. 27, 1997
-----------------------------------------------------------------------------------------------------------
<S>                                                                            <C>               <C>
ACTUARIAL PRESENT VALUE OF BENEFIT OBLIGATIONS
  Vested benefit obligation                                                    $240,339          $174,673
                                                                               --------          --------
  Accumulated benefit obligation                                               $252,334          $183,164
                                                                               --------          --------
  Projected benefit obligation                                                 $274,216          $203,070
Market value of plan assets                                                     213,472           192,424
                                                                               --------          --------
Excess of projected benefit obligation over plan assets                          60,744            10,646
Unrecognized actuarial gain/(loss)                                              (38,277)           15,560
Unrecognized prior service cost                                                 (23,388)          (16,561)
Unrecognized transition surplus, net                                              5,402             6,236
                                                                               --------          --------
Net pension liability included in current and other liabilities                 $ 4,481          $ 15,881
                                                                               --------          --------

ASSUMPTIONS USED IN COMPUTING THE FUNDED
STATUS OF THE PLANS
  Weighted average discount rate                                                  6.96%             7.63%
  Expected long-term weighted average rate of return of assets                    9.28%             9.41%
  Weighted average rate of increase in compensation levels                        4.00%             4.16%

</TABLE>

                                       38

<PAGE>

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 generally resulted in increased benefits to participants with
creditable service prior to October 1, 1997.

As of September 26, 1998,  the Company  recorded a liability of $26.7 million to
recognize  the  accumulated  benefit  obligation in excess of plan assets and an
intangible  asset of $20.4  million  equal to the amount of  unrecognized  prior
service cost for the U.S pension  plan.  The amount of the  accumulated  benefit
obligation in excess of the  intangible  asset of $6.3 million has been recorded
as a separate component of stockholders' equity.

The Company also has foreign defined  contribution  pension plans. Total pension
cost  charged to expense for these plans was $2.3  million in fiscal  1998,  and
$1.6 million in both fiscal years 1997 and 1996.

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
                                              ----------------------------------------------------------
IN THOUSANDS                                       SEPT. 26, 1998     SEPT. 27, 1997     SEPT. 28, 1996
--------------------------------------------------------------------------------------------------------
<S>                                                         <C>                <C>               <C>
Service cost                                               $  325             $  296            $  293
Interest on projected benefit obligation                      722                687               655
Actual return on plan assets                                    7                (26)              (56)
Deferral of net actuarial gains and
  amortization of transition surplus and
  prior service cost                                          288                247               282
                                                           ------             ------            ------
Net pension expense                                        $1,342             $1,204            $1,174
                                                           ------             ------            ------
</TABLE>

The funded status of the plan is as follows:
<TABLE>

                                                                                       AS OF
IN THOUSANDS                                                               SEPT. 26, 1998     SEPT. 27, 1997
-------------------------------------------------------------------------------------------------------------
<S>                                                                               <C>                <C>
ACCUMULATED POST-RETIREMENT BENEFIT OBLIGATION
  Retirees                                                                         $4,464             $4,273
  Fully eligible active plan participants                                           1,370              1,206
  Other active plan participants                                                    4,637              4,085
                                                                                   ------             ------
Total accumulated post-retirement benefit obligation                               10,471              9,564
Market value of plan assets                                                           301                 88
                                                                                   ------             ------
Excess of accumulated post-retirement benefit obligation
  over plan assets                                                                 10,170              9,476
Unrecognized transition obligation                                                 (1,973)            (2,292)
Unrecognized prior service cost                                                      (603)              (719)
Unrecognized actuarial gain                                                           662              1,293
                                                                                   ------             ------
Net post-retirement benefit liability included
  in current and other liabilities                                                 $8,256             $7,758
                                                                                   ------             ------

ASSUMPTIONS USED IN COMPUTING THE FUNDED
STATUS OF THE PLAN
  Weighted average discount rate                                                     7.25%             7.75%
  Expected long-term weighted average rate of return of assets                      10.00%            10.00%

</TABLE>


<PAGE>

For participants who receive full retiree medical benefits,  the medical premium
rates  were  assumed to  increase  at 7% for fiscal  1998 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 26, 1998.


NOTE 11.  EARNINGS PER SHARE

In the first quarter of fiscal 1998, the Company adopted  Statement of Financial
Accounting  Standards  No. 128 (SFAS 128),  "Earnings  per Share." The following
data show the amounts used in computing earnings (loss) per share and the effect
on income  (loss)  and the  weighted  average  number  of shares of  potentially
dilutive common stock.

<TABLE>
<CAPTION>

                                                                       YEAR ENDED
                                         -------------------------------------------------------------------------------
                                              SEPT. 26, 1998            SEPT. 27, 1997               SEPT. 28, 1996
                                         -------------------------  -------------------------  -------------------------
                                         (LOSS)   SHARES PER-SHARE  INCOME   SHARES PER-SHARE  INCOME   SHARES PER-SHARE
IN  THOUSANDS, EXCEPT PER-SHARE          (NUM.)   (DEN.)    AMOUNT  (NUM.)   (DEN.)    AMOUNT  (NUM.)   (DEN.)   AMOUNT
AMOUNTS                                  -------------------------  -------------------------  -------------------------

<S>                                    <C>       <C>      <C>    <C>         <C>        <C>   <C>       <C>       <C>   
BASIC EARNINGS (LOSS) PER SHARE
Net  income  (loss)   available  to    
common stockholders                    $(152,395) 49,038   $(3.11) $55,900   41,347     $1.35 $28,145   38,769    $0.73

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

DILUTED EARNINGS (LOSS) PER SHARE
Net  income  (loss)   available  to
common   stockholders  and  assumed  
conversions                            $(152,395) 49,038   $(3.11) $55,900   44,215     $1.26 $28,145   41,095    $0.68
                                       ---------  ------   ------- -------   ------     ----- -------   ------    -----

</TABLE>


For the years ended  September 26, 1998,  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.  For the
year ended  September 26, 1998, the assumed  exercise of stock  options,  giving
effect to the incremental shares is anti-dilutive and has been excluded from the
calculation.

                                       39

<PAGE>

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  26, 1998
Total revenues
  Unaffiliated customers           $1,057,684      $286,362       $118,063                      $1,462,109
  Inter-area transfers                121,531            -          23,933      $(145,464)               - 
                                   ----------      --------       --------      ----------      ----------
     Total                         $1,179,215      $286,362       $141,996      $(145,464)      $1,462,109
                                   ----------      --------       --------      ----------      ----------
Restructuring Charge               $   49,660      $ 26,927       $  5,813              -       $   82,400
                                   ----------      --------       --------      ----------      ----------
Loss from operations               $ (118,356)     $(23,841)      $ (5,145)     $  (1,279)      $ (148,621)
                                   ----------      --------       --------      ----------      ----------
Identifiable assets                $  616,740      $216,296       $ 85,632      $ (82,704)      $  835,964
                                   ----------      --------       --------      ----------                  
Corporate assets                                                                                   229,100
                                                                                                ----------
     Total assets                                                                               $1,065,064
                                                                                                ----------

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
                                                                                                ----------
</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 $252.3 million as of September 26, 1998 and $247.2 million as
of  September  27,  1997.   Cumulative   retained   earnings  of   international
subsidiaries were $94.1 million as of September 26, 1998 and $87.7 million as of
September 27, 1997.

                                       40

<PAGE>

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 26, 1998 and September 27,
1997,  and the results of their  operations and their cash flows for each of the
three years in the period ended September 26, 1998, 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/ PricewaterhouseCoopers LLP
Boston, Massachusetts
October 28, 1998


<PAGE>



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 1998
Total revenues                               $365.3        $361.8        $351.3        $383.7    $1,462.1
Total cost of revenues                        249.3         253.8         304.2         264.2     1,071.5
Net income (loss)                               3.5          (4.5)       (155.1)          3.7      (152.4)
Net income (loss) per share                   $0.07        $(0.09)       $(3.15)        $0.07      $(3.11)

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

</TABLE>


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 1998                       FISCAL 1997
                                                     -------------------------         -------------------------
                                                         HIGH          LOW                 HIGH         LOW
----------------------------------------------------------------------------------------------------------------
<S>                                                       <C>         <C>                  <C>           <C>    
First quarter                                               27       16 5/16              15 5/8           13
Second quarter                                         21 5/16      13 13/16              20 3/8       14 1/2
Third quarter                                           19 1/8       14 1/16              26 1/2       15 5/8
Fourth quarter                                        15 15/16        7 7/16              37 1/4       25 3/4

</TABLE>

                                       41

<PAGE>

DIRECTORS AND SENIOR MANAGEMENT

DATA GENERAL CORPORATION

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.                   Senior Vice President and General Manager,
                                  AViiON Enterprise Server Division

Stephen P. Baxter                 Vice President, Europe/Pacific

Ferdinand Colloredo-Mansfeld      Director; Chairman of the Board and Chief
                                  Executive Officer, Cabot Industrial Trust,
                                  Boston, Massachusetts

Jeffrey M. Cunningham             Director; Business Consultant

William J. Cunningham             Senior Vice President, Manufacturing,
                                  Information Management, and Customer Services

Arthur W. DeMelle                 Senior Vice President; Chief Financial Officer

Jacob Frank                       Vice President and General Counsel

John J. Gavin Jr.                 Vice President; Controller

Joel Schwartz                     Senior Vice President and General Manager,
                                  CLARiiON Advanced Storage Division

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

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


FACILITIES

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

FACILITY LOCATION

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

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

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

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

Duluth, Georgia                 customer support center
(86,000/Leased)

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

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

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

Schwalbach, Germany             sales; customer education; services
(23,000/Leased)

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

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

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

SUBSIDIARY HEADQUARTERS

Canada                          Toronto/Mississauga

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

<PAGE>

EUROPE
Austria                         Vienna
Belgium                         Brussels
Denmark                         Copenhagen/Smedeholm
France                          Paris/Velizy
Germany                         Frankfurt/Schwalbach
Italy                           Milan
Netherlands                     Amsterdam
Norway                          Oslo/Voyenenga
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

*  Includes 6,000 square-feet of sub-leased space.
** Includes 42,000 square-feet of sub-leased space.

                                       42

<PAGE>

                             CORPORATE INFORMATION


CORPORATE HEADQUARTERS              Data General Corporation
                                    4400 Computer Drive
                                    Westborough, Massachusetts 01580
                                    508-898-5000

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

INDEPENDENT ACCOUNTANTS             PricewaterhouseCoopers LLP
                                    Boston, Massachusetts

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, New York 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, New York 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
                                    Listed
                                    NYSE

ANNUAL MEETING                      The Annual Meeting of Stockholders will be 
                                    held at 1:00 p.m., January 27, 1999, in the
                                    Enterprise Room, State Street Bank Building,
                                    225 Franklin Street, Boston, Massachusetts.

NUMBER OF STOCKHOLDERS              As of September 26, 1998, there were
                                    approximately 10,500 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 changes 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 are available on 
                                    request to:
                                       Investor Relations Department
                                       Data General Corporation
                                       4400 Computer Drive, Mail Stop 9S/22
                                       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 web site 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 26, 1998. Any changes in such  assumptions or factors could
produce significantly different results.



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

AViiON,  CLARalert,  CLARiiON,  Cluster-in-a-Box,  DG/UX,  DG/ViiSION,  ECLIPSE,
Navisphere,  and VALiiANT are  registered  trademarks;  AVFlex,  DG/UX  Cluster,
Exchange-in-a-Box,  Multidimensional  Storage  Architecture,  NTerprise Manager,
QuickClusters,  TermServer-in-a-Box,  and THiiN are  trademarks;  and OMNiiCARE,
NTAlert and REPAIRiiON are service marks of Data General Corporation. Intel, the
Intel Inside logo and Pentium are registered  trademarks and Xeon is a trademark
of Intel  Corporation.  Microsoft  and Windows NT are  registered  trademarks of
Microsoft Corporation.

All other brand and product names may be trademarks or registered  trademarks of
their respective holders.

The terms and conditions  governing the sale of Data General  hardware  products
and services, and the licensing of Data General software consist solely of those
set forth in the written contracts  between Data General and its customers.  The
materials  contained  herein  are  summary in  nature,  subject  to change,  and
intended for general information only. Details and specifications regarding Data
General  equipment,  services,  and  software  are  included  in the  applicable
technical  manuals,  available  from  local  sales  representatives.  All rights
reserved. Printed in the U.S.A.

                                       43

<PAGE>

(BACK COVER)
How to contact Data General

World Wide Web

www.dg.com

E-Mail

info@dg.co

Mail, Telephone, FAX

Worldwide Headquarters
Data General Corporation
4400 Computer Drive
Westborough, Massachusetts 01580
Telephone: 508-898-5000
Literature Requests: 1-800-DATA-GEN
FAX: 508-898-7568

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

Latin American Headquarters
Data General Corporation
3400 Computer Drive
Westborough, Massachusetts 01580
Telephone: 508-898-6680
FAX: 508-898-7924

012-005183-00  Copyright (C) Data General Corporation, 1998.

<PAGE>