Letter to Our Shareholders:

Cabletron  Systems  continues  to perform as one of the major  internetworking
companies  in the  industry.  For the fiscal year ending  February  28,  1997,
Cabletron  reported sales of $1.4 billion,  an increase of 28 percent over the
$1.1 billion  reported  for fiscal year 1996.  Net income for fiscal year 1997
was $222.1  million or $1.43 per share,  compared  to $144.5  million or $0.95
per share for fiscal year 1996.  All results  have been  re-stated  to reflect
the acquisitions  that occurred in fiscal year 1997.  Cabletron also announced
a two-for-one  stock split in November 1996, the company's  second stock split
in the past three years.

This has been a very busy year for  Cabletron.  We picked up where we left off
in  fiscal  year  1996  (when  we   acquired  a  business   unit  of  Standard
Microsystems,  Inc.) by making four more  strategic  technology  acquisitions.
Agreements  with  Zeitnet,  Inc.  (for  Asynchronous  Transfer  Mode or  ATM),
Network  Express,  Inc. (for  Integrated  Services  Digital  Network or ISDN),
Netlink,  Inc.  (for frame relay) and The OASys Group (for  telecommunications
management  applications) have allowed us to enhance our existing product line
and still provide the tightly integrated,  end-to-end  solutions our customers
demand.  Whether it's through internal  development or an outside acquisition,
Cabletron  is  committed  to being the  single,  reliable  source for  today's
growing enterprise networks.

And while today's networks are demanding better  performance,  more horsepower
and faster connections,  what about tomorrow's  infrastructures?  Cabletron is
already  ahead of the game,  developing  solutions  that meet and  exceed  the
mission-critical  requirements for future  environments.  During the past year
alone,  Cabletron has introduced powerful switches that lay the groundwork for
a full-blown  ATM network or Gigabit  Ethernet  backbone.  Both are relatively
new technologies.  At the same time, we have introduced innovative network and
systems management  applications that work with the fastest growing management
platform in the industry:  SPECTRUM.  These  applications  allow  companies to
monitor  and  control   precious   networked   resources including   bandwidth
allocation,  e-mail file servers and  selected  databases from  a  centralized
location.

It doesn't seem that long ago that Cabletron was a two-man  operation based in
a small garage.  Times have certainly  changed to the point where we are now a
billion-dollar  company on the verge of even greater success.  The substantial
investments we've made in R&D,  acquisitions,  service and support, our global
sales  strategy and our people will  springboard  Cabletron well into the next
century and change the way customers rely on their information networks.

We are grateful to all of our  customers,  suppliers,  partners and employees,
because  without you,  this year could not have been as  successful as it was.
Thank you. We are equally  appreciative  of our  shareholders  whose continued
support helps keep Cabletron's momentum building.

Sincerely,


/s/ S. Rober Levine                      /s/ Craig, R. Benson
S. Robert Levine                         Craig R. Benson
President and Chief Executive Officer    Chairman and Chief Operating Officer

<PAGE>


                      SECURITIES AND EXCHANGE COMMISSION
                               Washington, D.C. 20549

                                  FORM 10-K

                 [X] ANNUAL REPORT UNDER SECTION 13 or 15 (d)
                    OF THE SECURITIES EXCHANGE ACT OF 1934

                 For the fiscal year ended February 28, 1997

                                      OR

            [ ] TRANSITION REPORT PURSUANT TO SECTION 13 or 15 (d)
                    OF THE SECURITIES EXCHANGE ACT OF 1934

              For the transition period from . . . . to . . . .
                        Commission File Number 1-10228

                           CABLETRON SYSTEMS, INC.
            (Exact name of registrant as specified in its charter)


         Delaware                                     04-2797263                
State or other jurisdiction of                    (I.R.S. Employee 
 incorporation or organization)                   identification no.)


              35 Industrial Way, Rochester, New Hampshire 03866
            (Address of principal executive offices and zip code)

      Registrant's telephone number, including area code: (603) 332-9400

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

Title of each class: Common Stock,   Name of each exchange on which registered:
    $0.01 par value                          New York Stock Exchange

         Securities registered pursuant to Section 12(g) of the Act:
                                     None

Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months,  (or for such shorter  period that the  registrant  was
required  to file  such  reports),  and  (2) has  been  subject  to such  filing
requirements for the past 90 days.

                                   YES X NO

As of May 8, 1997,  157,047,949  shares of the  Registrant's  common  stock were
outstanding. The aggregate market value of the registrant's voting stock held by
non-affiliates  of the  registrant  as of May 8,  1997  was  approximately  $4.4
billion.

Indicate by check mark if disclosure of delinquent  filers  pursuant to item 405
of Regulation  S-K (229.405) is not contained  herein and will not be contained,
to the best of the registrant's  knowledge,  in definitive proxy for information
statements  incorporated  by  reference  in Part  III of this  Form  10-K or any
amendment to this Form 10-K. [ ]

                     DOCUMENTS INCORPORATED BY REFERENCE

The following documents are incorporated by reference:

Part III Proxy Statement to be filed with the Securities and Exchange Commission
in connection with the 1997 Annual Meeting of Stockholders.
<PAGE>



                                TABLE OF CONTENTS



                                     PART I



Item
         Page

   1.   Business                                                       3
   2.   Properties                                                     8
   3.   Legal Proceedings                                              8
   4.   Submission of Matters to a Vote of Security Holders            8
   4a.  Executive Officers of the Registrant                            9


                                     PART II



   5.   Market for the Registrant's Common Equity and 
         Related Stockholder Matters                                   10
   6.   Selected Financial Data                                        11
   7    Management's Discussion and Analysis of Financial 
         Condition and Results of Operations                           12-16
   8.   Consolidated Financial Statements and Supplementary Data       17-30
   9.   Changes in and Disagreements with Accountants on 
         Accounting and Financial Disclosure                           32




                                    PART III



   10.   Directors and Executive Officers of the Registrant            32
   11.   Executive Compensation                                        32
   12.   Security Ownership of Certain Beneficial Owners 
          and Management                                               32
   13.   Certain Relationships and Related Transactions                32





                                     PART IV

   14.  Exhibits, Financial Statement Schedules and Reports 
         on Form 8-K                                                  33



<PAGE>
PART I

Unless otherwise  indicated,  all information in this Annual Report on Form 10-K
gives  effect  to a  two-for-one  stock  split  of the  Company's  common  stock
implemented as a 100 percent stock dividend, effective November 27, 1996.

1.  ITEM 1. Business

General

Cabletron Systems, Inc. (referred to herein as "Cabletron," "Registrant" or "the
Company") develops, manufactures, markets, installs and supports a wide range of
standards-based  local  area  network  and  wide  area  network  (LAN  and  WAN,
respectively) connectivity hardware and software products (including intelligent
switches  and  hubs,  remote  access  devices,   and  sophisticated   management
software).  Cabletron  delivers products to address the full range of networking
technologies,  including Ethernet, Fast Ethernet,  Gigabit Ethernet, token ring,
fiber  distributed  data  interface  (FDDI),  asynchronous  transfer mode (ATM),
integrated services digital network (ISDN) and frame relay.

The Company's networking strategy,  known as Synthesis, is a strategic framework
which combines  infrastructure  products and technologies,  automated management
tools,  and support  services.  Synthesis  allows the creation of a network with
enhanced  performance  and  capabilities,  manageability,  and reliability and a
lower  overall cost  structure.  The Company's  products  includes the MMAC-Plus
products,  the  Company's  modular  advanced  switching  intelligent  hubs,  the
SmartSwitch  products,  switching  products  which  provide  a high  density  of
switched  ports for  predominant  technologies  using a combination of ASICs and
RISC-based processors, the MMAC, the Company's wiring closet smart hub, and ISDN
and frame relay products.  All of the Company's intelligent  networking products
are  managed by  SPECTRUM,  Cabletron's  sophisticated  enterprise-wide  network
management  system.  The Company also  produces and  supports  other  networking
products, such as adapter cards, other interconnection equipment, wiring cables,
and file server products,  and provides a wide range of networking services. The
Company  believes  that its broad  product  line and full  service  capabilities
enable it to offer its customers "The Complete Networking Solution(R)"

Recent Product Line Acquisitions

Fiscal 1997 Acquisitions

In July 1996, the Company  acquired ZeitNet Inc.  ("ZeitNet"),  a privately held
manufacturer  and a leader in providing  high-quality,  low-cost  solutions  for
connecting applications, servers and workgroups to high-performance asynchronous
transfer mode (ATM) networks. Under the terms of the agreement, Cabletron issued
approximately  3.3  million  shares of common  stock for all of the  outstanding
shares  of  ZeitNet  (as well as all  shares to be issued  pursuant  to  ZeitNet
options  assumed by Cabletron)  in a  transaction  accounted for as a pooling of
interests.

In August 1996, the Company acquired Network Express,  Inc. ("Network Express"),
a publicly  held  manufacturer  and a provider of ISDN  high-speed  LAN switched
access   solutions.   Under  the  terms  of  the  agreement,   Cabletron  issued
approximately  2.9  million  shares of common  stock for all of the  outstanding
shares of  Network  Express  (as well as all  shares to be  issued  pursuant  to
Network Express options assumed by Cabletron) in a transaction  accounted for as
a pooling of interests.

In December 1996, the Company acquired Netlink,  Inc.  ("Netlink"),  a privately
held   manufacturer   and   supplier  of  frame  relay  access   solutions   for
multi-protocol,  mission-critical  networks.  Under the terms of the  agreement,
Cabletron issued approximately 3.8 million shares of common stock for all of the
outstanding  shares of Netlink  (as well as all shares to be issued  pursuant to
Netlink  options  assumed by  Cabletron)  in a  transaction  accounted  for as a
pooling of interests.

In February  1997,  the Company  acquired The OASys  Group,  Inc.  ("OASys"),  a
privately-held developer of software used to manage  telecommunications  devices
and  connections  in  high-speed,   fiber-optic   networks.   Cabletron   issued
approximately  226,000 shares of common stock for all of the outstanding  shares
of OASys (as well as all shares to be issued  pursuant to OASys options  assumed
by Cabletron) in a transaction accounted for as a purchase.

Fiscal 1996 Acquisitions

In order to broaden the range of switching  products offered by the Company,  in
January 1996 Cabletron acquired the Enterprise  Networks Business Unit (ENBU) of
Standard Microsystems  Corporation for $85.7 million. The products acquired from
<PAGE>
the ENBU include  standalone Fast Ethernet market,  as well as a modular chassis
offering several networking technologies. The transaction was accounted for as a
purchase.

Cabletron is a Delaware  corporation  organized in 1988. The executive offices
of the Company are located at 35  Industrial  Way,  Rochester,  New  Hampshire
03866 (telephone: (603) 332-9400).

Products and Services

The Company's operations are grouped into the product areas discussed below.

Smart Switches and Hubs, and Related Products

MMAC-Plus

The MMAC-Plus is an enterprise-level  backbone switching chassis. The MMAC-Plus,
with its high bandwidth (aggregate bandwidth 60 Gbps), switching rate (aggregate
switching rate of 10 million  packets/cells per second) and modularity (up to 14
separate MMAC-Plus modules), is designed to operate as the central switching hub
for networks containing large numbers of nodes and multiple disparate networking
technologies.  Each  MMAC-Plus  module  implements  one or more of the following
technologies:  ATM cell transport,  SecureFast packet switching (Cabletron's own
standards-based switching technology), SecureFast Virtual networking and network
layer routing or standard MAC layer bridging.  In addition to accommodating  the
latest  networking   technologies,   the  MMAC-Plus  is  designed  to  integrate
customers' legacy systems.  The MMAC-Plus,  like all members of the MMAC family,
is designed to be highly fault tolerant.

MMAC-Plus 6

The  MMAC-Plus 6,  introduced in 1996, is a six module  switching  chassis.  The
MMAC-Plus  6 offers  many of the  MMAC-Plus'  advanced  capabilities,  including
distributed virtual routing, high performance switching and embedded management,
in a product  designed  to be used in the wiring  closet or smaller  distributed
data centers.  The MMAC-Plus 6 enables deployment of dedicated  bandwidth to the
desktop, with support for over 200 shared or switched Ethernet ports.

SmartSwitch 6000

The SmartSwitch  6000,  based upon the Company's  SmartSwitch  architecture,  is
intended  primarily for the wiring closet  environment.  The  SmartSwitch  6000,
which principally provides  interconnectivity between Fast Ethernet, ATM or FDDI
backbone  connections  and  local  Ethernet  connections,  accepts  up  to  five
SmartSwitch  modules,  including a thirteen port 10 Mbps Ethernet  module, a two
port 100 Mbps Fast Ethernet module, a single port FDDI module and an ATM module.
By allowing  virtually any combination of these modules,  the  SmartSwitch  6000
provides customers with substantial flexibility.

SmartSwitch 2200

The SmartSwitch  2200 is a standalone  switch that provides  twenty-four  10Mbps
switch  ports and two 100 Mbps switch ports and has been  designed  specifically
for use at the workgroup or desktop  level of the  enterprise.  The  SmartSwitch
2200  offers  both  high-performance  Ethernet  switching  and  also  high-speed
backbone connections through either Fast Ethernet, FDDI, or ATM.

MMAC

First  introduced  in 1988,  the  Multi  Media  Access  Center  (MMAC)  provides
centralized  management and  connectivity  for any standard LAN or WAN through a
variety of networking  technologies.  The MMAC supports both previously existing
networking  technologies such as Ethernet,  token ring, FDDI and Systems Network
Architecture  (SNA)  as  well  as  emerging   advancements   including  ATM  and
Cabletron's own SecureFast Switching.  With more than one hundred MMAC interface
modules  available,  customers can custom configure a network according to their
particular  needs.  As  requirements  change,  the MMAC can be  reconfigured  to
provide a smooth migration to higher bandwidth technologies.

ATX

Cabletron's  ATX  (acquired  from  the ENBU of SMC)  provides  high-performance,
multiprotocol LAN solutions for high-capacity backbone or departmental networks.
The ATX permits high-bandwidth  switching between Ethernet, token ring, FDDI and
100BASE-T LANs, with full connectivity to ATM.
<PAGE>
Standalone Switches

Cabletron  offers  three  families  of  standalone  switches:  the FN  family of
departmental  Ethernet  network  switches  (acquired  from the ENBU of SMC); the
ZX-250  family of ATM  workgroup  and  interworkgroup  switches  (acquired  from
ZeitNet);  and the SFCS  family  of  products  for ATM  datacenter  applications
(through  the  Company's  partnership  with  Fore  Systems).  The FN10  provides
switched 12 or 24 Ethernet  ports with two optional Fast Ethernet  ports,  while
the FN100 is designed to support full 10 Mbps or 100Mbps  connectivity  on eight
ports.  The SmartCell  ZX-250 ATM switch family  combines  high-performance  ATM
switching  with advanced  networking  software in a compact  platform.  The SFCS
switches are designed to meet the needs of the LAN backbone networks. They offer
a wide  variety  of options  for  connectivity  with LAN to ATM access  devices,
inter-switch links, and entry to the WAN backbone.

Wide Area Networking Products

Cabletron's  CyberSWITCH  family of products includes both internally  developed
remote access products,  as well as Network Express' remote access product line.
The CyberSWITCH  products provide connectivity from the small office/home office
(SOHO) environment, to the central site locations of corporations.

In its acquisition of Netlink Cabletron  acquired products for transmitting data
over frame relay for WAN  connectivity.  For branch  locations,  the Netlink FRX
products provide seamless integration of all network traffic over frame relay to
provide prioritized service to mainframe-based applications. For the data center
of a company, the Netlink FRX product brings  multiprotocol,  T1 and frame relay
networking through a scaleable, parallel processing architecture.

Network Management Software

As  enterprise  networks  grow in number,  become  more  diverse and complex and
incorporate   increasing   bandwidth   capacity,   organizations   require  more
sophisticated network management systems. SPECTRUM,  Cabletron's enterprise-wide
network  management  software,  allows  network  administrators  to monitor  and
control all of the  physical  layer  components  making up a worldwide  network.
SPECTRUM,   which  integrates  a  graphical  user  interface  and  a  UNIX-based
client/server  architecture,  provides  powerful network  management tools in an
easy-to-use, scaleable and distributed environment. SPECTRUM incorporates IMT, a
form of artificial intelligence that provides SPECTRUM with the ability to model
every element of the network,  including physical cables,  network devices,  and
applications.  SPECTRUM  is designed to enable  network  administrators  to view
worldwide  enterprise  networks and diagnose,  actively  anticipate  and correct
problems at many levels,  including the individual  node level.  The Company has
developed SPECTRUM modules for a wide range of network products,  including over
110  applications  for  third-party  products.  The Company plans to continue to
develop  SPECTRUM  system  enhancements  and modules to  increase  the number of
third-party  network products for which SPECTRUM is applicable.  OASys' TL1/CMIP
product,  which is being  integrated  into SPECTRUM  will position  Cabletron to
manage  gigabit-speed  telco  carrier  networks.   OASys  products  support  the
management of SONET  (Synchronous  Optical Network) devices,  which are becoming
prevalent among telco carries for high bandwidth communications.  Cabletron also
offers SPECTRUM  toolkits,  Application  Program Interfaces (APIs), and Platform
External  Interfaces (PEIs) which are designed to enable the Company's customers
and partners to quickly and easily establish links with SPECTRUM.

The Company believes that SPECTRUM has helped to establish Cabletron as a leader
in the field of  network  management  software  and  contributes  to the  market
acceptance of the Company's interconnectivity hardware. SPECTRUM is sold both to
purchasers of Cabletron's  LAN and WAN products and on a stand-alone  basis as a
network management platform.

Network Interconnection Equipment

The  Company  manufactures  a  line  of  dual-port  and  multiport   stand-alone
repeaters,  which  are  designed  to  connect  up to eight  Ethernet/IEEE  802.3
segments together or to an Ethernet backbone.  The Company also produces Desktop
Network  Interface  ("DNI") cards,  which enable the user to connect directly to
10BASE-T  unshielded twisted pair, fiber optic or coaxial cabling via a built-in
transceiver  on the card,  and provide  high-speed  Ethernet and Token Ring data
connections for various personal computer platforms.
<PAGE>
Service and Support

Cabletron is one of the few companies that, in addition to manufacturing a broad
line of network  equipment,  also offers a wide range of services for  networks,
including service  maintenance;  consulting,  design and configuration;  project
planning;   project   management;    training;   testing,    certification   and
documentation; and performance analysis. To provide service to our multinational
customers,  Cabletron has  introduced  World/One,  a program that offers focused
account management and global support,  as well as special tools and privileges,
to  qualifying  multinational   corporations.   Cabletron  offers  comprehensive
training  programs to ensure that  customers  receive the maximum  benefit  from
their  networks.  Cabletron's  service  group  forms  an  integral  part  of the
Company's  marketing  strategy,  as it constitutes a key element of the complete
networking  solution  offered by the  Company.  The  Company  believes  that the
combination of its broad line of networking  products,  its emphasis on service,
and  its  close   acquaintance  with  customers'  needs  enable  it  to  compete
effectively.

Other Products

The Company's other products include test equipment designed to analyze networks
and protocols and to verify  proper  installation  and operation of the network,
cabling,  transceivers,  repeaters  and other  devices.  The Company  also sells
electronically-tested  Ethernet coaxial cable,  shielded twisted pair (IBM-type)
wire, unshielded twisted-pair wire and optical fiber cut to specific lengths.

Distribution and Marketing

Cabletron distributes its products through a substantial direct sales force that
is supplemented by several  distributors and other resellers through the Synergy
Plus Program.  The  Company's  direct sales are made by  approximately  200-plus
sales  representatives  located in 33  countries  around the world.  This direct
sales force is  supplemented  by more than 2,500 people located at the Company's
headquarters and regional in-house  technical  services and sales support staff.
The Company  believes that its ratio of in-house sales,  marketing and technical
services  and sales  support  staff to field sales force is among the highest in
the industry and contributes significantly to the effectiveness of the Company's
field sales force.  The  Company's  international  locations  use various  sales
strategies depending on the best channel of distribution for each country.  Such
strategies  include a direct sales presence, a direct sales force working with
local  distributors  or a combination  of the two. The Synergy Plus Program is a
blueprint  for  resellers  that  outlines  the  building  blocks  of a  business
relationship  with  Cabletron.  The blueprint  sets forth the  principles of the
relationship,  including level of information and training, business support and
services,  pricing structure, and levels of organization.  Synergy Plus offers a
comprehensive,  well-defined  business  strategy,  a clear pricing  policy,  and
effective support in sales and marketing.

The Company actively  employs several methods to market its products,  including
regular  participation  in trade shows as both a vendor and networker,  frequent
advertisement  in trade journals,  regular  attendance by corporate  officers at
press  briefings and trade  seminars,  submission of  demonstration  products to
selected  customers  for  evaluation,  and  direct  mailings  and  telemarketing
efforts.

Customers

Cabletron's end-user customers include commercial,  industrial and manufacturing
companies;   federal,  state  and  local  government  agencies;   brokerage  and
investment banking firms;  multinational and international companies;  insurance
companies and other financial institutions; universities; and leading accounting
and law firms.

In fiscal 1997, no single customer  represented  more than 3% of Cabletron's net
sales,  and the  Company's  top ten  customers  represented,  in the  aggregate,
approximately  13% of its  net  sales.  Net  sales  to  the  federal  government
accounted for  approximately  12% of the Company's  sales during the last fiscal
year.  Most of the  Company's  contracts  with the federal  government  are on a
fixed-price  basis. The books and records of the Company are subject to audit by
the  General  Services  Administration,   the  Department  of  Labor  and  other
government agencies.
<PAGE>
Competition

The  computer  networking  industry  is  intensely  competitive  and  subject to
increasing   consolidation.    Cabletron   expects   competition   to   increase
significantly in the future from its primary  competitors (Cisco Systems,  Inc.,
Bay Networks, Inc. and 3Com Corporation) and other existing competitors and from
potential  competitors  that may enter  Cabletron's  existing or future markets.
Increased competition could result in price reductions, reduced margins and loss
of market  share,  any or all of which could  materially  and  adversely  affect
Cabletron's  business  and  operating  results  and  increase   fluctuations  in
operating results.  Cabletron's margins may also decrease as a result of changes
in product mix,  increased sales through lower margin sales channels,  increased
component  costs and higher  research  and  development  and sales,  general and
administrative  expenses  which may be necessary  in future  periods to meet the
demand of  greater  competition.  Competitors  may  develop  new  products  with
features that could  adversely  affect the  competitive  position of Cabletron's
products.  There  can be no  assurance  that  Cabletron  will be  successful  in
selecting, developing, manufacturing and marketing new products or enhancing its
existing  products  or that  Cabletron  will be able to respond  effectively  to
technological  changes,  new standards or product  announcements by competitors.
Cabletron's  competitors  include many large domestic and foreign companies,  as
well as emerging  companies  attempting to sell products to specialized  markets
such as those addressed by Cabletron.

For  other  factors   related  to  the  Company's   competitive   outlook,   see
"Management's  Discussion  and Analysis of Financial  Conditions  and Results of
Operations-Business Environment and Risks Factors."

Research and Development

The  networking  industry  is  characterized  by rapid  technological  advances,
frequent  product  introductions  and  evolving  industry  standards.  Cabletron
believes that its future  success  depends on its ability to continue to enhance
its existing products and to develop on a timely basis technologically  advanced
new products  that meet industry  standards,  perform  successfully  and achieve
market acceptance.  Because of the nature of the Company's  distribution system,
which places heavy reliance on direct sales to end-users,  Cabletron believes it
has been able to react  quickly to changes in customer  demand and users' needs.
Additionally, the Company has representatives on many of the industry committees
drafting  evolving  standards.  In recent  years,  Cabletron  has  substantially
increased  its research and  development  expenses and its staff of software and
hardware engineers. There can, however, be no assurance that the Company will be
successful in selecting,  developing,  manufacturing  and marketing new products
that will perform  satisfactorily  and achieve market acceptance or in enhancing
its existing  products.  Nor can there be any assurance that the Company will be
able  to  respond   effectively   to   technological   changes  or  new  product
announcements by others or that the Company will be successful in augmenting its
software capability.  In addition,  technological changes may render portions of
the Company's inventory obsolete.

During fiscals years 1997, 1996 and 1995, research and development expenses were
$161.7  million,  $127.3  million and $89.1 million,  respectively.  The Company
believes that as networks grow larger and more complex, end-users' evaluation of
network  technology  will  increasingly  be based on the  software  component of
products, particularly in the area of network control management. As of February
28, 1997  approximately  60% of the  personnel  in the  Company's  research  and
development  department  consisted  of  software  development   personnel.   The
remaining personnel were involved in hardware  development.  The Company intends
to continue to increase both its research and development budget and engineering
staff.

Supply of Components

Cabletron's  network  interconnection  products are manufactured  principally in
printed  circuit  board format  produced  from  Company  designs  together  with
standard and  semi-custom  components.  Certain  components  used in Cabletron's
products are presently  available  from only one source and others are available
only from a limited number of sources.

Many of the connectors,  power supplies,  and ASICs used in Cabletron's products
are sole sourced. These sole sourced products are either proprietary or patented
by the  manufacturer,  or  designed  to  Cabletron's  specifications.  Cabletron
utilizes  the  design  and  manufacturing  capabilities  of many of the  leading
companies in the semiconductor industry. The Company believes current agreements
with these suppliers will adequately meet its design and production requirements
for the foreseeable future.
<PAGE>
The supply of critical integrated circuits,  which are often proprietary and are
used in the  Company's  DNI cards and bridging  products,  remains  steady.  The
demand for critical DRAM, SRAM and Flash products has decreased but is monitored
carefully.  Sources of supply are in place to meet manufacturing and engineering
requirements. Agreements with strategically sourced silicon vendors are in place
and continue to be updated for changes in design and manufacturing volumes.

The  Company   believes  it  is  well   positioned  to  meet  its  raw  material
requirements.  Most other parts are multiple  sourced.  The Company continues to
improve its materials support by utilizing world class suppliers and effectively
managing raw material  flows.  The Company  believes its  relationship  with its
suppliers is good, but the inability to develop  alternatives if and as required
in the future,  or to obtain  sufficient  sole or limited  source  components as
required  in the  future,  could  result  in  delays or  reductions  in  product
shipments, which could adversely affect the Company's operating results.

Manufacturing

Since the Company  manufactures and assembles virtually all of its products,  it
maintains direct control over production,  quality and product availability.  By
controlling its  manufacturing  process,  Cabletron is able to maintain a strict
quality  control  program,  respond to  changes  in market  demand and offer its
customers modified or customized products.

Intellectual Property

The Company relies upon US and foreign  patents,  copyright and trademark  laws,
and upon trade secret laws to establish its proprietary  rights to its products.
The Company holds a number of US and foreign  trademark  registration and patent
rights. The Company currently has several US and foreign trademark registrations
and patent applications pending.

There can be no assurance  that the steps taken by Cabletron in this regard will
be adequate to prevent  misappropriation  of its technology or that  Cabletron's
competitors will not independently  develop  technologies that are substantially
equivalent or superior to Cabletron's technology.  In addition, the laws of some
foreign  countries  do not protect  Cabletron's  proprietary  rights to the same
extent as do the laws of the United  States.  No assurance can be given that any
patents issued to Cabletron will not be challenged,  invalidated or circumvented
or that the rights granted thereunder will provide competitive advantages.

Backlog

The Company's  backlog at February 28, 1997, was  approximately  $125.0 million,
compared with backlog at February 29, 1996, of approximately  $129.5 million. In
general,  orders  included  in backlog may be  canceled  or  rescheduled  by the
customer without significant  penalty.  Therefore,  backlog as of any particular
date may not be  indicative  of the  Company's  actual sales for any  succeeding
fiscal  period.  The Company does not  anticipate any problems in fulfilling its
backlog within the upcoming fiscal year.

Inventory and Working Capital

The Company's policy is to maintain a sufficient inventory of products to permit
the shipping of most customer orders that require rapid delivery within 24 to 48
hours of receipt.  This delivery policy requires higher levels of inventory than
those  of other  companies  in the  networking  industry.  Additional  financial
information on  inventories  and working  capital is contained in  "Management's
Discussion  and Analysis of Financial  Conditions  and Results of Operations" at
pages 12 to 16 of this document.

Employees

As of  February  28,  1997,  the  Company  had 6,607  full-time  employees.  The
Company's  employees  are  not  represented  by  a  union  or  other  collective
bargaining  agent and the Company  considers its relations with its employees to
be good.

Domestic and Foreign Financial Information

Financial information concerning foreign and domestic operations is contained in
Note 13 of "Notes to the Consolidated  Financial Statements" included at page 30
of this document.
<PAGE>
ITEM 2. Properties

The Company  owns and occupies a number of buildings  Rochester,  New  Hampshire
including a 206,000 square-foot manufacturing facility which also accommodates a
portion of corporate  engineering  buildings totaling 122,000  square-feet which
accommodate  sales,  marketing,  administration and technical support personnel,
and a warehousing and distribution facility,  totaling 221,000 square-feet.  The
Company  owns a 114,000  square-foot  engineering  building  in  Merrimack,  New
Hampshire.  The Company also occupies  facilities  in Newington and Nashua,  New
Hampshire, Andover and Framingham,  Massachusetts, Ann Arbor, Michigan and Santa
Clara, California.

The Company leases three manufacturing  buildings totaling 87,000 square feet in
Ironton,  Ohio,  a  100,000  square-foot  manufacturing  facility  in  Limerick,
Ireland,  and a 50,000 square-foot  distribution center in Shannon,  Ireland, to
support  its  European  sales  activities.  The  Company  also  leases  a 62,000
square-foot  research and  development  facility in Durham,  New Hampshire and a
34,000 square-foot  engineering office in Nashua, New Hampshire.  Cabletron also
leases  sales and  technical  support  offices  that  range from 1,000 to 20,000
square feet at various locations throughout the world.

The Company  believes that its  facilities  are adequate to support  anticipated
sales growth over the next 12 to 18 months. Such growth,  however,  will require
additional production employees and capital equipment. The Company believes that
adequate  supplies  of labor  are  available  in the areas  where the  Company's
manufacturing operations are located.

Financial  information  regarding leases and lease  commitments are contained in
Note 8 of "Notes to the Consolidated  Financial Statements" included at page 25
of this document.

ITEM 3.  Legal Proceedings

The Company is involved in various legal  proceedings  and claims arising in the
ordinary course of business.  Management  believes that the disposition of these
matters would not have a material adverse effect on the  consolidated  financial
position or results of operations of the Company.

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

During the fourth  quarter of the fiscal year covered by this report,  no matter
was submitted to a vote of the Company's security holders.



<PAGE>
ITEM 4a. Executive Officers of the Registrant

The executive officers of the Company are as follows:

Name                          Age         Position

S. Robert Levine              39          President,  Chief Executive  Officer
                                          and Director

Craig R. Benson               42          Chairman,  Chief Operating  Officer,
                                          Treasurer and Director

Christopher J. Oliver         36          Director    of    Engineering    and
                                          Manufacturing

David J. Kirkpatrick          45          Director   of   Finance   and  Chief
                                          Financial Officer


S. Robert Levine  founded the Company in March 1983 and has been President and
Chief Executive Officer and a director of the Company since that date.

Craig R. Benson was Director of  Operations  from  November  1984 until April of
1989, when he became Chairman, Chief Operating Officer and Treasurer.

Christopher J. Oliver has been Director of Engineering and  Manufacturing of the
Company since February 1985.

David J. Kirkpatrick has been Director of Finance and Chief Financial Officer of
the Company  since August 1990.  From 1986 to 1990 he was the Vice  President of
Zenith Data Systems, a subsidiary of Zenith Electronics Corporation.

The Company's success is dependent in large part on S. Robert Levine,  President
and Chief  Executive  Officer,  Craig R. Benson,  Chairman  and Chief  Operating
Officer,  Christopher J. Oliver, Director of Engineering and Manufacturing,  and
other key technical,  sales and management personnel, the loss of one or more of
whom could adversely affect Cabletron's business.



<PAGE>
PART II

ITEM 5. MARKET FOR THE  REGISTRANT'S  COMMON  EQUITY AND  RELATED  STOCKHOLDER
MATTERS

STOCK PRICE HISTORY

The  following  table sets forth the high and low sale prices for the  Company's
Common Stock as reported on the New York Stock Exchange (symbol - CS) during the
last three fiscal years. As of February 28, 1997, the Company had  approximately
3,500  stockholders  of record.  The Company has paid no dividends on its Common
Stock and  anticipates  it will continue to reinvest  earnings to finance future
growth.


Fiscal 1997                 High           Low

First quarter             $43.56        $31.63
Second quarter             36.06         26.50
Third quarter              41.50         27.56
Fourth quarter            $42.50        $28.00

Fiscal 1996                 High           Low

First quarter             $27.88        $19.44
Second quarter             29.81         24.31
Third quarter              43.88         26.00
Fourth quarter            $41.63        $32.94

Fiscal 1995                 High           Low

First quarter             $26.50        $17.85
Second quarter             22.23         16.53
Third quarter              26.44         20.50
Fourth quarter            $24.63        $18.69


Note: The above stock prices have been adjusted for the two-for-one stock
split November 27, 1996.



<PAGE>
ITEM 6. SELECTED FINANCIAL
DATA

CABLETRON SYSTEMS, INC.

Income Statement Data:                                  FISCAL YEAR ENDED
                               
(in thousands, except per
share data)
<TABLE>
<CAPTION> 
<S>                           <C>             <C>               <C>            <C>              <C>  
                               February         February        February       February         February
                                   28,             29,             28,            28,              28,
                                  1997            1996            1995           1994             1993
                               ---------       ---------        --------       ---------        --------

Net sales ..............      $1,406,552      $1,100,349        $833,218        $602,486        $419,607
Cost of sales                    575,107         448,699         340,424         246,154         170,924
Research and development         161,674         127,289          89,129          61,456          42,315
Selling, general and
administrative .........         286,469         223,083         166,649         118,373          82,345
Nonrecurring items                63,024          94,343              --              --              --
                               ---------      ----------        --------        --------        --------
Income from operations           320,278         206,935         237,016         176,503         124,023
Interest income                   19,422          17,891           5,572           5,948           5,583
                               ---------      ----------        --------        --------        -------- 
Income before taxes              339,700         224,826         242,588         182,451         129,606
Income taxes                     117,575          80,341          86,014          64,130          46,405
                               ---------      ----------        --------        --------        --------                      
Net income .............      $  222,125      $  144,485        $156,574        $118,321        $ 83,201
                              ==========      ==========        ========        ========        ========   
Net income per share ...      $     1.43      $     0.95        $   1.08        $   0.82        $   0.59
                              ==========      ==========        ========        ========        ========                            
Weighted average shares
outstanding ............         155,207         151,525         145,125         143,692         141,456
                              ==========      ==========        ========        ========        ========
</TABLE>

Included in fiscal 1997 results are $39.2  million (net of tax) of  nonrecurring
items related to all acquisitions for the fiscal year.  Excluding these one-time
charges, fiscal year 1997 net income would have been $261.4 million or $1.68 per
share,  compared to fiscal 1996 net income of $205.4  million or $1.36 per share
before nonrecurring acquisition related expenses of $60.8 million (net of tax).
<TABLE>
<CAPTION>
<S>                           <C>                <C>             <C>             <C>              <C>   

Balance Sheet Data:             February         February        February        February         February
                                   28,              29,             28,             28,              28,
(in thousands)                    1997             1996            1995            1994             1993
                               ---------        ---------        --------       ---------         --------
Working capital                $676,336          $485,152        $381,758        $258,463         $234,114                          
Total assets                  1,306,855           996,908         702,200         502,377          344,517
Stockholders' equity          1,081,498           809,886         593,942         425,719          289,279

</TABLE>





<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITIONS
AND RESULTS OF OPERATIONS

The discussion below contains certain  forward-looking  statements  relating to,
among other things, estimates of economic and industry conditions, sales trends,
expense  levels and  capital  expenditures.  Actual  results may vary from those
contained in such forward-looking statements. See "Business Environment and Risk
Factors" below.

Results of Operations

This  table  sets  forth  Cabletron's  net  sales,  cost of sales,  expenses  by
category,  income from operations,  interest income,  income before income taxes
and net income expressed as percentages of net sales, for the fiscal years ended
February 28, 1997, February 29, 1996 and February 28, 1995:


                                                 1997
1996                     1995
                         ----

Net sales                                 100.0%      100.0%      100.0%
Cost of sales                               40.9        40.8        40.9
                                          ------      ------      ------
Gross profit                                59.1        59.2        59.1
Research and development                    11.5        11.6        10.7
Selling, general and administrative         20.4        20.3        20.0
Nonrecurring items                           4.5         8.6          --
                                          ------      ------      ------
Income from operations                      22.7        18.7        28.4
Interest income                              1.4         1.6         0.7
                                          ------      ------      ------
Income before income taxes                  24.1        20.3        29.1
                                          ------      ------      ------
Net income                                  15.8%       13.1%       18.8%
                                          ======      ======      ======


Acquisitions

During  fiscal 1997 the Company  augmented  its product  line and  expanded  its
markets by acquiring:  (1) ZeitNet Inc., a manufacturer of ATM products, in July
1996; (2) Network Express,  Inc., a manufacturer of remote access equipment,  in
August 1996;  (3) Netlink,  Inc., a  manufacturer  of frame relay  products,  in
December 1996; and (4) The OASys Group, Inc., a software developer,  in February
1997. The nonrecurring  charges related to these acquisitions were $39.2 million
(net of tax).  Excluding  these one time  charges,  fiscal 1997 net income would
have been $261.4 million or $1.68 per share.

During fiscal 1996 the Company  acquired the Enterprise  Networks  Business Unit
from Standard Microsystems  Corporation in January 1996. The acquisition added a
line of Fast Ethernet  products,  as well as switching  products for token ring,
Ethernet and FDDI.  For fiscal 1996 net income would have been $205.4 million or
$1.36 per share before  acquisition  related  expenses of $60.8  million (net of
tax).

Revenues

Net sales in fiscal 1997 increased by 27.8%, to $1,406.6 million,  from $1,100.3
million in fiscal 1996, a 32.1% increase from $833.2 million in fiscal 1995. The
increases in revenues in fiscal  years 1997,  1996 and 1995 were  primarily  the
result of increases in sales of the  MMAC-Plus  and the MMAC and in fiscal 1997,
the SmartSwitch product lines.

Net sales outside the United States in fiscal 1997 were $408.2 million, or 29.0%
of net sales,  compared  to $329.2  million or 29.9% of net sales in fiscal 1996
and $242.9  million or 29.2% of net sales in fiscal  1995.  In  addition  to its
direct international sales force, the Company sells its products through several
international  distributors.  Management anticipates that foreign shipments will
continue to increase in absolute dollars during the coming fiscal year.

The Company  currently has 41 foreign  subsidiaries  throughout  the world.  The
impact  of  fluctuations  in  foreign  exchange  rates  on  operations  was  not
significant in fiscal 1997.
<PAGE>
During fiscal 1997,  growth in net sales was attributed to the  SmartSwitch  and
the MMAC-Plus product lines and other switching  products,  small stackable hubs
and SPECTRUM,  the Company's network  management  software.  During fiscal 1996,
MMAC-Plus,  token  ring  management  interface  modules  for  the  MMAC  and the
MMAC-Plus,  small stackable hubs,  bridges and routers,  and network  management
(SPECTRUM)   accounted   for  the  largest   sales  growth  within  the  network
interconnection  products.  During fiscal 1995, the MMAC,  including  token ring
modules,  SPECTRUM and other  network  management  software,  accounted  for the
largest sales growth within the network interconnection products.


Net sales of diagnostic test instruments, installation and maintenance services,
and other  products  were $188.1  million or 13.4% of net sales in fiscal  1997,
compared to $97.8  million or 8.9% of net sales in fiscal 1996 and $59.7 million
or 7.2% of net sales in fiscal 1995. Sales of diagnostic test instruments are on
a  downward  trend due to greater  functionality  being  incorporated  into more
intelligent  devices.  Management  anticipates  diagnostic  test  instruments to
decrease as a  percentage  of sales in the next fiscal  year.  Installation  and
maintenance  services are an integral part of Cabletron's  customer  development
and support activities.  Management  anticipates that sales of such services and
other products could increase in absolute sales dollars in the future year.

Costs, Expenses and Interest Income

Cost of sales was $575.1 million or 40.9% of net sales in fiscal 1997,  compared
to $448.7  million or 40.8% of net sales in fiscal  1996 and  $340.4  million or
40.9% of net sales in fiscal  1995.  The Company was able to maintain  its gross
margins in fiscal 1997, 1996 and 1995 by introducing  and selling  products with
improved  functionality,  further developing its service maintenance program and
improving purchasing and manufacturing efficiencies.

Research and  development  ("R&D")  expenses in fiscal 1997  increased to $161.7
million or 11.5% of net sales,  compared to $127.3 million or 11.6% of net sales
in fiscal 1996. In fiscal 1995,  R&D expenses were $89.1 million or 10.7% of net
sales.  The increased R&D spending in fiscal 1997 reflected  increased hiring of
software and hardware engineers,  the addition of engineers through acquisitions
and associated  costs related to the development of new products.  The increased
expenditures  in R&D over the past three fiscal years in both absolute  spending
and as a percentage of sales are  indicative of the  commitment  the Company has
made to remain in the forefront of developing  new and  innovative  products for
the networking industry,  as exemplified by the Company's  SmartSwitch family of
products.

Selling,  general and  administrative  ("SG&A")  expenses were $286.5 million or
20.4% of net sales in fiscal  1997,  compared to $223.1  million or 20.3% of net
sales in fiscal  1996 and $166.6  million or 20.0% of net sales in fiscal  1995.
Increases  in SG&A  spending  resulted  from  expanding  the sales  and  support
workforce,   establishing   additional   office   locations   domestically   and
internationally,  the  addition  of  administrative  personnel  as a  result  of
acquisitions and increased administrative spending primarily due to increases in
volume.

For  fiscal  1997  a  $63.0  million  nonrecurring  charge  was  taken  for  the
acquisitions of ZeitNet, Network Express, Netlink and The OASys Group. In fiscal
1996 a $94.3 million  nonrecurring charge was taken for the purchase of the ENBU
of SMC and Fivemere Limited (purchased by Network Express in fiscal 1996).

Interest  income in fiscal 1997 was $19.4  million  compared to $17.9 million in
fiscal 1996 and $5.6  million in fiscal 1995.  The  increase in interest  income
reflects  increased  cash and  marketable  securities  acquired  from  favorable
operating results.

Income

Income  before  income taxes was $339.7  million or 24.1% of net sales in fiscal
1997, compared to $224.8 million or 20.3% of net sales in fiscal 1996 and $242.6
million  or 29.1% of net sales in fiscal  1995.  In  fiscal  1997 the  Company's
nonrecurring  charges related to  acquisitions  was $63.0 million as compared to
$94.3  million in fiscal 1996. As a  consequence,  the increase in income before
income taxes in fiscal 1997,  was in part due to the $31.3  million  decrease in
nonrecurring  charges.  The decrease in income before  income  taxes,  in fiscal
1996,  as a percentage of sales,  was due  primarily to expenses  related to the
acquisition of the ENBU of SMC and Fivemere (Network Express).  The tax rate for
fiscal 1997 was 34.6%, a 1.1% decrease from a tax rate of 35.7% for fiscal 1996,
which  was  due  to  tax  loss  carryforwards  of  the  acquired  aforementioned
acquisitions.
<PAGE>
Net income was $222.1  million in fiscal  1997,  compared  to $144.5  million in
fiscal 1996 and $156.6 million in fiscal 1995.  Excluding the above nonrecurring
charges for fiscal 1997 and 1996 the Company  would have  realized net income of
$261.4 million and $205.4 million in fiscal 1997 and 1996, respectively.

Liquidity and Capital Resources

Accounts receivable, net of allowance for doubtful accounts, were $219.9 million
at February 28, 1997 or 52 days of sales outstanding, compared to $153.3 million
or 43 days of sales  outstanding  in accounts  receivable  at February 29, 1996.
This increase in receivables reflects timing on shipments and collections. These
trends are expected to continue for the intermediate term.

The Company has  historically  maintained  higher  levels of inventory  than its
competitors  in the  networking  industry  in order to  implement  its policy of
shipping  most  orders  requiring  immediate  delivery  within  24 to 48  hours.
Worldwide  inventories  were $197.4  million at February 28, 1997 or 109 days of
inventory, compared to $160.8 million or 112 days of inventory at the end of the
preceding  fiscal  year.  The  decrease of days in  inventory  was the result of
improving inventory control procedures.

Net cash  provided by operating  activities  was $189.0  million in fiscal 1997,
compared to $79.2 million in fiscal 1996 and $150.3 million in fiscal 1995.

Capital expenditures for fiscal 1997 of $94.4 million included $58.9 million for
the  engineering  computer  hardware and software and $3.3 million for leasehold
improvements. During fiscal 1996, $67.8 million of capital expenditures included
$9.8 million for building costs of which $3.4 million was for the purchase of an
engineering  building,  $21.4  million for  engineering  computer  hardware  and
software, $5.5 million for manufacturing and related equipment and $19.0 million
for expanding global sales operations.  During fiscal 1995, capital expenditures
of $66.1 million included  approximately $8.2 million for building costs related
to expanding  manufacturing and distribution  capacities and enlarging worldwide
sales operations,  $12.5 million for  manufacturing  and  manufacturing  support
equipment and $15.0  million for  engineering  hardware and software,  and $15.0
million in support of expanded global sales activities.

Cash,  cash  equivalents,   marketable   securities  and  long-term  investments
increased during fiscal 1997 to $568.3 million, from $432.4 million in the prior
fiscal year.  State and local municipal bonds of  approximately  $464.9 million,
maturing in three years or less,  were being held by the Company at February 28,
1997.

At February 28, 1997,  the Company did not have any short or long term borrowing
or any significant financial commitments outstanding,  other than those required
in the normal course of business.

On March 7, 1997 the Company  obtained a $250 million  revolving credit facility
with Chase  Manhattan  Bank,  First  National  Bank of Chicago and several other
lenders.  The  facility has a term of three years but the Company has the option
to extend the  facility  for an  additional  two years.  As of May 27,  1997 the
Company had not drawn down any money under the facility.

In the opinion of management,  internally  generated  funds from  operations and
existing cash, cash  equivalents  and marketable  securities will be adequate to
support  Cabletron's  working capital and capital  expenditure  requirements for
both short and long term needs.

Business Environment and Risk Factors

THE  FOLLOWING  ARE  CAUTIONARY  STATEMENTS  FOR PURPOSES OF THE "SAFE HARBOR"
PROVISIONS OF THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995

The Company may occasionally make forward-looking  statements and estimates such
as forecasts and projections of the Company's  future  performance or statements
of management's plans and objectives.  These  forward-looking  statements may be
contained  in, among other  things,  SEC filings and press  releases made by the
Company  and in oral  statements  made by the  officers of the  Company.  Actual
results could differ materially from those in such  forward-looking  statements.
Therefore,  no assurances can be given that the results in such  forward-looking
statements  will be achieved.  Important  factors that could cause the Company's
actual results to differ from those contained in such forward-looking statements
include, among others, the factors mentioned below.
<PAGE>
Cabletron's  primary competitors have recently acquired several other networking
companies possessing complementary technologies, and Cabletron expects that such
acquisitions will continue in the future.  The acquisition of these technologies
may allow  Cabletron's  primary  competitors  to offer new products  without the
lengthy time delays typically associated with internal product development. As a
consequence,  such  competitors  may be able to more  swiftly  meet the  growing
demand for so-called  "end-to-end"  enterprise-wide  networking solutions.  With
such increased  competition,  Cabletron anticipates an increase in the degree of
sales  variability  and a decreased  ability to predict  aggregate sales demand.
Certain of these  acquisitions may also have the effect of limiting  Cabletron's
access to commercially  significant  technologies.  The greater resources of the
competitors  engaged in these  acquisitions  may permit them to  accelerate  the
development and  commercialization of new competitive products and the marketing
of existing  competitive  products to their larger  installed  bases.  Cabletron
expects that  competition  will increase  substantially as a result of these and
other industry consolidations.

In the past,  Cabletron  has  relied  upon a  combination  of  internal  product
development  and  partnerships  with other  networking  vendors  to broaden  its
product line to meet this demand for "end-to-end" enterprise wide solutions. The
increasing   competitiveness  among  vendors,   together  with  acquisitions  by
Cabletron  and  its  competitors  of  smaller  networking  companies  possessing
complementary technologies, may materially limit Cabletron's ability to continue
to partner with other vendors for new or complementary  products. In the future,
Cabletron  expects to meet the demand for a broad  array of  products  primarily
through internal  development and  acquisitions.  There can be no assurance that
Cabletron will be successful in developing or acquiring  products that will meet
customers' needs.

Volatility  of Stock Price.  As is  frequently  the case with the stocks of high
technology  companies,  the market price of Cabletron's  stock has been, and may
continue to be, volatile.  Factors such as quarterly  fluctuations in results of
operations, increased competition, the introduction of new products by Cabletron
or its competitors,  expenses or other difficulties associated with assimilating
OASys,  Netlink,  Network  Express,  ZeitNet  and  other  companies  that may be
acquired in the future by Cabletron,  changes in the mix of sales channels,  the
timing of  significant  customer  orders (the average  dollar amount of customer
orders has increased in recent periods), and macroeconomic conditions generally,
may have a significant impact on the market price of the stock of Cabletron.  In
addition,  the stock market has from time to time experienced  extreme price and
volume fluctuations,  which have particularly affected the market price for many
high technology companies and which, on occasion,  have appeared to be unrelated
to the operating  performance  of such  companies.  Past  financial  performance
should  not be  considered  a  reliable  indicator  of  future  performance  and
investors  should not use historical  trends to anticipate  results or trends in
future periods. Any shortfall in revenue or earnings from the levels anticipated
by securities analysts could have an immediate and significant adverse effect on
the market price of Cabletron's stock in any given period.

Fluctuations   in   Operating   Results.   A  variety  of   factors   may  cause
period-to-period  fluctuations  in the  operating  results  of  Cabletron.  Such
factors  include,  but are not  limited to, the rate of growth of the market for
the Company's products,  product mix,  competitive  pricing pressures,  costs of
materials,  and  timely  availability,  revenue  and  expenses  related  to  new
products, upgrades of existing products, as well as delays in customer purchases
and variability in overall customer purchasing patterns. Further, because of the
possibility of customer changes in delivery  schedules,  cancellation of orders,
purchasing  patterns or inventory  levels,  backlog as of any particular date is
not indicative of future revenue. In particular, Cabletron has been experiencing
longer sales cycles for its core products as a result of the  increasing  dollar
amount of customer orders and longer customer planning cycles. In addition,  the
increase  in the average  dollar  amount of customer  orders has  increased  the
possibility  that the  operating  results  for a  quarter  could  be  materially
adversely  affected if a number of large customer orders are either not received
or are  delayed,  due,  for example,  to  cancellations,  delays or deferrals by
customers.  Cabletron  plans to continue to invest in research and  development,
sales and marketing  and  technical  support  staff,  and its earnings  could be
adversely  affected  if it is  unable  to  match  spending  to  revenue  levels.
Moreover,  with industry standards established and new standards emerging,  more
companies have developed  standards-based products and are seeking to compete on
the basis of price. If Cabletron does not respond with lower  production  costs,
pricing  pressures could adversely  affect future  earnings.  Accordingly,  past
results may not be indicative of future results.  There can be no assurance that
the  announcement  or  introduction  of  new  products  by  the  Company  or its
competitors,  or a change in industry  standards,  will not cause  customers  to
defer or cancel purchases of the Company's existing products, which could have a
<PAGE>
material  adverse  effect on the  Company's  business,  financial  condition  or
results of  operations.  The market of the Company's  products is evolving.  The
rate of growth of the market and the resulting demand for the Company's recently
introduced  products  is  subject to a high  level of  uncertainty.  The rate of
growth in the market in recent  periods has  exceeded  the long term  historical
rate of growth in similar  markets.  If the  market  fails to grow or grows more
slowly than anticipated,  the Company's business, financial condition or results
of operations would be materially adversely affected.

Technological  Changes.  The market for networking  products is subject to rapid
technological  change,  evolving  industry  standards  and  frequent new product
introductions,  and therefore requires a high level of expenditures for research
and development.  Cabletron may be required to incur significant expenditures to
develop such new integrated  product  offerings.  There can be no assurance that
customer  demand for  products  integrating  routing,  switching,  hub,  network
management  and remote  access  technologies  will grow at the rate  expected by
Cabletron,  that Cabletron will be successful in developing,  manufacturing  and
marketing new products or product  enhancements  that respond to these  customer
demands  or to  evolving  industry  standards  and  technological  change,  that
Cabletron  will not  experience  difficulties  that could  delay or prevent  the
successful  development,   introduction,  manufacture  and  marketing  of  these
products  (especially  in  light  of the  increasing  design  and  manufacturing
complexities  associated with the integration of technologies),  or that its new
product and product  enhancements  will adequately meet the  requirements of the
marketplace  and achieve  market  acceptance.  Cabletron's  business,  operating
results and  financial  condition may be  materially  and adversely  affected if
Cabletron encounters delays in developing or introducing new products or product
enhancements or if such product  enhancements do not gain market acceptance.  In
order to  maintain a  competitive  position,  Cabletron  must also  continue  to
enhance its existing  products and there is no assurance that it will be able to
do so. In addition,  the demand for traditional  "shared media" hubs such as the
Company's basic MMAC product have been  experiencing  declines over the last few
years,  and there can be no assurance that such decline will not  accelerate.  A
portion of future  revenues will come from new products and services.  Cabletron
cannot  determine  the  ultimate  effect  that  new  products  will  have on its
revenues, earnings or stock price.

Acquisition Strategy.  Cabletron has addressed the need to develop new products,
in part,  through  the  acquisition  of other  companies.  Acquisitions  involve
numerous risks  including  difficulties  in the  assimilation of the operations,
technologies  and  products  of  the  acquired   companies,   the  diversion  of
management's  attention from other business concerns,  risks of entering markets
in  which  Cabletron  has  no or  limited  direct  prior  experience  and  where
competitors in such markets have stronger  market  positions,  and the potential
loss  of key  employees  of the  acquired  company.  Achieving  the  anticipated
benefits of an acquisition  will depend in part upon whether the  integration of
the companies'  businesses is accomplished in an efficient and effective manner,
and there can be no assurance that this will occur.  The successful  combination
of companies in the high technology industry may be more difficult to accomplish
than in other industries.  The combination of such companies will require, among
other things,  integration of the companies'  respective  product  offerings and
coordination of their sales and marketing and research and development  efforts.
There can be no assurance that such integration will be accomplished smoothly or
successfully.  The  difficulties  of such  integration  may be  increased by the
necessity  of   coordinating   geographically   separated   organizations.   The
integration  of certain  operations  following an  acquisition  will require the
dedication of management  resources that may temporarily distract attention from
the   day-to-day   business  of  Cabletron.   The  inability  of  management  to
successfully  integrate the operations of such  companies  could have a material
adverse  effect on the  business  and results of  operations  of  Cabletron.  In
addition,  as commonly occurs with mergers of technology  companies,  during the
pre-merger and integration phases,  aggressive  competitors may undertake formal
initiatives to attract  customers and to recruit key employees  through  various
incentives.

Dependence  on Key  Personnel  and  Management  of Change.  Cabletron's  success
depends upon the continued  contributions of Craig R. Benson, Chairman and Chief
Operating  Officer,  S. Robert Levine,  President and Chief  Executive  Officer,
Christopher J. Oliver,  Director of Engineering and  Manufacturing,  and certain
other key  personnel,  many of whom would be difficult to replace.  If these key
personnel  were  to  leave  Cabletron,  operating  results  could  be  adversely
affected.  The success of  Cabletron  will depend on the ability of Cabletron to
attract and retain skilled employees, and on the ability of its officers and key
employees to manage change successfully.
<PAGE>
Product  Protection and Intellectual  Property.  Cabletron's  success depends in
part  on  its  proprietary   technology.   Cabletron  attempts  to  protect  its
proprietary technology through patents,  copyrights,  trademarks,  trade secrets
and license  agreements.  Cabletron  believes,  however,  that its success  will
depend  to  a  greater  extent  upon  innovation,  technological  expertise  and
distribution  strength.  There  can be no  assurance  that  the  steps  taken by
Cabletron  in this regard will be  adequate to prevent  misappropriation  of its
technology  or that  Cabletron's  competitors  will  not  independently  develop
technologies  that are  substantially  equivalent  or  superior  to  Cabletron's
technology.  In  addition,  the laws of some  foreign  countries  do not protect
Cabletron's  proprietary  rights to the same extent as do the laws of the United
States.  No assurance can be given that any patents issued to Cabletron will not
be challenged, invalidated or circumvented or that the rights granted thereunder
will provide competitive advantages.

Although  Cabletron does not believe that its products  infringe the proprietary
rights of any third parties,  third parties have asserted infringement and other
claims  against  Cabletron from time to time, and there can be no assurance that
third  parties  will not assert such claims  against  Cabletron in the future or
that such claims will not be successful.  Patents have been granted  recently on
fundamental  technologies  incorporated  in Cabletron's  products.  Since patent
applications  in the United States are not publicly  disclosed  until the patent
issues,  applications  may have been filed by third parties which,  if issued as
patents,  could relate to Cabletron's  products.  In addition,  participants  in
Cabletron's  industry  also rely upon trade  secret law.  Cabletron  could incur
substantial  costs and  diversion of  management  resources  with respect to the
defense of any claims relating to proprietary rights which could have a material
adverse  effect on  Cabletron's  business,  financial  condition  and results of
operations.  Furthermore,  parties  making such claims  could  secure a judgment
awarding  substantial  damages,  as well as injunctive or other equitable relief
which could effectively block Cabletron's ability to license its products in the
United States or abroad. Such a judgment could have a material adverse effect on
Cabletron's business, financial condition and results of operations.

Dependence  on  Suppliers.  Cabletron's  products  include  certain  components,
including application specific integrated circuits ("ASICs"), that are currently
available from single or limited sources,  some of which require long order lead
times.  In  addition,  certain of  Cabletron's  products and  subassemblies  are
manufactured by single source third parties.  With the increasing  technological
sophistication  of new  products  and the  associated  design and  manufacturing
complexities,  Cabletron  anticipates  that it may  need  to rely on  additional
single source or limited suppliers for components or manufacture of products and
subassemblies. Any reduction in supply, interruption or extended delay in timely
supply,  variances  in actual  needs  from  forecasts  for long  order lead time
components, or change in costs of components could affect Cabletron's ability to
deliver its  products in a timely and  cost-effective  manner and may  adversely
impact Cabletron's operating results and supplier relationships.

New Accounting Pronouncements

The Company has adopted  Statement of Financial  Accounting  Standards  No. 123,
"Accounting  for Stock Based  Compensation"  ("SFAS 123").  As permitted by SFAS
123, the Company will  continue to measure its  compensation  cost in accordance
with Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to
Employees."  Therefore,  the  adoption  of  SFAS  123 was  not  material  to the
Company's  financial condition or results of operations;  however,  the proforma
impact on earnings  per share has been  disclosed  in the Notes to  Consolidated
Financial Statements as required by SFAS 123.

In February 1997, the Financial  Accounting  Standards Board issued Statement of
Financial  Accounting Standards No. 128, "Earnings per Share" ("SFAS 123"). SFAS
128  establishes  a different  method of computing  net income per share than is
currently  required under the provisions of Accounting  Principles Board Opinion
No. 15.  Under SFAS 128,  the Company will be required to present both basic net
income per share and  diluted  net income per share.  The impact on diluted  net
income per share is not expected to be material. The Company plans to adopt SFAS
128 in its  fiscal  quarter  ending  February  28,  1998  and at that  time  all
historical  net  income  per  share  data will be  restated  to  conform  to the
provisions of SFAS No. 128.


<PAGE>
ITEM 8. CONSOLIDATED FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

CABLETRON SYSTEMS, INC.

CONSOLIDATED BALANCE SHEETS
February 28, 1997 and February 29, 1996
(in
thousands)

Assets                                         1997              1996
                                               ----              ----

Current
assets:
   Cash and cash equivalents                 $214,828          $106,102         
   Short-term investments(note 4)             165,396           172,896
   Accounts receivable, net of allowance
    for doubtful accounts ($15,476 and 
    $6,655 in 1997 and 1996,
    respectively)                             219,896           153,256
   Inventories (note 5)                       197,438           160,806
   Deferred income taxes (note 9)              57,107            38,315
   Prepaid expenses and
   other assets                                35,925            31,711
                                            ---------          --------
      Total current assets                    890,590           663,086
                                            ---------          --------
Long-term investments (note 4)                188,081           153,424
Long-term deferred income taxes (note 9)       29,627            23,473
Property, plant and equipment, net (note 6)   198,557           153,904
Other assets                                      ---             3,021
                                           ==========          ========
      Total assets                         $1,306,855          $996,908
                                           ==========          ========


Liabilities and Stockholders' Equity

Current liabilities:
   Accounts payable                        $   68,604          $ 38,826
   Accrued expenses (note 7)                  135,208           120,572
   Income taxes payable                        10,442            18,536
                                           ----------         --------
      Total current liabilities               214,254           177,934
   Long-term deferred income taxes (note 9)    11,103             9,088
                                           ----------         ---------
      Total liabilities                       225,357           187,022
                                           ----------         ---------

Commitments and contingencies (notes 8 and 10)

Stockholders' equity (notes 11 and 12):
   Preferred stock, $1.00 par value.
   Authorized
    2,000 shares; none issued                     ---               ---
   Common stock, $0.01 par value.
   Authorized
    240,000 shares; issued and outstanding
    156,305 and 152,892 shares in 1997  
    and 1996, respectively                      1,563               776
   Additional paid-in capital                 266,829           218,792
   Retained earnings                          812,885           591,518
                                           ----------          --------
                                            1,081,277           811,086
   Cumulative translation adjustment              221            (1,049)
   Notes receivable, stockholders                 ---              (151)
                                           ----------          --------
      Total stockholders' equity            1,081,498           809,886
                                            ----------         --------         
      Total liabilities and stockholders' 
        equity                             $1,306,855          $996,908         
                                           ==========          ========

See accompanying notes to consolidated financial statements.
<PAGE>
CABLETRON SYSTEMS, INC.

CONSOLIDATED STATEMENTS OF INCOME
Years Ended  February  28,  1997,  February  29, 1996 and  February 28, 1995 (in
thousands, except per share amounts)


                                               1997          1996        1995
                                               ----          ----        ----

Net sales (note 13)                          $1,406,552    $1,100,349   $833,218
Cost of sales                                   575,107       448,699    340,424
                                            ----------    ----------   --------
    Gross                                       831,445       651,650    492,794
    profit
Operating expenses:
    Research and development                    161,674       127,289     89,129
    Selling, general and                       
      administrative                            286,469       223,083    166,649
   
    Nonrecurring items (note 3)                  63,024        94,343       ---
                                             ----------    ----------   --------
      Income from operations                    320,278       206,935    237,016
Interest income                                  19,422        17,891      5,572
                                             ----------    ----------   --------
      Income before income taxes                339,700       224,826    242,588
Income taxes (note 9)                           117,575        80,341     86,014
                                             ----------    ----------   --------
      Net income                             $  222,125    $  144,485   $156,574
                                             ==========    ==========   ========
Net income per common share                  $     1.43    $     0.95   $   1.08
                                             ==========    ==========   ========
Weighted average number of shares                           
outstanding                                     155,207      151,525     145,125
                                             ==========   ==========    ========


See accompanying notes to consolidated financial statements.






<PAGE>
CABLETRON SYSTEMS, INC.

CONSOLIDATED  STATEMENTS OF STOCKHOLDERS'  EQUITY Years ended February 28, 1997,
February 29, 1996 and February 28, 1995
<TABLE>
<CAPTION>
<S>                                          <C>       <C>             <C>            <C>              <C>             <C>

------------------------------------------------------------------------------------------------------------------------------
 (in thousands)                                        ADDITIONAL                   CUMULATIVE            NOTES          TOTAL
                                             COMMON       PAID-IN      RETAINED    TRANSLATION       RECEIVABLE  STOCKHOLDERS'
                                              STOCK       CAPITAL      EARNINGS     ADJUSTMENT    STOCKHOLDERS'         EQUITY
------------------------------------------------------------------------------------------------------------------------------
BALANCE AT FEBURARY 28, 1994 .........        $309      $139,515      $290,888       ($3,171)           ($335)       $427,206
------------------------------------------------------------------------------------------------------------------------------      
Repayments of notes receivable,
     stockholders ....................           --           --            --             --             131             131
Canceled 38 shares upon employee
     terminations, net ...............           --          (30)           --             --              30              --
Issuance of common stock, net ........           19        8,584            --             --            (195)          8,408
Exercise of options for 741
     shares of common stock ..........            3        4,884            --             --              --           4,887
Tax benefit for options exercised ....           --        5,712            --             --              --           5,712
Issuance of 136 shares under employee
     stock purchase plan .............           --        2,287            --             --              --           2,287
Stock dividend from stock split ......          429          (11)         (429)            --              --             (11)
Stock repurchased and retired ........           (3)     (13,056)           --             --              --         (13,059)
Effect of foreign currency translation           --           --            --          1,807              --           1,807
Net income ...........................           --           --       156,574             --              --         156,574
------------------------------------------------------------------------------------------------------------------------------      
BALANCE AT FEBRUARY 28, 1995 .........          757      147,885       447,033         (1,364)           (369)        593,942
------------------------------------------------------------------------------------------------------------------------------      
Repayments of notes receivable,
     stockholders ....................           --           --            --             --             218             218
Issuance of common stock, net ........            9       41,765            --             --              --          41,774
Issuance of common stock for 
     Fivemere acquisition ............            1        2,564            --             --              --           2,565
Exercise of options for 1,453
     shares of common stock ..........            8       17,214            --             --              --          17,222
Tax benefit for options exercised ....           --        7,215            --             --              --           7,215
Issuance of 154 shares under employee
     stock purchase plan .............            1        3,322            --             --              --           3,323
Stock repurchased and retired ........           --       (1,173)           --             --              --          (1,173)
Effect of foreign currency translation           --           --            --            315              --             315
Net income ...........................           --           --       144,485             --              --         144,485
------------------------------------------------------------------------------------------------------------------------------      
BALANCE AT FEBRUARY 29, 1996 .........          776      218,792       591,518         (1,049)           (151)        809,886
------------------------------------------------------------------------------------------------------------------------------      
Issuance of common stock, net ........           15        8,562            --             --              --           8,577
Exercise of options for 1,345
     shares of common stock ..........           10       18,012            --             --              --          18,022
Repayment of notes receivable ........           --           --            --             --             151             151
Issuance of common stock for The
     OASys Group acquisition .........            2        6,955            --             --              --           6,957
Tax benefit for options exercised ....           --        8,302            --             --              --           8,302
Stock split ..........................          758           --          (758)            --              --              --
Issuance of 197 shares under employee
     stock purchase plan .............            2        6,206            --             --              --           6,208
Effect of foreign currency translation           --           --            --          1,270              --           1,270
Net income ...........................           --           --       222,125             --              --         222,125
------------------------------------------------------------------------------------------------------------------------------      
BALANCE AT FEBRUARY 28, 1997 .........       $1,563     $266,829      $812,885           $221              --      $1,081,498
------------------------------------------------------------------------------------------------------------------------------      
</TABLE>

On  November  27,  1996,  the  Company's  common  stock  split  2-for-1  and was
distributed  as  a  stock  dividend.   All  share  amounts  have  been  adjusted
accordingly.

See accompanying notes to consolidated financial statements.


<PAGE>
CABLETRON SYSTEMS, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS
Years Ended February 28, 1997, February 29, 1996 and
February 28, 1995
(in thousands)

                                                 1997         1996        1995
                                                 ----         ----        ----

Cash flows from operating activities:
   Net income                                   $222,125    $144,485   $156,574
   Adjustments to reconcile net income to net
   cash
   provided by operating activities:
     Depreciation and amortization                49,704      32,739     31,144
     Provision for losses on accounts            
       receivable                                  9,140         435        187
     Loss on disposal of property, plant and        
       equipment                                      87          93        174
     Deferred income taxes                       (22,933)    (38,766)    (4,434)
     Changes in assets and liabilities:
        Accounts receivable                      (74,925)    (55,795)   (29,623)
        Inventories                              (37,669)    (55,597)   (23,168)
        Prepaid expenses and other assets         (1,709)    (18,947)    (3,427)
        Accounts payable and accrued expenses     52,812      66,882     12,400
        Income taxes payable                      (7,653)      3,705     10,476
                                                --------    --------   --------
           Net cash provided by operating      
             activities                          188,979      79,234    150,303
                                                --------    --------   ---------

Cash flows from investing activities:
     Capital expenditures                        (94,368)    (67,760)   (66,116)
     Purchase of available-for-sale securities  (203,667)   (124,968)   (71,598)
     Purchase of held-to-maturity securities    (247,855)   (205,852)  (282,712)
     Sales/maturities of marketable securities   424,308     236,393    323,682
                                                --------    --------   --------
           Net cash used in investing          
            activities                          (121,582)   (162,187)   (96,744)
                                                --------    --------   --------

Cash flows from financing activities:
     Proceeds from issuance of short-term        
       notes                                       8,577      15,607        ---
     Principal payments on debt                      ---        (438)      (377)
     Repayment of notes receivable from             
       stockholders                                  ---         217        131 
     Repurchase of common stock                      ---      (1,173)   (13,070)
     Tax benefit of options exercised              8,302       7,215      5,712
     Proceeds from sale of common stock              ---      28,548      8,258 
     Common stock issued to employee stock         
       purchase plan                               6,208       3,323      2,287 
     Proceeds from exercise of stock options      18,022      17,164      4,887
                                                --------    --------   --------
           Net cash provided by financing       
            activities                            41,109      70,463      7,828 
                                                --------    --------   --------
   Effect of exchange rate changes on cash           220         159        712
                                                --------    --------   --------

   Net (decrease) increase in cash and cash    
     equivalents                                 108,726     (12,331)    62,099
   Cash and cash equivalents, beginning of     
     year                                        106,102     118,433     56,334 
                                                --------    --------   --------
   Cash and cash equivalents, end of year       $214,828    $106,102   $118,433
                                                ========    ========   ========

   Cash paid during year for:
     Income taxes                               $132,291    $142,733   $ 68,420 
                                                ========    ========   ========


See accompanying notes to consolidated financial statements.

<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note (1)    Business Operations

The Company develops,  manufactures,  markets,  designs, installs and supports a
broad range of standards-based local and wide area network connectivity hardware
and software products.

Note (2)    Summary of Significant Accounting Policies

(a)  Principles of Consolidation

The consolidated financial statements include the accounts of Cabletron Systems,
Inc.  (the  "Company")  and  its  wholly-owned  subsidiaries.   All  significant
intercompany balances and transactions have been eliminated in consolidation.

(b)  Investments

Held-to-maturity  securities  are those  investments  which the  Company has the
ability  and  intent to hold until  maturity.  Held-to-maturity  securities  are
recorded at amortized cost, adjusted for amortization of premiums and discounts,
which approximates market value. Available-for-sale securities are also recorded
at amortized cost,  adjusted for amortization of premiums and discounts.  Due to
the nature of the Company's  investments and the resulting low  volatility,  the
difference between fair value and amortized cost is not material.

(c)  Inventories

Inventories  are stated at the lower of cost or market.  Costs are determined at
standard which approximates the first-in, first-out (FIFO) method.

(d)  Property, Plant and Equipment

Property,  plant and equipment are stated at cost.  Depreciation  is provided on
straight-line  and  accelerated  methods over the estimated  useful lives of the
assets.  Leasehold  improvements  are amortized over the shorter of the lives of
the related assets or the term of the lease.  The Company reviews its long-lived
assets for impairment whenever events or changes in circumstances  indicate that
the carrying amount of an asset may not be recoverable. If it is determined that
the carrying amount of an asset cannot be fully recovered, an impairment loss is
recognized.

(e)  Income Taxes

The Company  accounts  for income  taxes under the asset and  liability  method.
Under this method,  deferred tax assets and  liabilities  are recognized for the
future tax  consequences  attributable  to  differences  between  the  financial
statement  carrying  amounts  of  existing  assets  and  liabilities  and  their
respective tax bases and operating loss and tax credit  carryforwards.  Deferred
tax assets and  liabilities  are measured  using  enacted tax rates  expected to
apply to taxable income in the years in which those  temporary  differences  are
expected  to be  recovered  or settled.  The effect on  deferred  tax assets and
liabilities  of a change in tax rates is recognized in income in the period that
includes the enactment date.

The Company has reinvested earnings of its foreign  subsidiaries and, therefore,
has not provided  income taxes which could  result from the  remittance  of such
earnings. The unremitted earnings at February 28, 1997 amounted to approximately
$125.7  million.  Furthermore,  any taxes paid to foreign  governments  on those
earnings may be used, in whole or in part, as credits  against the US tax on any
dividends  distributed from such earnings. It is not practicable to estimate the
amount of unrecognized deferred US taxes on these undistributed earnings.

(f) Net Income Per Share

Net income per share of common stock is based on the weighted  average number of
shares outstanding during the period. The effect of outstanding stock options is
excluded from the computation because the dilutive effect is not material.

In February 1997, the Financial  Accounting  Standards Board issued Statement of
Financial  Accounting Standards ("SFAS") No. 128, "Earnings per Share." SFAS 128
establishes  a  different  method of  computing  net  income  per share  then is
currently  required under the provisions of Accounting  Principles Board Opinion
No. 15.  Under SFAS 128,  the Company will be required to present both basic net
income per share and  diluted  net income per share.  The impact on diluted  net
income per share is not expected to be material.
<PAGE>
The Company plans to adopt SFAS 128 in its fiscal  quarter  ending  February 28,
1998 and at that time all  historical net income per share data will be restated
to conform to the provisions of SFAS No. 128.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

 (g)  Foreign Currency Translation and Transaction Gains and Losses

Assets and liabilities of the Company's  foreign  operations are translated into
US dollars at the exchange  rate in effect at the balance sheet date and revenue
and expenses are  translated at average  rates in effect during the period.  The
resultant  translation  adjustment  is  reflected  as a  separate  component  of
stockholders'  equity on the  consolidated  balance  sheets.  Transaction  gains
(losses) are  reflected in the  consolidated  statements  of income and were not
material.

(h)  Statements of Cash Flows

Cash and cash  equivalents  consist of cash in banks and short-term  investments
with original maturities of three months or less.

(i)  Revenue Recognition

Sales are  recognized  upon  shipment of products and  software.  In the case of
design, consulting, installation, support services and evaluations, revenues are
recognized  upon  completion  and  acceptance  of such  products  and  services.
Revenues  from  service  contracts  are  recognized  ratably over the period the
services are  performed.  Warranty  costs and sales returns and  allowances  are
accrued at the time of shipment.

 (j)  Derivatives

The Company uses derivative financial instruments,  principally forward exchange
contracts and options in its  management  of foreign  currency  exposure.  These
financial  instruments  are  designed to minimize  exposure and reduce risk from
exchange rate fluctuations in the regular course of the Company's  international
business  operations.  Market  value gains and losses are  included in income as
incurred and effectively  offset gains and losses on foreign  currency assets or
liabilities that are hedged.

(k) Use of Estimates

The  preparation  of  consolidated   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 the  reported  amounts  of  revenues  and  expenses  during  the
reporting period. Actual results could differ from those estimates.

 (l)  New Accounting Pronouncement

The Company has adopted  Statement of Financial  Accounting  Standards  No. 123,
"Accounting  for Stock Based  Compensation"  ("SFAS 123").  As permitted by SFAS
123,  the Company  measures  compensation  cost in  accordance  with  Accounting
Principles  Board Opinion No. 25,  "Accounting  for Stock Issued to  Employees."
Therefore,  the adoption of SFAS 123 was not material to the Company's financial
condition or results of operations; however, the proforma impact on earnings per
share has been disclosed in the Notes to  Consolidated  Financial  Statements as
required by SFAS 123.

Note (3)  Business Combinations

For  acquisitions  accounted  for under  the  pooling-of-interests  method,  all
financial  data of  Cabletron  has  been  restated  to  include  the  historical
financial data of these acquired  companies.  For acquisitions  accounted for as
purchases,  Cabletron's consolidated results of operations include the operating
results of the acquired companies from their acquisition dates.  Acquired assets
and  liabilities  were  recorded at their  estimated  fair market  values at the
acquisition   date  and  the  aggregate   purchase  price  plus  costs  directly
attributable to the completion of acquisitions have been allocated to the assets
and liabilities acquired.
<PAGE>
On  July  26,  1996,  the  Company  acquired  ZeitNet  Inc.,  a  privately  held
manufacturer of ATM products. Under the terms of the agreement, Cabletron issued
approximately  3.3  million  shares of common  stock for all of the  outstanding
shares  (and all shares  issuable  upon  exercise  of  options)  of ZeitNet in a
transaction  accounted  for as a pooling of interests.  In  connection  with the
acquisition, the Company recorded nonrecurring charges of $23.0 million.

On August 1, 1996, the Company acquired  Network Express,  Inc., a publicly held
manufacturer  of ISDN LAN  switched  access  solutions.  Under  the terms of the
agreement, Cabletron issued approximately 2.9 million shares of common stock for
all of the outstanding shares (and all shares issuable upon exercise of options)
of Network Express in a transaction accounted for as a pooling of interests.  In
connection with the acquisition,  the Company recorded  nonrecurring  charges of
$20.0 million.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

Note (3)  Business Combinations (continued)

On December 11,  1996,  the Company  acquired  Netlink  Inc.,  a privately  held
manufacturer  of  frame  relay  products.  Under  the  terms  of the  agreement,
Cabletron issued approximately 3.8 million shares of common stock for all of the
outstanding shares (and all shares issuable upon exercise of options) of Netlink
in a transaction accounted for as a pooling of interests. In connection with the
acquisition, the Company recorded nonrecurring charges of $13.0 million.

Revenues,  operating  income (loss),  and net income (loss) of the four entities
during the periods  preceding  the  acquisitions  are presented in the following
table.

(in thousands)                  
                                 Unaudited     
                         ------------------------
                               Nine         Three       
                             months        months          Fiscal       Fiscal
                              ended         ended            1996         1995
                           11/30/96       5/31/96
Revenues:
Cabletron Systems, Inc.  $1,025,997      $664,439      $1,069,715     $810,684
ZeitNet, Inc.                   ---         2,140           4,395        2,879  
Network Express, Inc            ---         3,177          18,997       11,113  
Netlink, Inc.                 7,935           ---           7,242        8,542  
                         ----------      --------      ----------     --------
                         $1,033,932      $669,756      $1,100,349     $833,218
                         ==========      ========      ==========     ========

Operating income (loss):
Cabletron Systems, Inc.    $234,842      $135,813        $227,562     $238,363
ZeitNet, Inc.                   ---        (2,965)         (8,890)         171
Network Express, Inc.           ---        (2,293)         (9,415)         419  
Netlink, Inc.                (2,856)          ---          (2,322)      (1,937) 
                          ---------     ---------       ---------     --------
                           $231,986      $130,555        $206,935     $237,016
                          =========     =========       =========    =========

Net income (loss):
Cabletron Systems, Inc.    $161,789       $94,047        $164,418     $161,974
ZeitNet, Inc.                   ---        (2,972)         (8,938)         155  
Network Express, Inc.           ---        (2,154)         (8,475)         466  
Netlink, Inc.                (2,887)          ---          (2,520)      (6,021) 
                           --------       -------        ---------    --------
                           $158,902       $88,921        $144,485     $156,574
                           ========       =======        ========     ========


<PAGE>
Note that the fiscal 1997 interim  financial  information  is presented  for the
interim periods nearest the dates that the combinations were consummated.

On February 7, 1997,  the Company  acquired The OASys  Group,  Inc., a privately
held developer of software targeted at managing  telecommunications  devices and
connections  used  in  high-speed,   fiber-optic   networks.   Cabletron  issued
approximately  226,000 shares of common stock for all of the outstanding  shares
(and all shares  issuable  upon  exercise of options) of OASys in a  transaction
accounted  for  as  a  purchase  and,  accordingly,   the  acquired  assets  and
liabilities  were recorded at their  estimated fair market values at the date of
acquisition.  The total purchase price of $7.0 million included $6.7 million for
in-process  research and development and $0.3 million for  nonrecurring  charges
which included  adjustments  to conform with  Cabletron's  accounting  policies.
The Company's  consolidated  results of operations include the operating results
of  the  acquired  business  from  its  acquisitions  date.  Proforma  financial
information is not presented as it is not material to the consolidated financial
statements.

On January 12, 1996, the Company acquired the Enterprise  Networks Business Unit
from Standard Microsystems  Corporation.  The acquisition was accounted for as a
purchase and, accordingly,  the acquired assets and liabilities were recorded at
their  estimated  fair market values at the date of the  acquisition.  The total
purchase price of $85.7 million  included $67.8 million for in-process  research
and  development  and $17.9  million for  nonrecurring  charges  which  included
adjustments  to  conform  the  ENBU  accounting   policies  with  the  Company's
accounting  policies.  The Company's  consolidated results of operations include
the  operating  results of the  acquired  business  from its  acquisition  date.
Proforma  financial  information  is not  presented as it is not material to the
consolidated financial statements.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

 Note (4)  Investments

Investments  are  summarized  as follows at February  28, 1997 and  February 29,
1996:

                             1997                              1996
                  ----------------------------     -----------------------------
(in thousands)               Long                              Long
                  Current    Term      Total       Current     Term      Total
                  --------  --------  --------     ---------  --------  --------

Held-to-maturity  $84,261   $115,209  $199,470     $130,079   $115,500  $245,579
Available-for-sale 81,135    72,872   154,007        42,817    37,924    80,741
                  ========  ========  ========     =========  ========  ========
      Total       $165,396  $188,081  $353,477     $172,896   $153,424  $326,320
                  ========  ========  ========     =========  ========  ========

The contractual maturities for the above securities are less than three years.


Note (5)  Inventories

 Inventories  consist of the  following  at February  28, 1997 and  February 29,
1996:

(in thousands)            1997       1996
                          ----       ----

Raw materials          $64,685    $52,642
Work-in-process         57,070     39,317
Finished goods          75,683     68,847
                      --------   --------
Total                 $197,438   $160,806
                      ========   ========
<PAGE>
Note (6)  Property, Plant and Equipment

Property,  plant and equipment consist of the following at February 28, 1997 and
February 29, 1996:

(in thousands)                      1997       1996      Estimated useful
                                    ----       ----             lives
                                                          ---------------
Land and land improvements         $7,751    $1,760         ---                 
Buildings and building                                    
  improvements                     38,015     37,058        30-40 years
Construction in progress              305        ---        ---
Equipment                         284,621    194,366        3-5 years           
Furniture and fixtures             11,711     14,004        5-7 years
Leasehold improvements              9,448      6,445        3-5 years
Motor vehicles                      4,690      3,651        3-5 years
                                 --------   --------
                                  350,541    257,284
Less accumulated
depreciation and amortization     151,984    103,380
                                 --------   --------
                                 $198,557   $153,904
                                 ========   ========

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

Note (7)  Accrued Expenses

Accrued  expenses consist of the following at February 28, 1997 and February 29,
1996:

(in thousands)              1997         1996
                            ----         ----
thousands)

Salaries and benefits     $ 15,527     $ 18,625
Deferred revenue            50,041       38,325
Warranty                    19,315       18,719
Other                       50,325       44,903
                          --------     --------
     Total                $135,208     $120,572
                          ========     ========


Note (8)  Leases

The Company  leases  manufacturing  and office  facilities  under  noncancelable
operating  leases  expiring  through  the year  2020.  The  leases  provide  for
increases  based on the consumer price index and increases in real estate taxes.
Rent expense  associated with operating  leases was  approximately  $12,179,000,
$10,265,000  and $7,642,000 for the years ended February 28, 1997,  February 29,
1996 and February 28, 1995, respectively.

Total future minimum lease payments under all noncancelable  operating leases as
of February 28, 1997, are as follows:

(in              Year
thousands)

                 1998   $8,108                         
                 1999    5,163
                 2000    3,538
                 2001    2,720
                 2002    1,853
             Thereafter  7,825
                       -------
                       $29,207
                       =======

<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

Note (9) Income Taxes

Income before income taxes is summarized as follows:

(in thousands)                          1997       1996       1995
                                        ----       ----       ----

Total US domestic income            $313,017   $173,515   $202,620
Total foreign subsidiaries income     26,683     51,311     39,968
                                    --------   --------   --------
Total income before income taxes    $339,700   $224,826   $242,588
                                    ========   ========   ========

Currently payable:
    Federal                         $117,546    $92,109    $63,944
    State                             21,962     20,807     19,286
    Foreign                            1,000     11,519      7,218
Deferred tax benefit                 (22,933)   (44,094)    (4,434)
                                    --------   --------    -------
Total tax expense                   $117,575    $80,341    $86,014
                                    ========   ========    =======

The  following is a  reconciliation  of the effective tax rates to the statutory
federal tax rate:

                                        1997       1996       1995
                                        ----       ----       ----

Statutory federal income tax rate       35.0%      35.0%      35.0%
State income tax (net of federal        
  tax benefit)                           3.6        3.8        4.7
Exempt income of foreign sales
corporation, net of tax                 (0.7)      (1.1)      (0.7)
Research and experimentation credit     (0.7)       ---       (1.1)             
Foreign operations                      (2.7)      (1.6)      (2.7)
Other                                    0.1       (0.4)       0.3
                                        ----      -----       ----
                                        34.6%     35.7%       35.5%
                                        =====     =====       =====

The tax effects of temporary  differences that give rise to significant portions
of the deferred tax assets and deferred tax liabilities at February 28, 1997 and
February 29, 1996 are presented below:

(in thousands)                              1997          1996
                                            ----          ----
Deferred tax assets:
    Accounts receivable                  $ 4,996       $ 2,019                  
    Inventories                           33,859        27,993
    Other reserves and accruals           24,079         5,454
    Acquired research and            
    development                           29,262        26,322
    Domestic net operating loss     
    carryforwards                         27,213           ---
    Foreign net operating loss       
    carryforwards                          5,636         3,268
                                         -------       -------
      Total gross deferred tax assets    125,045        65,056
    Less valuation allowance             (38,381)       (3,268)
                                         -------        ------
      Net deferred tax assets             86,664        61,788
                                         -------        ------
Deferred tax liabilities: 
    Property, plant and equipment        (11,033)       (9,088)
                                         -------        -------
      Total gross deferred               
      liabilities                        (11,033)       (9,088)
                                         -------       -------
     Net deferred tax assets             $75,631       $52,700
                                         =======       =======


<PAGE>
At February  28,  1997,  the  Company  had  domestic  net  operating  loss (NOL)
carryforwards  for tax purposes of  $27,213,000  expiring in fiscal 1998 through
fiscal 2010. The NOL  carryforwards  were acquired from  acquisitions of ZeitNet
Inc., Network Express, Inc., Netlink, Inc. and The OASys Group, Inc.

The net change in the total valuation  allowance for the year ended February 28,
1997 was an increase of $4,619,000.  In assessing the  realizability of deferred
tax assets,  management  considers  whether it is more likely than not that some
portion or all of the deferred  tax assets will not be realized.  Based upon the
level of historical  taxable  income and  projections  for future taxable income
over the  periods  which the  deferred  tax  assets are  deductible,  management
believes it is more likely than not the  Company  will  realize the  benefits of
these  deductible  differences,  net  of the  existing  valuation  allowance  at
February 28, 1997.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

Note (10) Financial Instruments and Concentration of Credit Risk

The Company uses derivative financial instruments,  principally forward exchange
contracts and options,  in its management of foreign currency  exposures arising
from its international operations. These contracts primarily require the Company
to purchase or sell certain foreign  currencies either with or for US dollars at
contractual rates. The Company's foreign currency hedging activities are used to
minimize  adverse  foreign  exchange  movements on the eventual  dollar net cash
inflows of its  foreign  denominated  net assets.  The Company  does not hold or
issue derivative financial instruments for trading purposes.

At February 28, 1997 and February  29,  1996,  the Company had forward  exchange
contracts and purchased option  contracts,  all having  maturities less than two
years, in the contractual  amount of $69 million (forward  contracts $31 million
and option contracts $38 million) and $90 million (forward contracts $49 million
and option contracts $41 million), respectively.

Realized and  unrealized  foreign  exchange  gains and losses are  recognized in
operating  income and offset foreign exchange gains and losses on the underlying
exposures.  The Company's derivative  financial  instruments are revalued at the
balance sheet date and the carrying  amount  approximates  the fair value of the
instruments.

Several major  international  financial  institutions are  counterparties to the
Company's financial instruments. It is Company practice to monitor the financial
standing of the  counterparties  and limit the amount of  exposure  with any one
institution.  The  Company  may be  exposed  to  credit  loss  in the  event  of
nonperformance by the  counterparties to these contracts,  but believes that the
risk of such loss is remote and that it would not be material  to its  financial
position and results of operations.

The carrying amounts of cash, cash equivalents, accounts receivable and accounts
payable  approximate fair value because of the short maturity of these financial
instruments.

For the year ended February 28, 1997, no single customer  represented  more than
3% of  net  sales.  However,  sales  to the  federal  government  accounted  for
approximately 12% of net sales for the year ended February 28, 1997.

With respect to trade receivables,  concentration of credit risk is limited, due
to the diverse areas covered by the Company's operations.  Any probable bad debt
loss has been provided for in the allowance for doubtful accounts.  The carrying
amounts for cash, short-term and long-term  investments,  receivables,  accounts
payable  and accrued  liabilities  approximate  fair value  because of the short
maturity of these instruments.

Note (11)  Common Stock

On  November  27,  1996,  the  Company's  common  stock  split  2-for-1  and was
distributed as a stock  dividend.  On September 12, 1994,  the Company's  common
stock split 2.5-for-1 and was distributed as a stock dividend. All share and per
share amounts have been adjusted accordingly.
<PAGE>
Note (12)  Stock Plans

(a) Equity Incentive and Directors Plans

The Company has an Equity  Incentive Plan which provides for the availability of
25,000,000  shares of common  stock for the  granting of a variety of  incentive
awards to eligible  employees.  As of February 28, 1997,  the Company had issued
19,953,680  stock options under the Equity Incentive Plan, which were granted at
fair  market  value at the date of grant,  vest over a three to five year period
and expire within six to ten years from the date of grant.

The Company has a Directors  Option Plan which provides for the  availability of
1,250,000  shares of common stock for purchase by  nonemployee  directors of the
Company.  The  Directors  Option Plan  provides for issuance of options at their
fair market value on the date of grant.  The options vest over a period of three
years and  expire six years  from the date of grant.  A total of  381,000  stock
options are outstanding under the Directors Option Plan.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

Note (12)  Stock Plans (continued)

A summary of option transactions under the two plans follows:

                                                                 Weighted
                                                                  average
                                                                 exercise
                                                                 price of
                                                             shares under
                                               Shares                plan
                                            ---------        ------------

Options outstanding at February 28, 1994    6,302,028              $12.29
                                            ---------        ------------
Granted and assumed                         2,736,182               21.18
Exercised                                    (740,980)               6.60
Cancelled                                    (440,004)              15.96
                                            ---------        ------------
Options outstanding at February 28, 1995    7,857,226               15.72
                                            ---------        ------------
Granted and assumed                         3,898,112               28.50
Exercised                                  (1,453,402)              11.13
Cancelled                                    (465,410)              24.28
                                            ---------        ------------
Options outstanding at February 29, 1996    9,836,526               20.02
                                            ---------        ------------
Granted and assumed                         6,542,663               29.67
Exercised                                  (1,345,415)              12.50
Cancelled                                  (1,497,219)              24.28
                                            ---------        ------------
Options outstanding at February 28, 1997   13,536,555              $24.96
                                           ==========        ============
Options exercisable at February 28, 1997    3,356,372              $14.88
                                           ==========        ============

<PAGE>
The following table summarizes  information concerning currently outstanding and
exercisable options as of February 28, 1997:
<TABLE>
<CAPTION>
<S>              <C>                 <C>             <C>        <C>              <C>   

                                   Weighted
                                    average         Weighted                    Weighted
                                  remaining          average                     average
 Range of         Number        contractual      outstanding         Options    exercise
 exercise        outstanding           life           option     exercisable       price
  prices                            (years)            price
--------------   -----------    -----------       ----------     -----------    --------

$0.053 - 15.00     2,104,815           5.7            $ 5.38       1,681,115       $5.14                                   
$15.01 - 30.00     4,407,408           7.4             24.00       1,268,117       22.67
$30.01 - 45.00     7,004,068           8.9             31.38         402,075       30.60                            
$45.01 - 65.00        20,264           8.0             46.83           5,065       46.83
                  ----------                                       ---------
                  13,536,555                                       3,356,372
                  ==========                                       =========
</TABLE>

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

Note (12)  Stock Plans (continued)

The Company applies Accounting  Principles Board Opinion No. 25, "Accounting for
Stock Issued to Employees"  and related  interpretations  in accounting  for its
stock option and employee stock purchase  plans,  accordingly,  no  compensation
expense has been recognized in the  consolidated  financial  statements for such
plans.  The following  assumptions  were used in the calculation of these values
for fiscal years 1996 and 1997,  respectively:  volatility of 63.97%,  risk free
interest rate of 6.18% and expected life of 3.7 years. Had compensation cost for
the Company's  stock option plans been  determined  based upon the fair value at
the grant date for awards  under these  plans  consistent  with the  methodology
prescribed  under  SFAS 123,  "Accounting  for  Stock-based  Compensation,"  the
Company's net income would have been reduced to the pro forma amounts  indicated
below:

      (in thousands)                    1997              1996
                                        ----              ----

      Net income  As reported       $222,125          $144,485
                  Pro forma          207,109           121,302

The effect of applying SFAS 123 as shown in the above proforma disclosure is not
representative  of the proforma  effect on net income in future years because it
does not take into consideration proforma compensation expense related to grants
made prior to fiscal 1996.

(b)  Employee Stock Purchase Plans

The Company has two Employee  Stock  Purchase Plans (ESPP) which provide for the
combined  availability  of  4,500,000  shares of common stock to be purchased by
employees  who have  completed a minimum  period of  employment.  Under the 1989
ESPP,  employees  must be  continuously  employed for a period of six months and
under the 1995 ESPP employees must be continuously  employed for a period of two
years. Under these plans, options are granted to eligible employees twice yearly
and are exercisable through the accumulation of employee payroll deductions from
two to ten percent of employee compensation as defined in the plan, to a maximum
of $1,904  annually,  for each  plan,  (adjusted  to  reflect  increases  in the
consumer  price index) which may be used to purchase  stock at 85 percent of the
fair  market  value of the common  stock at the  beginning  or end of the option
period, whichever amount is lower. In fiscal 1997, 197,262 shares were purchased
at a weighted  average price of $31.47 (153,768 at $21.43 and 136,698 at $16.75,
for 1996 and  1995,  respectively).  The  remaining  balance  of both  ESPPs for
purchase by employees at February 28, 1997 was 3,514,937 shares.



<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

Note (13)  Geographic Area Information
(dollars in thousands)

                                     % of               % of             % of
                          1997      Total       1996    Total     1995    Total
                          ----      -----       ----    -----     ----    -----
Net Sales:
US                    $  998,384    71.0%    $771,179    70.1% $590,331   70.8%
Direct Foreign Export     38,457     2.7       35,378     3.2    37,889    4.5
                      -----------  -----   ----------   -----  --------   -----
Total US Source        1,036,841    73.7      806,557    73.3   628,220   75.3
Europe                   273,972    19.5      215,796    19.6   155,467   18.7
Other (1)                 95,739     6.8       77,996     7.1    49,531    6.0
                      -----------  -----   ----------   -----  --------   -----
    Total Sales       $1,406,552   100.0%  $1,100,349   100.0% $833,218   100.0%
                      ==========   =====   ==========   =====  ========   =====

Income from
Operations:
US                      $282,480    88.2%    $169,103    81.7% $196,792   83.0%
Europe                    29,877     9.3       33,834    16.4    39,343   16.6
Other (1)                  7,921     2.5        3,998     1.9       881    0.4
                        --------    ----     --------    ----  --------   ----
    Total Income
    from Operations     $320,278   100.0%    $206,935   100.0% $237,016  100.0%
                        ========   =====     =========  =====  ========  =====

Identifiable Assets:
US                    $1,122,762    85.9%    $841,979   84.4%  $588,028   83.7%
Europe                   119,527     9.2      115,949    11.7    92,548   13.2
Other (1)                 64,566     4.9       38,980     3.9    21,624    3.1
                      ----------   -----     --------   -----  --------  -----
    Total Assets      $1,306,855   100.0%    $996,908   100.0% $702,200  100.0%
                      ==========   =====     ========   =====  ========  =====

(1) Includes Australia, Latin America and the
Pacific Rim countries.


Note (14) Quarterly Financial Data (unaudited)

(in thousands, except per share amounts)
                                           Income                    Net
                     Net        Gross       From         Net       Income
                    Sales      Profit     Operations   Income     Per Share (a)
1997
First Quarter    $  323,499    $190,645   $  85,672    $ 57,139       $0.37     
Second Quarter      340,940     202,085      50,141      36,908 (b)    0.24
Third Quarter       361,558     213,960      99,029      67,742        0.44
Fourth Quarter      380,555     224,756      85,436      60,336 (c)    0.39
                 ----------    --------    --------    --------       -----
Total Year       $1,406,552    $831,445    $320,278    $222,125       $1.43
                 ==========    ========    ========    ========       =====

1996
First Quarter     $ 247,337    $146,612    $ 68,048    $ 46,262       $0.31     
Second Quarter      266,804     158,067      74,968      51,389        0.34
Third Quarter       284,193     168,213      78,619      54,286        0.36
Fourth Quarter      302,015     178,758     (14,699)     (7,451) (d)  (0.05)
                 ----------    ---------   --------    --------       ------
Total Year       $1,100,349    $651,650    $206,935    $144,485       $0.95
                  ==========   ========    ========    ========       ======

(a)  Due to rounding some totals will not add.
(b) Includes $43.0 million nonrecurring charge related to the acquisitions of
ZeitNet and Network Express.
(c) Includes $20.0 million nonrecurring charge related to the acquisitions of
Netlink and OASys.
(d) Includes $94.3 million nonrecurring charge related to acquisitions of
SMC's Enterprise Networks Business Unit and Fivemere (by
Network Express)

<PAGE>

INDEPENDENT AUDITORS' REPORT


The Board of Directors and Stockholders
Cabletron Systems, Inc.:

We have  audited  the  accompanying  consolidated  balance  sheets of  Cabletron
Systems,  Inc. and  subsidiaries  as of February 28, 1997 and February 29, 1996,
and the related consolidated statements of income, stockholders' equity and cash
flows for each of the years in the  three-year  period ended  February 28, 1997.
These consolidated  financial statements are the responsibility of the Company's
management.  Our  responsibility is to express an opinion on these  consolidated
financial statements based on our audits.

We  conducted  our  audits  in  accordance  with  generally   accepted  auditing
standards.  Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement.  An audit also includes  assessing the accounting  principles used
and significant estimates made by management,  as well as evaluating the overall
financial  statement  presentation.   We  believe  that  our  audits  provide  a
reasonable basis for our opinion.

In our opinion, the consolidated  financial statements referred to above present
fairly, in all material  respects,  the financial position of Cabletron Systems,
Inc. and  subsidiaries  as of February  28, 1997 and February 29, 1996,  and the
results  of their  operations  and their cash flows for each of the years in the
three-year period ended February 28, 1997, in conformity with generally accepted
accounting principles.








Boston, Massachusetts
March 21, 1997












<PAGE>


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

Not applicable.

                                   PART III


ITEM 10.  Directors and Executive Officers of the Registrant

Information relating to the Directors of the Company is set forth in the section
entitled "Election of Directors," appearing in the Company's Proxy Statement for
its  1997  Annual  Meeting  of  Stockholders  ("Proxy   Statement"),   which  is
incorporated herein by reference. Information relating to the executive officers
of the Company is included in Item 4a,  "Executive  Officers of the Registrant,"
appearing in Part I hereof.  Information with respect to directors and executive
officers  who failed to timely file  reports  required  by Section  16(a) of the
Securities  Exchange Act of 1934 may be found in the Proxy  Statement  under the
caption  "Section  16(a)  Beneficial   Ownership  Reporting   Compliance."  Such
information is incorporated herein by reference.

ITEM 11. Executive Compensation

See the information set forth in the section entitled "Executive  Compensation,"
appearing  in the  Company's  Proxy  Statement  for its 1997  Annual  Meeting of
Stockholders, which is incorporated herein by reference.

ITEM 12. Security Ownership of Certain Beneficial Owners and Management

See the information set forth in the section  entitled  "Election of Directors -
Beneficial  Ownership,"  appearing in the Company's Proxy Statement for its 1997
Annual Meeting of Stockholders, which is incorporated herein by reference.

ITEM 13.  Certain Relationships and Related Transactions

See the information set forth in the section  entitled  "Certain  Transactions,"
appearing  in the  Company's  Proxy  Statement  for its 1997  Annual  Meeting of
Stockholders, which is incorporated herein by reference.






<PAGE>
PART IV

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

(a)   Documents filed as part of this report:

 1.   Consolidated financial statements (see item 8)

      The consolidated financial statements of Cabletron Systems, Inc. can be
      found in this document on the following pages:

                                                                       page(s)
      Independent Auditors' Report                                      31

      Consolidated Balance Sheets at February 28, 1997 
       and February 29, 1996                                            17

      Consolidated Statements of Income for fiscal years 
       1997, 1996 and 1995                                              18

      Consolidated Statements of Stockholders' Equity 
       for fiscal years 1997, 1996 and 1995     `                       19

      Consolidated Statements of Cash Flows for fiscal years 
       1997, 1996 and 1995                                              20

      Notes to Consolidated Financial Statements                     21-30

 2.   Consolidated financial statement schedule

      The consolidated financial statement schedule of Cabletron
      Systems, Inc. is included in Part IV of  this report:

      Independent Auditors' Report                                      31

      Schedule II - Valuation and Qualifying Accounts                   36

      All other  schedules  have been omitted since they are not  required,  not
applicable or the  information has been included in the  consolidated  financial
statements or the notes thereto.



<PAGE>
3.    Exhibits

      The following exhibits unless herein filed are incorporated by reference.

      3.1   Restated Certificate of Incorporation of Cabletron Systems,  Inc., a
            Delaware corporation,  which is incorporated by reference to Exhibit
            3.1 of  the  Company's  Registration  Statement  on  Form  S-1,  No.
            33-28055, (the First Form S-1).
      3.2   Certificate of Correction of the Company's Restated Certificate of 
            Incorporation, which is incorporated by reference to Exhibit 3.1.2 
            of the Company's Registration Statement on Form S-1, No. 33-42534 
            (the Third Form S-1).
      3.3   Certificate of Amendment of the Restated Certificate of 
            Incorporation of Cabletron Systems, Inc., incorporated by
            reference to Exhibit 4.3 of the Company's Registration Statement on
            Form S-3, No. 33-54466, (the First Form S-3).
      3.4   Amended bylaws of Cabletron Systems, Inc., which is incorporated by
            reference to Exhibit 3.2 of the Company's Registration Statement on
            the Third Form S-1.
      10.1  1989 Restricted Stock Purchase Plan, which is incorporated by
            reference to Exhibit 10.1 of the First Form S-1.
      10.2  1989 Restricted Stock Plan, which is incorporated by reference to 
            Exhibit 10.2 of the First Form S-1.
      10.3  1989 Equity Incentive Plan, as amended, which is incorporated by
            reference to Exhibit 4 of the Company's Registration Statement on 
            Form S-8, No.33-50454.
      10.4  1989 Employee Stock Purchase Plan, as amended, which is incorporated
            by reference to Exhibit 4.1 of the Company's Registration
            Statement on Form S-8, No. 33-31572.
      10.5  1989 Stock Option Plan for Directors, as amended, which is
            incorporated by reference to Exhibit 10.5 of the Third Form S-1.
      10.6  Agency Agreement between the Registrant and International
            Cable Networks Inc., which is incorporated by reference to Exhibit
            10.6 of the First Form S-1.
      10.7  Modification  dated October 1990, of the Blue, Inc. Lease,  relating
            to leased  premises  in  Ironton,  Ohio,  which is incorporated  by
            reference to Exhibit 10.8 of the First Form S-3.
      10.8  Lease dated October 19, 1992 between the  Registrant and Heidelberg
            Harris,  Inc., relating to leased premises in Durham, New Hampshire,
            which is incorporated by reference to Exhibit 10.9 of the First Form
            S-3.
      10.9  Lease dated  December 1, 1991 between the  Registrant  and George L.
            Beattie,  Ruth V.  Blomstedt  and Dan A. Wooley,  as trustees of the
            Execpark Realty Trust, relating to leased premises in Merrimack, New
            Hampshire,  which I s incorporated  by reference to Exhibit 10.10 of
            the First Form S-3.
      10.10 Lease dated July 3, 1992  between the  Registrant  and Shannon  Free
            Airport Development Company Limited,  relating to leased premises in
            Limerick,  Ireland,  which is  incorporated  by reference to Exhibit
            10.12 of the Company's Registration Statement on the First Form S-3.
      10.11 Lease dated July 15, 1996  between the  Registrant  and the Lawrence
            County Economic Development Corporation, relating to leased premises
            in Ironton, Ohio, which is filed with this form 10-K.
      10.12 Credit Agreement dated March7, 1997, between the Registrant and the 
            Chase Manhattan Bank, as administrative agent, the First National 
            Bank of Chicago, as syndication agent and certain other lenders 
            relating to the Company's $250,000,000 revolving credit facility.
      11.1  Statement regarding computation of per share earnings.
      22.1  Subsidiaries of Cabletron Systems, Inc.
      23.1  Consent of Independent Auditors.

(b) The Registrant  filed on form 8-K during the last quarter of the fiscal year
ended February 28, 1997, as follows:

      The Company filed this report on form 8-K to disclose certain  information
that Network  Express had filed  confidentially  before the Company had acquired
them.


<PAGE>
                         INDEPENDENT AUDITORS' REPORT



The Board of Directors and Stockholders
Cabletron Systems, Inc.:

Under date of March 21, 1997, we reported on the consolidated  balance sheets of
Cabletron  Systems,  Inc. and  subsidiaries as of February 28, 1997 and February
29,  1996,  and the related  consolidated  statements  of income,  stockholders'
equity  and cash  flows for each of the  years in the  three-year  period  ended
February  28,  1997.  In  connection  with  our  audits  of  the  aforementioned
consolidated financial statements, we also have audited the related consolidated
financial  statement  schedule as listed in item 14(a)2 of this Form 10-K.  This
consolidated financial statement schedule is the responsibility of the Company's
management.  Our  responsibility  is to express an opinion on this  consolidated
financial statement schedule based on our audits.

In our opinion, the consolidated  financial statement schedule,  when considered
in relation to the basic  consolidated  financial  statements  taken as a whole,
presents fairly, in all material respects, the information set forth therein.





                                          KPMG Peat Marwick LLP


Boston, Massachusetts
March 21, 1997





<PAGE>

<TABLE>
<CAPTION>


                                    SCHEDULE II

                              CABLETRON SYSTEMS, INC.

                         VALUATION AND QUALIFYING ACCOUNTS

    For Years Ended February 28, 1997, February 29, 1996 and February 28, 1995

                                  (in thousands)

<S>                        <C>       <C>              <C>     <C>          <C>    

                                                   Amounts
                                               attributable
                       Balance at               to changes                  Balance
                                                        in
                        beginning  Charged to      foreign      Amounts      at end
Description             of period     expense    currency   written off   of period
                                                     rates

Allowance for
doubtful
accounts

February 28, 1997          $6,655     $10,698         ($1)     ($1,876)     $15,476

February 29, 1996          $6,190      $2,725          $1      ($2,261)      $6,655

February 28, 1995          $6,066        $124         ---          ---       $6,190
                                           

</TABLE>





<PAGE>


Signatures

Pursuant to the  requirement of Section 13 or 15(d) of the  Securities  Exchange
Act of 1934,  the  registrant  has duly  caused  this report to be signed on its
behalf by the undersigned, thereunto duly authorized.

                                          CABLETRON SYSTEMS, Inc.




Date:      May 28, 1997                      By: /s/ S. Robert Levine
                                                 S. Robert Levine
                                                 President and Chief Executive
Officer


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

Signature                  Titles                                 Date


/s/ S. Robert Levine       President, Chief Executive Officer,    May 28, 1997
S. Robert Levine           and Director

/s/ Craig R. Benson        Chairman, Chief Operating Officer      May 28, 1997
Craig R. Benson            Treasurer and Director

/s/ David J. Kirkpatrick   Director of Finance and Chief          May 28, 1997
David J. Kirkpatrick       Financial Officer

/s/ Michael D. Myerow      Secretary and Director                 May 28, 1997
Michael D. Myerow

/s/ Paul R. Duncan         Director                               May 28, 1997
Paul R. Duncan

/s/ Donald F. McGuinness   Director                               May 28, 1997
Donald F. McGuinness








<PAGE>


                                EXHIBIT INDEX


Exhibit No.    Exhibit                                                Page No.

10.11          Lease between the Registrant and Lawrence County
               Economic Development Corporation                          46

10.12          Credit Agreement between the Registrant and the Chase
               Manhattan Bank, the First National Bank of Chicago and 
               and other lenders for a $250,000,000 revolving credit
               facility                                                  65

11.1           Statement regarding computation of per share earnings     39

22.1           Subsidiaries of Cabletron Systems, Inc.                   40

23.1           Consent of Independent Auditors                           41








<PAGE>



                                EXHIBIT 11.1

                           CABLETRON SYSTEMS, INC.

               STATEMENT RE: COMPUTATION OF PER SHARE EARNINGS

 For Years Ended February 28, 1997, February 29, 1996 and February 28, 1995

                                                  1997        1996       1995
                                                  ----        ----       ----
(in thousands, except per share data)

Net Income Per Common Share - (non-dilutive)

Net income                                    $222,125    $144,485    $156,574
                                              ========    ========    ========

Weighted average number of  common
shares
    outstanding                                155,207     151,525     145,125
                                               =======     =======     =======

Net income per common share                   $   1.43    $   0.95    $   1.08
                                              ========    ========    ========


Net Income Per Common Share - (full dilution)

Net income                                    $222,125    $144,485    $156,574
                                              =========   ========    ========

Weighted average number of  common
shares
    outstanding                                155,207    151,525     145,125

Add net additional common shares upon
exercise of
    common stock options                         3,726      3,646       1,892
                                              --------    -------     -------

Adjusted average common shares outstanding     158,933    155,171     147,017
                                              ========    =======     =======

Net income per common share                   $   1.40    $  0.93     $  1.07
                                              ========    =======     =======


<PAGE>


                                 EXHIBIT 22.1



                   SUBSIDIARIES OF CABLETRON SYSTEMS, INC.


         Cabletron Systems de Argentina S.A.(Argentina)
         Cabletron Systems Pty. Limited (Australia)
         Cabletron Systems do Brasil Representacoes Ltda. (Brazil)
         Cabletron Systems of Canada Limited (Canada)
         Cabletron Systems Chile (Chile)
         Cabletron Systems de Colombia Ltda. (Colombia)
         Cabletron Systems Inc. - Organizacni Slozka (Czech Republic)
         Cabletron Systems Acquisition, Inc. (Delaware)
         Cabletron Systems Government Sales, Inc. (Delaware)
         Cabletron Insurance Company (Vermont)
         Cabletron Systems Sales & Service, Inc. (Delaware)
         Cabletron Systems Ltd. (England)
         Cabletron Systems S.A. (France)
         International Cable Networks, Inc.(Virgin Islands)
         Cabletron Systems, GmbH  (Germany)
         Cabletron Systems Limited (Ireland)
         Cabletron Systems (Distribution)Limited (Ireland)
         Cabletron Systems Inc. (Hong Kong)
         Cabletron Systems S.r.l. (Italy)
         Cabletron Systems, K.K. (Japan)
         Cabletron Systems, Pte Ltd  (Korea)
         Cabletron Systems Sdn Bhd (Malaysia)
         Cabletron Systems, S.A. de C. V.(Mexico)
         Cabletron Systems Benelux BV (Netherlands)
         Netlink, Inc. (Delaware)
         Netlink, Ltd (UK)
         Network Express, Inc. (Michigan)
         Network Express GmbH (Germany)
         Network Express K.K. (Japan)
         Network Express Europe Limited (UK)
         The OASys Group, Inc. (California)
         Cabletron Systems, Pte Ltd.(Singapore)
         Cabletron Systems, Ltd (South Africa)
         Cabletron Systems S.A.  (Spain)
         Cabletron Systems Sweden AB (Sweden)
         Cabletron Systems de Venezuela C.A.(Venezuela)
         Fivemere Ltd (UK)
         Fivemere Asia-Pacific Singapore Limited
         Fivemere Developments Limited
         ZeitNet Inc. (California)
         ZeitNet India Private Limited (India)

<PAGE>

                                 EXHIBIT 23.1



                       CONSENT OF INDEPENDENT AUDITORS


The Board of Directors
Cabletron Systems, Inc.:

We consent to incorporation  by reference in the  registration  statements (Nos.
33-50454,  33-31572 and 33-42490) on Form S-8 of Cabletron Systems,  Inc. of our
reports dated March 21, 1997,  relating to the  consolidated  balance  sheets of
Cabletron  Systems,  Inc. and  subsidiaries as of February 28, 1997 and February
29,  1996,  and the related  consolidated  statements  of income,  stockholders'
equity  and cash  flows and the  related  schedule  for each of the years in the
three-year  period ended  February 28, 1997,  which  reports are included in the
February  28,  1997  Annual  Report to  Stockholders  on Form 10-K of  Cabletron
Systems, Inc.











Boston, Massachusetts
May 29, 1997



<PAGE>


DIRECTORS AND OFFICERS

Board of Directors                              Officers

S. Robert Levine                          S. Robert Levine
President and Chief Executive Officer,    President and Chief Executive Officer
Cabletron Systems, Inc.
                                          Craig R. Benson
Craig R. Benson                           Chairman of the Board
Chairman of the Board,                    Chief Operating Officer and           
Chief Operating Officer and Treasurer,    Treasurer
Cabletron Systems, Inc.                   
                                          Christopher J. Oliver
Michael D. Myerow                         Director of Engineering and
Partner in law firm of Myerow & Poirier   Manufacturing

Paul R. Duncan                            David J. Kirkpatrick
Executive Vice President                  Director of Finance and
and President, Specialty Business Group   Chief Financial Officer
Reebok International, Ltd. 
                                          Michael D. Myerow
Donald F. McGuinness                      Secretary
Chairman of the Board,
Electronic Designs, Inc.





STOCKHOLDER INFORMATION


Annual Meeting of Stockholders               Transfer Agent
The Annual Meeting of Stockholders will      State Street Bank and Trust Company
take place at 10:00 a.m. on Thursday,        is the Transfer Agent and Registrar
July 10, 1997 at the Cabletron Systems,      of the Company's common stock.
Training Facility, Pease International       Inquires regarding lost
Trade-port, Newington, NH 03801              certificates, change of address, 
                                             name or ownership should be
                                             addressed to:
Stockholder Inquiries                         Boston EquiServe
Inquiries relating to financial information   PO Box 8200
of Cabletron Systems, Inc. should be          Boston, MA 02266-8200
addressed to:
   Cabletron Systems, Inc.                   Independent Auditors
   Investor Relations                        KPMG Peat Marwick LLP
   PO Box  5005                              99 High Street
   Rochester, NH 03866-5005                  Boston, MA 02110
   Telephone: (603) 337-4225
   Facsimile:   (603)332-4004                Legal Counsel
                                             Ropes & Gray
Listing                                      One International Place
Cabletron Systems, Inc. common stock is       Boston, MA 02110
traded on the New York Stock Exchange -
symbol CS.




<PAGE>

WORLDWIDE LOCATIONS


Corporate Headquarters

Cabletron Systems, Inc.
Rochester, NH
Phone: (603) 332-9400

North America

ALASKA
Anchorage
Phone: (205) 733-1772

ARIZONA
Phoenix
Phone: (602) 953-8500

CALIFORNIA
Inglewood
Phone: (310) 342-5942

Newport Beach
Phone: (714) 852-4126

Sacramento
Phone: (916) 449-9622

San Diego
Phone: (619) 497-2546

San Jose
Phone: (408) 383-1550

Santa Clara
Phone: (408) 986-9100

COLORADO
Denver
Phone: (303) 331-0990

CONNECTICUT
Hartford
Phone: (860) 947-7684

FLORIDA
Ft. Lauderdale
Phone: (305) 776-2004

Tallahasse
Phone: (904) 309-0212

Tampa
Phone: (813) 282-1227

GEORGIA
Atlanta
Phone: (404) 395-9909

HAWAII.
Honolulu
Phone: (808) 532-9830

IDAHO
Post Falls
Phone: (208) 773-1711

ILLINOIS
Chicago
Phone: (312) 214-2595

Rolling Meadows
Phone: (708) 364-4555

INDIANA
Indianapolis
Phone: (317) 587-1600

IOWA
Iowa City
Phone: (319) 337-3330

KANSAS
Overland Park
Phone: (913) 338-7119

KENTUCKY
Lexington
Phone: (606) 225-8518

LOUISIANA
Metaire
Phone: (504) 836-5526

MARYLAND
Baltimore
Phone: (410) 385-5224

MICHIGAN
Grand Rapids
Phone: (313) 953-1334

Livonia
Phone: (313) 953-8510

Ann Arbor
Phone: (313) 761-5005

MINNESOTA
Minnetonka
Phone: (612) 449-5214

MISSOURI
St. Louis
Phone:( 314) 542-3142

NEBRASKA
Omaha
Phone: (402) 496-9390

NEVADA
Las Vegas
Phone: (702) 892-3775

NEW YORK
New York
Phone: (212) 643-9560

Rochester
Phone: (716) 383-4240


NORTH CAROLINA
Durham
Phone: (919) 484-8381

Charlotte
Phone: (704) 525-4895

Greensboro
Phone: (910) 299-2928

OHIO
Cincinnati
Phone: (513) 762-7646

Columbus
Phone: (614) 785-6416

Independence
Phone: (216) 573-3709

OKLAHOMA
Tulsa
Phone: (918) 492-2895

OREGON
Lake Oswego
Phone: (503)968-6919

PENNSYLVANIA
Erie
Phone: (814) 454-5755

Philadelphia
Phone: (215) 569-5100

Pittsburgh
Phone: (412) 928-4999

RHODE ISLAND
Lincoln
Phone: (401) 334-1600

SOUTH CAROLINA
Columbia
Phone: (803) 748-1232

TENNESSEE
Goodlesville
Phone: (615) 859-7797

TEXAS
Austin
Phone: (512) 794-9166

Dallas
Phone: (972) 931-6222

Houston
Phone: (713) 871-3134

San Antonio
Phone: (210) 344-7241


WORLDWIDE LOCATIONS CONTINUED


UTAH
Salt Lake City
Phone: (801) 350-9480

VIRGINIA
Herndon
Phone: (703) 736-9100

Richmond, VA 23236
Phone: (804) 323-0291

WASHINGTON
Bellevue
Phone: (206) 637-2977

WISCONSIN
Milwaukee
Phone: (414) 221-0475

Madison
Phone: (608) 273-9192

PUERTO RICO
Guaynabo
Phone: (787) 273-6770

Canada

CALGARY
Calgary
Phone: (403) 234-8012

VANCOUVER
Vancouver
Phone: (604) 688-2550

OTTAWA
Ottawa
Phone: (613) 782-2320

TORONTO
Toronto
Phone: (416) 213-8222

MONTREAL
Montreal
Phone: (514) 395-4949

EUROPE

BELGIUM
Belgium
Phone: 011-32-2176-4901

CZECH REPUBLIC
Praha
Phone: 011-42-2-2423-8127

ENGLAND
Berkshire
Phone: 011-44--635-580000


London
Phone: 011-44-171-312-0210

Cheshire, England WA7 1HR
Phone: 011-44-928-579013

FRANCE
Rosny-Sous-Bois
Phone: 011-33-148-947072

GERMANY
Frankfurt
Phone: 011-49-610-339900

Berlin
Phone: 011-49-30-399-5939

Munich
Phone: 011-49-89-3177450

ITALY
Assago
Phone: 011-39-2-892-2021

NETHERLANDS
Woerden
Phone: 011-31-348-433155

RUSSIA
Moscow
Phone: 011-7501-258-7673

SCOTLAND
Sterling
Phone: 011-44-1786-449-264

SPAIN
Madrid
Phone: 011-34-1326-4320

SWEDEN
Taby
Phone: 011-46-8792-6040

SWITZERLAND
Zurich
Phone: 011-41-1308-3610

Latin America

ARGENTINA
Buenos Aires
Phone: 011-54-13-42777

BRASIL
Sao Paulo
Phone: 011-55-11-5561-0888

Rio de Janeiro
Phone: 011-55-21-532-1504

Curitiba
Phone: 011-55-41-232-7154

CHILE
Santiago
Phone: 011-56-2203-3733

COLUMBIA
Santa fe de Bogata
Phone: 011-57-1-2960009

MEXICO
Mexico City
Phone: 011-525-629-9904

Guadalajara
Phone: 011-52-3678-9224

Monterrey
Phone: 011-52-8-335-9234

VENEZUELA
Caracas
Phone: 011-58-2285-6267

Pacific Rim

AUSTRALIA
Brisbane
Phone: 011-61-7367-1750

Canberra
Phone: 011-61-6-257-2422

Melbourne
Phone: 011-61-3526-3639

Sydney
Phone: 011-61-29950-5900

CHINA
Beijing
Phone: 011-86-1-8492748

Shanghai
Phone: 011-86-21-6248-1120

HONG KONG
Wanchai
Phone: 011-852-539-6882

INDIA
Bombay
Phone: 011-91-22-2184-434

New Delhi
Phone: 011-91-11-462-1586

JAPAN
Tokyo
Phone: 011-81-3-3459-1981

KOREA
Seoul
Phone: 011-822-739-5257

WORLDWIDE LOCATIONS CONTINUED

MALAYSIA
Penang
Phone: 011-60-3754-4388

Selangor
Phone: 011-60-3754-4388

SINGAPORE
The Cavendish
Phone: 011-65-775-5355

TAIWAN
Taipei Hsien
Phone: 011-886-2-6487641

THAILAND
Bangkok
Phone: 011-662-661-9238

Middle East

SAUDI ARABIA
Phone: 011-9661-462-0101

Africa

SOUTH AFRICA
Johannesburg
Phone: 011-27-11-709-1300

<PAGE>