<PAGE>   1
                                 UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                           -------------------------

                                   FORM 10-Q
                                   (Mark one)

         [ X ]  Quarterly report pursuant to Section 13 or 15(d) of the
                Securities Exchange Act of 1934

                    FOR THE QUARTER ENDED DECEMBER 31, 1996

         [   ]  Transition report pursuant to Section 13 or 15(d) of the
                Securities Exchange Act of 1934


                         Commission file number 0-19856

                           -------------------------

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


           CALIFORNIA                                         95-4221884
(State or other jurisdiction of                              (IRS Employer
incorporation or organization)                            Identification No.)
                        


                          2300 CORPORATE CENTER DRIVE
                        THOUSAND OAKS, CALIFORNIA  91320
              (Address of principal executive offices & zip code)

                  REGISTRANT'S TELEPHONE NUMBER:(805) 376-9300

                           -------------------------

 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 
                                    ---      ---

    There were 20,125,152 shares of the registrant's $.001 par value Common
                   Stock outstanding as of  February 7, 1997.
<PAGE>   2
                                  XIRCOM, INC.

                               TABLE OF CONTENTS

<TABLE>
<CAPTION>
                                                                                         Page
                                                                                         ----
<S>                                                                                     <C>
PART I.  FINANCIAL INFORMATION

    Item 1.  Financial Statements

         Condensed Consolidated Balance Sheets                                              3

         Condensed Consolidated Statements of Operations                                    4

         Condensed Consolidated Statements of Cash Flows                                    5

         Notes to Condensed Consolidated Financial Statements                             6-7


    Item 2.  Management's Discussion and Analysis
               of Financial Condition and Results of Operations                          8-15


PART II.  OTHER INFORMATION

    Item 1.  Legal Proceedings                                                             16

    Item 2.  Changes in Securities                                                         16

    Item 3.  Defaults Upon Senior Securities                                               16

    Item 4.  Submission of Matters to a Vote of Security Holders                        16-17

    Item 5.  Other Items                                                                   17

    Item 6.  Exhibits and Reports on Form 8-K                                              17

SIGNATURES                                                                                 18
</TABLE>


                                       2
<PAGE>   3
                                  XIRCOM, INC.
                     CONDENSED CONSOLIDATED BALANCE SHEETS
                                 (In thousands)

<TABLE>
<CAPTION>
                                                               (Unaudited)
                                                            December 31, 1996           September 30, 1996
                                                            -----------------           ------------------
<S>                                                           <C>                         <C>
Current  assets:
    Cash and cash equivalents                                    $  24,286                     $ 21,504
    Accounts receivable, net                                        45,124                       32,169
    Income tax receivable                                            2,652                        2,652
    Inventories                                                     20,086                       17,277
    Deferred income taxes                                            7,048                        7,048
    Other current assets                                             4,124                        3,424
                                                                 ---------                     --------
Total current assets                                               103,320                       84,074
Equipment and improvements, net                                     20,837                       19,928
Other assets                                                         4,383                        4,795
                                                                 ---------                     --------
Total assets                                                     $ 128,540                     $108,797
                                                                 =========                     ========


Current liabilities:
    Notes payable to bank                                        $   8,744                     $  5,100
    Accounts payable                                                19,235                       12,613
    Accrued liabilities                                             20,356                       20,362
    Current portion of long-term obligations                         1,779                        1,456
    Accrued income taxes                                             1,865                        1,066
                                                                 ---------                     --------
Total current liabilities                                           51,979                       40,597
Long-term obligations                                                2,175                        1,860
Deferred income taxes                                                  737                          737
Shareholders' equity:
    Common stock                                                        20                           20
    Paid-in capital                                                 86,810                       83,221
    Accumulated deficit                                           ( 13,181)                     (17,638)
                                                                 --------                      -------- 
Total shareholders' equity                                          73,649                       65,603
                                                                 ---------                     --------
Total liabilities and shareholders' equity                       $ 128,540                     $108,797
                                                                 =========                     ========
</TABLE>


           SEE NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS.



                                       3
<PAGE>   4
                                  XIRCOM, INC.
          CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
                  (In thousands, except per share information)

<TABLE>
<CAPTION>
                                                                                Three months ended
                                                                                   December 31
                                                                              1996           1995
                                                                              ----           ----
<S>                                                                       <C>              <C>
Net sales                                                                   $62,311         $37,698
Cost of sales                                                                38,633          23,944
                                                                            -------         -------
Gross profit                                                                 23,678          13,754

Operating expenses:
    Research and development                                                  3,785           3,007
    Sales and marketing                                                      11,126           9,121
    General and administrative                                                2,450           2,365
                                                                            -------         -------
        Total operating expenses                                             17,361          14,493
                                                                            -------         -------
Operating income (loss)                                                       6,317         (   739)
Other income (expense), net                                                      50         (   283)
                                                                            -------         ------- 
Income (loss) before income taxes                                             6,367         ( 1,022)
Income tax provision (benefit)                                                1,910         (   262)
                                                                            -------         ------- 
Net  income (loss)                                                          $ 4,457         $(  760)
                                                                            =======         ======= 

Weighted average shares outstanding                                          20,662          18,989
Net income (loss) per share                                                 $   .22         $(  .04)
</TABLE>


           SEE NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS.

                                       4
<PAGE>   5
                                  XIRCOM, INC.
          CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
                                 (In thousands)
<TABLE>
<CAPTION>
                                                                                Three months ended
                                                                                    December 31
                                                                               1996           1995
                                                                               ----           ----
<S>                                                                     <C>              <C>
Operating activities:
    Net income (loss)                                                      $  4,457        $(   760)
    Adjustments to reconcile net income (loss) to net
    cash used in operating activities:
         Depreciation and amortization                                        2,208           1,995
         Changes in assets and liabilities:
             Accounts receivable                                            (12,955)        ( 8,655)
             Income tax receivable                                                -           3,000
             Inventories                                                    ( 2,809)        ( 2,351)
             Other current assets                                           (   700)        ( 1,436)
             Accounts payable and accrued liabilities                         6,616         ( 7,638)
             Income taxes payable                                             1,828         (   170)
                                                                            -------        -------- 
    Net cash used in operating activities                                   ( 1,355)        (16,015)
                                                                            -------        -------- 

Investing activities:
    Purchases of equipment and improvements                                 ( 2,728)        ( 1,521)
    Other                                                                        23              37
                                                                            -------        --------
    Net cash used in investing activities                                   ( 2,705)        ( 1,484)
                                                                            -------        -------- 

Financing activities:
    Proceeds from issuance of capital stock                                   2,560             504
    Proceeds from issuance of long-term debt                                    960           1,800
    Net borrowings under line-of-credit agreement                             3,644          10,199
    Long-term debt repayments                                               (   322)       (    277)
                                                                            -------        -------- 
    Net cash provided by financing activities                                 6,842          12,226
                                                                            --------       --------

Net increase (decrease) in cash                                               2,782        (  5,273)
                                                                            -------        -------- 
Cash and cash equivalents at beginning of period                             21,504          13,658
                                                                            -------        --------
Cash and cash equivalents at end of period                                  $24,286        $  8,385
                                                                            =======        ========

Supplemental cash flow disclosures:
    Cash paid for interest                                                  $   144        $     41
    Tax benefit related to employee stock options                           $ 1,029        $    136
</TABLE>


           SEE NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS.

                                       5
<PAGE>   6
                                  XIRCOM, INC.
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                               DECEMBER 31, 1996


BASIS OF PRESENTATION

The accompanying condensed consolidated financial statements have been prepared
by the Company without audit (except for the balance sheet information as of
September 30, 1996, which was derived from audited consolidated financial
statements) pursuant to Securities and Exchange Commission regulations.  In the
opinion of management, the financial statements reflect all adjustments
(consisting only of normal recurring adjustments) necessary to present fairly
the consolidated financial position at December 31, 1996 and the consolidated
results of operations for the three-month periods ended December 31, 1996 and
1995, and cash flows for the three-month periods ended December 31, 1996 and
1995, in accordance with generally accepted accounting principles. The
accompanying financial statements are condensed and do not include footnotes
and certain financial presentations normally required under generally accepted
accounting principles and, therefore, should be read in conjunction with the
audited financial statements included in the Company's 1996 annual report on
Form 10-K.

The results of operations for the three-month period ended December 31, 1996
are not necessarily indicative of the results to be expected for the entire
fiscal year.

NET INCOME (LOSS) PER SHARE

Net income (loss) per share is computed using the weighted average number of
shares of common stock and dilutive common stock equivalents (stock options)
outstanding.  Fully diluted amounts for each period do not materially differ
from the amounts presented herein.

INVENTORIES

Inventories are stated at the lower of cost (first-in, first-out) or market.
Inventories consisted of the following (in thousands):

<TABLE>
<CAPTION>
                                             December 31               September 30
                                                 1996                     1996
                                                 ----                     ----
         <S>                                  <C>                     <C>
         Finished goods                          $ 7,383                  $ 6,154
         Subassemblies                             2,168                    3,251
         Work-in-process                           1,840                      650
         Component parts                           8,695                    7,222
                                                 -------                  -------
                                                 $20,086                  $17,277
                                                 =======                  =======
</TABLE>


                                       6
<PAGE>   7
                                  XIRCOM, INC.
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                               DECEMBER 31, 1996


REVENUE RECOGNITION

The Company recognizes revenue from product sales when shipped.  The Company
generally provides a lifetime limited warranty against defects in the hardware
component and a two-year limited warranty on the software component of its
network adapters and modem products.  Netaccess products have a five-year
hardware warranty and a 90-day software warranty, and ISDN products have a
two-year hardware and a one-year software warranty. In addition, the Company
provides telephone support to purchasers of its products as needed to assist
them in installation or use of the products.  The Company makes provisions for
these costs in the period of sale.  The Company also has policies and/or
contractual agreements which permit distributors and dealers to return products
under certain circumstances.  The Company makes a provision for the estimated
amount of product returns that may occur under these programs and contracts in
the period of sale.

CASH AND CASH EQUIVALENTS

All highly liquid investments with a maturity of three months or less at the
date of purchase are considered to be cash equivalents and are carried at cost
plus accrued interest.

SUBSEQUENT EVENT

On January 16, 1997 the Company announced that it had signed an agreement with
Intel Corporation ("Intel") pursuant to which Intel would purchase a 12.5
percent interest in the Company's common stock (2.5 million newly issued
shares) and acquire a warrant to purchase an additional 7.5 percent of the
Company's common stock (1.5 million newly issued shares).  The value of the
initial Intel equity investment, which is subject to regulatory approval, is
approximately $52 million.  In addition, the Company and Intel have signed a
three-year technology and OEM agreement.



                                       7
<PAGE>   8
                                  XIRCOM, INC.
          MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
                           AND RESULTS OF OPERATIONS



This Quarterly Report contains trend analysis and other forward-looking
statements within the meaning of Section 27A of the Securities Act of 1933, as
amended, and Section 21E of the Securities Exchange Act of 1934, as amended.
Actual results could differ materially from those projected in the trend
analysis and other forward-looking statements contained herein, as a result of
the risk factors set forth below and elsewhere in this report.

RESULTS OF OPERATIONS

The following table sets forth the statements of operations as a percentage of
net sales:

<TABLE>
<CAPTION>
                                                               Three months ended
                                                                  December 31
                                                             1996             1995
                                                             ----             ----
<S>                                                         <C>    <C>      <C>
Net sales                                                   100.0%           100.0%
Cost of sales                                                62.0             63.5
                                                            -----            -----
Gross profit                                                 38.0             36.5

Operating expenses:
    Research and development                                  6.1              8.0
    Sales and marketing                                      17.9             24.2
    General and administrative                                3.9              6.3
                                                            -----            -----
                                                             27.9             38.5
                                                            -----            -----
Operating income (loss)                                      10.1            ( 2.0)
Other income (expense), net                                   0.1            ( 0.7)
                                                            -----            -----
Income (loss) before income taxes                            10.2            ( 2.7)
Income tax provision (benefit)                                3.0            ( 0.7)
                                                            -----            ----- 
Net  income (loss)                                            7.2            ( 2.0)%
                                                            =====            =====
</TABLE>

NET SALES

PC CARD AND PARALLEL PORT PRODUCT SALES.  Net sales of LAN adapters, modems and
multifunction LAN and modem cards ("Combo cards") (collectively "client
products") for the quarter ended December 31, 1996 increased 67% from the
corresponding period a year ago primarily due to growth in overall market
demand for local and wide area network connectivity products that connect
portable PCs to networks, the Internet and on-line services and an increase in
unit sales of the Company's client products by its distributors in each of the
last six quarters.  The growth in channel sell-through may be indicative of
several factors: an increased growth rate in shipments of portable PCs, which
in turn require network connections; a more competitive pricing strategy first
adopted by the Company during fiscal 1995; continuing increased market
acceptance of the Company's Combo cards; and increased sales of the Company's
modem-only


                                       8
<PAGE>   9
                                  XIRCOM, INC.
          MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
                           AND RESULTS OF OPERATIONS


PC Card products, which were first introduced in September 1995.  Unit
shipments of client products increased 110% for the December 1996 quarter
versus the December 1995 quarter but average selling prices declined due to
increased competition in the PC Card LAN adapter market and to a continuing
shift in mix of products from higher-priced parallel port versions to PC Card
versions.

NETACCESS PRODUCT SALES.  The Netaccess family of products includes remote
access server products sold to original equipment manufacturers ("OEMs") and
through two-tier distribution channels.  Netaccess product sales increased by
54% in the December 1996 quarter compared to the December 1995 quarter, but
decreased to 10% of total net sales from 11% during the same period. Sales to a
significant customer, which accounted for 32% and 29% of Netaccess product
sales in the September 1996 and December 1995 quarters, respectively, declined
significantly in the December 1996 quarter due to the customer developing the
product internally.  Sales to this customer are not expected to be significant
during the remainder of fiscal 1997.

INTERNATIONAL SALES.  Total international sales (shipments to customers located
outside the U.S.) were 46% of total net sales for the December 1996 quarter,
compared to 36% for the December 1995 quarter.  International sales of PC Cards
increased as a percentage of total PC Card sales to 50% in the December 1996
quarter from 38% in the December 1995 quarter.  PC Card sales in Europe and
Asia-Pacific grew at a faster rate than in the U.S. during the December 1996
quarter primarily because of greater market growth in Asia and shorter delays
in 1996 as compared to 1995 between initial shipment of new products in the
U.S. and the shipment of internationally approved versions of such products.

GROSS PROFIT

Gross profit margins for the December 1996 quarter increased to 38.0% compared
with 36.5% for the comparable prior-year period.  The increase in gross profit
as a percentage of net sales was primarily attributable to a change in the
discount structure on products sold into the distribution channel beginning in
the September 1996 quarter and a change in the classification of certain
expenses effective in the December 1996 quarter.  Increased shipments and the
resulting decrease in fixed costs as a percentage of total cost of sales, as
well as the favorable impact of cost reduction efforts including the successful
transition of all the Company's PC Card production to its own manufacturing
facility in Penang, Malaysia also contributed to the increase in gross profit
margins.  These positive margin impacts were partially offset by the increased
portion of sales represented by PC Card products, which have lower gross profit
margins than the Company's parallel port products, and to selling price
reductions on PC Card products.  In addition, start-up expenses related to the
Malaysian manufacturing facility had a negative impact on gross margins in the
first quarter of fiscal 1996.


                                       9
<PAGE>   10
                                  XIRCOM, INC.
          MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
                           AND RESULTS OF OPERATIONS



OPERATING EXPENSES

Operating expenses for the December 1996 quarter increased by 20% compared to
the corresponding prior-year period because of the expansion of product lines
and expanded international operations, but decreased as a percentage of sales
due to more focused product development activities, a reduction in certain
promotional spending and the higher sales in the December 1996 quarter.  Total
operating expenses are expected to increase for the balance of fiscal 1997 but
may fluctuate as a percentage of net sales.

Research and development expenses increased by 26% in the December 1996 quarter
compared to the December 1995 quarter due to expenditures on product
enhancements and new product introductions offset partially by reduced spending
on the Netwave product line, which was sold in August 1996.  Research and
development expenses decreased as a percentage of sales due to higher sales
levels and more focused product development efforts.  Although the Company
continues to focus on a narrower set of product areas, total expenditures for
research and development expenses are likely to continue to increase in 1997
due to planned expenditures on product enhancements and new product
introductions.

Sales and marketing expenses increased by 22% but decreased as a percentage of
sales in the December 1996 quarter as compared with the December 1995 quarter.
The increase in expenses was due to additional headcount and marketing
activities to support the increased sales levels.  In addition, as discussed in
"Gross profit" above, the Company changed its discount structure on products
sold into the distribution channel beginning in the September 1996 quarter and,
as a result, improved its gross profit margins.  The additional gross profit
dollars were used to invest in sales and marketing programs focused on
accelerating product sell-through in the distribution channel.  Sales and
marketing expenses increased at a slower rate than the sales growth due to the
consolidation of certain sales operations and reduced overall promotional
spending resulting from a more focused product line.  Sales and marketing
expenses are expected to increase through the remainder of fiscal 1997 to
support planned new product introductions.

General and administrative expenses increased by 4% in the December 1996
quarter compared to the comparable prior-year period due to expanded
information systems hardware and software and the need to support growth in the
overall organization.  General and administrative expenses have decreased as a
percentage of sales primarily due to the higher sales in the December 1996
quarter. General and administrative expenses are expected to increase modestly
during the remainder of fiscal 1997.

OTHER INCOME (EXPENSE), NET

Net other income or expense includes interest income from the investment of
available cash, early payment discounts earned by the Company offset by early
payment


                                       10
<PAGE>   11
                                  XIRCOM, INC.
          MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
                           AND RESULTS OF OPERATIONS



discounts taken by customers, foreign currency transaction gains and losses,
and interest expense on notes payable and capital leases.  Net other income for
the fiscal 1997 period compared to net other expense for the fiscal 1996 period
is due primarily to lower interest expense and higher interest income as a
result of increased cash balances and reduced borrowings under the Company's
credit facilities, and increased net foreign currency transaction gains.

INCOME TAXES

The Company's effective tax rate for the three-month period ended December 31,
1996 was 30.0%.  The difference between the effective tax rate in the current
quarter and the 35% federal statutory tax rate is due primarily to benefits
from the tax holiday status of the Company's operations in Malaysia, offset by
the nondeductible amortization of goodwill.  The Company's effective tax
benefit for the three-month period ended December 31, 1995 was 25.6%.  The
difference between the effective tax benefit in the December 1995 quarter and
the 35% federal statutory tax rate is due primarily to the nondeductible
amortization of goodwill.

RISK FACTORS

The market for portable PC LAN adapters has grown rapidly since the Personal
Computer Memory Card International Association (PCMCIA) introduced a standard
form factor for PC Card (originally "PCMCIA") LAN adapters in 1993.  Companies
with greater name recognition in the PC, desktop LAN adapter and PC Card modem
industries and with greater financial resources now have a significant presence
in the PC Card adapter market.  As a result, the Company's net sales and gross
profit margins have been and could continue to be adversely impacted by several
competitive factors, including increased price competition, new product
introductions by competitors, promotional efforts by competitors, any reduction
in the Company's percentage market share of the PC Card adapter markets, and
the levels of inventories in the Company's distribution channels.  Although
competition is expected to remain intense, the Company believes its share of
the PC Card LAN adapter market stabilized in 1996 and the first quarter of
fiscal 1997, primarily because of a more competitive pricing strategy for PC
Card products adopted during fiscal 1995, the success of its combination
Ethernet LAN and Modem PC Card, and the introduction of several new PC Card
products in late 1996, including the Company's Fast Ethernet PC Card which
began shipping in June 1996, its CardBus Ethernet adapter which began shipping
in October 1996, and its fourth-generation Combo cards which began shipping in
September 1996.

The Company believes that the market for PC Card LAN adapters, modems and Combo
cards will continue to be price competitive for the long-term and thus could
continue to result in lower gross profit margins than the Company has earned
from such products in the past.  The Company believes its current product costs
are competitive, and continues to redesign its products for cost savings.  In
addition, the


                                       11
<PAGE>   12
                                  XIRCOM, INC.
          MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
                           AND RESULTS OF OPERATIONS



Company's manufacturing facility, which began volume production in early fiscal
1996 and is now producing all of the Company's PC Card products, is operating
at a greater efficiency level than in the first half of fiscal 1996.  While the
in-house manufacturing facility is expected to continue to have a positive
impact on cost reduction efforts, the proportion of revenues derived from the
Combo and modem-only PC Cards, which have lower gross profit margins compared
to LAN PC Cards and Netaccess products, have negatively impacted overall gross
margins and may continue to offset improvements from manufacturing and design
efficiencies if such revenue mix changes continue.  In addition, there can be
no assurances that cost reductions achieved through increased manufacturing
efficiencies will keep pace with competitors' cost reductions or will be
sufficient in the event of anticipated competitive price reductions to allow
price reductions required to maintain or increase market share without
adversely affecting gross profit margins.

The Company generally ships products within one to six weeks after receipt of
orders and therefore its sales backlog is typically minimal.  Accordingly, the
Company's expectations of future net sales are based largely on its own
estimate of future demand and not on firm customer orders.  If net sales do not
meet expectations, the Company may not be able to reduce expenses
commensurately in the near-term, and profitability would be adversely affected.

The Company's net sales may be affected by its distributors' decisions as to
the quantity of the Company's products to be maintained in their inventories.
At December 1996, the Company believes its distributors had what the Company
considers to be normal levels of inventory overall.  However, there can be no
assurance that distributors will not choose to reduce inventory levels
nonetheless, which would adversely affect net sales.

There can be no assurances that new products that the Company may introduce
will achieve market acceptance or sell through to end users in sufficient
quantities to make them viable for the long-term.  In addition, the Company may
have difficulty in establishing its presence in markets in which it does not
have significant brand recognition, such as remote access.

The Company introduced a line of modem-only PC Card products late in fiscal
1995, utilizing existing technologies from its Combo cards and modem-based
remote access products.  While the PC Card modems generally have lower gross
profit margins than PC Card LAN adapters, increased sales volume from modems
would have a positive impact on coverage of fixed manufacturing costs, which in
time could partially offset the generally lower margins on modem products.
While product areas such as remote access and ISDN are expected to contribute
higher gross profit margins, any sales growth achieved in these areas may not
exceed sales growth, if any, in PC Card products, and therefore any positive
impact on overall gross margins may be limited.

Because all PC Card products are being manufactured at the Company's own
facilities, interruptions in supply of products could occur if the Company is
unable to accurately


                                       12
<PAGE>   13
                                  XIRCOM, INC.
          MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
                           AND RESULTS OF OPERATIONS




forecast or react to changes in product demand, which in turn could adversely
affect future sales.  Interruptions could also occur due to political or
economic changes in Malaysia.

In summary, gross profit margins are impacted by a number of factors, including
the rate of sales growth, competitive pricing pressures, the mix of product
sales, component and manufacturing costs, and shipment of new products, which
often have lower margins until market acceptance and increased volumes permit
component cost reductions and manufacturing efficiencies.  Frequent product
transitions also increase the risk of inventory obsolescence and interruptions
of sales.

Historically, Netaccess (and previously PRI) has focused its sales and
development efforts on the OEM market and has recorded limited sales to date in
the end-user market.  There can be no assurances that the Company will be able
to successfully develop the end-user market for its remote access products or
be able to compete effectively with other companies that have significantly
greater resources.

The Company's corporate headquarters, research and development facilities and
other critical business operations are located near major earthquake faults.
Operating results could be materially adversely affected in the event of a
major earthquake.

A number of additional factors could have an impact on the Company's future
operating results.  The industry in which the Company operates is characterized
by rapid technological change and short product life cycles.  While the Company
has historically been successful in developing leading technology for its
products, ongoing investment in research and development will be required to
maintain the Company's technological position, and the Company could be
required to increase the rate of such investments depending on competitive
factors.  Many of the Company's competitors have greater financial and
technical resources than the Company.  It is also possible that networking
capability could be included in the PC itself or in extension modules to PCs,
which could cause a reduction in the demand for add-on networking devices.  The
Company's results are also dependent on continued growth in the underlying
market for portable networking products as well as the Company's ability to
retain its market share.

The Company is aware that competitors have duplicated certain functionality of
the Company's products.  There can be no assurance that the Company's patents,
copyrights, trademarks and other efforts to protect its intellectual property
will prevent duplication of the Company's technology or that they will provide
a competitive advantage.  The Company is also aware that there can be no
assurance that a patent issued to the Company would be upheld as valid if
litigation over a patent were initiated.  The Company believes that, due to the
rapid pace of technological change in the LAN communications industry, the
Company's success is likely to depend more upon continued innovation, technical
expertise, marketing skills and customer support and service than legal
protection of the Company's proprietary rights.


                                       13
<PAGE>   14
                                  XIRCOM, INC.
          MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
                           AND RESULTS OF OPERATIONS




With the proliferation of new products and rapidly changing technology in the
PC Card and remote access server markets, there is a significant volume of
patents or similar intellectual property rights held by third parties.  Given
the nature of the Company's products and development efforts, there are risks
that claims associated with such patents or intellectual property rights could
be asserted by third parties.  These risks may include the following: the cost
of licensing a given technology if the Company believes it may be prudent to
secure such rights; the claimant may not offer such a license on terms
acceptable to the Company; the cost of litigation or settlement of such claims
could be substantial regardless of the merits of the allegations; the Company
may not prevail in the event of litigation; if the Company did not prevail in
litigation, it could be required to pay significant damages, and/or to cease
sales and production of infringing products, and only make future sales of a
noninfringing design.

The Company currently includes software licensed from third parties in certain
of its Ethernet+Modem, modem-only, Token Ring and remote access products,
which, in the aggregate, accounted for 64% of revenues in the first quarter of
fiscal 1997.  The Company's operating results could be adversely affected by a
number of factors relating to this third-party software, including failure by a
licensor to promote or support the software, delays in shipment of the
Company's products as a result of delays in the introduction of licensed
software or errors in the licensed software, excess customer support costs or
product returns experienced by the Company due to errors in licensed software,
or termination of the Company's relationship with such licensors.

Because of frequent technology changes and rapid industry growth, the cost and
availability of components used to manufacture the Company's products may
fluctuate.  Some components, including custom chipsets, are available from only
one supplier.  Any interruptions in these supply sources or limitations on
availability could impact the Company's ability to deliver its products and in
turn adversely affect future earnings.

The Company is also subject to additional risk factors as identified in its
Annual Report to Shareholders and filing on Form 10-K for the year ended
September 30, 1996.

LIQUIDITY AND CAPITAL RESOURCES

At December 31, 1996 the Company had $24.3 million in cash and cash
equivalents.  The Company's operating activities used cash of approximately
$1.4 million in the three-month period ended December 31, 1996, primarily as a
result of increases in accounts receivable and inventories offset partially by
income from operations and an increase in accounts payable and accrued
liabilities.  Accounts receivable increased due to higher quarterly revenue and
fewer early payment discounts offered in the December 1996 quarter compared to
the September 1996 quarter.  Inventories increased primarily due to an increase
in the volume of PC Card business and to lower revenues in the Netaccess
business.  The Company had capital expenditures of $2.7 million in the first
three months of fiscal 1997 primarily for manufacturing equipment at its
Malaysian manufacturing facility.  The Company has no material fixed
commitments and does not expect an increase in the rate of capital expenditures
during the


                                       14
<PAGE>   15
                                  XIRCOM, INC.
          MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
                           AND RESULTS OF OPERATIONS



remainder of fiscal 1997 except that it has signed a letter of intent to
purchase its manufacturing facilities in Penang, Malaysia for approximately
$5.6 million.  The Company is currently evaluating its options for funding the
purchase price.

On December 30, 1996, the Company entered into a two-year credit facility with
a bank that permits borrowings up to $25.0 million under base rate advances at
the prime rate or under London Interbank Offered Rate ("LIBOR") advances at the
related LIBOR rate plus 1-1/4%.  The new facility replaced the Company's
previous credit facility with a financial institution.  Advances under the new
agreement are based on eligible accounts receivable and inventories and are
secured by all U.S.-based assets of the Company.  As of December 31, 1996,
there was $2.4 million outstanding under this agreement, which expires in
December 1998.  The Company also has a credit facility in Malaysia totaling
$10.8 million with interest ranging from a fixed rate of approximately 7.0% to
a variable rate of 1/2% to 1-1/2% over the bank's reference rate.  As of
December 31, 1996, there was $6.3 million in demand notes and $3.9 million in
term loans outstanding under this facility, which expires in December 1998.  At
December 31, 1996 the Company had approximately $11.7 million in borrowings
available under its credit facilities.

On January 16, 1997 the Company announced that it had signed an agreement with
Intel Corporation ("Intel") pursuant to which Intel would purchase a 12.5
percent interest in the Company's common stock (2.5 million newly issued
shares) and acquire a warrant to purchase an additional 7.5 percent of the
Company's common stock (1.5 million newly issued shares).  The value of the
initial Intel equity investment, which is subject to regulatory approval, is
approximately $52 million.  The Company intends to use the proceeds from the
equity investment for working capital purposes.

The Company believes that cash on hand, borrowings available under its existing
facilities or from other financing sources and cash provided by operations will
be sufficient to support its working capital and capital expenditure
requirements for at least the next twelve months.  However, there can be no
assurances that future cash requirements to fund operations will not require
the Company to seek additional capital sooner than the twelve months, or that
such additional capital will be available when required on terms acceptable to
the Company.



                                       15
<PAGE>   16
                                  XIRCOM, INC.

                                    PART II
                               OTHER INFORMATION


ITEM 1.      LEGAL PROCEEDINGS
             Not applicable.

ITEM 2.      CHANGES IN SECURITIES
             Not applicable.

ITEM 3.      DEFAULTS UPON SENIOR SECURITIES
             Not applicable.

ITEM 4.      SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
             The Annual Meeting of Shareholders of the Company was held on
             January 17, 1997.  The following is a brief description of each
             matter voted upon at the meeting and the number of affirmative
             votes and the number of negative votes cast with respect to each
             matter.

             (a)  The shareholders elected the following persons as directors
             of the Company:  Michael F.G. Ashby, Kenneth J. Biba, Gary J.
             Bowen, Dirk I. Gates, J. Kirk Mathews, William J. Schroeder, and
             Delbert W. Yocam.  The votes for and against (withheld) each
             nominee were as follows:

<TABLE>
<CAPTION>
                 Nominee                               Votes For             Votes Withheld
                 -------                               ---------             --------------
                 <S>                                  <C>                        <C>
                 Michael F.G. Ashby                   18,390,162                 130,536
                 Kenneth J. Biba                      18,388,928                 130,536
                 Gary J. Bowen                        18,385,778                 130,536
                 Dirk I. Gates                        18,345,535                 130,536
                 J. Kirk Mathews                      18,387,695                 130,536
                 William J. Schroeder                 18,387,962                 130,536
                 Delbert W. Yocam                     18,332,462                 130,636
</TABLE>

             (b)  The shareholders approved an amendment to the Company's 1992
             Stock Option Plan to increase the number of shares of common stock
             reserved for issuance thereunder from 6,000,000 shares to
             6,600,000 shares.  There were 10,322,987 votes in favor of and
             7,972,826 votes cast against the amendment.  There were 56,835
             abstentions.

             (c)  The shareholders approved an amendment to the Company's 1992
             Director Stock Option Plan to increase the number of shares of
             common stock reserved for issuance thereunder from 225,000 shares
             to 425,000 shares.  There were 11,314,307 votes in favor of and
             6,947,907 votes cast against the amendment.  There were 49,274
             abstentions.

             (d)  The shareholders approved an amendment to the Company's 1994
             Employee Stock Purchase Plan to increase the number of shares of
             common stock reserved for issuance thereunder from 250,000 shares
             to 400,000 shares.  There were 17,680,347 votes in favor of and
             582,976 votes cast against the amendment.  There were 48,165
             abstentions.


                                       16
<PAGE>   17
                                  XIRCOM, INC.

                                    PART II
                               OTHER INFORMATION


             (e)  The shareholders ratified the appointment of Ernst & Young
             LLP as independent auditors for the Company for the year ending
             September 30, 1997.  There were 18,347,423 votes in favor of and
             117,686 votes cast against the appointment of Ernst & Young LLP as
             independent auditors.  There were 24,077 abstentions.

ITEM 5.      OTHER ITEMS
             Not applicable.

ITEM 6.      EXHIBITS AND REPORTS ON FORM 8-K
             Exhibits

                 10.29g      Amendment #3 to Loan and Security Agreement, dated
                             as of December 16, 1996 between the CIT
                             Group/Credit Finance, Inc., and Xircom, Inc. and
                             Primary Rate Incorporated
                 10.30       Credit Agreement Among Xircom, Inc., Certain
                             Lenders Named Herein and NationsBank of Texas,
                             N.A. as Administrative Agent, dated as of December
                             30, 1996
                 10.30a      Security Agreement Between Xircom, Inc. as Debtor
                             and NationsBank of Texas, N.A. as Administrative
                             Agent, dated as of December 30, 1996
                 10.30b      Security Agreement Between Netaccess, Inc. as
                             Debtor and NationsBank of Texas, N.A. as
                             Administrative Agent, dated as of December 30,
                             1996
                 10.30c      Intellectual Property Security Agreement Between
                             Xircom, Inc. as Debtor and NationsBank of Texas,
                             N.A. as Administrative Agent, dated as of December
                             30, 1996
                 10.30d      Intellectual Property Security Agreement Between
                             Netaccess, Inc. as Debtor and NationsBank of
                             Texas, N.A. as Administrative Agent, dated as of
                             December 30, 1996
                 10.30e      Subsidiary Guaranty, dated effective December 30,
                             1996, between Netaccess, Inc. and NationsBank of
                             Texas, N.A. as Administrative Agent
                 27          Financial Data Schedule

             (b) Reports on Form 8-K
                 A Report on Form 8-K was filed by the Company on January 23,
                 1997 pursuant to Item 5 of Form 8-K ("Other Events").  The
                 report related to certain press releases issued by Xircom,
                 Inc. on January 16, 1997 regarding an OEM agreement and an
                 investment agreement between Xircom, Inc. and Intel
                 Corporation, and the release by Xircom, Inc. of its first
                 quarter 1997 earnings.  Copies of the press releases were
                 filed as an exhibit to such report.


                                       17
<PAGE>   18
                                   SIGNATURES
                                   ----------




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


                                          XIRCOM, INC.
                                          ------------
                                          (Registrant)


Date:   February 13, 1997                 /s/ Dirk I. Gates                   
        -----------------                 ------------------------------------
                                          Dirk I. Gates
                                          Chairman of the Board, President and
                                          Chief Executive Officer


Date:   February 13, 1997                 /s/ Steven F. DeGennaro
        -----------------                 ------------------------------------
                                          Steven F. DeGennaro
                                          Vice President, Finance and
                                          Chief Financial Officer


                                       18