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                                  UNITED STATES

                       SECURITIES AND EXCHANGE COMMISSION

                             Washington, D.C. 20549


                                    FORM 10-Q

          |X| QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
                         SECURITIES EXCHANGE ACT OF 1934

                For the quarterly period ended December 31, 1999

                                       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 0-28450

                                  Netopia, Inc.
             (Exact name of registrant as specified in its charter)


            Delaware                                            94-3033136
 (State or other jurisdiction of                             (I.R.S. Employer
  incorporation or organization)                          Identification Number)


                            2470 Mariner Square Loop
                            Alameda, California 94501
          (Address of principal executive offices, including Zip Code)
                          ---------------------------

                                 (510) 814-5100
              (Registrant's telephone number, including area code)


     Indicate  by  |X|check  whether  the  registrant  (1) has filed all reports
required to be filed by Sections 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 January 31, 2000 there were 16,376,408 shares of the
                     Registrant's Common Stock outstanding.


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

<PAGE>



NETOPIA, INC.
FORM 10-Q
TABLE OF CONTENTS                                                           PAGE
--------------------------------------------------------------------------------


PART I.        FINANCIAL INFORMATION

Item 1.        Condensed Consolidated Financial Statements..................   2

               Condensed consolidated balance sheets at
               December 31, 1999 and September 30, 1999.....................   2

               Condensed consolidated statements of operations for
               the three months ended December 31, 1999 and 1998............   3

               Condensed consolidated statements of cash flows
               for the three months ended December 31, 1999 and 1998........   4

               Notes to condensed consolidated financial statements.........   5

Item 2.        Management's Discussion and Analysis of Financial
               Condition and Results of Operations..........................  10

Item 3.        Quantitative and Qualitative Disclosures About
               Market Risk..................................................  26

PART II.       OTHER INFORMATION

Item 2.        Changes in Securities and Use of Proceeds....................  27

Item 6.        Exhibits and Reports on Form 8-K.............................  27

SIGNATURE      .............................................................  29

<PAGE>

PART I.       FINANCIAL INFORMATION
Item 1.       Condensed Consolidated Financial Statements
--------------------------------------------------------------------------------

NETOPIA, INC. AND SUBSIDIARIES
Condensed Consolidated Balance Sheets
(in thousands, except for share and per share amounts)
(unaudited)

<TABLE>
<CAPTION>
                                                                                    December 31,        September 30,
                                                                                        1999                 1999
                                                                               --------------------------------------

  ASSETS

<S>                                                                            <C>                  <C>
  Current assets:
      Cash and cash equivalents..............................................      $    26,141          $    61,381
      Short-term investments.................................................           32,764                8,102
      Trade accounts receivable less allowance for doubtful accounts and
           returns of $931 and $796, respectively............................           12,654                9,852
      Royalties receivable...................................................              537                  361
      Note receivable........................................................              980                  966
      Inventories, net.......................................................            4,818                3,681
      Prepaid expenses and other current assets..............................            1,956                1,397
                                                                               -----------------    -----------------
              Total current assets...........................................           79,850               85,740
  Royalties receivable.......................................................               --                  377
  Furniture, fixtures and equipment, net.....................................            2,669                2,403
  Intangible assets, net.....................................................           23,163                2,362
  Deposits and other assets..................................................            4,653                5,087
                                                                               -----------------    -----------------
                                                                                  $    110,335          $    95,969
                                                                               =================    =================
  LIABILITIES AND STOCKHOLDERS' EQUITY

  Current liabilities:
      Accounts payable.......................................................      $     6,250          $     5,258
      Accrued compensation...................................................            2,511                2,170
      Accrued liabilities....................................................            1,572                1,564
      Deferred revenue.......................................................            1,759                1,343
      Other current liabilities..............................................                6                   11
                                                                               -----------------    -----------------
              Total current liabilities......................................           12,098               10,346
  Long-term liabilities......................................................              453                  544
                                                                               -----------------    -----------------
              Total liabilities..............................................           12,551               10,890

  Commitments and contingencies

  Stockholders' equity:
   Preferred stock: $0.001 par value, 5,000,000 shares authorized;
      none issued or outstanding.............................................               --                   --
   Common stock: $0.001 par value, 25,000,000 shares authorized;
      16,281,460 and 15,519,198 shares issued and outstanding at
      December 31, 1999 and September 30, 1999, respectively.................               16                   15
      Additional paid-in capital.............................................          118,839               99,978
      Accumulated deficit....................................................          (21,404)             (14,942)

      Accumulated other comprehensive income.................................              333                   28
                                                                               -----------------    -----------------
              Total stockholders' equity.....................................           97,784               85,079
                                                                               -----------------    -----------------
                                                                                  $    110,335          $    95,969
                                                                               =================    =================
</TABLE>

     See accompanying notes to condensed consolidated financial statements.

                                       2
<PAGE>

NETOPIA, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Operations
(in thousands, except for per share amounts)
(unaudited)

<TABLE>
<CAPTION>
                                                                                             Three months ended
                                                                                                December 31,
                                                                                    -----------------------------------
                                                                                          1999               1998
                                                                                    -----------------------------------

<S>                                                                                 <C>                  <C>

  Revenues:
       Internet equipment.......................................................    $     10,839         $     4,151
       Web platform licenses and services.......................................           5,453               3,772
                                                                                    --------------       -------------
                                                                                          16,292               7,923
  Cost of revenues:
       Internet equipment.......................................................           7,609               2,646
       Web platform licenses and services.......................................             122                 160
                                                                                    --------------       -------------
                                                                                           7,731               2,806
                                                                                    --------------       -------------
  Gross profit..................................................................           8,561               5,117

  Operating expenses:
       Research and development.................................................           2,998               1,985
       Selling and marketing....................................................           5,647               4,761
       General and administrative...............................................             976                 782
       Acquired in-process research and development.............................           5,668               4,205
       Amortization of goodwill and other intangible assets.....................           1,709                  --
                                                                                    --------------       -------------
       Total operating expenses.................................................          16,998              11,733
                                                                                    --------------       -------------
              Operating loss....................................................          (8,437)             (6,616)
  Other income, net.............................................................             828                 570
                                                                                    --------------       -------------
              Loss from continuing operations before income taxes...............          (7,609)             (6,046)
 Income tax provision (benefit).................................................              --                  --
                                                                                    --------------       -------------
              Loss from continuing operations...................................          (7,609)             (6,046)
  Discontinued operations:
         Income from discontinued operations, net of taxes......................           1,147                  --
                                                                                    --------------       -------------
              Net loss..........................................................    $     (6,462)       $     (6,046)
                                                                                    ==============      ==============
 Comprehensive loss:
       Net loss.................................................................    $     (6,462)       $     (6,046)
       Other comprehensive income...............................................             305                  --
              Total comprehensive loss..........................................    $     (6,157)       $     (6,046)
                                                                                    ==============      ==============

 Per share data, continuing operations:
      Basic and diluted loss per share..........................................    $      (0.47)        $     (0.50)
                                                                                    ==============      ==============
      Common shares used in the per share calculations..........................          16,047              12,159
                                                                                    ==============      ==============

 Per share data, net loss:
      Basic and diluted net loss per share......................................    $      (0.40)       $     (0.50)
                                                                                    ==============      ==============
      Common shares used in the per share calculations..........................          16,047              12,159
                                                                                    ==============      ==============

======================================================================================================================
</TABLE>

     See accompanying notes to condensed consolidated financial statements.

                                       3
<PAGE>

NETOPIA, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Cash Flows
(in thousands)
(unaudited)

<TABLE>
<CAPTION>
                                                                                             Three months ended
                                                                                                December 31,
                                                                                    -----------------------------------
                                                                                          1999               1998
                                                                                    -----------------------------------

<S>                                                                                 <C>                  <C>

  Cash flows from operating activities:
  Net loss...................................................................      $    (6,462)         $    (6,046)
  Adjustments to reconcile net loss to net cash used in operating activities:
     Depreciation and amortization...........................................            1,887                  604
     Charge for in-process research and development..........................            5,668                4,205
     Changes in allowance for doubtful accounts and returns on
        accounts receivable..................................................              135                   (2)
     Changes in operating assets and liabilities:
        Trade accounts receivable............................................           (2,938)              (1,193)
        Inventories..........................................................           (1,138)                 190
        Prepaid expenses, and other current assets...........................               96                  222
        Deposits and other assets............................................               54                   --
        Accounts payable and accrued liabilities.............................              990               (1,551)
        Deferred revenue.....................................................              348                   82
        Other liabilities....................................................              323                  (26)
                                                                                   -------------        -------------
           Net cash used in operating activities.............................           (1,037)              (3,515)
                                                                                   -------------        -------------

  Cash flows from investing activities:
     Purchase of furniture, fixtures and equipment...........................             (116)                (173)
     Capitalization of software development costs............................             (111)                  --
     Acquisition of technology...............................................          (10,855)              (4,161)
     Purchase of short-term investments......................................          (25,635)              (6,885)
     Proceeds from the sale and maturity of short-term investments...........              974               11,343
                                                                                   -------------        -------------
           Net cash provided by (used in) investing activities...............          (35,743)                 124
                                                                                   -------------        -------------

  Cash flows from financing activities:
     Proceeds from the issuance of common stock, net.........................            1,540                  594
                                                                                   -------------        -------------
           Net cash provided by financing activities.........................            1,540                  594
                                                                                   -------------        -------------

  Net decrease in cash and cash equivalents..................................          (35,240)              (2,797)
  Cash and cash equivalents, beginning of period.............................           61,381               19,244
                                                                                   -------------        -------------
  Cash and cash equivalents, end of period...................................      $    26,141          $    16,447
                                                                                   =============        =============

  Supplemental disclosures of noncash investing and financing activities:
     Issuance of common stock and common stock options for acquisition of
     intangible assets.......................................................      $    17,322          $     2,811
                                                                                   =============        =============

=====================================================================================================================
</TABLE>

     See accompanying notes to condensed consolidated financial statements.

                                       4
<PAGE>

NETOPIA, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

(1)  Basis of Presentation

     The unaudited condensed  consolidated financial statements included in this
Form  10-Q  reflect  all  adjustments,   consisting  only  of  normal  recurring
adjustments   which  in  our  opinion  are  necessary  to  fairly   present  our
consolidated  financial  position,  results of operations and cash flows for the
periods presented.  These condensed  consolidated financial statements should be
read in conjunction with our consolidated  financial  statements included in our
Annual Report on Form 10-K and other  filings with the United States  Securities
and Exchange  Commission.  The consolidated results of operations for the period
ended  December  31, 1999 are not  necessarily  indicative  of the results to be
expected  for any  subsequent  quarter  or for the  entire  fiscal  year  ending
September 30, 2000.

(2)  Recent Accounting Pronouncements

     In March 1998, AcSec issued SOP 98-1,  Accounting for the Costs of Computer
Software  Developed or Obtained for Internal Use. SOP 98-1 requires that certain
costs  related to the  development  or  purchase  of  internal-use  software  be
capitalized  and amortized  over the estimated  useful life of the software.  We
adopted SOP 98-1 on October 1, 1999, which did not have a material impact on our
results of operations.

     In June 1998,  the FASB issued SFAS No. 133,  Accounting for Derivative and
Hedging Activities.  SFAS No. 133 establishes accounting and reporting standards
for derivative  instruments  (including derivative instruments embedded in other
contracts) and for hedging activities. SFAS No. 133, as amended by SFAS No. 137,
is effective for all fiscal  quarters of fiscal years  beginning  after June 15,
2000. To date, we have not entered into any derivative financial  instruments or
hedging activities.

(3)  Inventories

     Inventories  are stated at the lower of cost or market.  Cost is determined
by the first-in,  first-out  (FIFO)  method.  Net  inventories  consisted of the
following (in thousands):

<TABLE>
<CAPTION>
                                                                          December 31         September 30,
                                                                             1999                 1999
                                                                        ----------------     ----------------

<S>                                                                     <C>                  <C>
         Raw materials and work in process........................          $     2,313          $     1,699
         Finished goods...........................................                2,505                1,982
                                                                        ----------------     ----------------
                                                                            $     4,818          $     3,681
                                                                        ================     ================



(4)      Furniture, Fixtures and Equipment, net (in thousands):
         ------------------------------------------------------
                                                                         December 31,         September 30,
                                                                             1999                 1999
                                                                        ----------------     ----------------

         Furniture, fixtures and equipment........................          $    13,679          $    13,565
         Accumulated depreciation and amortization................              (11,010)             (11,162)
                                                                        ----------------     ----------------
                                                                            $     2,669          $     2,403
                                                                        ================     ================
</TABLE>
                                       5
<PAGE>

(5)  Earnings Per Share

     Basic net loss per share (EPS) is based on the weighted  average  number of
shares of common stock outstanding during the period. Diluted net loss per share
is based on the weighted  average  number of shares of common stock  outstanding
during the  period and  dilutive  common  equivalent  shares  from  options  and
warrants outstanding during the period. No common equivalent shares are included
for loss  periods as they would be  anti-dilutive.  Dilutive  common  equivalent
shares consist of options and warrants.

     Potentially  dilutive common shares have been excluded from the computation
of diluted EPS for the three months ended December 31, 1999 and 1998 since their
effect  on EPS is  antidilutive  due to the  losses  incurred  in  each  period.
Consequently,  the number of shares in the computations of basic and diluted EPS
is the same for each  period.  Potentially  dilutive  common  shares  which were
excluded  from the  computation  of diluted EPS consisted of options to purchase
common stock  totaling  3,803,516 for the three months ended  December 31, 1999,
3,474,527 for the three months ended  December 31, 1998 and warrants to purchase
common stock  totaling  60,000 for the three months ended  December 31, 1999 and
1998.

(6)  Acquisitions

     On October 13, 1999, we acquired StarNet Technologies, Inc., ("StarNet"), a
California  corporation in a merger transaction in which StarNet merged into our
newly formed,  wholly  owned,  subsidiary.  StarNet has been  developing a voice
channel technology architecture that allows the transmission of voice lines over
a digital  subscriber line along with the simultaneous  transmission of standard
data  packets.  We intend to integrate  StarNet's  technology  into our existing
Internet  equipment  development  and begin offering  voice and data  integrated
access  devices.  Any delay in the completion of the development of the products
would cause us to incur additional unplanned development expenses as well as the
loss or deferral of customer purchases, either of which could seriously harm our
business.

     We accounted for the transaction  under the purchase method.  The aggregate
consideration constituting the purchase price was approximately $27.5 million at
closing (which included $1.0 million of the potential earnout payments discussed
below),  and may increase by up to an additional  $4.9 million  depending on the
actual  amount  of  potential  earnout  payments.  The  aggregate  consideration
included:

     o    $8.4 million in cash paid on the closing date of the transaction;

     o    447,852 shares of our common stock issued on the closing date;

     o    A  series  of  potential  cash  earnout  payments  aggregating  up  to
          approximately  $5.9 million at various times after the closing date if
          certain technical and revenue  milestones are achieved.  These earnout
          opportunities  will be included in the purchase  price for  accounting
          purposes when it is deemed  probable that the earnout will be paid. At
          the   acquisition   date,   we  had  deemed   probable   and  recorded
          approximately $1.0 million in earnout payments;

     o    The  substitution  of stock  options to purchase  our common  stock in
          replacement of the StarNet options held by StarNet's  former employee,
          who joined  Netopia after the closing,  valued at  approximately  $1.4
          million. We used the Black-Scholes  method to value the options issued
          using the following assumptions:  volatility of 101%, expected life of
          4 years, interest rate of 4.9%; and no dividends; and

     o    Transaction costs of approximately  $820,000 which include legal fees,
          accounting fees, fees paid for an independent  fairness  opinion,  and
          fees for other services.

     Approximately  30,673 shares of common stock are being held in escrow for a
period  of  time  after  the  closing  to  satisfy   StarNet's   indemnification
obligations under the definitive acquisition agreements.

                                       6
<PAGE>

     The  acquisition  has been  accounted  for as a purchase  and  resulted  in
goodwill and other  intangible  assets of  approximately  $22.4 million which is
being  amortized  over  four and  three  years,  respectively  and a charge  for
acquired in-process research and development of $5.7 million.

     We used the income  approach  to  appraise  the value of the  business  and
projects acquired.  Such method takes into consideration the stage of completion
of the projects and estimates related to expected future revenues,  expenses and
cash flows which are then  discounted  back to present day  amounts.  Based upon
these estimates, material net cash flows from the acquired business are expected
to occur  during  our  fiscal  fourth  quarter  of 2000.  These  cash flows were
discounted  using a  weighted  average  discount  rate of 20%.  Based  upon  the
expenses incurred and the development time invested in the products prior to the
acquisition  and the  estimated  expenses and  development  time to complete the
products, we determined the products purchased in aggregate,  including products
under  development and completed  products,  to be approximately 73% complete at
the time of  acquisition.  We expect to complete  the  in-process  research  and
development  in the summer of calendar 2000 and we estimate the cost to complete
the in-process research and development to be approximately $1.8 million.

     The funds used to pay the cash portion of the  purchase  price were derived
from our existing working capital.

     All of StarNet's  former full time employees  became  employees of Netopia.
Each of  StarNet's  founders,  and certain  other key  employees,  entered  into
non-competition agreements in connection with the acquisition.

     The following summary,  prepared on an unaudited pro forma basis,  reflects
the condensed  consolidated  statement of operations  for the three months ended
December  31,  1999 and  1998  assuming  StarNet  had  been  acquired  as of the
beginning of the periods presented (in thousands, except per share data):

                                                      December 31   December 31,
                                                          1999         1998
                                                       ----------    ---------

         Revenues......................................  $16,292      $8,219
         Net loss......................................  ($6,802)    ($8,154)
         Basic and diluted loss per share..............   ($0.42)     ($0.42)

         Weighted-average shares used  in pro forma
         per share computation.........................   16,110      12,607

     The above pro forma net loss figure for the three months ended December 31,
1999 includes the charge for acquired in-process research and development.

     The pro forma  results are not  necessarily  indicative  of what would have
occurred if the  acquisitions had been in effect for the periods  presented.  In
addition,  they are not intended to be a projection of future results and do not
reflect any synergies that might be achieved from combined operations.

(7)  Discontinued Operations

     On August  5,  1998,  we sold our  Farallon  Local  Area  Networking  (LAN)
Division (the LAN  Division)  including the LAN  Division's  products,  accounts
receivable,  inventory, property and equipment,  intellectual property and other
related assets to Farallon  Communications,  Inc. (Farallon),  formerly known as
Farallon  Networking  Corporation,  a Delaware  corporation  and an affiliate of
Gores Technology Group (Gores). The consideration we received, in aggregate, for
the sale of the LAN Division  totaled $4.9 million and consisted of cash, a note
receivable,  royalties  receivable  and a warrant  to  purchase  up to 5% of the
equity of Farallon.

                                       7
<PAGE>

     The note receivable is for $1.0 million  payable on July 31, 2000,  bearing
interest at 8% per annum. The value of the note has been discounted to reflect a
rate of 15%, the assumed  fair market rate of interest  for a similar  financial
instrument.

     The royalties  receivable are based upon  Farallon's  total annual revenues
over each of the next five fiscal years ending on July 31, 2003. At December 31,
1999 there was a balance of $537,000  recorded as royalties  receivable due from
Farallon.  Farallon's  total  revenues in each annual period must reach at least
$15.0 million for a royalty to be paid to us.

     The  disposition  of our LAN Division in August 1998 has been accounted for
as a  discontinued  operation in  accordance  with APB Opinion No. 30, and prior
period consolidated  financial  statements have been restated to reflect the LAN
Division's  operations as a  discontinued  operation.  Income from  discontinued
operations,  net of taxes was $1.1 million for the three  months ended  December
31, 1999. This income represents the reversal of a liability we recorded for the
excess space created at our Alameda,  California  headquarters  that we believed
could not be subleased to third parties.  During the three months ended December
31, 1999, we found alternative uses for this excess space.

(8)  Geographic, Segment and Significant Customer Information

     We adopted the provisions of SFAS No. 131,  Disclosure about Segments of an
Enterprise  and  Related  Information,  during  fiscal  year 1999.  SFAS No. 131
establishes  standards  for the  reporting  by public  business  enterprises  of
information about operating segments,  products and services,  geographic areas,
and major  customers.  The  methodology  for  determining  what  information  is
reported is based on the  organization  of  operating  segments  and the related
information that our Chief Operating  Decision Maker (CODM) uses for operational
decisions and financial  performance  assessments.  Our Chief Executive  Officer
(CEO) is considered  our CODM.  For purposes of making  operating  decisions and
assessing financial performance, our CEO reviews financial information presented
on a consolidated  basis  accompanied by disaggregated  information for revenues
and gross margins by product group as well as revenues by geographic  region and
by customer.  Currently,  operating  expenses or assets are not disaggregated by
product  group  for  purposes  of  making  operating   decisions  and  assessing
performance.

     We  generate   revenue  from  three   groups  of  products  and   services.
Disaggregated  financial  information regarding our three operating segments for
the three months ended December 31, 1999 and 1998 is as follows:


<TABLE>
<CAPTION>
                                                        WEB PLATFORM LICENSES
                                                        ---------------------


                                     INTERNET          WEB SITE         TIMBUKTU        TOTAL PRODUCTS
                                    EQUIPMENT          PRODUCTS         PRODUCTS
              1999

<S>                                  <C>             <C>              <C>                 <C>
 Revenues........................... $    10,839     $    1,832       $    3,621          $   16,292
 Cost of revenues...................       7,609              6              116               7,731
                                     -----------     ----------       ----------          -----------
 Gross profit.......................       3,230          1,826            3,505               8,561
 Unallocated operating expenses                                                               16,998
                                                                                          -----------
     Operating loss.................                                                          (8,437)
 Other income, net..................                                                             828
                                                                                          -----------
     Loss before income taxes.......                                                          (7,609)
 Income tax provision (benefit).....                                                              --
                                                                                          -----------
     Loss from continuing
      operations....................                                                      $   (7,609)
                                                                                          ===========
-----------------------------------------------------------------------------------------------------
</TABLE>

                                       8
<PAGE>

<TABLE>
<CAPTION>
                                                      WEB PLATFORM LICENSES
                                                      ---------------------

                                     INTERNET          WEB SITE         TIMBUKTU            TOTAL
                                    EQUIPMENT          PRODUCTS         PRODUCTS          PRODUCTS
              1998

<S>                                  <C>               <C>             <C>                <C>
 Revenues........................... $   4,151         $     542       $    3,230         $  7,923
 Cost of revenues...................     2,646                 5              155            2,806
                                     ----------        ----------       ----------       ----------
 Gross profit.......................     1,505               537            3,075            5,117
 Unallocated operating expenses                                                             11,733
                                                                                         ----------
     Operating loss.................                                                        (6,616)
 Other income, net..................                                                           570
                                                                                         ----------
     Loss before income taxes.......                                                        (6,046)
 Income tax provision (benefit).....                                                           --
                                                                                         ----------
     Loss from continuing
      operations....................                                                      $ (6,046)
                                                                                         ==========
</TABLE>

     We sell our products and provide services  worldwide through a direct sales
force, independent distributors, and value-added resellers. We currently operate
in five regions, United States, Europe, Asia/Pacific, Canada, and Latin America.
Revenues outside of the United States are primarily export sales  denominated in
United  States  dollars.   Disaggregated  financial  information  regarding  our
products  and  services  and  revenues  by  geographic  region is as follows (in
thousands):

                                                         Three Months Ended
                                                            December 31,
                                                      -------------------------
                                                          1999         1998
                                                      ------------ ------------
United States.......................................    $12,282      $5,079
Europe..............................................      3,260       2,317
Asia/Pacific........................................        299         243
Canada..............................................        359         238
Latin America.......................................         92          46
                                                      ------------ ------------
         Total revenues.............................    $16,292      $7,923
                                                      ============ ============

     We do not have material operating assets outside of the United States.

     During the three months ended December 31, 1999, Northpoint Communications,
a competitive  local  exchange  carrier  (CLEC),  accounted for 12% of our total
revenues and 11% of our total  accounts  receivable.  All revenues  derived from
this customer were related to sales of our internet equipment. No other customer
during the three months ended December 31, 1999 accounted for 10% or more of our
total  revenues.  One other  customer  accounted  for 10% of our total  accounts
receivable for the three months ended December 31, 1999. No customers during the
three months  ended  December  31, 1998  accounted  for 10% or more of our total
revenues or total accounts receivable.

                                       9
<PAGE>

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


     Some  of  the  information  in  this  Form  10-Q  contains  forward-looking
statements that involve  substantial risks and  uncertainties.  You can identify
these  statements  by  forward-looking  words such as "may,"  "will,"  "expect,"
"anticipate,"  "believe," "estimate" and "continue" or similar words. You should
read statements that contain these words carefully because they: (i) discuss our
expectations  about our future  performance;  (ii)  contain  projections  of our
future operating  results or of our future financial  condition;  or (iii) state
other "forward-looking"  information.  We believe it is important to communicate
our expectations to our investors.  There may be events in the future,  however,
that we are not accurately able to predict or over which we have no control. The
risk factors  listed in this Form 10-Q,  as well as any  cautionary  language in
this Form 10-Q,  provide  examples of risks,  uncertainties  and events that may
cause our actual results to differ materially from the expectations we described
in our  forward-looking  statements.  You should be aware that the occurrence of
any of the events  described in this Form 10-Q could seriously harm our business
and that upon the  occurrence of any of these  events,  the trading price of our
common stock could decline.

Overview

     We provide  Internet and electronic  commerce  infrastructure  that enables
small and medium size businesses to easily and  cost-effectively  connect to the
Internet,  establish  and  enhance  their  presence,  and conduct  business  and
electronic commerce on the Web. We offer digital subscriber line (DSL) and other
high-speed,  multi-user  Internet  equipment  and Web platforms for creating and
hosting  Web  sites,  creating  and  hosting  electronic  commerce  stores,  and
conducting real-time Internet communications.

     We sell our products and related  maintenance,  support and other  services
through telecommunication service providers,  Internet service providers (ISPs),
distributors, value-added resellers (VARs) and directly to end users.

     During the three months ended December 31, 1999:

o    Our four largest customers,  who each individually  represented at least 5%
     of our total revenues, accounted for 33% of our total revenues; and

o    Northpoint  Communications,  a competitive  local exchange  carrier (CLEC),
     accounted  for 12% of our  revenues.  No other  customer  during  the three
     months  ended  December  31,  1999  accounted  for 10% or more of our total
     revenues.

     During the three months ended December 31, 1998:

o    Our three largest customers,  who each individually represented at least 5%
     of our total revenues, accounted for 25% of our total revenues; and

o    No customer  during the three months ended  December 31, 1998 accounted for
     10% or more of our total revenues.

     We do not have purchase  contracts  with any of our customers that obligate
them  to  continue  to  purchase  our  products.  These  customers  could  cease
purchasing our products at any time, which could seriously harm our business.

     Historically,  a significant  portion of our revenues has been derived from
customers  outside of the United  States,  and we expect this trend to continue.
For the three months ended  December 31, 1999 and 1998,  international  revenues
accounted for 25% and 36% of our total revenues, respectively.

                                       10
<PAGE>

     Our  international  revenues are  currently  denominated  in United  States
dollars, and revenues generated by our international distributors are paid to us
in United States dollars.

     Our revenues  are derived  from the sale of hardware and software  products
and include license  revenues for our Web site server and Timbuktu Pro software,
recurring  revenues  from our Web sites and  E-stores  and sales of our Internet
equipment and fees for related  services.  We recognize revenue from the sale of
our hardware  products  upon  shipment.  We recognize  revenues from licenses of
computer  software  provided that a firm purchase order has been  received,  the
software  and  related  documentation  have  been  shipped,  collection  of  the
resulting  receivable  is  deemed  probable,  and no  other  significant  vendor
obligations exist. We recognize maintenance and service revenues over the period
in which the services are  provided.  Certain of our sales are made to customers
under agreements permitting limited rights of return for stock balancing or with
protection  for future price  decreases.  We record  revenue net of an estimated
allowance  for  returns  and price  protection.  Any  product  returns  or price
decreases  in the future  that  exceed our  allowances  may  seriously  harm our
business.

     We provide  end users of our  products  with a 90-day  limited  warranty on
single-user  versions  of our  Timbuktu  Pro  software  and a  one-year  limited
warranty on our Internet  equipment.  We permit end users to return Timbuktu Pro
and our Internet  equipment for  replacements or for refund of the full purchase
price if the products do not perform as warranted. Our Web sites are provided on
an "as is" basis, and we generally do not offer a warranty on this product.  End
users of our Web sites are offered a free 30-day  evaluation  period to evaluate
the product prior to purchase and  thereafter can  discontinue  their service at
any time at no cost.  In the past,  we have not  encountered  material  warranty
claims.  In the future,  if warranty claims exceed our reserves for such claims,
our business  would be  seriously  harmed.  Additionally,  we attempt to further
limit our liability to end users through  disclaimers of special,  consequential
and indirect damages and similar provisions.  However, we cannot assure you that
such limitations of liability will be legally enforceable.


<PAGE>

Results of Operations

         The  following  table sets  forth for the  periods  indicated,  certain
statement of operations data expressed as a percentage of revenues.

<TABLE>
<CAPTION>
                                                                             Three months ended
                                                                                December 31,
                                                                         --------------------------
                                                                             1999          1998
                                                                         ----------     -----------
<S>                                                                      <C>            <C>
           Revenues:
              Internet equipment......................................      66.5%          52.4%
              Web platform licenses and services......................      33.5%          47.6%
                                                                         ----------     -----------
                                                                           100.0%         100.0%
           Cost of revenues:
              Internet equipment......................................      46.7%          33.4%
              Web platform licenses and services......................       0.8%           2.0%
                                                                         ----------     -----------
                                                                            47.5%          35.4%
                                                                         ----------     -----------
              Gross profit............................................      52.5%          64.6%

           Operating expenses:
              Research and development................................      18.4%          25.1%
              Selling and marketing...................................      34.7%          60.1%
              General and administrative..............................       6.0%           9.9%
              Acquired in-process research
                and development.......................................      34.8%          53.1%
              Amortization of goodwill and other intangible assets....      10.5%            --
                                                                         ----------     -----------
                Total operating expenses..............................      104.3%        148.1%
                                                                         ----------     -----------

                Operating loss........................................     (51.8%)        (83.5%)
                                                                         ----------     -----------
            Other income, net.........................................       5.1%           7.2%
                                                                         ----------     -----------
               Loss from continuing operations
                  before income taxes.................................     (46.7%)        (76.3%)
            Income tax  provision (benefit)...........................        --             --
                                                                         ----------     -----------

               Loss from continuing operations........................     (46.7%)        (76.3%)

            Income from discontinued operations, net of taxes.........       7.0%            --
                                                                         ----------     -----------

                  Net loss............................................     (39.7%)        (76.3%)
                                                                         ==========     ===========
---------------------------------------------------------------------------------------------------
</TABLE>

Three Months Ended December 31, 1999 and 1998

     Revenue. Our revenues increased 105.6% to $16.3 million in the three months
ended December 31, 1999 from $7.9 million in the three months ended December 31,
1998.

     The increase in the three months ended  December 31, 1999 was primarily due
to:

     o    Increased sales in North America of our DSL Internet  equipment as our
          strategic  relationships  for the  distribution  of our  DSL  products
          continued to expand,  and the  introduction of new Internet  equipment
          interoperable with Nokia's DSL central office access concentrator; and

     o    Increased sales of our Web site licenses including the introduction of
          our E-commerce enabled Web sites.

                                       12
<PAGE>

     These increases were partially  offset by decreased sales of our integrated
services  digital network (ISDN) Internet routers in North America as demand for
DSL  products  increased  and  decreased  sales of the shrink  wrap  versions of
Timbuktu Pro for the Macintosh.

     International  revenues increased 41.0% to $4.0 million in the three months
ended December 31, 1999 from $2.8 million in the three months ended December 31,
1998.  International  revenues  increased  primarily  due to  sales  of our  DSL
internet  equipment  which  were not  available  during the three  months  ended
December 31, 1998, the introduction of our integrated voice and data ISDN router
acquired in  connection  with our  acquisition  of StarNet as well as  increased
sales of our Web site licenses. International revenues accounted for 25% and 36%
of our total  revenues for the three  months  ended  December 31, 1999 and 1998,
respectively.  International revenues declined as a percentage of total revenues
primarily  due to  increasing  sales of our Internet  equipment and Web platform
products in the United States.

     The following table provides a breakdown of revenue by region  expressed as
a percentage of total revenues for the periods presented.

                                               Three months ended December 31,
                                               -------------------------------
                                                    1999             1998
------------------------------------------------------------------------------

  Europe..................................           20%              29%
  Pacific Rim.............................            2                3
  Canada and Other........................            3                4
                                                  --------         --------
    Subtotal international revenues.......           25               36
  United States...........................           75               64
                                                  --------         --------
      Total revenues......................          100%             100%
                                                  ========         ========
------------------------------------------------------------------------------

     Although  international revenues as a percentage of total revenue decreased
in the three months  ended  December  31,  1999,  a  substantial  portion of our
revenues was derived from sales to international  customers, and we expect sales
to international customers to continue.

     Gross Margin. Our total gross margin decreased to 52.5% in the three months
ended  December 31, 1999 from 64.6% in the three months ended December 31, 1998.
The decrease was primarily due to:

o    Increased sales of our Internet equipment,  which have a lower gross margin
     than our Web platform products; and

o    Declining  average selling prices of our Internet  equipment as a result of
     price competition and more volume DSL contracts.

     These  decreases  were  partially  offset by  increased  volume  and server
license sales of our Web platform products as well as declining average costs of
our products.  In the past, our gross margin has varied  significantly  and will
likely vary significantly in the future. Our gross margins depend primarily on:

o    The mix of hardware and software products sold;

o    Pricing strategies;

o    Standard cost changes;

o    New versions of existing products; and

o    External market factors, including, but not limited to, price competition.

                                       13
<PAGE>

     Our Web  platform  products  have a higher  average  gross  margin than our
Internet equipment.  Accordingly,  to the extent we sell more Internet equipment
than Web platform products, our gross margins would be lower.

     Research and Development.  Our research and development  expenses increased
51.0% to $3.0  million for the three  months  ended  December 31, 1999 from $2.0
million for the three months ended December 31, 1998.  Research and  development
expenses increased  primarily due to increased employee and development  related
expenses  primarily as a result of our  acquisitions  of Serus,  netOctopus  and
StarNet. The employees and operations acquired were not included in our research
and development expenses for the three months ended December 31, 1998.

     We expect to  continue  to devote  substantial  resources  to  product  and
technological  development  and therefore,  research and  development  costs may
increase in absolute  dollars in fiscal  years 2000 and 2001.  Historically,  we
have believed that our process for developing software is essentially  completed
concurrently  with the establishment of technological  feasibility,  and we have
not capitalized any internal software development costs to date. However, during
the three months ended  December 31, 1999,  we  capitalized  $111,000 of product
development costs incurred  subsequent to the delivery of a working model, under
a development agreement with third parties.

     Selling and Marketing.  Our selling and marketing  expenses increased 18.6%
to $5.6 million for the three  months ended  December 31, 1999 from $4.8 million
for the three months ended  December 31, 1998.  Selling and  marketing  expenses
increased primarily due to:

o    Increased headcount and other employee related expenses; and

o    Increased participation in tradeshows.

     These expenses were partially offset by reduced advertising expenses.

     We believe  that our  selling  and  marketing  expenses  will  increase  in
absolute dollars in fiscal years 2000 and 2001 as a result of:

o    Our acquisition of StarNet;

o    Increased  advertising and promotion  campaigns related to our Web site and
     electronic commerce platform as well as our DSL Internet equipment; and

o    Continued expansion of our sales staff domestically and internationally.

     General  and  Administrative.   Our  general  and  administrative  expenses
increased  24.8% to $976,000 for the three  months ended  December 31, 1999 from
$782,000   for  the  three  months   ended   December  31,  1998.   General  and
administrative expenses increased primarily due to:

o    Increased employee related expenses including employee recruitment costs;

o    Increased use of third party contractors and temporary  employee  services;
     and

o    Increased occupancy costs related to our Alameda facility.

     Acquired  In-Process  Research and  Development.  Based upon an independent
third party  valuation  analysis of our  acquisition of StarNet,  we allocated a
one-time charge of approximately  $5.7 million of the purchase price to acquired
in-process  research and  development  for the three  months ended  December 31,
1999.  See Note 6 of "Notes To  Condensed  Consolidated  Financial  Statements."
Based upon an independent third party valuation  analysis of our acquisitions of
Serus and  netOctopus,  we  allocated  one time  charges of

                                       14
<PAGE>

approximately  $3.9  million of the Serus  purchase  price and  $400,000  of the
netOctopus  purchase price to acquired  in-process  research and development for
the three months ended December 31, 1998.

     We believe  we  followed  recent  guidance  disseminated  by the SEC in our
valuation of the assets acquired and liabilities assumed and, in particular,  in
the valuation of in-process research and development. However, in the event that
it is determined that we did not properly value such assets and liabilities,  we
may have to re-state the charges to  operations  taken in  connection  with such
transactions.

     Amortization of Goodwill and Other Intangible  Assets. For the three months
ended December 31, 1999,  amortization of goodwill and other  intangible  assets
represents  the  amortization  of such  amounts  allocated to goodwill and other
intangible assets related to our acquisitions of Serus,  netOctopus and StarNet.
The amount allocated to goodwill and other intangible  assets in connection with
our acquisition of StarNet was $22.4 million. We are amortizing the goodwill and
other  intangible  assets over four and three  years,  respectively.  The amount
allocated  to  goodwill  and  other  intangible  assets in  connection  with our
acquisition  of Serus was $2.1 million and the amount  allocated to goodwill and
other  intangible  assets in connection  with our  acquisition of netOctopus was
$700,000.  We are amortizing the goodwill and other intangible assets related to
these transactions over four years.

     Other Income, Net. Other income, net, primarily represents interest we earn
on our cash, cash  equivalents and short-term  investments.  Other income,  net,
increased  45.3% to $828,000 for the three  months ended  December 31, 1999 from
$570,000 for the three months ended  December 31, 1998.  The increase was due to
the higher cash,  cash  equivalents and short-term  investment  balances on hand
primarily from the cash we raised through our secondary offering in August 1999.
We expect interest income to decrease  moderately in absolute dollars due to the
cash used for operating activities.

     Income Tax  Benefit.  We did not record an income  tax  benefit  during the
three  months  ended  December  31,  1999 or  1998  primarily  due to  continued
substantial uncertainty regarding our ability to realize our tax assets.

     Discontinued  Operations.  Income  from  discontinued  operations  of  $1.1
million during the three months ended December 31, 1999 primarily represents the
reversal of a liability we recorded for the excess space created at our Alameda,
California  facility,  in connection with the sale of our LAN Division on August
5, 1998, that we believed could not be subleased to third parties.

Year 2000 Disclosure

     Except for  expenditures  disclosed in prior filings,  our business was not
adversely affected by the risks posed by Year 2000 issues. Based on our testing,
which was completed before December 31, 1999 and our experience to date, we have
confirmed that our internally  developed  systems and technology  (including our
financial,  order entry, inventory,  shipping and customer database systems) are
Year 2000 compliant,  and have been functioning  properly in calendar year 2000.
Additionally,  we do not believe  the risks posed by Year 2000 issues  adversely
affected any of our critical vendors and suppliers or our strategic partners. In
addition to the investment of employee time and  resources,  we estimate that we
spent approximately  $130,000 to upgrade certain facility related items for Year
2000  compliance.  As a result of our Year 2000  preparedness,  the preparedness
efforts of our critical vendors and suppliers and strategic  partners,  while no
assurances  are  possible,  we currently  assess future risks posed by Year 2000
issues as not material to our business.

                                       15

<PAGE>

Other Factors That You Need To Be Aware Of Which May Affect Our Future Operating
Results

We have a history  of losses  and  negative  cash  flow,  and we expect to incur
losses and we may incur negative cash flow in the future.

     Our  failure  to  significantly  increase  our  revenues  would  result  in
continuing losses. We incurred losses from continuing operations of $7.6 million
and $6.0 for the three months ended December 31, 1999 and 1998, respectively. We
expect to incur net losses in the future,  and these losses may be  substantial.
Further,  we may incur  negative  cash flow in the  future  particularly  to the
extent  we  complete  any  acquisition  opportunities.   Because  of  continuing
substantial capital expenditures and product development,  sales,  marketing and
administrative  expenses,  we will  need to  generate  significant  revenues  to
achieve   profitability   and  positive  cash  flow.   Even  if  we  do  achieve
profitability  and positive cash flow, we may not be able to sustain or increase
profitability or cash flow on a quarterly or annual basis.

Our quarterly  operating results are likely to fluctuate because of many factors
and may cause our stock price to fluctuate.

     Our revenues and  operating  results have varied in the past and are likely
to vary in the future from  quarter to  quarter.  As a result,  we believe  that
period-to-period  comparisons  of our  operating  results  are  not  necessarily
meaningful.  Investors  should  not rely on the  results  of any one  quarter or
series of quarters as an indication of our future performance.

     It is likely that in some future quarter or quarters our operating  results
will be below the  expectations  of securities  analysts or  investors.  In such
event, the market price of our common stock may decline significantly.

     These variations in our operating  results will likely be caused by factors
related to the operation of our business, including:

o    Variations in the timing and size of orders for our Internet equipment;

o    Our ability to license,  and the timing of  licenses,  of our Web  platform
     products, particularly site server licenses and Timbuktu Pro;

o    The growth  rate in the  number of Web sites  that are built  using our Web
     platform, from which we derive revenues;

o    Loss of significant  distributors or customers, or significant decreases or
     delays in purchases  by  significant  distributors  or  customers,  such as
     Ingram Micro, Softway  International,  NorthPoint  Communications and Covad
     Communications;

o    The mix of products and services and the gross margins associated with such
     products and services, including the impact of our increased sales of lower
     margin Internet equipment as a percentage of our total revenues;

o    The price and  availability  of chip sets,  which we obtain  from  Conexant
     Systems, for our DSL Internet equipment;

o    The timing and size of expenses,  including operating expenses and expenses
     of developing new products and product enhancements; and

o    Our ability to attract and retain key personnel.

     These  variations may also be caused by factors  related to the development
of the DSL market,  the market for our Web platform products and the competition
we face in these markets, including:

                                       16
<PAGE>

o    The timing and rate of  deployment  of DSL  services by  telecommunications
     service providers;

o    The  timing  and  rate  of  deployment  of  alternative   high-speed   data
     transmission  technologies,  such as cable modems and  high-speed  wireless
     data transmission;

o    Anticipated price competition in the market for Internet  equipment and Web
     platform products;

o    The level of market  penetration of our Internet equipment and Web platform
     products relative to those of our competitors; and

o    Anticipated   increases  in  competition   among   producers  of  Web  site
     development and Web site server products,  including the impact of products
     that are available from some of our competitors at no cost.

     These  variations  may  also be  caused  by  other  factors  affecting  our
business,  many  of  which  are  substantially  outside  of the  control  of our
management, including:

o    Costs associated with future litigation,  including  litigation relating to
     the use or ownership of intellectual property;

o    Acquisition  costs or other  non-recurring  charges in connection  with the
     acquisition of companies, products or technologies;

o    Foreign  currency  and  exchange  rate  fluctuations  which  may  make  our
     dollar-denominated  products  more  expensive  in foreign  markets or could
     expose  us  to  currency  rate  fluctuation   risks  if  our  sales  become
     denominated in foreign currencies; and

o    General global economic  conditions  which could adversely  affect sales to
     our customers.

We  may  not  be  able  to  compete  successfully  against  current  and  future
competitors.

     We sell  products and services in markets that are highly  competitive.  We
expect competition to intensify as current  competitors expand their product and
service offerings and new competitors enter the market. Increased competition is
likely to result in price  reductions,  reduced gross margins and loss of market
share,  any one of which could seriously harm our business.  Competitors vary in
size, scope and breadth of the products and services offered.

     In the DSL router market,  we primarily  encounter  competition  from 3Com,
Lucent  Technologies,   Cayman  Systems,   Cisco  Systems,   Efficient  Networks
(FlowPoint),  Ramp  Networks and several other  companies.  In addition to these
competitors,  there  have  been a  growing  number  of  announcements  by  other
companies  that they  intend  to enter  the DSL  router  market.  Further,  some
competitors  offer low-cost or no-cost support  programs that are similar to our
"Up & Running, Guaranteed!" program.

     In the market for Web sites and electronic commerce platforms, we encounter
competition  primarily  from  Homestead  Technologies,  IBM, Inc.  Online,  Site
Architects,  Sitematic,  Verio,  Yahoo!Geocities and several other companies. In
the  market  for our  remote  control  and  enterprise  software,  we  primarily
encounter  competition  from  Computer  Associates,  Intel,  Microcom  (Compaq),
Microsoft,  Vector Networks, Stac Software,  Symantec,  Tivoli Systems (IBM) and
several other companies.  We anticipate  intense  competition from some of these
companies because some of these competitors  provide their products to consumers
at no cost. For example, Microsoft has available at no cost a communications and
collaboration software product that could limit the market for Timbuktu Pro.

     Many of our current and  potential  competitors  in all three product areas
have longer operating  histories,  significantly  greater financial,  technical,
marketing and other  resources,  significantly  greater name

                                       17
<PAGE>

recognition and a larger base of customers than we do. In addition,  many of our
customers  have  well-established  relationships  with our current and potential
customers and have extensive knowledge of these industries. In the past, we have
lost  potential  customers to competitors in all three product areas for various
reasons,  including  lower  prices and other  incentives  not  matched by us. In
addition,  current and potential  competitors  have established or may establish
cooperative relationships among themselves or with third parties to increase the
ability of their products and services to address  customer needs.  Accordingly,
new  competitors or alliances  among  competitors may emerge and rapidly acquire
significant  market share.  We also expect that  competition  will increase as a
result of industry consolidation.

We need to develop,  introduce and market new and enhanced  products in a timely
manner to remain competitive.

     We  compete   in  markets   characterized   by   continuing   technological
advancement,  changes in customer  requirements and evolving industry standards.
To compete successfully,  we must design,  develop,  manufacture and sell new or
enhanced  products  that  provide  increasingly  higher  levels of  performance,
reliability and  compatibility.  For example,  we anticipate that voice over DSL
technology will become an important feature of future DSL router products.  As a
result,  we believe we will need to successfully  develop,  introduce and market
voice over DSL  functionality  in our  products.  Additionally,  we will need to
continue  to  integrate  our DSL router  technology  with the  architectures  of
leading central office equipment  providers in order to enhance the reliability,
ease-of-use and management functions of each of our DSL products. Currently, our
router  products  are  fully  integrated  with  Copper   Mountain's   CopperView
management  for  CopperEdge   central  office  access   concentrators   and  are
interoperable  with Lucent's  Stinger and Nokia's ATM/DSL D50 Speedlink  digital
subscriber line central office access concentrators. However, we may not be able
to successfully  develop,  introduce,  enhance or market these or other products
necessary  to  our  future  success.  In  addition,  any  delay  in  developing,
introducing  or  marketing  these or other  products  would  seriously  harm our
business.

We may engage in  acquisitions  or  divestitures  that involve  numerous  risks,
including the use of cash and the diversion of management attention.

     In the past, we have engaged in both  acquisitions  and  divestitures.  For
example,  in August 1998,  we sold our LAN  Division,  which  developed and sold
local area  network  (LAN)  products.  We may  continue  to  acquire  companies,
technologies or products or to sell or discontinue  some of our  technologies or
products in future periods.  In the past, our acquisitions and divestitures have
involved numerous risks,  including the use of significant  amounts of our cash,
diversion of the attention of our management from our core business, loss of our
key employees and significant expenses and write-offs.  For example, in December
1998, we acquired  netOctopus and Serus and in October 1999, we acquired StarNet
Technologies, Inc. The success of these acquisitions depends upon our ability to
timely and successfully develop,  manufacture and gain market acceptance for the
products we acquired. If we engage in additional acquisitions or divestitures in
future  periods,  we may not be able to address these risks and our business may
be harmed.

We may  experience  declining  gross  margins  due to price  competition  and an
increase in sales of lower margin  Internet  equipment  as a  percentage  of our
total revenue.

     We expect  that sales of our  Internet  equipment  may account for a larger
percentage of our total revenues in future  periods.  Because these products are
generally sold at lower gross margins than our Web platform products,  this will
likely result in a decrease in our overall  gross  margins.  Further,  we expect
that the market for Internet equipment,  in particular DSL products, will become
increasingly  competitive  and that we will be  forced  to lower  the  prices we
charge for our Internet equipment in the future. As the average selling price of
our  routers  declines,  our gross  margins  related  to such  products,  and in
general, are likely to decline.

                                       18
<PAGE>

The loss of, or decline in,  purchases by one or more of our key distributors or
customers would result in a significant decline in our revenues.

     Our revenues  will  decline and our losses will  increase if we lose one or
more of our significant  customers or if our customers reduce or delay purchases
of our products.  During the three months ended  December 31, 1999, our top four
customers who each  individually  represented  at least 5% of our total revenues
accounted for approximately 33% of our total revenues as a group,  respectively.
In this period, sales to Northpoint Communications represented approximately 12%
of our total revenues.

Our limited  operating  history in DSL Internet  equipment makes it difficult to
evaluate our prospects.

     Our DSL Internet  equipment has only recently been  introduced.  You should
consider our prospects in light of the  difficulties  we may  encounter  because
these products are at an early stage of development in a relatively new, rapidly
evolving and intensely  competitive  market.  For example,  we may not correctly
anticipate market requirements,  including requirements for performance,  price,
features  and  compatibility  with  other DSL  equipment.  We may not be able to
rapidly introduce  innovative new products that meet these market  requirements.
It is possible  that the market for DSL  Internet  equipment  will  develop in a
manner that we do not anticipate.  Our competitors have introduced DSL products,
some  of  which  may  compete  effectively   against  our  DSL  products.   Such
developments could render our DSL products obsolete.

Our revenues will not grow and our losses will increase if we cannot continue to
successfully introduce, market and sell our DSL Internet equipment.

     A substantial  portion of our revenues  from Internet  equipment is derived
from  non-DSL  routers.  We  anticipate  that in the  future the market for such
non-DSL  products  will  decrease  and that sales of our non-DSL  products  will
decline as a percentage of our total  revenues.  Accordingly,  our revenues will
not grow if we are  unable to  continue  to  introduce,  market and sell our DSL
Internet equipment.

Sales  of our DSL  Internet  equipment  will  decline  substantially  if  Copper
Mountain and Nokia DSL equipment is not widely deployed.

     We are  dependent  on the  selection  of  Copper  Mountain  and  Nokia  DSL
equipment  by  telecommunications  service  providers  that  are  deploying  DSL
services. Historically,  substantially all of our sales of DSL routers have been
for use with DSL equipment  manufactured  by Copper Mountain  Networks.  We have
recently  introduced  our DSL  routers for use with DSL  central  office  access
concentrators  manufactured  by Nokia. If Copper Mountain or Nokia DSL equipment
is not widely used in DSL deployments, our business will be seriously harmed.

Substantial  sales  of  our  DSL  Internet   equipment  will  not  occur  unless
telecommunications  service  providers  initiate  substantial  deployment of DSL
services.

     The  success  of  our  DSL   Internet   equipment   depends   upon  whether
telecommunications service providers deploy DSL technologies and upon the timing
of the deployment of such technologies. Factors that will impact such deployment
include:

o    A prolonged  approval process by service  providers,  including  laboratory
     tests,  technical trials,  marketing trials,  initial commercial deployment
     and full commercial deployment;

o    The development of a viable business model for DSL services,  including the
     capability to market, sell, install and maintain DSL services;

o    Cost  constraints,   such  as  installation   costs  and  space  and  power
     requirements at the telecommunications service provider's central office;

                                       19
<PAGE>

o    Lack of  compatibility  of DSL  equipment  that is  supplied  by  different
     manufacturers;

o    Evolving industry standards for DSL technologies; and

o    Government regulation.

     If  telecommunications  service providers do not expand their deployment of
DSL  services,  or if additional  telecommunications  providers do not offer DSL
services on a timely basis, then our business,  financial  condition and results
of operations will be seriously harmed.

Other  technologies  for the high-speed  Internet  equipment market will compete
with DSL services.

     DSL services are competing with a variety of different  high-speed Internet
connectivity  technologies,  including cable modem, satellite and other wireless
technologies.  Many of these  technologies  will  compete  effectively  with DSL
services.  If any  technology  competing  with DSL  technology is more reliable,
faster, less expensive,  reaches more customers or has other advantages over DSL
technology,  then the demand for our  products and services and our revenues and
gross margins may decrease.

We depend upon the ability of emerging  competitive  telecommunications  service
providers  to  compete  effectively  with  traditional  telephone  companies  in
providing DSL services.

     The  purchasers  of our  DSL  Internet  equipment  are  primarily  emerging
competitive    telecommunications   service   providers   such   as   NorthPoint
Communications  and Covad  Communications.  We depend  upon the  ability of such
competitive  telecommunications  service  providers  to  successfully  offer DSL
services. These competitive  telecommunications  service providers are competing
with traditional  regional telephone  companies.  Traditional regional telephone
companies  may  have  a  number  of  competitive   advantages   over  their  new
competitors,  including  greater  resources,  name  recognition  and  access  to
customers.  Also,  traditional  regional  telephone  companies may restrict,  or
attempt to  restrict,  the  ability of  competitive  telecommunications  service
providers to install DSL equipment at the regional telephone  companies' central
offices.

We purchase the  semi-conductor  chips for our DSL routers from a limited number
of suppliers.

     All of our  DSL  routers  rely  on  certain  semi-conductor  chips  that we
purchase  from a limited  number of  suppliers.  We do not have volume  purchase
contracts  with any of our  suppliers  and they  could  cease  selling  us these
semi-conductor chips at any time. If we are unable to timely obtain a sufficient
quantity of these  semiconductor chips from any of our suppliers for any reason,
sales of our DSL routers could be delayed or halted.  Further,  we could also be
forced to redesign our DSL routers and qualify new  suppliers  of  semiconductor
chip sets.  The  resulting  stoppage  or delay in selling our  products  and the
expense of redesigning  our DSL routers would  seriously harm our reputation and
business.

Substantially  all of our circuit boards are  manufactured  by SMTC  Corporation
(SMTC), a contract manufacturer.

     Substantially all of our Internet equipment include circuit boards that are
manufactured by SMTC which recently acquired Hi-Tech Manufacturing,  or HTM, our
former  contract  manufacturer.  Additionally,  certain of our DSL  routers  are
assembled  and  packaged by SMTC.  If supplies of circuit  boards or DSL routers
from SMTC are interrupted for any reason, we will incur significant losses until
we can arrange for alternative sources. Any such interruption may seriously harm
our reputation and business.

                                       20
<PAGE>

We  may  be  unable  to  obtain  components  for  our  Internet  equipment  from
independent contractors and specialized suppliers.

     We do not  manufacture  any of the  components  used  in our  products  and
perform only limited  assembly on some products.  All of our Internet  equipment
rely on components that are supplied by independent  contractors and specialized
suppliers.  We generally do not have guaranteed  supply  arrangements with these
third-parties  and  they  could  cease  selling  components  to us at any  time.
Moreover,  the ability of independent  contractors and specialized  suppliers to
provide us with  sufficient  router  components  also  depends on our ability to
accurately forecast our future requirements. If we are unable to timely obtain a
sufficient   quantity  of  components  from  the   independent   contractors  or
specialized  suppliers for any reason,  sales of our Internet equipment could be
delayed or halted.  Further,  we could also be forced to redesign  our  Internet
equipment and qualify new  suppliers of  components.  The resulting  stoppage or
delay in selling  our  products  and the  expense of  redesigning  our  Internet
equipment  would  seriously harm our reputation  and business.  In addition,  we
anticipate  that it will be  necessary  for us to establish  relationships  with
additional  component  suppliers  in  the  future.  If we  are  unsuccessful  in
establishing  these  relationships,  we may  not be able  to  obtain  sufficient
components in some future period.

Our  revenues  will  not  grow  and  our  losses  will  increase  if  we  cannot
successfully introduce, market and sell our Web platform.

     A  substantial  majority of revenues  from our Web platform is derived from
the sale of  Timbuktu  Pro.  We  anticipate  that in the  future  the market for
Timbuktu  Pro will grow  more  slowly  than the  market  for other Web  platform
products and services.  In addition, we rely on licensees of our Web platform to
promote  the use of our Web  platform  for  building  Web sites.  The extent and
nature of the  promotions  by  licensees  of our Web platform are outside of our
control.  If licensees of our Web platform do not success  fully promote our Web
platform,  we will not generate  recurring  revenues from royalties on Web sites
promoted by licensees of our Web platform.

The market for our Web platform may be limited by products and services that are
available at no cost.

     Some  companies  are offering Web presence and  enhancement  products at no
cost. In some  instances,  we believe these  companies are not charging for such
products and services  because they are generating  revenue from their Web sites
from other  sources,  such as  advertising  or  subscription  fees. If such free
products  and  services  become  widely  used,  the market for our Web  platform
products will be limited.

To be successful,  use of our Web platform must become widespread, and this will
require us to rapidly build our sales channel, which we may be unable to do.

     Growth in  revenues  from our Web  platform  will be heavily  dependent  on
recurring  fees  from  Web  sites  created  by  licensees.  Accordingly,  to  be
successful,  our Web  platform  must  become  widely  used.  The sales cycle for
licensing  our Web  platform  can be long.  We will be  required  to  build  our
internal sales  organization and customer  support  organization to increase the
number of licensees of our Web platform.  Because the market for technical sales
and support  personnel is intensely  competitive,  growing our sales and support
organization  may be  difficult.  If we are  unable  to  rapidly  establish  the
widespread use of our Web platform, it is possible that competing products could
become widely used,  reducing the likelihood  that we will generate  significant
revenues from our Web platform.

If hosting services for our Web platform perform poorly,  our reputation will be
damaged and we could be sued.

     We depend on our servers,  networking hardware and software infrastructure,
and  third-party  service and  maintenance  of these items to provide  reliable,
high-performance Web site hosting services for our customers.  In addition,  our
servers are located at third-party  facilities.  Failure or poor  performance by

                                       21
<PAGE>

the third  parties with which we contract to maintain our servers,  hardware and
software,  could lead to interruption or  deterioration  of our Web site hosting
services.  Additionally, a slowdown or failure of our systems due to an increase
in the use of the Web sites we currently  host, or due to damage or  destruction
of our systems for any reason,  could also lead to interruption or deterioration
of our Web site hosting services. If there is an interruption or a deterioration
of our Web site hosting services,  our reputation would be seriously harmed and,
consequently,  sales  of our  products  and  services  would  decrease.  If such
circumstances  do arise in some  future  period,  in  order  to  retain  current
customers and attract new customers, we may have to provide our Web site hosting
services at a subsidized price or even at no cost. In addition,  if our Web site
hosting services are interrupted,  perform poorly, or are unreliable,  we are at
risk of litigation from our customers.

We license a  substantial  portion of our  Timbuktu  Pro  software  to a limited
number of large customers and these licenses have a lengthy sales cycle.

     A volume  license of our  Timbuktu  Pro  software  involves  a  significant
commitment of financial resources by our customers. As a result, volume licenses
of our Timbuktu Pro software  have a long sales cycle,  and in the past, we have
only sold volume  licenses of our  Timbuktu  Pro  software to a small  number of
large customers each quarter.  Further, volume license sales of Timbuktu Pro are
typically  closed  in the final  weeks of the  quarter  and the  timing of these
licenses may cause our quarterly results to vary. We generally incur significant
expenses in sales and marketing prior to obtaining customer  commitments for the
volume licenses of our Timbuktu Pro software.  As a result, our inability to get
customer  commitments  or delays in such  commitments  due to the lengthy  sales
cycles would reduce our revenues and cause our losses to increase.

A  substantial  portion  of  our  revenues  come  from  sales  to  international
customers.

     A  substantial  portion of our  revenues  come from sales to  international
customers.  We expect sales to international customers to continue to comprise a
significant portion of our revenues. While our international sales are typically
denominated in United States dollars,  fluctuations  in currency  exchange rates
could cause our products and services to become relatively more expensive to our
foreign  customers.  This could lead to decreased  profitability of our products
and services.

We  typically  experience  a seasonal  reduction in revenues in the three months
ended September 30.

     In the past, we have  experienced  a seasonal  reduction in our revenues in
the  three  months  ended  September  30,  primarily  due to  European  vacation
schedules which typically result in reduced  economic  activity in Europe during
such periods. We anticipate that this trend will continue.

The  proceeds  we expect to receive  for the sale of our LAN  Division  could be
affected by its future performance under the new owner.

         In  connection  with the sale of our LAN  Division  in  August  1998 to
Farallon Communications, or Farallon, an affiliate of Gores Technology Group, or
Gores,  we received  consideration  which  included  (i) a two year $1.0 million
promissory  note from  Farallon,  guaranteed  by Gores,  and (ii)  royalties  on
Farallon's  revenues for a period of five years which are currently  recorded on
our balance  sheet as an amount  receivable  of $537,000.  Because a substantial
portion of Farallon's products are designed for products sold by Apple Computer,
or Apple,  the ability of the buyer to make these payments depends in large part
upon the market for Apple's products.

Our  success  depends on  retaining  our current key  personnel  and  attracting
additional key personnel.

         Our future  performance  depends on the continued service of our senior
management,  product development and sales personnel,  particularly Alan Lefkof,
our President and Chief Executive Officer. None of these persons,  including Mr.
Lefkof, is bound by an employment agreement, and we do not carry key person life
insurance.  The loss of the services of one or more of our key  personnel  could
seriously

                                       22
<PAGE>

harm our  business.  Our future  success  depends on our  continuing  ability to
attract,  hire,  train  and  retain  a  substantial  number  of  highly  skilled
managerial,  technical,  sales,  marketing and customer  support  personnel.  In
addition,  new hires frequently  require extensive  training before they achieve
desired levels of productivity.  Competition for qualified personnel is intense,
and we may fail to retain our key employees or to attract or retain other highly
qualified personnel.

Our intellectual property may not be adequately protected,  and our products may
infringe upon the intellectual property rights of third parties.

     We depend on our ability to develop and maintain the proprietary aspects of
our technology.  To protect our proprietary  technology,  we rely primarily on a
combination  of  contractual  provisions,   confidentiality  procedures,   trade
secrets, and patent, copyright and trademark law.

     Despite our efforts to protect our proprietary rights, unauthorized parties
may attempt to copy aspects of our products or obtain and use  information  that
we  regard  as  proprietary.  Policing  unauthorized  use  of  our  products  is
difficult,  and there is no guarantee  that the  safeguards  that we employ will
protect our intellectual property and other valuable competitive information.

     For example, in selling our Timbuktu Pro software, we often rely on license
cards  that are  included  in our  products  and are not  signed  by  licensees.
Therefore,  such  licenses  may be  unenforceable  under  the  laws  of  certain
jurisdictions.  In  addition,  the  laws of some  foreign  countries  where  our
products are or may be manufactured or sold,  particularly  developing countries
including  various countries in Asia, such as the People's Republic of China, do
not protect our proprietary rights as fully as do the laws of the United States.

     We rely upon  certain  software,  firmware  and  hardware  designs  that we
license from third  parties,  including  firmware  that is  integrated  with our
internally developed firmware and used in our products to perform key functions.
We cannot be  certain  that  these  third-party  licenses  will  continue  to be
available to us on commercially  reasonable  terms. The loss of, or inability to
maintain,  such licenses  could result in shipment  delays or  reductions  until
equivalent  firmware is developed,  identified,  licensed and  integrated  which
would seriously harm our business.

Our customers may return our products to us for replacement or refund.

     We provide end users of our products with a 90-day limited  warranty on our
Timbuktu Pro software and a one-year limited warranty on our Internet equipment.
In  addition,  we provide end users of our Web sites a free 30-day  trial period
after which time end users can cancel at no cost.  We permit end users to return
our  Internet  connectivity  equipment,  Timbuktu Pro software and Web sites for
replacement  or refund of the full purchase price if the products do not perform
as warranted.  If a substantial portion of our customers return our products for
replacement or refund,  we will lose revenue and our business could be seriously
damaged.

Our products are complex and may contain undetected or unresolved defects.

     Our products are complex and may contain  undetected or unresolved  defects
when first  introduced  or as new versions are  released.  We cannot  assure you
that,  despite our  testing,  defects  will not be found in new  products or new
versions of products following  commercial  release.  If our products do contain
undetected or unresolved defects, we may lose market share, experience delays in
or losses of market  acceptance  or be  required to issue a product  recall.  In
addition,  we would be at risk of product liability  litigation for financial or
other damages to our customers  because of defects in our products.  Although we
attempt to limit our  liability  to end users  through  disclaimers  of special,
consequential and indirect damages and similar provisions,  we cannot assure you
that such limitations of liability will be legally enforceable.

                                       23
<PAGE>

Substantial sales of our common stock by our large  stockholders could cause our
stock price to fall.

     We have a limited number of  stockholders  that hold a large portion of our
common stock. To the extent our large  stockholders sell substantial  amounts of
our common  stock in the public  market,  the market  price of our common  stock
could fall.

Our industry may become subject to changes in tariffs and regulations.

     Our industry and industries that our business depends on may be affected by
changes in tariffs and regulations. For example, we depend on telecommunications
service providers for sales of our DSL Internet equipment,  and companies in the
telecommunications  industry  must  comply  with  numerous  regulations  and pay
numerous tariffs. If our industry or industries that we depend on become subject
to increases in tariffs and regulations that lead to corresponding  increases in
the cost of doing our business or doing  business  with us, our  revenues  could
decline. For example, if a regulatory agency imposed restrictions on DSL service
that were not also imposed on other forms of  high-speed  Internet  access,  our
business could be harmed.

Our California facilities are located near major earthquake fault lines.

     Our California facilities are located near major earthquake fault lines. If
there is a major  earthquake  in the region,  our  business  could be  seriously
harmed.

We may find it  difficult  to raise  needed  capital in the future,  which could
significantly harm our business.

         We may require  substantial  capital to finance  our future  growth and
fund our ongoing  research and  development  activities  beyond fiscal 2000. Our
capital requirements will depend on many factors, including:

     o    Acceptance of and demand for our products;

     o    The number and timing of acquisitions;

     o    The costs of developing new products;

     o    The costs associated with our expansion; and

     o    The  extent to which we  invest in new  technology  and  research  and
          development projects.

     If we issue  additional  stock or other  instruments to raise capital,  the
percentage  ownership  in Netopia of  existing  stockholders  would be  reduced.
Additional  financing may not be available when needed and, if such financing is
available, it may not be available on terms favorable to us.

Our stock price may be volatile,  which may result in substantial losses for our
stockholders.

     The  market  price of our  common  stock  may  fluctuate  significantly  in
response to the following factors, some of which are beyond our control:

     o    Variations in our quarterly operating results;

     o    Changes  in   securities   analysts'   estimates   of  our   financial
          performance;

     o    Changes in market valuations of similar companies;

                                       24
<PAGE>

     o    Announcements  by us or  our  competitors  of  significant  contracts,
          acquisitions,   strategic  partnerships,  joint  ventures  or  capital
          commitments;

     o    Losses of major  customers  or the  failure  to  complete  significant
          licensing transactions;

     o    Additions or departures of key personnel; and

     o    Fluctuations  in  the  stock  market  price  and  volume,   which  are
          particularly  common among highly volatile  securities of companies in
          our industry.

We are at  risk  of  securities  class  action  litigation  due to the  expected
volatility of our stock price.

     In the past,  securities  class  action  litigation  has often been brought
against a company  following  periods of  volatility  in the market price of its
securities.  We may in the future be a target of similar litigation.  Securities
litigation could result in substantial costs and divert  management's  attention
and resources.

A third  party  may  have  difficulty  acquiring  us,  even if doing so would be
beneficial to our stockholders.

     Provisions of our Amended and Restated  Certificate of  Incorporation,  our
Bylaws and Delaware law could make it difficult for a third party to acquire us,
even if doing so would be beneficial to our stockholders.

Liquidity and Capital Resources

     We have funded our operations to date primarily through the private sale of
equity  securities  and the initial public  offering of our common stock.  As of
December 31, 1999, we had cash,  cash  equivalents  and  short-term  investments
representing 53% of total assets.

     Our  operating  activities  used $1.0  million of cash for the three months
ended December 31, 1999 and $3.5 million for the three months ended December 31,
1998.  The cash used by operations  in the three months ended  December 31, 1999
was primarily due to supporting our operating activities as well as the increase
in  accounts  receivable  and  inventories,  partially  offset by an increase in
accounts  payable and accrued  liabilities.  The cash used by  operations in the
three  months  ended  December  31, 1998 was  primarily  due to  supporting  our
operating  activities  as well as the  increase in accounts  receivable  and the
reduction of accounts payable and accrued liabilities related to the sale of our
LAN Division.

     Cash used in investing  activities  for the three months ended December 31,
1999 was primarily due to:

     o    Purchases of short-term investments; and

     o    The acquisition of StarNet.

     Cash provided by investing  activities  for the three months ended December
31, 1998 was primarily  due to proceeds from the sale of short-term  investments
partially offset by:

     o    Purchases of short-term investments; and

     o    The acquisitions of Serus and netOctopus.

     Cash  provided  by our  financing  activities  for the three  months  ended
December  31, 1999 and 1998 was  primarily  related to the  exercise of employee
stock options.

                                       25
<PAGE>

     Although we believe that our existing cash balance will decrease moderately
during the remainder of fiscal 2000 as a result of increased operating expenses,
we believe that our existing cash, cash  equivalents and short-term  investments
will  be  adequate  to  meet  our  cash  needs  for  working  capital,   capital
expenditures  and  earnouts  related to our  acquisitions  for at least the next
twelve months. We may require  substantial  capital to finance our future growth
and fund our ongoing research and development activities during the remainder of
fiscal 2000 and thereafter.  If we issue additional stock to raise capital,  the
percentage  ownership  in Netopia of  existing  stockholders  would be  reduced.
Additional  financing may not be available when needed and, if such financing is
available, it may not be available on terms favorable to us.

     From time to time,  in the  ordinary  course of  business,  we may evaluate
potential acquisitions of businesses, products and technologies.  Accordingly, a
portion of our cash may be used to acquire or invest in complementary businesses
or products,  to obtain the right to use complementary  technologies,  to obtain
additional  presence on the Internet or to support  additional  advertising  and
promotional  campaigns.  In the past, our  acquisitions  and  divestitures  have
involved numerous risks,  including the use of significant  amounts of our cash,
diversion of the attention of our management from our core business, loss of our
key employees and significant expenses and write-offs.  For example, in December
1998, we acquired netOctopus and Serus and in October 1999, we acquired StarNet.
The  success  of these  acquisitions  depends  upon our  ability  to timely  and
successfully develop, manufacture and gain market acceptance for the products we
acquired.  If we engage in additional  acquisitions  or  divestitures  in future
periods,  we may not be able to  address  these  risks and our  business  may be
harmed.

     Item 3. Quantitative and Qualitative Disclosures About Market Risk

     Our exposure to market risk for changes in interest rates relates primarily
to our investment portfolio.  We do not use derivative financial instruments for
speculative or trading  purposes.  We place our investments in instruments  that
meet high credit quality standards,  as specified in our investment policy. This
policy  also limits the amount of credit  exposure to any one issue,  issuer and
type of  instrument.  We do not expect  any  material  loss with  respect to our
investment portfolio.

     The table below  presents the carrying  value and related  weighted-average
interest rates for our  investment  portfolio.  The carrying value  approximates
fair value at December 31, 1999. All of our investments  mature in twelve months
or less.

<TABLE>
<CAPTION>
                                                                  Carrying                Average
 Principal (notional) amounts in United States dollars:            Amount              Interest Rate
------------------------------------------------------------------------------------------------------
                                                               (in thousands)
<S>                                                             <C>                         <C>
 Cash equivalents - fixed rate.............................     $    9,150                  6.00%
 Short-term investments - fixed rate.......................                                 5.84%
                                                                    32,918
                                                                -------------

                                                                $   42,068
                                                                =============
</TABLE>

                                       26
<PAGE>


PART II.      OTHER INFORMATION

Item 2.  Changes in Securities and Use of Proceeds

     On October 13, 1999 we issued 447,852 shares of our Common Stock as partial
consideration for the acquisition of StarNet  Technologies,  Inc. In addition to
the issuance of the Common Stock,  the  consideration  we paid included (i) $8.4
million in cash paid on the closing  date of the  transaction;  (ii) a series of
potential cash earnout payments  aggregating up to approximately $5.9 million at
various times after the closing date if certain technical and revenue milestones
are achieved;  and; (iii) the  substitution  of stock options to purchase 39,311
shares  of our  Common  Stock in  replacement  of the  StarNet  options  held by
StarNet's  former  employee,  who joined  Netopia  after the closing,  valued at
approximately  $1.4 million.  The shares were issued in reliance on Section 4(2)
of the  Securities  Act and/or Rule 506 of  Regulation D  promulgated  under the
Securities  Act,  in part  based on the  limited  number  and the  nature of the
StarNet shareholders.

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

(a)      Exhibits

27.1     Financial Data Schedule

(b)      Reports on Form 8-K

     On October 28, 1999, we filed a Form 8-K, with  disclosures made under Item
2 "Acquisition of Securities" and Item 7 "Financial Statements and Exhibits," in
connection with our acquisition of StarNet Technologies, Inc.

     On December 28, 1999, we filed a Form 8-K/A,  with disclosures under Item 5
"Registrants'  Audited Consolidated  Financial Statements" and Item 7 "Financial
Statements and Exhibits," in connection  with our acquisition of StarNet and the
filing of certain other financial information.

     The financial statements filed under Item 5 were:

     o    Netopia,  Inc.  and  Subsidiaries  consolidated  balance  sheets as of
          September 30, 1999 and 1998;

     o    Netopia, Inc. and Subsidiaries  consolidated  statements of operations
          for the years ended September 30, 1999, 1998 and 1997;

     o    Netopia,   Inc.   and   Subsidiaries    consolidated   statements   of
          stockholders'  equity for the years ended September 30, 1999, 1998 and
          1997;

     o    Netopia, Inc. and Subsidiaries  consolidated  statements of cash flows
          for the years ended September 30, 1999, 1998 and 1997; and

     o    Netopia, Inc. and Subsidiaries notes to consolidated statements.

     The financial statements filed under Item 7 were:

     o    StarNet Technologies, Inc. balance sheets as of September 30, 1999 and
          1998;

     o    StarNet  Technologies,  Inc.  statements of  operations  for the years
          ended September 30, 1999 and 1998;

                                       27
<PAGE>

     o    StarNet   Technologies,   Inc.  statements  of  stockholders'   equity
          (deficit) for the years ended September 30, 1999 and 1998;

     o    StarNet  Technologies,  Inc.  statements  of cash  flows for the years
          ended September 30, 1999 and 1998; and

     o    StarNet Technologies, Inc. notes to financial statements.

     The financial statements filed under Item 7(b) were:

     o    Netopia,  Inc. and Subsidiaries  unaudited pro forma condensed balance
          sheet as of September 30, 1999; and

     o    Netopia,   Inc.  and   Subsidiaries   unaudited  pro  forma  condensed
          consolidated  statement of operations for the year ended September 30,
          1999.

                                       28
<PAGE>

SIGNATURE
--------------------------------------------------------------------------------

     Pursuant to the  requirements  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.

Date:  February 14, 2000                        NETOPIA, INC.

                                        (Registrant)



                                        By:  /s/ James A. Clark
                                             -----------------------------------
                                             James A. Clark
                                             Vice President and Chief Financial
                                               Officer (Duly Authorized Officer
                                               and Principal Financial Officer)