UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
                                         

FORM 10-Q


QUARTERLY REPORT PURSUANT TO SECTION 13 OR
 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1997
OR

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

For the transition period from ________ to ________


Commission file number 0-28450

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


Delaware

94-3033136
(State or other jurisdiction of
incorporation or organization)

(I.R.S. Employer
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 check  X 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 August 1, 1997 there were 11,471,121 shares of the
 Registrant's common stock outstanding.




FARALLON COMMUNICATIONS, INC.

FORM 10-Q

INDEX



PART I.	FINANCIAL INFORMATION	                        PAGE

Item 1.	Condensed Financial Statements		              
Condensed Condolidated Balance Sheets
at September 30, 1996 and June 30, 1997      		               3

Condensed Consolidated Statements of Operations 
for the three and nine months ended June 30, 1996 and 1997    4		

Condensed Consolidated Statements of Cash Flows 
for the nine months ended June 30, 1996 and 1997	           	 5

Notes to Condensed Consolidated Financial Statements	         6	
Item 2.	Management's Discussion and Analysis of 
Financial Condition and Results of Operations                 7

PART II.	OTHER INFORMATION

Item 6.	Exhibits and Reports on Form 8-K                   		25

SIGNATURE                                                    26

INDEX TO EXHIBITS		                                          27








PART I.  FINANCIAL INFORMATION

Item 1.  Condensed Financial Statements

FARALLON COMMUNICATIONS, INC. AND SUBSIDIARY
 CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands, except share and per share amounts)

<TABLE>
<CAPTION>                            September 30, 1996         June 30, 1997
ASSETS                                                            (unaudited) 
<S>                                     <C>                            <C>
Current assets:
     Cash and cash equivalents       $  19,910                   $    16,964
     Short-term investments             17,235                        24,109  
     Trade accounts receivable, net 
      of allowances of $1,328 and 
      $1,276 at September 30, 1996 and 
      June 30, 1997, respectively       11,172                         6,920
      Inventories, net                   6,295                         5,452
      Deferred tax asset                 1,829                         1,829
      Prepaid expenses and other 
       current assets                    1,457                           782
                                       --------                      --------
	 Total current assets                  57,898                        56,056
                                       ========                       =======  
     Furniture, fixtures, and 
      equipment, net                     2,935                         2,402
    Deposits and other assets              785                           754
                                       --------                       -------  
                   Total assets  $      61,618                  $     59,212
                                        ======                        ======
                LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
     Accounts payable and 
      accrued liabilities        $       5,449                   $     3,057
     Accrued compensation                2,023                         1,612
     Deferred revenue                      787                         1,159
     Other current liabilities             170                            88
                                        --------                     --------
               Total current liabilities 8,429                          5,916
  Other long-term liabilities               46                             -
                                        -------                       -------
              Total liabilities          8,475                          5,916
  Commitments and contingencies
 Stockholders' equity:
    Preferred stock: $0.001 par value, 
      5,000,000 shares authorized; 
      none outstanding                      -                              -
    Common stock:  $0.001 par value, 
      25,000,000 shares authorized; 
      11,119,961 and 11,386,229 shares 
      issued and outstanding at 
      September 30, 1996 and June 30, 
      1997, respectively                    12                             12
  Additional paid-in capital            49,232                         49,968
  Deferred compensation	                   (81)                           (68)
  Retained earnings                      3,980                          3,384
                                       --------                       -------
        Total stockholders' equity      53,143                         53,296
                                       --------                      --------
        Total liabilities and 
         stockholders' equity      $    61,618                   $     59,212
                                        ======                         ======
</TABLE>
See accompanying notes to Condensed Consolidated Financial Statements.




FARALLON COMMUNICATIONS, INC. AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share data; unaudited)
<TABLE>
<CAPTION>


                                    Three Months Ended       Nine Months Ended
                                          June 30,                 June 30, 
                                    1996          1997       1996         1997
<S>                                 <C>           <C>        <C>          <C>
Revenues: 
   Internet/Intranet products    $ 4,614      $  5,054      $11,055   $ 14,513
   LAN products                   11,013         7,102       34,016     23,786
                                 -------        -------     --------   -------
            Total revenues        15,627        12,156       45,071     38,299
Cost of revenues:
   Internet/Intranet products      1,080         1,482        2,318      4,740
       LAN products                6,987         4,802       20,930     15,270
                                ---------       -------     --------   --------
         Total cost of revenues    8,067         6,284       23,248     20,010
                                ---------       --------    --------  ---------
            Gross profit           7,560         5,872       21,823     18,289
Operating expenses:
       Research and development    2,368         2,212        6,680      6,625
       Selling and marketing       4,044         3,600       11,622     11,308
       General and administrative    823           907        2,664      2,576
                                 ---------      -------     --------  --------
         Total operating expenses  7,235         6,719       20,966     20,509
            Operating income (loss)  325          (847)         857     (2,220)
   Other income, net                 230           507          663      1,304
                                   -------      -------      -------  ----------
 Income (loss) before income taxes   555          (340)       1,520      (916)
Income tax provision (benefit)       195          (119)      (1,721)     (320)
                                   -------      --------    ---------  ---------
            Net income (loss)     $  360       $  (221)   $   3,241   $  (596)
                                   =======       ======      ======      =====
Net income (loss) per share       $  0.03      $  (0.02)  $    0.30   $ (0.05)
                                   =======       ======      ======     ====== 
Shares used in per 
  share calculation                11,106        11,378      10,686     11,286

</TABLE>
See accompanying notes to Condensed Consolidated Financial Statements.

FARALLON COMMUNICATIONS, INC. AND SUBSIDIARY
 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands; unaudited)
<TABLE>
<CAPTION>
                                               Nine Months Ended June 30,
                                               1996                 1997
                                              ------               ------
<S>                                             <C>                 <C>
Cash flows from operating activities:
Net income (loss)                            $ 3,241              $ (596)
Adjustments to reconcile net income (loss)
 to net cashash provided by operating 
 activities:
	Depreciation and amortization                 1,287                1,391
 Deferred taxes                               (2,254)                  -
	Amortization of deferred  compensation           -                    13
	Non-cash  compensation	                         192                    -
Changes in assets and liabilities:
 Trade accounts receivable                    (2,036)               4,252
 Inventories, net                             (2,178)                 843
 Prepaid expenses, deposits and other assets    (336)                 642
 Accounts payable and accrued liabilities     (1,390)              (2,804)
                 Other liabilities              (134)                (127)
                 Deferred revenue                515                  372
                                             --------             --------
           Net cash provided by (used in) 
            operating activities               (3,093)               3,986
                                              ---------           --------
Cash flows from investing activities:
	Purchase of short-term investments           (70,507)             (32,817)
	Proceeds from the sale of short-term 
  investments                                  74,187               25,943
	Acquisition of furniture, fixture and 
    equipment                                  (1,789)                (794)
                                              --------              --------
            Net cash provided by (used in) 
             investing activities               1,891                (7,668)
                                               -------              --------
Cash flows from financing activities:
	Proceeds from issuance of common stock, net   24,964                   736
                                             ---------               -------
            Net cash provided by financing 
             activities                        24,964                   736
                                              --------                -------
Net increase (decrease) in cash and 
 cash equivalents                              23,762                 (2,946)
Cash and cash equivalents, beginning of period 13,963                 19,910
                                             ---------             ----------
Cash and cash equivalents, end of period  $    37,725            $    16,964
                                              ========                ======  
Supplemental disclosures of cash flow information:
	Interest paid                                $    2              $       2
                                               ======                 ======= 
	Income taxes paid                        $       554             $      287
                                               ======                 =======
</TABLE>
See accompanying notes to Condensed Consolidated Financial Statements.


FARALLON COMMUNICATIONS, INC. AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1. Basis of Presentation
The unaudited condensed consolidated financial statements included herein
reflect all adjustments, consisting only of normal recurring adjustments 
which in the opinion of management are necessary to fairly present the 
Company's consolidated financial position, results of operations, and cash 
flows for the periods presented. These condensed consolidated financial 
statements should be read in conjunction with the Company's consolidated 
financial statements included in the Company's 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 
June 30, 1997 are not necessarily indicative of the results to be expected 
for any subsequent quarter or for the entire fiscal year ending September 
30, 1997.

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

                                                          September 30, 1996        June 30, 1997
<S>                                                                 <C>                             <C>
Raw materials and work in process       $         2,477                    $       2,671
Finished goods                                                  3,818                            2,781
                                                                         -------                           --------
                                                               $         6,295                    $     5,452
                                                                        =====                       ======
</TABLE>
<TABLE>
<CAPTION>
3. Furniture, Fixtures and Equipment, net (in thousands):
                                                          September 30, 1996         June 30, 1997
<S>                                                                 <C>                             <C>
Furniture, fixtures and equipment          $        11,993                    $    12,788
Accumulated depreciation and amortization     (9,058)                        (10,386)
                                                                         ---------                          ---------
                                                               $          2,935                     $      2,402
                                                                        ======                         =====
</TABLE>

4. Net Income (Loss) Per Share

		Net income per share for the three and nine months 
ended June 30, 1996 is based on the weighted average number of shares 
of common stock outstanding and dilutive common equivalent shares 
from options outstanding during the period using the treasury stock 
method and common equivalent shares from the convertible preferred 
stock using the ''as-if-converted'' method. Net loss per share for the 
three and nine months ended June 30, 1997 is based on the weighted 
average number of shares of common stock outstanding.  The inclusion of 
common equivalent shares from options outstanding during the period using 
the treasury stock method would have been antidilutive. 

		For the three and nine month periods ended June 
30, 1996 pursuant to certain SEC Staff Accounting Bulletins, 
common stock issued for consideration below the Initial Public 
offering ("IPO") price and stock options granted with exercise prices 
below the IPO price during the 12-month period prior to the date of 
the initial filing of the registration statement, even when antidilutive, 
have been included in the calculation of net income per share, using the 
treasury stock method based on the IPO filing price, as if they were 
outstanding for the entire period.
	
In February 1997, the Financial Accounting Standards Board ("FASB") 
issued Statement of Financial Accounting Standards ("SFAS") No. 128, 
"Earnings Per Share".  SFAS No. 128 requires the presentation of basic 
earnings per share ("EPS") and, for companies with complex capital 
structures, diluted EPS. SFAS No. 128 is effective for annual and 
interim periods ending after December 15, 1997.  The Company 
expects that for profitable periods basic EPS will be higher than 
primary earnings per share as the Company has historically presented. 
Diluted EPS for profitable periods will not differ materially from primary 
EPS. Computations for loss periods should not change significantly.  

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

The discussion in this Report contains forward-looking statements 
that involve risks and uncertainties.  The statements contained in 
this Report that are not purely historical are forward-looking 
statements within the meaning of Section 27A of the Securities 
Exchange Act of 1933, as amended, including statements regarding 
the Company's expectations, beliefs, intentions or strategies regarding 
the future. All forward-looking statements included in this document 
are based on information available to the Company on the date hereof, 
and the Company assumes no obligation to update any such forward-
looking statement. The Company's actual results could differ 
materially from those discussed herein.  Factors that could cause 
or contribute to such differences include, but are not limited to, 
those discussed in "Other Risk Factors That May Affect Future 
Operating Results" as well as those discussed in this section and 
elsewhere in this Report, and the risks discussed in the Company's 
other United States Securities and Exchange Commission Filings.

RESULTS OF OPERATIONS

Three Months Ended June 30, 1996 and 1997

	Revenues.  The Company's total revenues are derived from the 
sale of Internet/Intranet and local area networking ("LAN") connectivity 
products. Internet/Intranet product revenues include license revenues 
for the Company's software products, sales of Netopia Internet 
connectivity products and fees for related services as well as revenue 
from licensing its patent covering cross-platform screen-sharing 
technology. LAN products revenue is derived primarily from the sale 
of EtherWave, Fast Ethernet, Ethernet and LocalTalk compatible 
products which include the PhoneNET system network connectivity 
products, of which a substantial majority have been sold to Macintosh 
operating system ("MacOS") customers. Revenue relating to the sale 
and licensing of hardware and software products is recognized upon 
shipment of the products by the Company and service revenues are 
recognized ratably over the term of the contract. Certain of the 
Company's sales are made to customers under agreements permitting 
limited rights of return for stock balancing. Revenue is recorded net 
of an estimated allowance for returns. Any product returns or price 
decreases in the future that exceed the Company's allowances will 
adversely affect the Company's business, operating results and financial 
condition. 

        The Company's total revenues decreased 22.2% from $15.6 million 
to $12.2 million for the three months ended June 30, 1996 and 1997, 
respectively. Internet/Intranet products revenue increased 9.5% from 
$4.6 million to $5.1 million for the three months ended June 30, 1996 
and 1997, respectively. The increase in Internet/Intranet revenue was 
primarily due to increased sales of Netopia Internet connectivity 
products and revenue from the recently introduced Netopia Virtual 
Office software product which was not available during the three months 
ended June 30, 1996 as well as increased sales of the Windows versions 
of Timbuktu Pro. Netopia Internet connectivity product revenue increased 
from the same period in the prior year primarily due to sales of the 
"So-Smart" and international Netopia ISDN routers as well as an increase 
in the number of regional U.S. Internet Service Providers ("ISPs") selling 
Netopia Internet connectivity products. Neither the "So-Smart" nor 
international Netopia ISDN routers were available during the three 
months ended June 30, 1996. Revenue from the Windows versions of 
Timbuktu Pro increased primarily due to increased sales of volume 
licenses and Original Equipment Manufacturer ("OEM") licenses. 
These increases were partially offset by decreased revenue from the 
Macintosh version of Timbuktu Pro which the Company believes was 
adversely affected by the general confusion surrounding Apple Computer, 
Inc. ("Apple") and the MacOS including Apple's recently reported 
declining sales volumes of the Macintosh computers and substantial 
losses. LAN products revenue decreased 35.5% from $11.0 million to 
$7.1 million for the three months ended June 30, 1996 and 1997, 
respectively, primarily due to declining volume and average selling 
prices of EtherWave, certain Ethernet products and LocalTalk products 
partially offset by increased sales of certain other of the Company's 
Ethernet products for Macintosh clones and retrofit upgrades. The 
Company believes LAN product revenue continue to be adversely 
affected by the general confusion surrounding Apple and the MacOS 
including Apple's substantial losses as well as vendor incorporation of 
built-in Ethernet into new computers. LAN product revenue accounted 
for 70.5% and 58.4% of the Company's total revenues for the three 
months ended June 30, 1996 and 1997, respectively, while Internet/Intranet 
products revenue accounted for 29.5% and 41.6% of the Company's total 
revenues for the three months ended June 30, 1996 and 1997, respectively. 

      The Company continues to focus on the development of its 
Internet/Intranet business.  Due to price competition related to the 
Company's LAN products, the erosion of pricing premiums on MacOS 
products, Apple's continued difficulties, declining sales of MacOS 
computers, and other competitive factors, the Company expects that 
revenue from its LAN products will continue to decline.  As a result, 
the Company's future operating results are dependent upon continued 
and increasing market acceptance and penetration of its Internet/Intranet 
products and enhancements thereto, particularly in the Windows market.  
However, the Company's operating results will continue to be adversely 
affected to the extent that declines in revenues from LAN products are not 
offset by increases from other sources, such as revenues from the Company's 
Internet/Intranet products.  To date, the Company has derived a substantial 
majority of its revenue from LAN products, which represented 89% 
and 73% of total revenues for fiscal years 1995 and 1996, respectively, 
and 76% and 62% of total revenues for the nine month periods ended 
June 30, 1996 and 1997, respectively.  There can be no assurance that 
the Company's increasing focus on its Internet/Intranet products will 
offset the decline in revenues from its LAN products.  Should the 
Company's Internet/Intranet products and enhancements not continue 
to gain market acceptance, particularly in the Windows market, the 
Company's business, operating results and financial condition will by 
materially and adversely affected.

	Farallon sells its Internet/Intranet and LAN products and 
related maintenance, support and other services primarily through 
distributors, while certain products are also sold directly through 
Value Added Resellers ("VARs") and ISPs or directly by the 
Company to corporate accounts, higher education institutions and 
through the Company's website. Revenues from distributors accounted 
for 57% and 60% of total revenues for the three months ended 
June 30, 1996 and 1997, respectively. Revenues from Ingram Micro 
("Ingram") accounted for 17% and 16% of total revenues for the 
three months ended June 30, 1996 and 1997, respectively, and 
revenues from MicroWarehouse accounted for 10% and 11% of 
total revenues for the three months ended June 30, 1996 and 1997, 
respectively. No other customers have accounted for 10% or more 
of the Company's total revenues during the three months ended 
June 30, 1996 and 1997. The Company intends to continue to 
use its existing distributors, VARs and ISPs to sell the Company's 
products, to recruit additional VARs and ISPs, and pursue other 
marketing channels in the future. There can be no assurance that 
the Company's current distributors, VARs and ISPs will choose 
to or be able to market the Company's products effectively, that 
economic conditions or industry demand will not adversely affect 
these or other distribution channels, or that these distributors, 
VARs and ISPs will not devote greater resources to marketing 
products of other companies. The loss of, or a significant 
reduction in revenue from, one of the Company's distributors 
and/or ISPs could have a material adverse effect on the 
Company's business, operating results and financial condition.

	International revenues accounted for 28% and 29% of 
total revenues for the three months ended June 30, 1996 and 1997, 
respectively. The Company believes international revenues, 
both in Europe and the Pacific Rim continue to be adversely 
affected by the general confusion surrounding Apple and the 
MacOS including Apple's recently reported declining sales of 
Macintosh computers and substantial losses, partially offset 
by international sales of Netopia ISDN routers. To the extent 
that the Company continues to experience weakened international 
demand for its products such as its Timbuktu Pro and LAN 
products, the Company's business, operating results and 
financial condition would be materially adversely affected. 
The Company's international revenues are currently denominated 
in United States dollars, and revenues generated by the 
Company's distributors currently are paid to the Company in
United States dollars. The results of the Company's international 
operations may fluctuate from period to period based on global 
economic factors including, but not limited to, movements in 
currency exchange rates. Historically, movements in exchange 
rates have not materially affected the Company's total revenues. 
However, there can be no assurance that movements in currency 
exchange rates will not have a material adverse effect on the 
Company's revenues in the future.

	Gross Margin.  The Company's gross margin for Internet/Intranet 
and LAN products is affected by many factors, including pricing strategies, 
royalties paid to third parties, new versions of existing products and product 
mix. The Company's total gross margin was 48.4% and 48.3% for the three 
months ended June 30, 1996 and 1997, respectively. The Company's gross 
margin for Internet/Intranet products decreased from 76.6% to 70.7% for 
the three months ended June 30, 1996 and 1997, respectively, primarily 
due to increased sales of Netopia Internet connectivity products which 
have lower gross margins than the Company's Internet/Intranet software 
products. The Company's gross margin for LAN products decreased from 
36.6% to 32.4% for the three months ended June 30, 1996 and 1997, 
respectively, primarily due to declining sales of higher margin 
products and average selling price reductions as a result of increased 
price competition partially offset by increased sales of certain higher 
margin Ethernet products for Macintosh clones and retrofit upgrades. 
The Company expects gross margins for Internet/Intranet products to 
decrease in future periods reflecting increased sales of hardware 
products that carry lower gross margins than software products. In 
addition, the Company expects gross margins for LAN products to 
decrease in future periods primarily due to changes in product mix 
and declining average selling prices. The Company's gross margin 
has varied significantly in the past and will likely vary significantly 
in the future depending primarily on the mix of products sold by the 
Company and external market factors including but not limited to 
price competition. The Company's Internet/Intranet software products
have a higher average gross margin than the balance of the Company's 
products. Accordingly, to the extent the product mix for any particular 
quarter includes a substantial proportion of lower margin products, there 
will be a material adverse effect on the Company's business, operating 
results and financial condition. 
 
	Research and Development. Research and development expenses 
decreased from $2.4 million to $2.2 million for the three months ended 
June 30, 1996 and 1997, respectively. The decrease in research and 
development expenses is primarily due to declining tooling, recruiting 
and third party engineering expenses. Research and development 
expenses represented 15.2% and 18.2% of total revenues for the three 
months ended June 30, 1996 and 1997, respectively. The Company 
believes that it will continue to devote substantial resources to product 
development and that research and development expenses may increase 
in absolute dollars for the remainder of fiscal 1997 and into fiscal 1998. 
The Company believes its process for developing software is essentially 
completed concurrent with the establishment of technological feasibility, 
and no internal software development costs have been capitalized to date. 
The Company may enter into future development or acquisition agreements 
in which the Company may be required to capitalize the cost of certain 
software or software development.

	Selling and Marketing. Selling and marketing expenses decreased 
from $4.0 million to $3.6 million for the three months ended 
June 30, 1996 and 1997, respectively.  The decrease in selling and 
marketing expenses is primarily due to reduced print advertising and 
related expenses as the company continues to focus on electronic 
advertising efforts as well as reduced trade show related expenses, 
partially offset by increased headcount and related expenses. Selling 
and marketing expenses represented 25.9% and 29.6% of total revenues 
for the three months ended June 30, 1996 and 1997, respectively. The 
Company believes that selling and marketing expenses may increase in 
absolute dollars for the remainder of fiscal 1997 and into fiscal 1998 
primarily due to personnel related expenses and increased advertising 
and promotional activities. 

	General and Administrative. General and administrative expenses 
increased from $823,000 to $907,000 for the three months ended June 30, 
1996 and 1997, respectively. The increase in general and administrative 
expenses is primarily due to increased legal, insurance and other services 
related to being a public company partially offset by decreased third party 
contractor expenses. General and administrative expenses represented 5.3% 
and 7.5% of total revenues for the three months ended June 30, 1996 and 
1997, respectively. The Company believes that general and administrative
expenses may increase in absolute dollars for the remainder of fiscal
1997 and into fiscal 1998 as the Company adds infrastructure, such
as expenses to maintain and support the Company's web related activities, 
and incurs additional costs related to being a public company, such as 
expenses related to increased professional fees and investor relations programs.

	Other Income, net.  Other income, net, primarily represents 
interest earned by the Company on its cash equivalents and short-term 
investments.

	Provision for Income Taxes.  The effective tax rate was 35% for 
the each of three months ended June 30, 1996 and 1997. This rate differs 
from the statutory rate primarily due to state income taxes, investment 
income from tax advantaged investments and the utilization of research 
and tax credits.  

Nine Months Ended June 30, 1996 and 1997

            The Company's total revenues decreased 15.0% 
from $45.1 million to $38.3 million for the nine months ended 
June 30, 1996 and 1997, respectively. Internet/Intranet products 
revenue increased 31.3% from $11.1 million to $14.5 million for 
the nine months ended June 30, 1996 and 1997, respectively.  
The increase in Internet/Intranet revenue was primarily due to 
increased sales of Netopia Internet connectivity products and revenue
from the recently introduced Netopia Virtual Office software product 
which was not available during the nine months ended June 30, 1996 
as well as increased sales of the Windows version of Timbuktu Pro. 
Netopia Internet connectivity product revenue increased from the same 
period in the prior year primarily due to sales of the "So-Smart" and 
international Netopia ISDN routers as well as a great number of regional 
U.S. ISPs selling Netopia Internet connectivity products. Neither the 
"So-Smart" nor international Netopia ISDN routers were available 
during the nine months ended June 30, 1996. Revenue from the Windows 
versions of Timbuktu Pro increased primarily due to increased sales 
of volume licenses and OEM licenses. These increases are partially 
offset by decreased shrink wrap, volume licensing and upgrades of the 
Macintosh version of Timbuktu Pro which the Company believes 
continue to be adversely affected by the general confusion surrounding 
Apple and the MacOS including Apple's recently reported declining 
sales of Macintosh computers and substantial losses. LAN products 
revenue decreased 30.1% from $34.0 million to $23.8 million for the 
nine months ended June 30, 1996 and 1997, respectively, primarily 
due to declining volume and average selling prices of EtherWave, 
LocalTalk and certain Ethernet products partially offset by increased 
sales of certain other of the Company's Ethernet products for 
Macintosh clones and retrofit upgrades. The Company believes 
LAN products continue to be adversely affected by the general 
confusion surrounding Apple and the MacOS including Apple's 
substantial losses and vendor incorporation of built-in Ethernet 
into new computers. LAN products revenue accounted for 75.5% 
and 62.1% of the Company's total revenues for the nine months 
ended June 30, 1996 and 1997, respectively, while Internet/Intranet 
products revenue accounted for 24.5% and 37.9% of the Company's 
total revenues for the nine months ended June 30, 1996 and 1997, respectively. 

The Company continues to focus on the development of its 
Internet/Intranet business.  Due to price competition related to the 
Company's LAN products, the erosion of pricing premiums on MacOS 
products, Apple's continued difficulties, declining sales of MacOS 
computers, and other competitive factors, the Company expects that 
revenue from its LAN products will continue to decline.  As a result, 
the Company's future operating results are dependent upon continued 
and increasing market acceptance and penetration of its Internet/Intranet 
products and enhancements thereto, particularly in the Windows market.  
However, the Company's operating results will continue to be adversely 
affected to the extent that declines in revenues from LAN products are not 
offset by increases from other sources, such as revenues from the Company's 
Internet/Intranet products.  To date, the Company has derived a substantial 
majority of its revenue from LAN products, which represented 89% 
and 73% of total revenues for fiscal years 1995 and 1996, respectively, 
and 76% and 62% of total revenues for the nine month periods ended 
June 30, 1996 and 1997, respectively.  There can be no assurance that 
the Company's increasing focus on its Internet/Intranet products will 
offset the decline in revenues from its LAN products.  Should the 
Company's Internet/Intranet products and enhancements not continue 
to gain market acceptance, particularly in the Windows market, the 
Company's business, operating results and financial condition will by 
materially and adversely affected.

	Farallon sells its Internet/Intranet and LAN products and 
related maintenance, support and other services primarily through 
distributors, while certain products are also sold directly through 
VARs and ISPs or directly by the Company to corporate accounts, 
higher education institutions and through the Company's website. 
Revenues from distributors accounted for 63% and 61% of total 
revenues for the nine months ended June 30, 1996 and 1997, 
respectively. The decrease in the percentage of revenues from 
distributors is primarily due to the increasing percentage of sales 
of the Company's Internet/Intranet products, which are primarily 
sold direct by the Company and through ISPs. Revenues from 
Ingram accounted for 19% of total revenues for each of the nine 
months ended June 30, 1996 and 1997, and revenues from 
MicroWarehouse accounted for 11% and 10% of total revenues 
for the nine months ended June 30, 1996 and 1997, respectively. 
No other customers have accounted for 10% or more of the 
Company's total revenues during the nine months ended June 30, 
1996 and 1997. The Company intends to continue to use its existing 
distributors, VARs and ISPs to sell the Company's products, to 
recruit additional VARs and ISPs, and pursue other marketing 
channels in the future. There can be no assurance that the 
Company's current distributors, VARs and ISPs will choose to 
or be able to market the Company's products effectively, that 
economic conditions or industry demand will not adversely affect 
these or other distribution channels, or that these distributors, VARs 
and ISPs will not devote greater resources to marketing products of 
other companies. The loss of, or a significant reduction in revenue 
from, one of the Company's distributors and/or ISPs could have a 
material adverse effect on the Company's business, operating results 
and financial condition.

	International revenues accounted for 32% and 30% of total 
revenues for the nine months ended June 30, 1996 and 1997, 
respectively. The Company believes international revenues, 
both in Europe and the Pacific Rim, continue to be adversely 
affected by the general confusion surrounding Apple and the MacOS 
including Apple's recently reported declining sales of Macintosh 
computers and substantial losses, partially offset by international 
sales of Netopia ISDN routers. To the extent that the Company 
continues to experience weakened international demand for its 
products such as its Timbuktu Pro and LAN products, the Company's 
business, operating results and financial condition would be materially 
adversely affected. The Company's international revenues are currently 
denominated in United States dollars, and revenues generated by the 
Company's distributors currently are paid to the Company in United 
States dollars. The results of the Company's international operations 
may fluctuate from period to period based on global economic factors 
including, but not limited to, movements in currency exchange rates. 
Historically, movements in exchange rates have not materially affected 
the Company's total revenues. However, there can be no assurance that 
movements in currency exchange rates will not have a material adverse 
effect on the Company's revenues in the future.

	Gross Margin.  The Company's gross margin for Internet/Intranet 
and LAN products is affected by many factors, including pricing strategies, 
royalties paid to third parties, new versions of existing products and 
product mix. The Company's total gross margin decreased from 48.4% 
to 47.8% for the nine months ended June 30, 1996 and 1997, respectively. 
The Company's gross margin for Internet/Intranet products decreased 
from 79.0% to 67.3% for the nine months ended June 30, 1996 and 1997, 
respectively, primarily due to increased sales of Netopia connectivity 
products which have lower gross margins than the Company's 
Internet/Intranet software products. The Company also reduced the 
average selling prices of its Netopia routers due to price competition 
which contributed to declining Internet/Intranet margins. The Company's 
gross margin for LAN products decreased from 38.5% to 35.8% for the 
nine months ended June 30, 1996 and 1997, respectively, primarily 
due to declining sales of higher margin products and average selling 
price reductions as a result of increased price competition partially 
offset by increased sales of certain higher margin Ethernet products 
for Macintosh clones and retrofit upgrades. The Company expects 
gross margins for Internet/Intranet products to decrease in future 
periods reflecting increased sales of hardware products that carry 
lower gross margins than software products. In addition, the Company 
expects gross margins for LAN products to decrease in future periods 
primarily due to changes in product mix and declining average selling 
prices. The Company's gross margin has varied significantly in the past 
and will likely vary significantly in the future depending primarily on the 
mix of products sold by the Company and external market factors including 
but not limited to price competition.  The Company's Internet/Intranet 
software products have a higher average gross margin than the balance 
of the Company's products. Accordingly, to the extent the product mix for 
any particular quarter includes a substantial proportion of lower margin 
products, there will be a material adverse effect on the Company's business, 
operating results and financial condition. 
 
	Research and Development. Research and development expenses 
decreased slightly from $6.7 million to $6.6 million for the nine months 
ended June 30, 1996 and 1997, respectively. The decrease in research and 
development expenses is primarily due to decreased tooling and third party 
engineering expenses partially offset by increased headcount and related 
expenses. Research and development expenses represented 14.8% and 
17.3% of total revenues for the nine months ended June 30, 1996 and 
1997, respectively. The Company believes that it will continue to devote 
substantial resources to product development and that research and 
development expenses may increase in absolute dollars for the remainder 
of fiscal 1997 and into fiscal 1998. The Company believes its process 
for developing software is essentially completed concurrent with the 
establishment of technological feasibility, and no internal software 
development costs have been capitalized to date. The Company may 
enter into future development or acquisition agreements in which the 
Company may be required to capitalize the cost of certain software or 
software development.

	Selling and Marketing. Selling and marketing expenses 
decreased from $11.6 million to $11.3 million for the nine months 
ended June 30, 1996 and 1997, respectively. The decrease in total 
selling and marketing expenses was primarily due to decreased print 
advertising and related expenses as the Company continues to focus 
its efforts on electronic marketing partially offset by increased headcount 
and related expenses. Selling and marketing expenses represented 25.8% 
and 29.5% of total revenues for the nine months ended June 30, 1996 
and 1997, respectively. The Company believes that selling and marketing 
expenses may increase in absolute dollars for the remainder of fiscal 1997
and into fiscal 1998 primarily due to personnel related expenses and increased 
advertising and promotional activities.

	General and Administrative. General and administrative expenses 
decreased from $2.7 million to $2.6 million for the nine months ended 
June 30, 1996 and 1997 due to reduced recruiting and third party contractor 
expenses partially offset by increased expenses related to being a public 
company. General and administrative expenses represented 5.9% and 6.7% 
of total revenues for the nine months ended June 30, 1996 and 1997, respectively
 . 
The Company believes that general and administrative expenses may increase in 
absolute dollars for the remainder of fiscal 1997 as the Company adds 
infrastructure, 
such as expenses to maintain and support the Company's web related activities, 
and incurs additional costs related to being a public company, such as expenses 
related to increased professional fees and investor relations programs.

	Other Income, net.  Other income, net, primarily represents interest 
earned by the Company on its cash, cash equivalents and short-term investments.

	Provision for Income Taxes.  The effective tax rate was 35% 
(excluding a non-recurring income tax benefit recorded in the three 
months ended June 30, 1996) for the each of nine months ended June 30, 
1996 and 1997. This rate differs from the statutory rate primarily due to 
state income taxes, investment income from tax advantaged investments 
and the utilization of research and tax credits.  During fiscal 1996, the 
Company reversed a full valuation allowance that it had previously provided 
against its deferred tax assets, resulting in a non-recurring income tax benefit
of approximately $2.3 million. 

OTHER RISK FACTORS THAT MAY AFFECT FUTURE OPERATING 
RESULTS

	The Company operates in a rapidly changing environment 
that involves a number of risks, many of which are beyond the 
Company's control. The following discussion highlights some of 
these risks. The Company's actual results could differ materially 
from those discussed herein. Factors that could cause or contribute 
to such differences include, but are not limited to, those discussed in 
this section and elsewhere in this Report, and the risks discussed in 
the Company's other United States Securities and Exchange Commission 
Filings.

	Fluctuations in Quarterly Results; Future Operating Results 
Uncertain. The Company's quarterly operating results have varied 
significantly in the past and are likely to vary significantly in the future, 
for example, the Company has recently experienced quarterly losses 
and may experience a loss for the fiscal year.  The Company's results 
depend on factors such as changes in networking and communications 
technologies, price and product competition, usage of the Internet and 
developments and changes in the Internet market, the demand for the 
Company's products, demand for Apple's products, changes in pricing 
policies by the Company or its competitors, including the grant of price 
protection terms and discounts by the Company, changes in the mix of 
products sold by the Company and the resulting change in total gross 
margin, changes in the mix of channels through which the Company's 
products are offered, product enhancements and new product announcements 
by the Company and its competitors, market acceptance of new products 
of the Company or its competitors, raw material costs, write-offs of obsolete 
inventory, the size and timing of distributor and end user orders and 
purchasing
cycles, customer order deferrals in anticipation of enhancements to the 
Company's or competitors' products, customer order deferrals in anticipation 
of new MacOS product offerings and a new operating system for the 
Macintosh by Apple, customer deferrals for budgetary or other reasons, 
manufacturing delays, disruptions in sources of supply, product life cycles, 
product quality problems, personnel changes, changes in the Company's 
strategy, changes in the level of operating expenses, the timing of research 
and development expenditures, the level of the Company's international 
revenues, fluctuations in foreign currency exchange rates, general economic 
conditions, both in the United States and abroad, and economic conditions 
specific to the industries in which the Company competes, among others. The 
Company's limited Internet/Intranet operating history makes the prediction 
of future Internet/Intranet operating results difficult, if not impossible. 
Sales 
orders are typically shipped shortly after receipt and, consequently, order 
backlog at the beginning of any quarter has in the past represented only a 
small portion of that quarter's revenues. Accordingly, the Company's net 
revenues in any quarter are substantially dependent on orders booked and 
shipped during that quarter. Historically, the Company has often shipped 
and recognized a significant portion of its revenues in the last weeks, or 
even days, of a quarter. As a result, the magnitude of quarterly fluctuations 
may not become evident until late in, or after the close of a particular 
quarter. The Company typically experiences significant volume of 
shipments at the end of the quarter which may be exposed to delays 
caused by shipping halts, such as the current strike at United Parcel 
Service of America, Inc. or other factors beyond the Company's control. 
In addition, the Company recognizes revenue on products sold through 
distributors upon shipment to the distributor. Although the Company 
maintains reserves for projected returns and price decreases, there can 
be no assurance that such reserves will be adequate. The Company's 
business also has experienced seasonality in the past, largely due to customer 
buying patterns such as budgeting cycles of educational institutions that 
purchase the Company's products. There can be no assurance that the 
Company's operating results will not be affected by seasonality in the 
future or that such seasonality will occur in a manner consistent with 
prior periods. 

	The Company's expense levels are based in large part on 
expectations as to future revenues and as a result are relatively fixed 
in the short term. If revenues are below expectations in any given 
quarter, net income or loss is likely to be disproportionately affected. 
Due to all of the foregoing factors, and other factors discussed herein, 
revenues and net income or loss for any future period are not predictable 
with any significant degree of certainty. Accordingly, the Company 
believes that period-to-period comparisons of its results of operations 
are not necessarily meaningful and should not be relied upon as 
indications of future performance. There can be no assurance that the 
Company's business strategies will be successful or that the Company 
will be able to return to or sustain profitability on a quarterly or 
annual basis in the future. It is likely that in some future quarter 
the Company's operating results will be below the expectations of 
public market analysts and investors. In such event, the price of the 
Company's Common Stock would likely be materially and adversely affected.  

	Dependence on Internet/Intranet Products. The Company's 
business is substantially dependent upon continued growth in the sale 
of its Internet/Intranet products. Rapid growth in the use of the Internet 
and Intranets is a recent phenomenon. There can be no assurance that 
communication or commerce over the Internet will become widespread. 
In addition, to the extent that the Internet continues to experience 
significant growth in the number of users and level of use, there can 
be no assurance that the Internet infrastructure will continue to be 
able to support the demands placed upon it by such potential growth, 
or will not otherwise lose its utility due to delays in the development 
or adoption of new standards and protocols required to handle 
increased levels of activity, or due to increased government regulation. 
Although the Company has experienced significant percentage 
growth rates in Internet/Intranet revenues, the Company does not 
believe prior percentage growth rates are sustainable or indicative 
of future operating results for these products and services. The 
Company's limited Internet/Intranet operating history makes the 
prediction of future Internet/Intranet operating results difficult, if 
not impossible. There can be no assurance that the Company will 
increase sales of its Internet/Intranet products, that the Company's 
existing distribution channels are appropriate for the sale of its 
Internet/Intranet products or that sales of such products will reach 
levels significant enough to offset expected declines in sales, average 
selling prices and gross margins of the Company's LAN products. 
Accordingly, the failure of the Company's Internet/Intranet products to 
gain market acceptance or to achieve significant sales would materially 
and adversely affect the Company's business, operating results and 
financial condition. The markets in which the Company competes 
currently are subject to intense price competition and the Company 
expects additional price and product competition as other established 
and emerging companies enter these markets and new products and 
technologies are introduced. Increased competition may result in further 
price reductions, reduced 
gross margins and loss of market share, any of which could materially 
adversely affect the Company's business, operating results and financial 
condition. 

	Dependence on LAN Products; Declining LAN Business. To 
date, the Company has derived a substantial majority of its revenue from 
LAN products, which represented 89% and 73% of total revenues for 
fiscal years 1995 and 1996, respectively, and 76% and 62% of total 
revenues for the nine month periods ended June 30, 1996 and 1997, 
respectively. These products have experienced variable average 
selling prices and gross margins, and declining sales volumes. The 
Company anticipates that the average selling prices and gross margins 
of its existing LAN products will continue to decline. Accordingly, to 
the extent the product mix for any particular period includes a 
substantial proportion of LAN products, the Company's total gross 
margin will be adversely affected. To date, the Company has been able to 
partially reduce the decline in total gross margin by reducing the 
manufacturing cost of products and by introducing new products 
with higher margins. There can be no assurance that the Company 
will achieve any such reductions in the future or that new products 
will achieve market acceptance. Although the Company's 
Internet/Intranet products currently carry a higher average gross 
margin than its LAN products, the Company anticipates that 
competitive pressures in its Internet/Intranet business may result 
in declining average selling prices and gross margins in this 
business as well. Historically, a substantial majority of the Company's 
LAN products revenue have been derived from sales of products 
designed for Apple MacOS and compatible computers. Net revenues 
from the Company's LAN products fluctuated on a quarterly basis 
during fiscal 1996 and the nine months ended June 30, 1997, and the 
Company expects that net revenues from LAN products may decline 
in the future as a result of declining sales and average selling prices of 
the Company's LAN products, Apple's incorporation of built-in Ethernet 
connectivity into certain of its computers, declining sales of MacOS 
computers and competition in the LAN products market. As a result 
of technical characteristics in the MacOS environment, Fast Ethernet 
products, in general, have not delivered expected performance levels. 
If these technical characteristics are not addressed in the future, then 
Fast Ethernet product sales in the MacOS market segment will be 
below the Company's expectations, and operating results may be 
materially and adversely affected. 

Due to all of the foregoing factors, the Company continues 
to focus on the development of its Internet/Intranet business.  
As a result, the Company's future operating results are dependent 
upon continued and increasing market acceptance and penetration 
of its Internet/Intranet products and enhancements thereto, 
particularly in the Windows market.  However, the Company's 
operating results will continue to be adversely affected to the extent t
hat declines in revenues from LAN products are not offset by increases 
from other sources, such as revenues from the Company's Internet/Intranet
products.  To date, the Company has derived a substantial majority of 
its revenue from LAN products, which represented 89% and 73% of 
total revenues for fiscal years 1995 and 1996, respectively, and 76% 
and 62% of total revenues for the nine month periods ended June 30, 
1996 and 1997, respectively.  There can be no assurance that the
Company's increasing focus on its Internet/Intranet products will 
offset the decline in revenues from its LAN products.  Should the 
Company's Internet/Intranet products and enhancements not continue 
to gain market acceptance, particularly in the Windows market, the 
Company's business, operating results and financial condition will 
by materially and adversely affected.

	Dependence on Apple; Competition with Apple Products. To date, 
the Company has derived approximately 85% to 90% of its LAN products 
revenue from products designed for networking the Apple MacOS family 
of personal computers. Accordingly, the Company is substantially dependent 
on the market for MacOS computers and the development and sale of new 
Apple computers, particularly sales of such computers into business 
environments. There can be no assurance that competitive personal 
computers will not displace the MacOS products or reduce sales of 
MacOS products. In addition, sales of the Company's products in the 
past have been adversely affected by the announcement by Apple of 
new products with the potential to replace existing products. The 
inability of Apple to successfully develop, manufacture, market or 
sell new products, and any decrease in the sales or market acceptance 
of the MacOS family of computers, would have a material adverse 
effect on the Company's business, operating results and financial 
condition.  For example, in the nine months ended June 30, 1997, 
the Company believes revenues were adversely affected by declining 
sales of Apple computers and continued confusion surrounding Apple 
and the MacOS including Apple's substantial losses.

	The Company relies on an informal working relationship 
with Apple in connection with the Company's LAN product 
development efforts. Although the Company and Apple have 
maintained a cooperative working relationship since the Company's 
founding, Apple is under no obligation to continue to share product
information or otherwise cooperate with the Company. In addition, 
there can be no assurance that Apple will continue to work cooperatively 
with the Company in connection with the Company's product development 
efforts. The absence of such cooperation in the future, as a result of the 
continued restructuring in process at Apple, including but not limited to 
the search for a new chief executive officer, or any other factors, could have 
a material adverse effect on the Company's business, operating results and 
financial condition. Apple currently offers products that compete directly 
with certain of the Company's products. The Company anticipates that 
Apple will continue to incorporate additional connectivity technologies 
into more of its products in the future, which will adversely affect sales 
of the Company's LAN products. Since Apple has substantially greater 
financial, technical, sales, marketing and other resources than the Company, 
as well as greater name recognition and a significantly larger customer base, 
Apple may be able to respond more quickly to new or emerging technologies 
and changes in customer requirements or to devote greater resources to the 
development, promotion and sales of their products. The Company believes 
that it is likely that Apple will in the future sell separately or bundle with 
its computers certain Internet access products, such as ISDN terminal 
adapters, similar to the Company's Netopia ISDN Modem. Any such 
additional bundling or enhancement by Apple could have a material 
adverse effect on the Company's business, operating results and financial 
condition.   

	Competition. The markets for the Company's products and 
services are intensely competitive, highly fragmented and characterized 
by rapidly changing technology, evolving industry standards, price 
competition and frequent new product introductions. A number of 
companies offer products that compete with one or more of the 
Company's products. The Company's current and prospective 
competitors include OEM product manufacturers of Internet access 
and remote LAN access equipment, manufacturers of remote control 
and screen sharing software and manufacturers of LAN client access
 and network systems products. In the Internet access and remote 
LAN access equipment market, the Company competes primarily 
with Ascend, Cisco, Motorola, 3Com, U.S. Robotics, Ramp 
Networks (formerly Trancell Networks) and several other companies. 
In the remote control and screen sharing software market, the 
Company competes primarily with Symantec, Microsoft, Tivoli,, 
IFS Industrial and Financial Systems (Avalon), Stac Electronics 
and several other companies. In the LAN client access and network 
systems product market, the Company competes primarily with 
Apple, Asante, Dayna, Global Village and several other companies. 
The Company has experienced and expects to continue to experience
increased competition from current and potential competitors, many 
of whom have substantially greater financial, technical, sales, marketing 
and other resources, as well as greater name recognition and a larger 
customer base than the Company. Accordingly, such competitors or
future competitors may be able to respond more quickly to new or 
emerging technologies and changes in customer requirements or 
devote greater resources to the development, promotion and sales 
of their products than the Company. In particular, established 
companies in the personal computer industry may seek to expand 
their product offerings by designing and selling products using 
competitive technology that could render the Company's products 
obsolete or have a material adverse effect on the Company's sales. 
For example, Microsoft has available for free, via download on the
 Internet, communications and collaboration software compatible 
with the Microsoft Internet Explorer and has publicly stated that 
they are committed to integrating Internet technology into existing 
products at no additional cost to customer. This software product, 
which enables real-time communication within a workgroup, 
as well as similar future product offerings from Microsoft, could 
undermine the Company's ability to market its Timbuktu Pro 
and/or Netopia Virtual Office collaboration software. In addition, 
Netscape also offers software that enables dispersed work groups 
to collaborate in the work environment. Accordingly, there can 
be no assurance that the Company can continue to market its collaboration 
software, which would have a material and adverse effect on the 
Company's business, operating results and financial condition. In 
addition, several of the Company's current competitors recently 
have introduced free and/or paid guaranteed service and support 
programs that appear to be similar to the Company's Up & Running, 
Guaranteed! program. As a result, there can be no assurance 
that the Company can continue to charge a fee for this support
 program, which could have a material and adverse effect upon 
the Company's business, operating results and financial condition. 
The markets in which the Company currently competes are 
subject to intense price competition and the Company expects 
additional price and product competition as other established 
and emerging companies enter these markets and new products 
and technologies are introduced. Recently announced 
consolidations in the networking environment continue to create 
companies with substantially greater financial, technical, sales, 
marketing and other resources than the Company, as well as 
greater name recognition and a significantly larger customer base.  
These companies may be able to respond more quickly to new or 
emerging technologies and changes in customer requirements or 
to devote greater resources to the development, promotion and 
sales of its products.  Increased competition may result in further 
price reductions, reduced gross margins and loss of market share, 
any of which could materially and adversely affect the Company's 
business, operating results and financial condition. There can be no 
assurance that the Company will be able to compete successfully 
against current and future competitors, or that competitive factors 
faced by the Company will not have a material adverse effect on the 
Company's business, operating results and financial condition.  

	New Product Development and Rapid Technological Change; 
Dependence on ISDN and Frame Relay Technology. The personal 
computer industry is characterized by rapidly changing technologies, 
evolving industry standards, frequent new product introductions, 
short product life cycles and rapidly changing customer requirements. 
The introduction of products embodying new technologies and the 
emergence of new industry standards can render existing products 
obsolete and unmarketable. The Company's future success will depend 
on its ability to enhance its existing products and to introduce new 
products to meet changing customer requirements and emerging 
technologies. For example, the Company's Netopia products currently 
operate over ISDN and Frame Relay telecommunication services. 
As other communications technologies such as 56K analog modems,
 Asynchronous Transfer Mode (''ATM''), Asymmetric Digital Subscriber 
Line (''ADSL''), various other Digital Subscriber Line ("xDSL") and 
communication over cable or wireless networks, are developed or 
gain market acceptance, the Company will be required to enhance 
its Internet connectivity products to support such technologies, which 
will be costly, time consuming and have uncertain market acceptance. 
If the Company is unable to modify its products to support new 
Internet access technologies, or if ISDN and/or Frame Relay do 
not achieve widespread customer acceptance as a result of the adoption 
of alternative technologies or as a result of deemphasis of ISDN 
and/or Frame Relay by telecommunications service providers, the 
Company's business, operating results and financial condition 
would be materially and adversely affected. In addition, the 
Company has historically derived a substantial majority of its 
revenues from the sale of Ethernet connectivity products. In the 
event that current Ethernet network technology is modified or 
replaced and the Company is unable to modify its products to 
support new Ethernet technologies or alternative technologies, 
the Company's business, operating results and financial condition 
could be materially and adversely affected. The Company has 
in the past and may in the future experience delays in new product 
development. There can be no assurance that the Company will be 
successful in developing and marketing product enhancements or 
new products that respond to technological change, evolving industry 
standards and changing customer requirements, that the Company will 
not experience difficulties that could delay or prevent the successful 
development, introduction and marketing of these products or product 
enhancements, or that its new products and product enhancements will 
adequately meet the requirements of the marketplace and achieve any 
significant degree of market acceptance. Failure of the Company, for 
technological or other reasons, to develop and introduce new products 
and product enhancements in a timely and cost-effective manner would 
have a material adverse effect on the Company's business, operating 
results and financial condition. In addition, the future introduction 
or even announcement of products by the Company or one or more 
of its competitors embodying new technologies or changes in industry 
standards or customer requirements could render the Company's then 
existing products obsolete or unmarketable. There can be no assurance 
that the introduction or announcement of new product offerings by the 
Company or one or more of its competitors will not cause customers to 
defer purchases of existing Company products. Any such deferral of 
purchases could have a material adverse effect on the Company's business, 
operating results or financial condition. 

	Complex products such as those offered by the Company 
(such as the recently introduced Netopia Frame Relay Routers, LAN 
products and new software products/upgrades) may contain undetected 
or unresolved defects when first introduced or as new versions are 
released. There can be no assurance that, despite testing by the Company, 
defects will not be found in new products or new versions of products 
following commercial release, resulting in loss of market share, delay 
in or loss of market acceptance or product recall. Any such occurrence 
could have a material adverse effect upon the Company's business, 
operating results or financial condition.  

	Management of Changing Business. The Company has shifted 
its business strategy from providing only LAN products to reducing its 
reliance on LAN products and focusing development and management 
efforts on its Internet/Intranet business. This transition represents a 
significant 
challenge for the Company and its administrative, operational and financial 
resources and places increased demands on its systems and controls. The 
Company's ability to manage the continuing development of its Internet/Intranet 
business will require the Company to continue to change, expand and
improve its operational, management and financial systems and controls 
and to expand its manufacturing capabilities. This transition has resulted 
in a continuing increase in the level of responsibility for both existing and 
new management personnel. The Company anticipates that any growth in 
its Internet/Intranet business will require it to recruit and hire a 
substantial 
number of new engineering, sales and marketing, customer service, 
administrative and managerial personnel. There can be no assurance 
that the Company will be successful in hiring or retaining these personnel, 
if needed. If the Company is unable to manage the transition effectively, 
the Company's business, operating results and financial condition will be 
materially and adversely affected.  

	Dependence on Distributors. The Company relies primarily on 
distributors for the sale of its Internet/Intranet and LAN products. Revenues 
from distributors accounted for 73% and 60% of total revenues in fiscal 1995 
and 1996, respectively, and 63% and 61% of total revenues for the nine months 
ended June 30, 1996 and 1997, respectively. A substantial amount of the 
Company's revenues result from a limited number of these distributors. The 
Company's three largest distributors accounted for 43% and 35% of total 
revenues in fiscal 1995 and 1996, respectively, and 35% and 33% of total 
revenues for the nine months ended June 30, 1996 and 1997, respectively. 
During fiscal 1995, 1996 and the nine months ended June 30, 1996 and 1997, 
revenue from Ingram accounted for 22%, 18%, 19% and 19%, respectively, 
of the Company's total revenues, and revenue from MicroWarehouse 
accounted for 13%, 11%, 11% and 10% of the Company's total revenues, 
respectively. No other customers have accounted for 10% or more of the 
Company's total revenues during fiscal 1995, 1996 or the nine months 
ended June 30, 1996 and 1997. The distribution of LAN products such 
as those offered by the Company has been characterized by rapid change, 
including industry consolidations, financial difficulties of distributors and 
the emergence of alternative distribution channels. There can be no 
assurance that Ingram and MicroWarehouse will continue to serve as 
distributors for the Company since the Company does not currently have a 
written agreement regarding price or quantity commitments with these or 
other distributors and operates with these and other distributors on a purchase 
order basis. The Company's distributors generally offer products of several 
different companies, including products that are competitive with the Company's 
products. There can be no assurance that future sales by the Company's 
distributors will continue at current levels, that the Company will be able 
to retain its current distributors in the future on terms which are acceptable 
to the Company, that the Company's current distributors will choose to or be 
able to market the Company's products effectively, that economic conditions 
or industry demand will not adversely affect these or other distributors, that 
these distributors will not devote greater resources to marketing products of 
other companies or that internal staffing changes or other changes at the 
Company's distributors will not disrupt historical purchasing or payment 
patterns. Accordingly, the loss of, or a significant reduction in revenue 
from, one of the Company's distributors, could have a material adverse 
effect on the Company's 
business, operating results and financial condition. 

	The Company grants to its distributors limited rights to return 
unsold inventories of the Company's products in exchange for new 
purchases and provides price protection to its distributors. Although 
the Company provides allowances for projected returns and price 
decreases, any product returns or price decreases in the future that 
exceed the Company's allowances will materially and adversely 
affect the Company's business, operating results and financial 
condition. The Company also provides end users with a lifetime 
warranty on certain products and permits end users to return any 
product for its full purchase price if the product does not perform 
as warranted. To date, the Company has not encountered material 
warranty claims. Nevertheless, if future warranty claims exceed the 
Company's reserves, the Company's business, operating results and 
financial condition could be materially and adversely affected. In 
addition, the Company attempts to further limit its liability to end 
users through disclaimers of special, consequential and indirect 
damages and similar provisions in its end user warranty. However, 
no assurance can be given that such limitations of liability will be 
legally enforceable.
  
	International Operations. International revenues accounted for 
29% of the Company's total revenues in fiscal 1995 and 1996, respectively, 
and 32% and 30% of total Company revenues for the nine months ended 
June 30, 1997, respectively. The Company expects that international 
revenues will continue to represent a significant portion of its total 
revenues. Any significant decline in international demand for the 
Company's products would have a material adverse effect on the 
Company's business, operating results and financial condition. 
The Company believes that in order to increase sales opportunities 
and profitability it will be required to expand its international 
operations. The Company has committed and continues to commit 
significant management attention and financial resources to 
developing international sales and support channels. There can 
be no assurance that the Company will be able to maintain or 
increase international market demand for its products. In addition, 
the Company is dependent upon the international demand for Apple 
products. To the extent that the Company is unable to maintain or
 increase international demand for its products, or that international 
demand for Apple products does not meet the Company's expectations, 
the Company's international sales will be limited, and the Company's
 business, operating results and financial condition would be materially 
and adversely affected. 

	The Company's international business is subject to inherent 
risks, including but not limited to the impact of possible recessionary 
environments in economies outside the United States, costs of localizing 
products for foreign countries, longer receivable collection periods 
and greater difficulty in accounts receivable collection, unexpected 
changes in regulatory requirements, difficulties and costs of staffing 
and managing foreign operations, potentially adverse tax consequences 
and political and economic instability. In addition, the laws of 
certain foreign countries in which the Company's products are 
or may be manufactured or sold, including various countries in 
Asia, may not protect the Company's products or intellectual 
property rights to the same extent as do the laws of the United 
Sates and thus make the possibility of piracy of the Company's 
technology and products more likely. There can be no assurance 
that the Company will be able to sustain or increase international 
revenues, or that the foregoing factors will not have a material 
adverse effect on the Company's future international revenues 
and its business, operating results and financial condition. The 
Company's international revenues are currently denominated in 
United States dollars, and revenues generated by the Company's 
distributors currently are paid to the Company in United States 
dollars. If, in the future, international revenues are denominated
in local currencies, foreign currency translations may contribute
to significant fluctuations in, and could have a material adverse
effect on, the Company's business, operating results and financial 
condition. In addition, the Company has a substantial portion of its
products and components manufactured by foreign suppliers. The 
Company's operating results are subject to the risks inherent in 
international purchases, including, but not limited to, various 
regulatory requirements, political and economic changes and 
disruptions, transportation delays, export/import controls, tariff 
regulations, higher freight rates and potentially adverse tax 
consequences. Duty, tariff and freight costs can materially increase 
the cost of crucial components for the Company's products. 

	Dependence on Strategic Alliances; Dependence on Contract
Manufacturers and Limited Source Suppliers.  The Company relies on 
a number of strategic relationships to help achieve market acceptance 
of the Company's products and to leverage the Company's development, 
sales and marketing resources. Although the Company views these 
relationships as important factors in the development and marketing 
of the Company's products and services, a majority of the Company's 
agreements with its strategic partners or customers do not require future 
minimum commitments to purchase the Company's products, are not 
exclusive and generally may be terminated at the convenience of either 
party. There can be no assurance that the Company's strategic partners 
regard their relationship with the Company as strategic to their own 
respective businesses and operations, that they will not reassess their 
commitment to the Company or its products at any time in the future, 
or that they will not develop and/or market their own competitive technology. 

	The Company does not manufacture any of the components 
used in its products and performs only limited assembly on some products. 
The Company relies on independent contractors to manufacture to 
specification the Company's components, subassemblies, systems and 
products. The Company also relies upon limited source suppliers for a 
number of components used in the Company's products, including 
certain key microprocessors and integrated circuits. There can be no 
assurance that these independent contractors and suppliers will be able 
to timely meet the Company's future requirements for manufactured 
products, components and subassemblies. The Company generally 
purchases limited source components pursuant to purchase orders 
and has no guaranteed supply arrangements with these suppliers. The 
Company has maintained relationships with certain of its domestic 
manufacturing suppliers whereby the Company will purchase 
components used in certain of its products for resale to its manufacturing
suppliers when the Company can secure more favorable terms 
for the purchase of such components.  As a result of the Company 
moving certain of its production offshore and terminating relationships 
with certain of its previous manufacturing suppliers, the Company may 
be required to repurchase certain of these component parts that the 
previous manufacturing suppliers are unable to resell to the Company's 
new manufacturing suppliers.  The Company currently believes that the 
component parts can be sold to its new manufacturing suppliers and 
does not anticipate having to repurchase any of these components, 
although there can be no assurance that such repurchases will not 
be required.  In addition, the availability of many of these 
components to the Company is dependent in part on the Company's 
ability to provide its suppliers with accurate forecasts of its future 
requirements. However, any extended interruption in the supply of 
any of the key components currently obtained from a limited source 
would disrupt its operations and have a material adverse effect on the
Company's business, operating results and financial condition. 
In addition, the Company anticipates that it will be necessary to 
establish additional strategic relationships in the future, in particular 
with additional national ISPs, and there can be no assurance that the 
Company will be able to establish such alliances or that such alliances 
will result in increased revenues.  



	Dependence on Proprietary Rights and Technology. The 
Company's ability to compete is dependent in part on its proprietary 
rights and technology. The Company relies primarily on a combination 
of patent, copyright and trademark laws, trade secrets, confidentiality
procedures and contractual provisions to protect its proprietary rights. 
The Company generally enters into confidentiality or license agreements 
with its employees, resellers, distributors, customers and potential 
customers and limits access to the distribution of its software, hardware 
designs, documentation and other proprietary information, however 
in some instances the Company may find it necessary to release its 
source code to certain parties, for example the Company recently 
entered into a product development agreement pursuant to which it 
released certain source code to a third party in the Asia. 
There can be no assurance that the steps taken by the Company 
in this regard will be adequate to prevent misappropriation of its 
technology. The Company currently has ten issued United States 
patents. There can be no assurance that the Company's patents will 
not be invalidated, circumvented or challenged, that the rights granted 
thereunder will provide competitive advantages to the Company or that 
any of the Company's pending or future patent applications, whether or 
not being currently challenged by applicable governmental patent 
examiners, will be issued with the scope of the claims sought by the 
Company, if at all. Furthermore, there can be no assurance that others 
will not develop technologies that are similar or superior to the 
Company's technology or design around the patents owned by the 
Company. Despite the Company's efforts to protect its proprietary 
rights, unauthorized parties may attempt to copy aspects of the 
Company's products or to obtain and use information that the 
Company regards as proprietary. Policing unauthorized use of the 
Company's products is difficult, and while the Company is unable 
to determine the extent to which piracy of its software products exists, 
software piracy is expected to be a persistent problem. In selling its 
software products, the Company relies primarily on ''shrink wrap'' 
licenses that are not signed by licensees and, therefore, it is possible 
that such licenses may be unenforceable under the laws of certain 
jurisdictions. In addition, the laws of some foreign countries where 
the Company's products are or may be manufactured or sold, 
particularly developing countries including various countries in Asia 
such as Asia, do not protect the Company's 
proprietary rights as fully as do the laws of the United States. There 
can be no assurance that the Company's means of protecting its 
proprietary rights in the United States or abroad will be adequate 
or that competing companies will not independently develop similar 
technology. 

	The Company relies upon certain software, firmware and 
hardware designs that it licenses from third parties, including firmware 
that is integrated with the Company's internally developed firmware 
and used in the Company's products to perform key functions. There 
can be no assurance that these third-party licenses will continue to be 
available to the Company on commercially reasonable terms. The loss 
of, or inability to maintain, such licenses could result in shipment delays 
or reductions until equivalent firmware could be developed, identified,
licensed and integrated which would materially and adversely affect the 
Company's business, operating results and financial condition. 

	Litigation. From time to time, the Company has received 
claims of infringement of other parties' proprietary rights and claims 
related to the termination of potential acquisitions. Although the 
Company believes that all such claims received to date are immaterial, 
there can be no assurance that third parties will not assert infringement 
or other claims in the future with respect to the Company's current 
or future products or activities. The Company expects that it will 
increasingly be subject to infringement claims as the number of 
products and competitors in the Company's industry segments 
grow and the functionality of products in different industry segments 
overlap. Any such claims, with or without merit, could be time 
consuming to defend, result in costly litigation, divert management's 
attention and resources, cause product shipment delays or require the 
Company to enter into royalty or licensing agreements. Such 
royalty or licensing agreements, if required, may not be available 
on terms acceptable to the Company, if at all. In the event of a 
successful claim of product infringement against the Company 
and failure or inability of the Company to license the infringed 
or similar technology, the Company's business, operating results 
and financial condition would be materially and adversely affected. 

	From time to time, the Company may be involved in litigation 
or administrative claims arising out of its operations in the normal course 
of business. In the event of a successful claim against the Company, the
 Company's business, operating results and financial condition would be 
materially and adversely affected. 

	Lengthy Sales Cycle and Lengthy Partnership Development. 
The Company's Internet/Intranet software products are often licensed 
to customers on a volume license basis for use on private wide area 
network (''WAN'') Intranets involving thousands of nodes. These 
licenses often involve significant license and maintenance fees. As 
a result, the license of the Company's Internet/Intranet software 
products often involves a significant commitment of management 
attention and resources by prospective customers. Accordingly, the 
Company's sales process for these products is often subject to delays 
associated with long approval processes that typically accompany 
significant capital expenditures. For these and other reasons, the sales 
cycle associated with the license of the Internet/Intranet software 
products is often lengthy and subject to a number of significant delays 
over which the Company has little or no control. There can be no 
assurance that the Company will not experience these and additional 
delays in the future on Internet/Intranet software or other products.   

	The Company's Netopia products are often distributed 
through partnerships with ISPs and telecommunications carriers.  
These partnerships often involve lengthy testing and certification 
studies as well as detailed agreements. As a result, partnerships 
with ISPs and/or telecommunications carriers to distribute Netopia 
products involve a significant commitment of management attention 
and resources by prospective partners. Accordingly, the Company's 
business development process for these distribution channels is often 
subject to delays associated with long approval processes that typically 
accompany significant partnership development and capital expenditures.
For these and other reasons, the business development process associated 
with the partnerships are often lengthy and subject to a number of significant 
delays over which the Company has little or no control. There can be no 
assurance that the Company will not experience these and additional delays 
in the future on partnership development.

	Risks Associated with Potential Acquisitions or Divestitures.  
The Company may acquire or invest in companies, technologies or 
products that complement the Company's business or its product 
offerings.  The Company continues to evaluate the performance of all its 
products and product lines. Any acquisitions or dispositions may result in 
potentially dilutive issuance of equity securities, the write-off of software 
development costs or the amortization of expenses related to goodwill 
and other intangible assets and/or the incurrence of debt, any of which 
could have a material adverse effect on the Company's business, financial 
condition and results of operations. Acquisitions or divestitures would 
involve numerous additional risks including difficulties in the assimilation 
or separation of operations, services, products and personnel, the 
diversion of management's attention from other business concerns, 
the disruption of the Company's business, the entry into markets in 
which the Company has little or no direct prior experience and the 
potential loss of key employees.  There can be no assurance that the 
Company would be successful in overcoming these or any other 
significant risks encountered.  

            Tariff and Regulatory Matters. The Company is not currently 
subject to direct regulation by any government agency, other than 
regulations applicable to businesses generally. However, rates for 
telecommunications services are governed by tariffs of licensed 
carriers that are subject to regulatory approval. Future changes in 
these tariffs could have a material adverse effect on the Company's 
business, operating results and financial condition. For example, if 
tariffs for public switched digital services increase in the future 
relative to tariffs for private leased services, then the cost-effectiveness 
of the Company's products would be reduced, and its business, 
operating results and financial condition would be materially and 
adversely affected. In addition, the Company's telecommunications 
products must meet standards and receive certification for connection 
to public telecommunications networks prior to their sale. In the 
United States, such products must comply with Part 15(a) (industrial 
equipment), Part 15(b) (residential equipment) and Part 68 (analog 
and ISDN lines) of the Federal Communications Commission 
regulations. The Company's telecommunications products also 
must be certified by certain domestic telecommunications carriers. 
In foreign countries, such products are subject to a wide variety of 
governmental review and certification requirements. While certain 
foreign countries and the European Economic Community regulate 
the importation and certification of the Company's products, most 
foreign customers typically require that the Company's products 
receive certification from their country's primary telecommunication 
carriers. Any future inability to obtain on a timely basis or retain 
domestic regulatory approvals and certification or foreign regulatory 
approvals, including safety and telecommunications, could have a 
material adverse effect on the Company's business, operating results 
and financial condition.
	
           Dependence on Key Personnel. The Company's business 
and prospects depend to a significant degree upon the continuing 
contributions of its key management, sales, marketing, product 
development and administrative personnel. The Company does 
not have employment contracts with its key personnel and does 
not maintain any key person life insurance policies. The loss of 
key management or technical personnel could materially and 
adversely affect the Company's business, operating results and 
financial condition. The Company believes that its prospects 
depend in large part upon its ability to attract and retain highly-
skilled engineering, managerial, sales and marketing, and 
administrative personnel. Competition for such personnel is 
intense, and there can be no assurance that the Company will 
be successful in attracting and retaining such personnel. Failure 
to attract and retain key personnel could have a material adverse 
effect on the Company's business, operating results and financial 
condition.  

             As of July 31, 1997 the Company employed 231 persons, 
including 51 in sales and marketing, 61 in research and development, 
39  in customer service and support, 46  in manufacturing operations, 
and 34 in general and administrative functions. Of the 61 research 
and development employees 52 were focused primarily on 
Internet/Intranet product development and 9 were focused 
primarily on LAN product development. The Company believes that
 its future success will depend in large part upon its ability to attract 
and retain highly-skilled engineering personnel. Competition for such 
personnel is intense, and there can be no assurance that the Company 
will be successful in attracting and retaining such personnel, the failure 
of which could have a material adverse effect on the Company's business, 
operating results and financial condition

	Volatility of Stock Price. The market price of the shares of the 
Company's Common Stock is highly volatile and may be significantly 
affected by factors such as actual or anticipated fluctuations in the 
Company's results of operations, announcements of technological 
innovations, introduction of new products by the Company or its 
competitors, developments with respect to patents, copyrights or 
proprietary rights, conditions and trends in the networking and 
other technology industries, changes in or failure by the Company 
to meet securities analysts' expectations, general market conditions 
and other factors. In addition, the stock market has from time to time 
experienced significant price and volume fluctuations that have 
particularly affected the market prices for the common stocks of 
technology companies. These broad market fluctuations may 
adversely affect the market price of the Company's Common Stock. 
In the past, following periods of volatility in the market price of a 
particular company's securities, securities class action litigation has 
often been brought against that company. There can be no assurance
that such litigation will not occur in the future with respect to the 
Company. Such litigation could result in substantial costs and a 
diversion of management's attention and resources, which could 
have a material adverse effect upon the Company's business, 
operating results and financial condition.  

	California Headquarters. The Company's corporate 
headquarters and a large portion of its research and development 
facilities as well as other critical business operations are located 
in California, near major earthquake faults.  The Company's 
business, financial condition and operating results could be 
materially adversely affected in the event of a major earthquake.

RECENT ACCOUNTING PRONOUNCEMENTS

	In June 1997, the FASB instituted SFAS No. 130 "Reporting 
Comprehensive Income".  This statement establishes standards for reporting 
and displaying comprehensive income and its components in the financial 
statements.  It does not, however, require a specific format for the 
statement, but rather requires the Company to display an amount 
representing total comprehensive income for the period in those 
financial statements.  The Company is in the process of determining 
its preferred format.  This statement is effective for fiscal years 
beginning after December 15, 1997.

	Also in June 1997, the FASB issued SFAS No. 131 
"Disclosures about Segments of an Enterprise and Related 
Information".  This statement establishes standards for the 
manner in which public business enterprises report information 
about operating segments in annual financial statements and 
requires those enterprises to report selected information about 
operating segments in interim financial reports issued to shareholders.  
This statement is effective for financial statements for periods 
beginning after December 15, 1997, and is not expected to have 
a significant impact on the Company's reporting of segment information.    

LIQUIDITY AND CAPITAL RESOURCES
 
	The Company has funded its operations to date primarily through 
cash flow from operations, the private sale of equity securities and the 
IPO of the Company's Common Stock. Since inception, the Company 
has raised $19.4 million from the private sale of equity securities and 
approximately $24.8 million of cash, net of offering expenses, from the 
Company's IPO completed in June, 1996. As of June 30, 1997, the 
Company had cash, cash equivalents and short-term investments of 
$41.1 million (representing 69.4% of total assets) and had working 
capital of $50.1 million. 

	The Company generated cash from operating activities of 
$4.0 million for the nine months ended June 30, 1997. The cash 
generated from operations was primarily due to the collection of 
accounts receivable of $4.3 million, accrual of income tax benefit 
and a reduction in inventories, partially offset by reductions of 
accounts payable of $1.8 million and decreased accrued expenses 
and other liabilities. Inventory decreased 13.4% from $6.3 million 
as of September 30, 1996 to $5.5 million as of June 30, 1997.  
Netopia and Fast Ethernet products represented 12% and 23% of 
total gross inventory as of September 30, 1996, respectively, and 
represented 23% and 17% of total gross inventory as of June 30, 1997, 
respectively.

	The Company's investing activities have consisted primarily 
of purchases of short-term investments and capital equipment.  
Expenditures for capital equipment totaled $794,000 for the nine 
months ended June 30, 1997, primarily representing acquisitions 
of computer equipment used predominantly in information systems, 
product development as well as tooling and test fixtures for new 
products. The Company expects that its capital expenditures will 
increase in future periods to support new product development 
and production. The Company's principal commitments consist 
primarily of leases on its headquarters facilities and certain operating 
equipment. 
	
	The Company believes that its existing cash, cash equivalents 
and short-term investments will be adequate to meet its cash needs for 
working capital and capital expenditures for the next 12 months. 
Thereafter, if cash generated from operations is insufficient to satisfy 
the Company's liquidity requirements, the Company may seek to sell 
additional equity or convertible debt securities or obtain additional 
credit facilities. The sale of additional equity or convertible debt 
securities could result in additional dilution to the Company's stockholders.
A portion of the Company's cash may be used to acquire or invest in 
complementary businesses or products or to obtain the right to use 
complementary technologies. From time to time, in the ordinary course 
of business, the Company evaluates potential acquisitions of such 
businesses, products or technologies. The Company has no agreements 
or commitments, and is not currently engaged in any negotiations with 
respect to any such transaction. 



PART II.  OTHER INFORMATION

Item 6.	Exhibits and Reports on Form 8-K

(a) 	Exhibits
 
11.1  Statement of Computation of Per Share Results
27.1  Financial Data Schedule

(b)	Reports on Form 8-K
	No Reports on Form 8-K were filed during the quarter 
ended June 30, 1997.

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:  August 13, 1997           FARALLON COMMUNICATIONS, INC.
                                                                    (Registrant)


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



INDEX TO EXHIBITS

Exhibit		Description 

11.1 	Statement of Computation of Per Share Results

27.1       	Financial Data Schedule