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

                                 AMENDMENT NO. 1
                                       TO
                                    FORM 10-K
(Mark One)

/x/     Annual Report pursuant to Section 13 or 15(d) of the Securities Exchange
         Act of 1934 for the fiscal year ended March 31, 1999 or

/ /     Transition Report pursuant to Section 13 or 15(d) of the Securities
         Exchange Act of 1934 for the transition period from __________ to
         __________.

Commission file number:    0-27266
                       -------------

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

                  DELAWARE                                    36-3154957
     (State or other jurisdiction of                         (I.R.S. Employer
     incorporation or organization)                        Identification No.)

    750 N. COMMONS DRIVE
         AURORA, ILLINOIS                                       60504
(Address of principal executive offices)                      (Zip Code)

Registrant's telephone number, including area code:   (630) 898-2500

Securities registered pursuant to Section 12(b) of the Act:  NONE

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

                      CLASS A COMMON STOCK, $.01 PAR VALUE
                      ------------------------------------
                                (Title of Class)

Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes /x/  No / /

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

The registrant estimates that the aggregate market value of the registrant's
Class A Common Stock (including Class B Common Stock which automatically
converts into Class A Common Stock upon a transfer of such stock except
transfers to certain permitted transferees) held by non-affiliates (within the
meaning of the term under the applicable regulations of the Securities and
Exchange Commission) on June 24, 1999 (based upon an estimate that 45.0% of the
shares are so owned by non-affiliates and upon the average of the closing bid
and asked prices for the Class A Common Stock on the NASDAQ National Market on
that date) was approximately $103,366,344. Determination of stock ownership by
non-affiliates was made solely for the purpose of responding to this requirement
and registrant is not bound by this determination for any other purpose.

As of June 24, 1999, 16,945,030 shares of the registrant's Class A Common Stock
were outstanding and 19,511,189 shares of registrant's Class B Common Stock
(which automatically converts into Class A Common Stock upon a transfer of such
stock except transfers to certain permitted transferees) were outstanding.

The following documents are incorporated into this Form 10-K by reference:

        Proxy Statement for 1999 Annual Meeting of Stockholders (Part III).


<PAGE>


           CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING INFORMATION

        Certain statements contained under "Management's Discussion and Analysis
of Financial Condition and Results of Operations," such as those concerning
future product sales and gross margins, certain statements contained under
"Business," such as statements concerning the development and introduction of
new products and the development of alternative Digital Subscriber Line ("DSL")
technology, and other statements contained in this Annual Report on Form 10-K
for the fiscal year ended March 31, 2000 (the "Form 10-K") regarding matters
that are not historical facts are forward-looking statements (as such term is
defined in the rules promulgated pursuant to the Securities Act of 1933, as
amended (the "Securities Act")). Because such forward-looking statements include
risks and uncertainties, actual results may differ materially from those
expressed in or implied by such forward-looking statements. Factors that could
cause actual results to differ materially include, but are not limited to, those
discussed herein under "Risk Factors" set forth herein. Westell Technologies,
Inc. ("Westell" or the "Company") undertakes no obligation to release publicly
the result of any revisions to these forward-looking statements that may be made
to reflect events or circumstances after the date hereof or to reflect the
occurrence of unanticipated events.

                                     PART I

ITEM 1.  BUSINESS

         Since 1980, Westell has developed telecommunications products that
address the needs of telephone companies to upgrade their existing network
infrastructures in order to deliver advanced data and voice services to their
customers. The Company designs, manufactures, markets and services a broad range
of digital and analog products used by telephone companies to deliver services
primarily over existing copper telephone wires that connect end users to a
telephone company's central office. The copper wires that connect users to these
central offices are part of the telephone companies' networks and are commonly
referred to as the local loop or the local access network. The Company also
markets its products and services to other telecommunications and information
service providers seeking direct access to end-user customers.

         Conference Plus, Inc., an 88% owned subsidiary, provides audio, video,
and data conferencing services. Businesses and individuals use these services to
hold voice, video or data conferences with many people at the same time.
Conference Plus sells its services directly to large customers, including
Fortune 100 companies and serves customers indirectly through its private
reseller program. Conference Plus is one of the largest providers of
conferencing services that is not directly affiliated with or owned by telephone
carriers such as AT&T.

TELECOMMUNICATIONS INDUSTRY OVERVIEW

         Since the early 1980s, the telecommunications industry has experienced
an increased demand for the number of services provided to end users. Not only
has traditional telephone voice traffic increased, but the growth of personal
computers and modems has created significant data traffic from a wide variety of
services such as fax, email and online access. For example, businesses with
multiple locations increasingly require their local voice and data networks,
often located in different places, to be linked to larger, more sophisticated
wide area networks that must handle large volumes of telecommunications traffic.
In addition, the Internet continues to expand beyond its traditional data
transmission and file-sharing functions to offer email, video broadcasts,
ecommerce, commercial services, transaction processing, independent bulletin
boards, and voice transmission. Business and residential based demand for
telecommunications services is expected to continue to grow as telephone
companies and information service providers increase their offerings of new
interactive multimedia services, including data and video applications such as
high speed Internet access, local area network extension, telecommuting and
video conferencing. These applications require individuals to remain on the line
longer than the telephone networks were originally designed to handle, and
telephone companies are installing an increasing number of second lines at end
user sites. Also, the size and rate of the content being transmitted demands

<PAGE>


more bandwidth, or greater speed and capacity, on both the main telephone wires
and the telephone wires that connect a telephone company's central office to the
end user. To handle the growing volume of data communications traffic and to
provide faster and higher quality transmission, telephone companies and
information service providers must continually upgrade the capacity and speed of
their networks typically by adding additional bandwidth to their telephone
wires.

         Deregulation. Deregulation also increased competition in the
telecommunications industry. Cable operators are competing with telephone
companies in the delivery of high-speed digital transmission and seek to compete
in the delivery of traditional local telephone service as well. Currently
available high-speed cable modems enable cable operators to provide data
transmission services to customers in addition to standard television services.
Alternative telephone access providers have deployed fiber and wireless systems
for high volume data transmission to business centers and other high-density
metropolitan areas. Competition will continue to increase as these alternatives
to telephone companies develop new products and their costs decline.
Deregulation allows telephone carriers, information service providers and cable
operators to deploy competitive services in the local access network leading to
a new class of service providers known as a competitive local exchange carrier.
In addition, this trend toward continued deregulation of the telecommunications
industry may further decrease the current restrictions and regulations affecting
telephone companies' ability to provide high bandwidth services such as high
speed Internet access and corporate local area network extensions. Telephone
companies are responding to this competition by upgrading their networks and
increasing their telecommunications service offerings.

         Existing Telephone Company Infrastructure. Traditionally, telephone
companies have provided local telephone services using analog technology, which
does not have the bandwidth, or speed and capacity, to support the growing
demand for new services over telephone wires such as Internet access. In
contrast, digital technology permits high speed, high volume and more reliable
data transmission, thereby increasing the variety of services that can be
provided by telephone companies. To handle the growing demand for digital
traffic, telephone companies have deployed broadband optical fiber to connect
their geographically dispersed central offices and to connect their central
offices to high-density telecommunications traffic areas. Deployment of fiber in
the local access network to connect end users to a telephone company's central
office, however, has proven labor intensive, complicated, time consuming and
expensive. Consequently, these connections to end users still predominantly
consist of low speed analog transmission over copper wire.

         Given the challenges of widespread replacement of copper wire in the
local access network, telephone companies have turned to systems suppliers for
cost-effective technology that can expand the ability of the existing copper
wire infrastructure to accommodate high speed digital transmission. Digital
conversion of the analog network has been built on the aggregating or
multiplexing format known as T-1 in the U.S. and E-1 in most countries outside
of the U.S. T-1/E-1 transmission utilizes a data rate of 1.544 and 2.048
Megabits per second, respectively, and the transmission can be aggregated or
subdivided into channels to deliver data communication services tailored to
specific end user requirements. For example, a T-1 line can be up to 24 times
faster than a traditional phone line. Products enabling T-1 and E-1
transmission, however, have typically required extensive engineering and
provisioning, which make them cost prohibitive for residential and small
business use.

         Existing and Emerging Technologies. Telecommunications manufacturers
have developed, and are currently developing, numerous products that have
increased the quality, speed and cost-effectiveness of digital transmission over
copper wire. These products include:

         ISDN. In the early 1980s, telephone companies introduced basic rate
           Integrated Service Digital Network technology commonly known as ISDN.
           ISDN provides digital transmission at rates up to 144 Kilobits per
           second as well as a means to aggregate multiple channels into a
           single high speed link over copper wire. Demand for existing basic
           rate ISDN technology may be constrained due to:

          o    its limited bandwidth (which does not allow telephone companies
               to offer advanced data and video services),

          o    its inability to provide existing telephone service over the same
               wire, and

          o    its relatively high installation costs.

           In addition, ISDN deployment will require telephone companies to
           increase their central office switch capacity to maintain network
           reliability.

         HDSL. In 1992, telephone companies introduced High bit-rate Digital
           Subscriber Line technology which is commonly known as HDSL. HDSL
           reduces the costs of installing and upgrading T-1/E-1 service.
           Traditional T-1/E-1 service requires the installation of one or more
           amplifiers called mid-span repeaters for line lengths greater than
           6,000 feet and requires the expensive and time consuming conditioning
           of copper wire. HDSL increases the non-repeater distance of T-1/E-1
           transmission over two pairs of copper wires to approximately 12,000
           feet, which reduces the need for repeaters and conditioning of the
           copper telephone wire. As a result, telephone companies are deploying
           HDSL technology in their local access networks where the end user
           requires a high-speed symmetrical digital communication stream and
           does not require a telephone channel to run on the same wire.

         DSL. The Digital Subscriber Line or ADSL technology permits even
           greater digital transmission capacity over copper wire than is
           possible with existing HDSL and ISDN products. DSL technology allows
           the simultaneous transmission of data at speeds up to 8.0 Mega bits
           per second in one direction and up to 1 Mega bits per second in the
           reverse direction, while also providing standard analog telephone
           service over a single pair of copper wires at distances of up to
           18,000 feet, depending on the transmission rate. With DSL technology,
           a user can talk and have high speed data transmissions at the same
           time over a regular phone line. DSL products enable telephone
           companies to provide interactive multimedia services over copper wire
           while simultaneously carrying traditional telephone services, thus
           mitigating the need for the telephone companies to install second
           lines to support these services. DSL products are currently being
           developed which will increase the data transmission capacity to up to
           52.0 Mega bits per second. DSL technology is also known as ADSL when
           it refers to products that provide bi-directional transmission
           capacity at varying speeds.

         DSLAM. A DSL product commonly known as DSLAM is piece of equipment that
           typically resides in the telephone companies' central offices. It
           aggregates, or multiplexes, multiple DSL access lines into a
           telephone company's high speed line back to its core or central
           network. As network service providers begin deploying DSL based
           services the need for DSL line concentration at the central offices
           increases.

         Digital Loop Carrier. The digital loop carrier product known as DLC is
           a mini-switch that extends central office services to remote
           locations. A digital loop carrier acts as a concentration point away
           from the telephone companies' central office for copper telephone
           lines in the local access network. DSL and DSLAM technology can be
           integrated into the digital loop carrier to provide a cost effective
           mechanism for delivering integrated services. This solution can
           sometimes be more cost effective than deployment directly from the
           telephone company central office.

         G.Lite. This technology is a version of DSL under development that will
           allow manufacturers to produce DSL products that can operate with
           each other. It also will allow users to more easily deploy DSL
           technology in their homes or business sites because end users may be
           able to install the G.Lite product themselves. G.Lite provides lower
           transmission speeds than other DSL products.

         DSL Routers (or DSL Local Area Network modems). These devices allow
           multiple computers to be networked together on a local area network
           and share access to the wide area network DSL line.


<PAGE>


         PPP over ATM. This is a protocol, or set of standards and rules, that
           allow allows telephone carriers to deploy DSL services in a manner
           similar to today's traditional dial-up modems. Unlike with dial-up or
           ISDN systems, DSL products permit telephone companies to avoid
           managing a computer's network address, and facilitates billing and
           security procedures.

TELECOMMUNICATIONS PRODUCTS

         The Company offers a broad range of products that facilitate the
transmission of high speed digital and analog data between a telephone company's
central office and end-user customers. These products can be categorized into
three groups:

          o    DSL products: products based on DSL technologies;
          o    T-1 products: products used by telephone companies to enable high
               speed digital T-1 transmission at approximately 1.5 megabits per
               second and E-1 transmission at approximately 2.0 megabits per
               second, which is approximately 24 times faster than standard
               analog telephone service; and
          o    Traditional products: products used by telephone companies to
               deliver digital services at relatively slower speeds than T-1
               products, with speeds ranging from approximately 2.4 to 64
               kilobits per second and traditional analog services with 4
               kilohertz bandwidth.

         The prices for the products within each of the product groups of the
Company vary based upon volume, customer specifications and other criteria and
are subject to change due to competition among telecommunications manufacturers.
Increasing competition, in terms of the number of entrants and their size,
continues to exert downward pressure on prices for the Company's products. The
following table sets forth the revenues from Westell's three product groups for
the periods indicated (for more information also see "Management's Discussion
and Analysis of Financial Condition and Results of Operations" included in this
Annual Report on Form 10-K):

                                         Fiscal Year Ended March 31,
                                         -------------------------------
                                         1997        1998       1999
                                         ----        ----       ----
                                                (in thousands)
DSL products.......................    $ 8,665     $12,448    $12,099
T-1 products.......................     49,353      52,481     53,232
Traditional products...............      8,963       5,235      3,707

         DSL Products. The Company is a developer and provider of DSL products.
DSL products allow telephone companies and other local access providers to
provide interactive multimedia services over existing copper telephone wire,
thus offering a more cost-effective and faster deployment alternative to fiber
optic cable. DSL systems support advanced data applications such as high speed
Internet access, local area network extension, telecommuting, and virtual
libraries.

         ADSL technology permits the multiple transmissions of varying speeds
over existing copper telephone wire. The transmission distances of current DSL
systems vary based upon the data rate and telephone line condition, with a
maximum distance of 18,000 feet.


<PAGE>


         The following table sets forth a representative list of the Company's
current DSL products and their applications.

<TABLE>

Product                        Description                                      Applications
-------                        -----------                                      ------------

<S>                            <C>                                              <C>
SuperVision(R)DSLAM            Consolidates DSL lines into a single network     Enables multiple services and
 .....................          interface.  Users can achieve speeds of up to    applications such as high-speed
 .....................          8 megabits per second downstream and up to 1     Internet access, remote local area
 .....................          megabit per second upstream.  Facilitates the    network access, and work at home,
 .....................          connection between copper wire digital           while providing simultaneous
 .....................          transmission used in the local access network    standard telephone service over
 .....................          and the optical fiber transmission in the        copper telephone wires.
 .....................          network.


FlexCap2(TM)                   Rate Adaptive DSL modem to modem system that     Provides similar applications as
 .....................          operates at up to 2.24 Mega bits per second      DSLAM without the multiplexing, or
 .....................          downstream and up to 1 Mega bits per second      aggregating feature. The rate
 .....................          upstream over copper telephone wires. The rate   adaptability allows telephone
 .....................          adaptive capability enables the operating        companies to maximize the digital
 .....................          speed to be automatically adjusted based on      capacity of copper wire and
 .....................          the quality of the telephone wire and the        facilitates the installation of DSL
 .....................          transmission distance.                           systems, thereby increasing the
                                                                                utilization of poor quality copper
                                                                                telephone wires which traditionally
                                                                                have required extensive installation
                                                                                and monitoring.



InterAccess 2                  HDSL system that supports 1.5 or 2.0 mega bits   Enables T-1 or E-1 transmission
 ......................         per second bi-directional services over copper   services.  Increases  transmission
 ......................         telephone wires. The Company's HDSL systems      distance to up to 12,000 feet over
 ......................         eliminate the need for telephone companies to    copper telephone wires
 ......................         improve the condition of the copper wire and
 ......................         to install amplifiers or line repeaters for
 ......................         distances of up to 12,000 feet.  Contains
 ......................         performance and monitoring functions with
 ......................         remote accessibility that may supplant the
 ......................         need for telephone signal repeaters throughout
 ......................         the telephone line and products such as
 ......................         Westell's Network Interface Units.
 ......................

</TABLE>

     In the last five years, over 100 customers have purchased the Company's
ADSL systems to conduct technical and marketing trials for interactive
multimedia applications. DSL applications in these trials include interactive
video-on-demand, music-on-demand, catalog shopping, financial services,
games-on-demand, television-on-demand and long distance learning services.
Internationally, Westell's DSL systems have been purchased by telephone
administrations in 40 countries including Australia, Belgium, Canada, Hong Kong,
Italy, Japan, Norway, Singapore, South Korea, Spain, Switzerland, Taiwan and the
United Kingdom for trials and early deployments of DSL products. Westell is


<PAGE>


currently involved in Bell Atlantic's initial deployment of ADSL systems.
Through its partnership with Fujitsu Telecom Europe, Ltd. (FTEL), Westell is
involved in the initial deployment of ADSL products by British Telecom. Westell
currently sells its HDSL systems primarily outside the U.S. and to U.S. federal
government agencies.

     Customers using the Company's DSL systems for initial service deployments
are not contractually bound for future deployments or product sales. The Company
is unable to predict whether customer initial service deployments or other
technical or marketing trials will be successful or when significant commercial
deployment will begin, if at all.

     The Company's growth is dependent upon whether ADSL technology gains
widespread commercial acceptance by telephone companies. Due to the Company's
significant ongoing investment in DSL technology, the Company anticipates losses
in each of the fiscal 2000 quarters. The Company's ability to achieve
profitability or revenue growth in the future will be associated with market
acceptance of the Company's DSL systems and the development and market
acceptance of other DSL products introduced by the Company. See "Risk Factors."

     The market for DSL products is intensely competitive. Bids for recent field
trials and initial commercial deployments of DSL products implicitly assume
"forward pricing," that is, pricing DSL products to reflect the expectation of
large future volume sales and anticipated reductions in manufacturing costs. The
Company has offered its DSL products to telephone companies at prices below
current production costs. Such pricing has and could in the future cause the
Company to incur losses on a substantial portion of its DSL product sales unless
and until it can reduce manufacturing costs. The Company's ability to reduce its
manufacturing costs is dependent upon (1) more cost-effective chipset and
product design, some of which is dependent upon the Company's strategic
partners, and (2) the achievement of economies of scale. The Company believes
that, following the pronouncement of the International Telecommunication Union
standard for G.Lite, competition will increase and result in pricing pressures
and "forward pricing" of DSL products. There can be no assurance that the
Company will be able to secure significant additional orders and reduce per unit
manufacturing costs to accommodate these pricing pressures. Accordingly, the
Company could incur losses in connection with sales of DSL products that could
have a material adverse effect on the Company's business and operating results.

     T-1 Products. Westell's T-1 products provide telephone companies with
cost-effective solutions to transport, maintain and improve the reliability of
high speed or T-1 services over copper and fiber lines in the local access
network. T-1 transmissions are digital transmissions that have a speed that is
up to 24 times faster than a traditional analog phone line.


<PAGE>


     The following table sets forth a representative list of the Company's T-1
products and their applications:

<TABLE>

Product                      Description                                    Applications
-------                      -----------                                    ------------

<S>                          <C>                                            <C>
NIU (Network Interface       Network Interface Unit.  An electronic         Facilitates the maintenance of T-1
Unit)                        module generally located in the phone          transmission.
 ......................       companies' central office, that provides
 ......................       maintenance capabilities for telephone lines
 ......................       providing T-1 transmission.
 ......................

NIU-PM                       Network Interface Unit with Performance        Facilitates the maintenance and provides
 ......................       Monitoring that stores maintenance             performance monitoring of T-1 facilities.
 ......................       information for seven days.

Mountings                    Mechanical shelves used to house Westell's     Provides easy installation of end user
 ......................       and other companies' traditional and higher    electronics.
 ......................       speed modules.

QuadJack(TM)                 Transport system that provides transmission    Provides transport and facilitates
 ......................       medium for one to four traditional signals     maintenance for high-speed digital
 ......................       over fiber.                                    facilities.

SmartLink                    Automatic protection system for up to 8        Increases the reliability of T-1 and
 ......................       customer telephone lines providing T-1         other high-speed digital transmission.
 ......................       transmission.                                  Used for critical circuits such as those
                                                                            used to provide service to cellular
                                                                            telephone sites.
</TABLE>

         Many of the Company's T-1 products, such as its Network Interface
Units, intelligent line repeaters, office repeaters and SmartLink automatic
protection switches, function to monitor and control the quality of digital
transmission over copper wire. The Company's Network Interface Units allow
telephone companies to monitor transmission conditions and to detect performance
problems in circuits from remote locations. All of the Regional Bell Operating
Companies and GTE have purchased the Company's Network Interface Units. Westell
also sells Network Interface Units that incorporate real time performance
monitoring. This feature monitors the telephone line and returns status messages
every second to the telephone company's central office. The deployment of HDSL
systems in the U.S., which reduces telephone companies' need for T-1 repeaters
used to boost transmission quality, may result in a decrease in demand for
Westell's T-1 products such as its Network Interface Units. Network Interface
Units represented 52.5%, 51.2% and 52.2% of the Company's revenues in fiscal
1997, 1998 and 1999, respectively.

         The Company's SmartLink(TM) Automatic Protection Switch system monitors
up to eight customer T-1 channels and allows telephone companies to provide
uninterrupted service in the event of a fault on any channel. Once the SmartLink
detects a fault in one channel, it automatically places that signal on a
protection channel and generates a notification alarm at the telephone company's
central office, thereby significantly reducing network downtime and costly data
interruption.

         Traditional Products. Westell's traditional products are used by
telephone companies to deliver digital and analog service across copper wire in
the local access network at speeds ranging from approximately 2.4 to 64 Kilobits


<PAGE>


per second for digital transmission or 4 Kilohertz for analog transmission. In
some circumstances, analog transmission is the most economical, most easily
installed or the only service available.

         The following table sets forth a representative list of the Company's
traditional products and their applications:


<TABLE>

Product                         Description                                      Applications
-------                         -----------                                      ------------

<S>                              <C>                                             <C>
Data Station Termination Unit   Provides maintenance and equalization of data    Point of sale, lottery and other
 ......................          transmission and provides the interface          analog data.
 ......................          between analog transmission and an end user's
                                modem.

Tandem................          Provides low speed and analog channel cross      Connections between phone
 ......................          connections in tandem environments.              companies' offices.

</TABLE>

     The Company's other traditional products include:

          o    voice frequency channel units and mountings, which are used to
               provide dedicated analog data lines;

          o    smart repeaters, which boost analog signals; and

          o    monitoring functions designed to improve the quality of analog
               transmission over copper wire.

         Revenues from traditional products have declined in recent years as
telephone companies continue to move from lower speed analog and digital
transmission services to networks that deliver higher speed services. The
Company expects revenues in the traditional product category to continue to
decline as a result of this migration.

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

FlexCap, FlexCap2, FlexPak, QuadJack, SlimJack, SmartLink and PROACT are
trademarks of Westell Technologies, Inc.
AccessVision and SuperVision are registered trademarks of Westell Technologies,
Inc. All other names indicated by (R) or (TM) are registered trademarks or
trademarks of their respective owners.
---------------------------

RESEARCH AND PRODUCT DEVELOPMENT

         The Company believes that its future success depends on its ability to
maintain its technological leadership through enhancements of its existing
products and development of new products that meet customer needs. Westell works
closely with its current and potential customers as part of the product
development process. Research and development expenses for fiscal 1997, 1998 and
1999 were $22.0 million $26.6 million and $26.6 million, respectively. To date,
all research and development costs have been charged to operating expense as
incurred. From time to time, development programs are conducted by other firms
under contract with the Company, and related costs are also charged to
operations as incurred.

         There can be no assurance that the Company will be able to introduce
products under development as planned, and the failure of the Company to do so
would have a material adverse effect on the Company's business and results of
operations. In addition, there can be no assurance that the Company's future
development efforts will result in commercially successful products or that the
Company's products will not be rendered obsolete by changing technology or new
product announcements by competitors. See Risk Factors


<PAGE>


         The Company and products under development are subject to industry wide
standardization organizations which include, the American National standards
Institute, the International Telecommunications Union and the European
Telecommunications Standards Institute which are responsible for specifying
transmission standards for telecommunications technologies. The industry
transmission standard for ADSL adopted by American National Standards Institute
and European Telecommunications Standards Institute is based upon a transceiver
technology referred to as Discreet Multi-Tone technology or DMT. Westell
incorporates DMT technology into its DSL products. The Company has not developed
a transceiver technology for its product offerings and it is dependent on
transceiver technologies from third parties. The Company has established
multiple strategic relationships with transceiver technology vendors for
transceiver technologies to be used in DSL systems by the Company. Absent the
proper relationships with key transceiver technology vendors, the Company's
products may not comply with the technology standards set for DSL products. If
customers require standards based products that require transceiver technologies
not available to the Company under reasonable terms and conditions, then the
Company's business and results of operations would be materially and adversely
affected.

         The Company's DSL products are dependent upon transceiver technology
licensed from third party suppliers. These licenses are nonexclusive and have
been licensed to numerous other manufacturers or will not require a license to
acquire. Without a third party transceiver technology the Company would not be
able to produce any of its DSL systems. Consequently, if the Company's third
party transceiver suppliers fail to deliver implementable or standards compliant
transceiver solutions to the Company and other alternative sources of DSL
transceiver technology are not available to the Company at commercially
acceptable terms, then the Company's business and results of operations would be
materially and adversely affected.

         The International Telecommunications Union is expected to complete a
final determination of a standard for an ADSL product called G.Lite in September
1999. The effect of a G.Lite standard on the Company is unknown. The Universal
ADSL Working Group, formed by leading companies in the personal computer,
telecommunications and networking industries, is in the process of establishing
ADSL G.Lite standards based upon a technology standard that will allow
manufacturers to manufacture DSL products that can be used with other
telecommunications manufacturers' products. Although products based upon the
expected G.Lite standard would reduce and simplify the telephone wiring
modifications at the customer premises that is required by full DSL products,
trials of the G.Lite products indicate that multiple distributed splitters may
be required at the customer premises for G.Lite products which could make
installation more expensive than other higher speed ADSL products. In addition,
the differences in the initial costs, premises wiring requirements, and data
rates between G.Lite products and higher speed ADSL products could confuse the
marketplace and delay a mass market adoption of any ADSL products. Additionally,
the Company's products will require design changes to achieve compliance with
the expected G.Lite standard. Further, because the Company is dependent on its
strategic silicon partners for providing G.Lite versions of transceiver
technology and these standards are still not finalized, there can be no
assurance that the Company will have a G.Lite transceiver technology in a timely
manner for product development.

         During the last fiscal year, the DSL industry has focused on achieving
interoperability of the products manufactured by different vendors. The
expectation is that widespread availability of interoperable equipment would
speed market deployment by eliminating dependencies between customer equipment
and the equipment used by the service provider. Although Westell participates in
interoperability tests and programs, there is no assurance that widespread
equipment interoperability would increase unit sales volumes as interoperability
has not been an issue in the market to date. Additionally, improved equipment
interoperability could also increase pricing pressures on the Company's ADSL
products.

         The Company's engineering is conducted in accordance with ISO 9001,
which is the international standard for quality management systems for design,
manufacturing and service. The Company's research and development personnel are
organized into product development teams. Each product development team is
generally responsible for sustaining technical support of existing products,
decreasing manufacturing costs, conceiving new products in cooperation with


<PAGE>

other groups within the Company and adapting standard products or technology to
meet new customer needs. In particular, each product development team is charged
with implementing the Company's engineering strategy of reducing product costs
for each succeeding generation of the Company's products in an effort to be a
low cost, high quality provider, without compromising functionality or
serviceability. The Company believes that the key to this strategy is choosing
an initial architecture for each product that enables engineering innovations to
result in future cost reductions. Successful execution of this strategy also
requires that the Company continue to attract and recruit highly qualified
engineers.

STRATEGIC ALLIANCES

         The Company's business strategy involves entering into selected
strategic alliances with other companies that are intended to secure
complementary technologies, insure access to transceiver technology chipsets at
the lowest possible cost and to better market its products. These relationships
are expected to enable the Company to more quickly develop products and
penetrate markets and to be able to price its products competitively. The
success of the Company is and will be dependent on the efforts of its strategic
alliances. The Company's strategic alliances primarily relate to the
development, manufacture and marketing of DSL systems. Examples of the Company's
alliances include the following:

         Fujitsu Telecom Europe Limited - Effective April 1998, the Company
entered into an agreement to design and manufacture DSL products for Fujitsu
Telecom. Fujitsu Telecom will distribute the product in Europe. The Company will
receive royalty payments in the event that Fujitsu chooses instead to
manufacture the products.

         Adtran - Effective March 1998, the Company entered into a nonexclusive
agreement with Adtran, Inc. to develop and market ADSL products for Adtran's
communications platform called Total Access. Total Access is used in phone
companies' central offices to provide traditional and high speed services to
customers. The Total Access partner program provides for different vendors to
supply components of the Total Access System. Westell supplies the ADSL
components and technology.

         Alcatel (formerly DSC Telecom) - In January 1997, the Company and DSC
Telecom L.P. entered into an agreement for the design and development of
equipment and the incorporation of the Company's ADSL technology into DSC
Telecom's Litespan(R) 2000 digital loop carrier system. In May 1997, the Company
and DSC Telecom entered into an agreement for DSC Telecom to distribute the
Company's DSL modem to its telecom customers to complement the DSL equipment and
technology used in the Litespan(R) 2000 digital loop carrier system. In fiscal
1999, Alcatel, a competitor, acquired DSC Telecom. The Company is unable to
predict what effect this acquisition, if completed, will have on this alliance.

         Alcatel USA - In March 1999, the Company signed an agreement with
Alcatel USA, a Division of Alcatel Networks to use Alcatel USA's central office
DSL product to assist the Company in developing high speed modems that
interoperate with Alcatel equipment.

         Lucent Technologies - In September 1997, the Company and Lucent
Technologies, Inc. entered into a nonexclusive agreement for the design and
development of equipment incorporating the Company's ADSL technology for use in
two of Lucent's digital loop carrier systems called SLC(R) Series 5 and
SLC-2000. In November 1997, the Company and Lucent entered into a nonexclusive
agreement to integrate the Company's SuperVision(R) DSLAM broadband capabilities
with Lucent Technologies' central office switch product called 5ESS(R)..Under
this agreement, Lucent Technologies will market and sell the ADSL enabled SLC
and SuperVision(R) solutions.


<PAGE>


CUSTOMERS

         The Company's principal customers historically have been U.S. telephone
companies. Since fiscal 1993, the Company has also marketed its products
internationally. In addition, Westell sells products to several other entities,
including public telephone administrations located outside the U.S., independent
domestic local exchange carriers, competitive local exchange carriers, inter
exchange carriers and the U.S. federal government. International revenues
represented approximately $4.4 million, $8.5 million and $8.5 million of the
Company's revenues in fiscal 1997, 1998 and 1999, respectively, accounting for
5.5%, 9.9% and 9.1% of the Company's revenues in such periods.

         The Company depends, and will continue to depend, on Regional Bell
Operating Companies, the large phone providers resulting from the break-up of
AT&T, and other smaller or independent telephone carriers for substantially all
of its revenues. Sales to the Regional Bell Operating Companies accounted for
61.9%, 51.1% and 46.6% of the Company's revenues in fiscal 1997, 1998 and 1999,
respectively and sales to Ameritech accounted for 16.2% of the Company's
revenues in fiscal 1999. Consequently, the Company's future success will depend
upon the timeliness and size of future purchase orders from the Regional Bell
Operating Companies, the product requirements of the Regional Bell Operating
Companies, the financial and operating success of the Regional Bell Operating
Companies, and the success of the Regional Bell Operating Companies' services
that use the Company's products. Any attempt by a Regional Bell Operating
Company or other telephone company access providers to seek out additional or
alternative suppliers or to undertake, as permitted under applicable
regulations, the internal production of products would have a material adverse
effect on the Company's business and results of operations. In addition, the
Company's sales to its largest customers have in the past fluctuated and in the
future are expected to fluctuate significantly from quarter to quarter and year
to year. The loss of such customers or the occurrence of such sales fluctuations
would materially adversely affect the Company's business and results of
operations.

         The Regional Bell Operating Companies and the Company's other customers
are significantly larger than, and are able to exert a high degree of influence
over, the Company. Prior to selling its products to telephone companies, the
Company must undergo lengthy approval and purchase processes. The Company has
supply contracts with most of its major customers, but these contracts typically
do not establish minimum purchase commitments.

MARKETING, SALES AND DISTRIBUTION

         The Company sells its products in the U.S. through its domestic field
sales organization and selected distributors. The Company markets its products
internationally in over 40 countries under various distribution arrangements
that include strategic partnerships, OEM agreements, technology licenses,
distributors, and internationally based sales personnel. As of March 31, 1999,
the Company's equipment marketing, sales and distribution programs were
conducted by 118 employees.

         For large telephone companies, such as the Regional Bell Operating
Companies and major European and Asian telephone carriers, the Company sells its
DSL products indirectly through its strategic partners. These large telephone
companies purchase their DSL products in a portfolio with other
telecommunications products. Westell provides DSL equipment and services for the
central office and telephone company networks to its strategic partners who then
sell those products along with other related products to the telephone
companies. See "--Strategic Alliances." The Company sells its DSL modems for use
by residential and business customers on their premises directly to small and
medium-sized providers.

         International revenues represented 5.5%, 9.9% and 9.1% of the Company's
revenues in fiscal 1997, 1998 and 1999, respectively. The Company's
international operations are based in Aurora, Illinois.


<PAGE>


         The Regional Bell Operating Companies and the Company's other customers
are significantly larger than, and are able to exert a high degree of influence
over, the Company. Prior to selling its products to telephone companies, the
Company must undergo lengthy approval and purchase processes. Evaluation can
take as little as a few months for products that vary slightly from existing
products in the local access network and a year or more for products based on
new technologies such as DSL. Accordingly, the Company is continually submitting
successive generations of its current products as well as new products to its
customers for approval. The length of the approval processes is affected by a
number of factors, including the complexity of the product involved, the
priorities of the telephone companies, telephone companies' budgets and
regulatory issues affecting telephone companies and other local access service
providers. In addition, the requirement that telephone companies obtain FCC
approval for certain services prior to their implementation has in the past
delayed the approval processes.
See Risk Factors.

         Although the telephone company approval processes may vary to some
extent depending on the customer and the product being evaluated, they generally
are conducted as follows:

         Laboratory Evaluation. The product's function and performance are
         tested against all relevant industry standards.

         Technical Trial. A number of telephone lines are equipped with the
         product for simulated operation in a field trial. The field trial is
         used to evaluate performance, assess ease of installation and establish
         troubleshooting procedures.

         Marketing Trial. Emerging products such as DSL are tested for market
         acceptance of new services. Marketing trials usually involve a greater
         number of systems than technical trials because systems are deployed at
         several locations in the telephone company's network. This stage gives
         telephone companies an opportunity to establish procedures, train
         employees to install and maintain the new product and to obtain more
         feedback on the product from a wider range of operations personnel.

         Commercial Deployment. Commercial deployment usually involves
         substantially greater numbers of systems and locations than the
         marketing trial stage. In the first phase of commercial deployment, a
         telephone company initially installs the equipment in select locations
         for select applications. This phase is followed by general deployment
         involving greater numbers of systems and locations. General deployment
         does not usually mean that one supplier's product is purchased for all
         of the telephone companies' needs throughout the system as telephone
         companies often rely upon multiple suppliers to ensure that their needs
         can be met. Subsequent orders, if any, are generally placed under
         single or multi-year supply agreements that are generally not subject
         to minimum volume commitments.

         In most international markets, there is one major telephone company per
country with limited or few alternate telephone carriers or independent
telephone companies. Typically, these telephone companies are highly regulated,
government-owned agencies that have approval and purchase processes similar to
those followed by the Regional Bell Operating Companies.

CUSTOMER SERVICE AND SUPPORT

         Westell maintains 24-hour, 7-day-a-week telephone support and provides
on-site support. The Company also provides technical consulting, research
assistance and training to its customers with respect to the installation,
operation and maintenance of its products.

         The Company has supply contracts with most of its major customers.
These contracts may require the Company to accept returns of products or
indemnify such customers against certain liabilities arising out of the use of
the Company's products. Although, to date, the Company has not experienced any


<PAGE>

significant product returns or indemnification claims under these contracts, any
such claims or returns could have a material adverse effect on the Company's
business and results of operations.

         The Company's products are required to meet rigorous standards imposed
by its customers. Most of the Company's products carry a limited warranty
ranging from one to seven years, which generally covers defects in materials or
workmanship and failure to meet published specifications, but excludes damages
caused by improper use and all other express or implied warranties. In the event
there are material deficiencies or defects in the design or manufacture of the
Company's products, the affected products could be subject to recall. For the
past five fiscal years, the Company's warranty expenses have been relatively
insignificant. The Company's standard limited warranty for its ADSL products
ranges from one to five years. Since the Company's DSL products are new, with
limited time in service, the Company cannot predict the level of warranty claims
that it will experience for these products. See Risk Factors

MANUFACTURING

         The Company purchases parts and components for its products from a
number of suppliers through a worldwide sourcing program. Key components used in
the Company's products, such as integrated circuits and other electronic
components, are currently available from only one source or a limited number of
suppliers. In addition, some of the electronic components used in the Company's
products are currently in short supply and are provided on an allocation basis
to the Company and other users, based upon past usage. There can be no assurance
that the Company will be able to continue to obtain sufficient quantities of
integrated circuits or other electronic components as required, or that such
components, if obtained, will be available to the Company on commercially
reasonable terms. Integrated circuits and electronic components are key
components in all of the Company's products and are fundamental to the Company's
business strategy of developing new and succeeding generations of products at
reduced unit costs without compromising functionality or serviceability. In the
past, however, the Company has experienced delays in the receipt of integrated
circuits and other key product, which have resulted in delays in related product
deliveries. There can be no assurance that delays in key components or product
deliveries will not occur in the future due to shortages resulting from the
limited number of suppliers, financial or other difficulties of such suppliers
or the possible limitations in integrated circuit production capacity or
electronic component availability because of significant worldwide demand for
these components. The inability to obtain sufficient key components or to
develop alternative sources for such components, if and as required in the
future, could result in delays or reductions in product shipments, which in turn
could have a material adverse effect on the Company's customer relationships,
its business and results of operations.

         The Company currently manufactures most of its products internally
while relying on a few subcontractors in the U.S. and the United Kingdom for
various assemblies. As part of its strategic plan to meet the potential
worldwide demand for its DSL systems, the Company currently is in the process of
developing the manufacturing capabilities necessary to supply and support large
volumes of ADSL systems and in the future may become increasingly dependent on
subcontractors. Reliance on third-party subcontractors involves several risks,
including the potential absence of adequate capacity and reduced control over
product quality, delivery schedules, manufacturing yields and costs. The use of
subcontractors could result in material delays or interruption of supply as a
consequence of required re-tooling, retraining and other activities related to
establishing a new subcontractor relationship.

         A substantial portion of the Company's shipments in any fiscal period
relate to orders for products received in that period. Further, a significant
percentage of orders, such as Network Interface Units, or NIUs, require delivery
within 48 hours. To meet this demand, the Company maintains raw materials
inventory and limited finished goods inventory at its manufacturing facility. In
addition, the Company maintains some finished goods inventory at the customer's
site pursuant to an agreement that the customer will eventually purchase such
inventory. Final testing and shipment of products to customers occurs in the


<PAGE>


Company's Aurora, Illinois facilities. The Company's domestic facilities are
certified pursuant to ISO 9001.

         The Company believes that because a substantial portion of customer
orders for its traditional and T-1 products are filled within the quarter of
receipt, the Company's backlog is not a meaningful indicator of actual revenues
for these products for any succeeding period. In general, customers purchasing
DSL products may reschedule orders without penalty to the customer. As a result,
the quantities of the Company's products to be delivered and their delivery
schedules may be revised by customers to reflect changes in their DSL product
needs. Since backlog of DSL products can be rescheduled without penalty, the
Company does not believe that its backlog of DSL products is a meaningful
indicator of future revenues from DSL products.

COMPETITION

         The markets for the Company's products are intensely competitive and
the Company expects competition to increase in the future, especially in the
emerging ADSL market. Westell's principal competitors with respect to its
Traditional Products are Adtran, Inc., Pulsecom, Tellabs, Inc. and Teltrend,
Inc. Westell's principal competitors in the T-1 market are ADC
Telecommunications Inc., Applied Digital Access Inc., PairGain Technologies,
Inc. and Teltrend, Inc. The Company's current competitors in the ADSL market
include Alcatel Network Systems, Nokia, ECI Telecom, Ltd., Ericsson, Cisco
Systems, Nortel, Orckit Communications, Ltd. PairGain Technologies, Inc.,
Paradyne, 3Com, and Siemens. Many of the Company's competitors and potential
competitors have greater financial, technological, manufacturing, marketing and
human resources than the Company. Our competitors include full network level
system suppliers who are much larger than the Company and can offer all elements
of a network solution. The Company has addressed this competition by entering
into strategic alliances to offer complete systems of which our ADSL product
offering is a part. The Company's ability to compete with these larger system
suppliers will depend on the success of the alliances we form and the system
solutions created to meet customers needs. The inability to form successful
alliances and develop systems that meet customers' requirements will materially
adversely affect the Company's business and results of operations.

         The Company expects competition in the ADSL market in the near future
from numerous other companies. In addition, the Telecommunications Act permits
the Regional Bell Operating Companies to engage in manufacturing activities.
Therefore, Regional Bell Operating Companies, which are the Company's largest
customers, may potentially become the Company's competitors as well. Any
increase in competition could reduce the Company's gross margin, require
increased spending by the Company on research and development and sales and
marketing, and otherwise materially adversely affect the Company's business and
results of operations.

         Products that increase the efficiency of digital transmission over
copper wire face competition from fiber, wireless, cable modems and other
products delivering broadband digital transmission. Many telephone companies and
other local access providers have adopted policies that favor the deployment of
fiber. To the extent that customers choose to install fiber and other
transmission media between the central office and the end user, the Company
expects that demand for its copper wire-based products will decline. Telephone
companies face competition from cable operators, new local access providers and
wireless service providers that are capable of providing high speed digital
transmission to end users. To the extent telephone companies decide not to
aggressively respond to this competition and fail to offer high speed digital
transmission, the overall demand for ADSL products could decline. In addition,
the deployment of products and technologies for copper wire may also reduce the
demand for the types of products currently manufactured by the Company.
Specifically, the development of G.Lite products may reduce the demand for the
Company's existing ADSL products. The deployment of HDSL systems in the U.S.,
which reduces telephone companies' need for T-1 repeaters, may result in a
decrease in demand for Westell's T-1 products such as its Network Interface
Units. The Company believes that the domestic market for many of its traditional
products is decreasing, and will likely continue to decrease, as high capacity
digital transmission becomes less expensive and more widely deployed. See Risk
Factors



<PAGE>


TELECONFERENCE SERVICES

         Conference Plus, Inc., founded in 1988, is a leading provider of
conferencing services. Conference Plus allows multiple individuals and/or
businesses to conduct conference calls using a combination of voice, video or
data such as graphs or spreadsheets. The Company is an 88.2% owned subsidiary of
Westell and manages its teleconferencing services through its operations center
in Schaumburg, Illinois and facilities in Lombard, Illinois and Dublin, Ireland.
By enabling its customers to share information, Conference Plus can increase
productivity and save money by reducing travel time, bringing down travel costs,
and make it easier for people in remote locations to work together.
Teleconferencing technologies also allow organizations and individuals to
collect and disseminate information faster, more accurately and without the
associated costs of face-to-face meetings.

         Conference Plus services generated $10.3 million, $14.1 million and
$21.3 million in revenues in fiscal 1997, 1998 and 1999, respectively. A
majority of Conference Plus' revenues come from private label commercial
teleconferencing services to customers who market Conference Plus services under
their own brand name. Such companies choose to outsource and private label audio
and video teleconferencing services to maintain continuity and save costs. Audio
and video teleconferencing is a people-intensive service, requiring high levels
of concentration on the execution of each and every call. In addition to
privately branded teleconferencing services, Conference Plus offers a wide range
of direct commercial teleconferencing and video services. The audio conferencing
services include:
o    operator initiated calls where the Conference Plus operator calls the
     participants
o    operator assisted calls where the customer dials in on a regular number or
     their own network, or the customers call into a toll free network and
o    fully automated services where the customers use a pre-assigned code to
     access the conference call without the assistance of an operator.
Expanded capabilities also provide for advanced meeting options that include
call polling, questions & answer queuing, broadcast/listen only, integrated
voice response digital playback, conference call tape recording and playback and
transcription and reservation/resource management services.

         Conference Plus received the first ISO 9002 certification in the audio
and video conferencing services industry.

         Conference Plus' strategic focus includes the following key objectives:

         Private Label Services - Build off of leadership in private label
           services by offering flexibility in the choice of networks or
           carriers, superior tailored reservations, confirmation, billing and
           customer service features and extensive experience in the design,
           implementation and ongoing management of private label programs.

         Automated Conferencing - Deliver solutions for automated conferencing
           through promoting electronic and Internet access to reservation and
           billing systems, and improved, convenient and cost effective use of
           automated (pass code) teleconferencing systems.

         International Expansion - Expand beyond the US. Conference Plus
           currently serves its teleconferencing needs of customers
           headquartered in the United States from its Schaumburg, Illinois
           facility. As these customers globalize their telecommunications
           services, Conference Plus will be required to expand its operational
           presence internationally to meet these needs. In addition, the
           international market for teleconferencing is expected to grow
           substantially as a result of deregulation and improved networks with
           associated reductions in end user costs.


<PAGE>


         Multimedia and IP Capability- Offer customers the ability to conduct
           conferencing services from multiple sites using a variety of media
           including voice, video and Internet Protocol applications.

         Commitment to Service Quality, Customer Service and Low-Cost Operations
           - Conference Plus recognizes that providing high quality service is
           an important aspect affecting Conference Plus' ability to compete in
           both the domestic and international teleconferencing markets. The
           Company's commitment to continuous improvement and total customer
           satisfaction is evidenced by its use of a total quality management
           program which has resulted in Conference Plus becoming ISO 9002
           certified in November 1997. Conference Plus will continue to focus on
           total quality management and continuous improvement to meet and
           exceed customer expectations. In addition, Conference Plus' focus
           will also include implementation of cost improvements to allow
           Conference Plus to offer world class services at low cost to remain
           competitive in its teleconference service offerings.

         Conference Plus sells its services in the U.S. principally through its
domestic in-house sales organization, through agents under contract to
Conference Plus and through the efforts of the Company's Private Label
customers. As of March 31, 1999, Conference Plus' sales, service representative
and agent support programs were conducted by 35 employees.

         The private label customers and many of the Company's other customers
are significantly larger than, and are able to exert a high degree of influence
over Conference Plus. Prior to selling its services, the Company must undergo
lengthy approval and purchase processes. Evaluation can take as little as a few
months for services that vary slightly from existing services used by the
prospective customer to a year or more for services based on technologies such
as video or data teleconferencing or which represent a new strategic direction
for the customer, as in the case with private labeling teleconference services
for a Regional Bell Operating Company.

         Conference Plus maintains 24 hour, 7 day a week telephone support and
provides on-site support for larger, more complex teleconferences. The Company
also provides technical consulting, call planning assistance and usage analysis
to its customers with respect to the introduction, enhancement and expanded
utilization of its services.

         Competition in the teleconferencing business is intense and the Company
expects that competition will increase due to low barriers to entry and recent
entrants into the audio teleconferencing service market. Many of Conference
Plus' competitors, including AT&T, MCI Communications and Sprint Communications,
have much greater name recognition, more extensive customer service and
marketing capabilities and substantially greater financial, technological and
personnel resources than the Company. There can be no assurance that the Company
will be able to successfully compete in this market in the future or that
competitive pressures will not result in price reductions that would materially
adversely affect the Company's business and results of operations.

GOVERNMENT REGULATION

         The telecommunications industry, including most of the Company's
customers, is subject to regulation from federal and state agencies, including
the FCC and various state public utility and service commissions. While such
regulation does not affect the Company directly, the effects of such regulations
on the Company's customers may, in turn, adversely impact the Company's business
and results of operations. For example, FCC regulatory policies affecting the
availability of telephone company services and other terms on which telephone
companies conduct their business may impede the Company's penetration of local
access markets. The Telecommunications Act lifted certain restrictions on
telephone companies' ability to provide interactive multimedia services
including video on demand. Under the Telecommunications Act, new regulations
have been established whereby telephone companies may provide various types of
video services. Rules to implement these new regulations have been established
whereas statutory provisions are now being considered by the FCC.


<PAGE>



         In addition, the Telecommunications Act permits the Regional Bell
Operating Companies to engage in manufacturing activities after the FCC
authorizes Regional Bell Operating Company to provide long distance services
within its service territory. A Regional Bell Operating Company must first meet
specific statutory and regulatory tests demonstrating that its monopoly market
for local exchange services is open to competition before it will be permitted
to enter the long distance market. When these tests are met, a Regional Bell
Operating Company will be permitted to engage in manufacturing activities and
the Regional Bell Operating Companies, which are the Company's largest
customers, may become the Company's competitors as well. See Risk Factors.

PROPRIETARY RIGHTS

         The Company's success and future revenue growth will depend, in part,
on its ability to protect trade secrets, obtain or license patents and operate
without infringing on the rights of others. Although the Company regards its
technology as proprietary, it has only one patent on such technology related to
Network Interface Units. The Company expects to seek additional patents from
time to time related to its research and development activities. The Company
relies on a combination of technical leadership, trade secrets, copyright and
trademark law and nondisclosure agreements to protect its unpatented proprietary
know-how. See Risk Factors.

         Many of the Company's products incorporate technology developed and
owned by third parties. For example, the Company is dependent upon third party
suppliers for DSL transceiver technology. Consequently, the Company must rely
upon third parties to develop and introduce technologies which enhance the
Company's current products and enable the Company, in turn, to develop its own
products on a timely and cost-effective basis to meet changing customer needs
and technological trends in the telecommunications industry. Any impairment or
termination of the Company's relationship with any licensors of third-party
technology would force the Company to find other developers on a timely basis or
develop its own technology. There can be no assurance that the Company will be
able to obtain the third-party technology necessary to continue to develop and
introduce new and enhanced products, that the Company will obtain third-party
technology on commercially reasonable terms or that the Company will be able to
replace third-party technology in the event such technology becomes unavailable,
obsolete or incompatible with future versions of the Company's products. The
absence of or any significant delay in the replacement of third-party technology
would have a material adverse effect on the Company's business and results of
operations.

EMPLOYEES

         As of March 31, 1999, the Company had 740 full-time employees.
Westell's equipment manufacturing business had a total of 533 full-time
employees, consisting of 118 in sales, marketing, distribution and service, 161
in research and development, 219 in manufacturing and 35 in administration.
Conference Plus had a total of 207 full-time employees. None of the Company's
employees are represented by a collective bargaining agreement nor has the
Company ever experienced any work stoppage. The Company believes its
relationship with its employees is good.




<PAGE>


RISK FACTORS

         You should carefully consider the following risk factors in addition to
the other information contained and incorporated by reference in this Annual
Report on Form 10-K before purchasing our stock.

WE MAY FACE OTHER RISKS NOT DESCRIBED IN THE FOREGOING RISK FACTORS WHICH MAY
IMPAIR OUR BUSINESS OPERATIONS.

         The risks and uncertainties described in the foregoing risk factors may
not be the only ones facing us. Additional risks and uncertainties not presently
known to us may also impair our business operations. If any of the following
risks actually occur, our business, financial condition and results of
operations could be materially adversely affected. In this case, the trading
price of our common stock could decline, and you may lose all or part of your
investment.

WE HAVE INCURRED AND CONTINUE TO EXPECT LOSSES.

        Due to our significant ongoing investment in DSL technology, we have
incurred and anticipate that our losses may extend at least through each of our
fiscal 2000 quarters. To date, we have incurred operating losses, net losses and
negative cash flow on both an annual and quarterly basis. For the year ended
March 31, 1999, we had net losses of $35.0 million.

         We believe that our future revenue growth and profitability will depend
on:

          o    creating sustainable DSL sales opportunities;
          o    developing new and enhanced T-1 products;
          o    developing other niche products for both DSL and T-1 markets; and
          o    growing our teleconference service revenues.

In addition, we expect to continue to evaluate new product opportunities and
engage in extensive research and development activities. As a result, we will
continue to invest heavily in research and development and sales and marketing,
which will adversely affect our short-term operating results. We can offer no
assurances that we will achieve profitability in the future.

WE DEPEND ON DSL MARKET ACCEPTANCE AND GROWTH FOR FUTURE SUCCESS.

         We expect to continue to invest significant resources in the
development of DSL products. Because the DSL market is in its early stages, our
DSL revenues have been difficult to forecast. If the DSL market fails to grow or
grow more slowly than anticipated, then our business, revenues and operating
results would be materially adversely affected.

         Our analog-based and T-1 based products (such as our Network Interface
Units) are not expected to generate sufficient revenues or profits to offset any
losses that we may experience due to a lack of sales of DSL systems. If we fail
to generate significant revenues from DSL sales, then we would not be able to
implement our business goals and our business and operating results would suffer
significantly.

         Customers have only recently begun to consider implementing DSL
products in their networks. We have shipped most of our DSL products for trials
and early deployment. Most of our customers are in initial service deployments
and are not contractually bound to purchase our DSL systems in the future. We
are unable to predict whether these initial service deployments or other
technical or marketing trials will be successful and when significant commercial


<PAGE>



deployment of our DSL products will begin, if at all. The timing of DSL orders
and shipments can significantly impact our revenues and operating results.

         Even if our customers adopt policies favoring full-scale implementation
of DSL technology, our DSL-based sales may not become significant. There is no
guaranty that our customers will select our DSL products instead of competitive
products. If we fail to significantly increase our DSL sales, then our business,
operating results and financial condition will suffer.

PRICING PRESSURES ON OUR PRODUCTS MAY AFFECT OUR ABILITY TO BECOME PROFITABLE.

         Due to competition in the DSL market, bids for recent field trials of
DSL products reflect:

          o    the forward pricing of DSL products below production costs to
               take into account the expectation of large future volumes and
               corresponding reductions in manufacturing costs; or
          o    suppliers providing DSL products at a lower price as part of a
               sale of a package of products and/or services.

         We are offering DSL products based upon forward pricing. For example,
in the September and December 1998 quarters, we shipped ADSL products to
customers that were priced below our current production costs. As a result, we
recognized forward pricing losses of approximately $1.7 million and $800,000,
respectively, for DSL orders received during those quarters. Such pricing will
cause us to incur losses on a substantial portion of our DSL product sales
unless and until we can reduce manufacturing costs. We believe that
manufacturing costs may decrease when:

          o    more cost-effective transceiver technologies are available;
          o    product design efficiencies are obtained; and
          o    economies of scale are obtained related to increased volume.

         There is no guaranty that we will be able to secure significant
additional orders and reduce per unit manufacturing costs that we have factored
into our forward pricing of DSL products. We could continue to incur losses in
connection with sales of DSL products even if our DSL unit volume increases.
Losses from our sales of DSL products would materially and adversely affect our
ability to achieve profitability and implement our business goals.

         Moreover, the International Telecommunication Union is expected to
announce a standard for a DSL product called G.Lite in late 1999, which will
allow consumers to install DSL technology on their computer themselves. We
believe this announcement will increase competition in the DSL market and result
in greater pricing pressures with respect to all DSL products.

OUR QUARTERLY OPERATING RESULTS ARE LIKELY TO FLUCTUATE SIGNIFICANTLY, CAUSING
OUR STOCK PRICE TO BE VOLATILE OR DECLINE.

         We expect to continue to experience significant fluctuations in
quarterly operating results. Factors that have had and may continue to influence
our quarterly operating results include:

o              the size and timing of customer orders and subsequent shipments,
               including customer order deferrals in anticipation of new
               products or anticipated sale or merger of the customer's business
               or other reasons;

          o    the impact of changes in the customer mix or product mix sold;
          o    long and unpredictable sales cycles and customer purchasing
               programs;


<PAGE>


          o    the absence of unconditional minimum purchase commitments from
               any customer;
          o    timing of product introductions or enhancements by us or our
               competitors;
          o    acceptance of new products by our customers;
          o    technological changes in the telecommunications industry;
          o    competitive pricing pressures;
          o    accuracy of customer forecasts of end-user demand;
          o    write-offs for obsolete inventory;
          o    changes in our operating expenses which can occur because of
               product development costs, pricing pressures and other factors;
          o    personnel changes;
          o    quality control of products sold;
          o    disruption in supplies of key components of our products;
          o    regulatory changes; and
          o    delays of payments by customers.

         Sales to our largest customers have fluctuated and are expected to
fluctuate significantly between financial periods. Sales to our customers
typically involve long approval and procurement cycles and can involve large
purchase commitments. Customers purchasing DSL products may generally reschedule
orders without penalty to the customer. Cancellation or deferral of one or a
small number of orders could cause significant fluctuations in our quarterly
operating results. Due to our fluctuations in quarterly results, we believe that
period-to-period comparisons of our quarterly operating results are not
necessarily meaningful and should not be relied upon as indications of future
performance.

         In addition, these quarterly fluctuations make it more difficult to
forecast our revenues. It is likely that in some future quarters our operating
results will be below the expectations of securities analysts and investors,
which may adversely affect our stock price. This occurred in fiscal 1999. We
attempt to address this possible divergence through our public announcements and
reports. The degree of specificity we can offer in such announcements, however,
and the likelihood that any forward-looking statements we make will prove
correct, can and will vary. As long as we continue to depend on DSL and new
products, there is substantial risk of widely varying quarterly results,
including the so-called "missed quarter" relative to investor expectations.

EVOLVING INDUSTRY STANDARDS MAY ADVERSELY AFFECT OUR DSL SALES

         Industry wide standardization organizations such as the American
National Standards Institute and the European Telecommunications Standards
Institute are responsible for setting transceiver technology standards for DSL
products. Because we have not internally developed a transceiver technology for
our products, we are dependent on transceiver technologies from third parties.
Absent the proper relationships with key transceiver technology vendors, our
products may not comply with the developing standards for DSL. If customers
require standards-based products that require transceiver technologies not
available to us under reasonable terms, then our DSL revenues would
significantly decrease and our business and operating results would materially
suffer.

         We will continue to rely on third party suppliers for access to
transceiver technologies for new DSL products such as the DSL product under
development called G.Lite, which will allow consumers to install DSL technology
on their computer themselves. Since standards have not been established for
G.Lite products, there can be no assurance that standards-compliant transceiver
technologies will be available to us in a timely manner for the purpose of
product development.

         In addition, the introduction of competing standards or implementation
specifications could result in confusion in the market and delay any decisions
regarding deployment of DSL systems. For example, the anticipated announcement
of G.Lite standard could also delay our customer's deployment of other DSL


<PAGE>


products. Delay in the announcement of standards would materially and adversely
impact sales of our DSL product offerings and could have a material adverse
effect on our business and operating results.

OUR PRODUCTS FACE COMPETITION FROM OTHER EXISTING PRODUCTS, PRODUCTS UNDER
DEVELOPMENT AND CHANGING TECHNOLOGY, AND WE MUST DEVELOP NEW COMMERCIALLY
SUCCESSFUL PRODUCTS TO ACHIEVE OUR BUSINESS GOALS AND GENERAL REVENUE.

         The markets for our products are characterized by:

          o    intense competition,
          o    rapid technological advances,
          o    evolving industry standards,
          o    changes in end-user requirements,
          o    frequent new product introductions and enhancements, and
          o    evolving telephone company service offerings.

         New products introductions or changes in telephone company services
could render our existing products and products under development obsolete and
unmarketable. For example, HDSL, product that enhances the signal quality of the
transmission over copper wire, may reduce the demand for the types of products
that we currently manufacture such as our Network Interface Units product, which
provide performance monitoring of copper telephone wires. Our Network Interface
Units accounted for at least 50% of our revenues in each of the last three
fiscal years. Further, we believe that the domestic market for many of our
traditional analog products is decreasing, and will likely continue to decrease,
as high capacity digital transmission becomes less expensive and more widely
deployed. Our future success will largely depend upon our ability to continue to
enhance our existing products and to successfully develop and market new
products on a cost-effective and timely basis.

         Our current product offerings apply primarily to the delivery of
digital communications over copper wire in the local access network. We expect
that the increasing deployment of fiber and wireless broadband transmission in
the local access network will reduce the demand for our existing products.
Telephone companies also face competition from cable operators, new local access
providers and wireless service providers that are capable of providing high
speed digital transmission to end-users. If telephone companies decide not to
aggressively respond to this competition and fail to offer high speed digital
transmission, then the overall demand for DSL products will decline.
Consequently, to remain competitive we must develop new products to meet the
demands of these emerging transmission media and new local access network
providers.

         If our products become obsolete or fail to gain widespread commercial
acceptance due to competing products and technologies, then our product revenues
would significantly decrease and business and operating results will be
materially adversely affected.

WE MAY EXPERIENCE DELAYS IN THE DEPLOYMENT OF NEW PRODUCTS.

         Our past sales have resulted from our ability to anticipate changes in
technology, industry standards and telephone company service offerings, and to
develop and introduce new and enhanced products and services. Our continued
ability to adapt to such changes will be a significant factor in maintaining or
improving our competitive position and our prospects for growth. Factors
resulting in delays in product development include:

          o    rapid technological changes in the telecommunications industry;
          o    the Regional Bell Operating Companies' lengthy product approval
               and purchase processes; and
          o    our reliance on third-party technology for the development of new
               products.



<PAGE>


There can be no assurance that we will successfully introduce new products on a
timely basis or achieve sales of new products in the future. In addition, there
can be no assurance that we will have the financial and manufacturing resources
necessary to continue to successfully develop new products or to otherwise
successfully respond to changing technology standards and telephone company
service offerings. If we fail to deploy new products on a timely basis, then our
product sales will decrease and our competitive position and financial condition
would be materially and adversely affected.

THE HIGHLY COMPETITIVE MARKET IN WHICH WE OPERATE MAY RESULT IN OPERATING
LOSSES, A DECREASE IN OUR MARKET SHARE, AND FLUCTUATIONS IN OUR REVENUE.

     We expect competition to increase in the future especially in the emerging
DSL market. Because we are significantly smaller than most of our competitors,
we may lack the financial resources needed to increase our market share. Our
principal competitors are as follows:

          o    DSL products: Alcatel Network Systems, AGCS, Cabletron, ECI
               Telecom, Ltd., Nokia, Copper Mountain, Cabletron, Ltd., Ericsson,
               Cisco Systems, Lucent Technologies, Inc., Nortel, Orckit
               Communications, Ltd. PairGain Technologies, Inc., Paradyne, 3Com,
               and Siemens;
          o    T-1 products: ADC Telecommunications Inc., Applied Digital Access
               Inc., PairGain Technologies, Inc. and Teltrend, Inc.; and
          o    Traditional products: Adtran, Inc., Pulsecom, Tellabs, Inc. and
               Teltrend, Inc.

In addition, under the Telecommunications Act , the Regional Bell Operating
Companies may engage in manufacturing activities. So our largest customers may
potentially become our competitors as well.

         We expect continued aggressive tactics from many of our competitors
such as:

          o    Forward pricing of products;
          o    Early announcements of competing products;
          o    Bids that bundle DSL products with other product
               offerings;
          o    Customer financing assistance; and
          o    Intellectual property disputes.

These tactics can be particularly effective in a highly concentrated customer
base such as ours.

         Many of our competitors are much larger than us and can a wide array of
different products and services that are required for all of the telephone
companies' business. Conversely, our products are used in the local access
network which is just one element of a telephone companies' network. Instead of
directly competing with these large suppliers, we have entered into strategic
alliances with companies such as Lucent and Fujitsu Telecom Europe, Ltd. (FTEL)
to offer our products within a package of products sold by these companies. Our
ability to sell our DSL products will depend on the success of our alliances
with large suppliers and our system solutions. Our inability to form successful
alliances and develop systems that meet customer requirements will affect our
ability to sell our DSL Products which would materially adversely affect our
business and operating results.

         In addition, the development of the G.Lite DSL product could enable
other companies with less technological expertise than us to more readily enter
the DSL market and could place additional pricing pressures on our other DSL
products.

         Conference Plus participates in the highly competitive industry of
voice, video, and multimedia conferencing services. Competitors include
stand-alone conferencing companies and major telecommunications providers. In
addition, internet service providers may attempt to expand their revenue base by
providing conferencing services. Conference Plus's ability to sustain growth and
performance is dependent on its:


<PAGE>


          o    maintenance of high quality standards and low cost position;
          o    continued operational excellence;
          o    strong alliances and partnerships;
          o    international expansion; and
          o    evolving technological capability.

         Any increase in competition could reduce our gross margin, require
increased spending on research and development and sales and marketing, and
otherwise materially adversely affect our business and operating results.


OUR LACK OF BACKLOG MAY AFFECT OUR ABILITY TO ADJUST TO AN UNEXPECTED SHORTFALL
IN ORDERS.

         Because we generally ship products within a short period after receipt
of an order, we typically do not have a material backlog of unfilled orders, and
our revenues in any quarter are substantially dependent on orders booked in that
quarter. Our expense levels are based in large part on anticipated future
revenues and are relatively fixed in the short-term. Therefore, we may be unable
to adjust spending in a timely manner to compensate for any unexpected shortfall
of orders. Accordingly, any significant shortfall of demand in relation to our
expectations or any material delay of customer orders would have immediate
adverse impact on our business and operating results.

INDUSTRY CONSOLIDATION COULD MAKE COMPETING MORE DIFFICULT.

         Consolidation of companies offering high speed telecommunications
products is occurring through acquisitions, joint ventures and licensing
arrangements involving our competitors, our customers and our customers'
competitors. We cannot provide any assurances that we will be able to compete
successfully in an increasingly consolidated telecommunications industry. Any
heightened competitive pressures that we may face may have a material adverse
effect on our business, prospects, financial condition and result of operations.

WE DEPEND ON A LIMITED NUMBER OF CUSTOMERS WHO ARE ABLE TO EXERT A HIGH DEGREE
OF INFLUENCE OVER US.

         We have and will continue to depend on the large Regional Bell
Operating Companies, those companies emerging from the break-up of AT&T, as well
as and other telephone carriers including smaller local telephone carriers and
new alternative telephone carriers such as Qwest, for substantially all of our
revenues. Sales to the Regional Bell Operating Companies accounted for 61.9%,
51.1% and 46.6% of our revenues in fiscal 1997, 1998 and 1999, respectively.
Consequently, our future success will depend significantly upon:

          o    the timeliness and size of future purchase orders from the
               Regional Bell Operating Companies;
          o    the product requirements of the Regional Bell Operating
               Companies;
          o    the financial and operating success of the Regional Bell
               Operating Companies; and
          o    the success of the Regional Bell Operating Companies' services
               that use our products.

The Regional Bell Operating Companies and our other customers are significantly
larger than we are and are able to exert a high degree of influence over us.
Customers purchasing our products may generally reschedule orders without
penalty to the customer. Even if demand for our products is high, the Regional
Bell Operating Companies have sufficient bargaining power to demand low prices
and other terms and conditions that may materially adversely affect our business
and operating results.

         Any attempt by a Regional Bell Operating Company or our other customers
to seek out additional or alternative suppliers or to undertake the internal
production of products would have a material adverse effect on our business and


<PAGE>


operating results. The loss of any or our customer could result in an immediate
decrease in product sales and materially and adversely affect our business.

         Conference Plus's customer base is very concentrated as its top ten
customers represent a large portion of revenue. Customers of Conference Plus
have expanded their requirements for our services, but there can be no assurance
that such expansion will increase in the future. Additionally, Conference Plus's
customers continually undergo review and evaluation of their conferencing
services to evaluate the merits of bringing those services in-house rather than
outsourcing those services. There can be no assurance in the future that
Conference Plus's customers will bring some portion or all of their conferencing
services in-house. Conference Plus must continually provide higher quality,
lower cost services to provide maintain and grow their customer base. Any loss
of a major account, would have a material adverse effect on Conference Plus. In
addition, any merger or acquisition of a major customer could have a material
adverse effect on Conference Plus.

OUR CUSTOMERS HAVE LENGTHY PURCHASE CYCLES WHICH AFFECT OUR ABILITY TO SELL OUR
PRODUCTS.

         Prior to selling products to telephone companies, we must undergo
lengthy approval and purchase processes. Evaluation can take as little as a few
months for products that vary slightly from existing products or up to a year or
more for products based on new technologies such as DSL products. Accordingly,
we are continually submitting successive generations of our current products as
well as new products to our customers for approval. The length of the approval
process can vary and is affected by a number of factors, including:

          o    the complexity of the product involved,
          o    priorities of telephone companies,
          o    telephone companies' budgets, and o regulatory issues affecting
               telephone companies.

The requirement that telephone companies obtain FCC approval for most new
telephone company services prior to their implementation has in the past delayed
the approval process. Such delays in the future could have a material adverse
affect on our business and operating results. While we have been successful in
the past in obtaining product approvals from our customers, there is no guaranty
that such approvals or that ensuing sales of such products will continue to
occur.

THE FAILURE TO MAINTAIN AND FURTHER DEVELOP PARTNERS AND ALLIANCES WOULD
ADVERSELY AFFECT OUR BUSINESS.

         We have developed and maintain partnerships and alliances with other
companies in order to secure complementary technologies, to lower costs, and to
better market and sell our products. These partnerships and alliances provide
important resources and channels for us to compete successfully. For example,
our partnership with Lucent Technologies for the development of an ADSL product
that may be integrated in a product sold by Lucent enables us to access to a
significant number of potential customers. We cannot provide any assurances that
these partnerships will continue in the future. As competition increases in the
DSL market, our alliances will become even more important to us. A loss of one
or more partnerships and alliances could affect our ability to sell our products
and therefore could materially adversely affect our business and operating
results.

WE ARE DEPENDENT ON THIRD PARTY TECHNOLOGY AND WE WOULD NOT BE ABLE TO COMPETE
WITHOUT THIRD PARTY TECHNOLOGY.

         Many of our products incorporate technology developed and owned by
third parties. Consequently, we must rely upon third parties to develop and
introduce technologies which enhance our current products and to develop new
products. Any impairment or termination of our relationship with any licensors
of technology would force us to find other developers on a timely basis or
develop our own technology. There is no guaranty that we will be able to obtain


<PAGE>


the third-party technology necessary to continue to develop and introduce new
and enhanced products, that we will obtain third-party technology on
commercially reasonable terms or that we will be able to replace third-party
technology in the event such technology becomes unavailable, obsolete or
incompatible with future versions of our products. We would have severe
difficulty competing if we cannot obtain or replace the third-party technology
used in our products. Any absence or delay would materially adversely affect our
business and operating results.

         For example, our ability to produce DSL products is dependent upon
third party transceiver technologies. Our licenses for DSL transceiver
technology are nonexclusive and the transceiver technologies either have been
licensed to numerous other manufacturers or do not require a license to acquire.
If our DSL transceiver licensors fail to deliver implementable or standards
compliant transceiver solutions to us and other alternative sources of DSL
transceiver technologies are not available to us at commercially acceptable
terms, then our business and operating results would be materially and adversely
affected.

WE ARE DEPENDENT ON SOLE OR LIMITED SOURCE SUPPLIERS AND COULD NOT SELL OUR
PRODUCTS WITHOUT THESE SUPPLIERS.

         Integrated circuits and other electronic components used in our
products are currently available from only one source or a limited number of
suppliers. For example, we currently depend on GlobeSpan Technologies, Alcatel
and Analog Devices, Inc. to provide critical integrated transceiver circuits
used in the Company's DSL products. In addition, some of the electronic
components used in our products are currently in short supply and are provided
on an allocation basis to us and other users based upon past usage. There is no
guaranty that we will be able to continue to obtain sufficient quantities of
integrated circuits or other electronic components as required, or that such
components, if obtained, will be available to us on commercially reasonable
terms. Integrated transceiver circuits and electronic components are key
components in all of our products and are fundamental to our business strategy
of developing new and succeeding generations of products at reduced unit costs
without compromising functionality or serviceability. In the past we have
experienced delays in the receipt of key components which have resulted in
delays in related product deliveries. We anticipate that integrated circuit
production capacity and availability of some electronic components may be
insufficient to meet the demand for such components in the future. The inability
to obtain sufficient key components or to develop alternative sources for such
components as required, could result in delays or reductions in product
shipments, and consequently have a material adverse effect on our customer
relationships and our business and operating results.

OUR SERVICES ARE AFFECTED BY UNCERTAIN GOVERNMENT REGULATION AND CHANGES IN
CURRENT OR FUTURE LAWS OR REGULATIONS COULD RESTRICT THE WAY WE OPERATE OUR
BUSINESS.

         Many of our customers are subject to regulation from federal and state
agencies, including the FCC and various state public utility and service
commissions. While such regulation does not affect us directly, the effects of
such regulations on our customers may adversely impact our business and
operating results. For example, FCC regulatory policies affecting the
availability of telephone company services and other terms on which telephone
companies conduct their business may impede our penetration of local access
markets. The Telecommunications Act lifted certain restrictions on telephone
companies' ability to provide interactive multimedia services including video on
demand. The Telecommunications Act establishes new regulations whereby telephone
companies may provide various types of video services. Rules to implement these
new statutory provisions are now being considered by the FCC. While the
statutory and regulatory framework for telephone companies providing video
products has become more favorable, it is uncertain at this time how this will
affect telephone companies' demand for products based upon DSL technology. In
addition, our business and operating results may also be adversely affected by
the imposition of tariffs, duties and other import restrictions on components
that we obtain from non-domestic suppliers or by the imposition of export
restrictions on products that we sell internationally. Internationally,
governments of the United Kingdom, Canada, Australia and numerous other



<PAGE>


countries actively promote and create competition in the telecommunications
industry. Changes in current or future laws or regulations, in the U.S. or
elsewhere, could materially and adversely affect our business and operating
results.

         In addition, the Telecommunications Act permits the Regional Bell
Operating Companies to engage in manufacturing activities after the FCC
authorizes a Regional Bell Operating Company to provide long distance services
within its service territory. A Regional Bell Operating Company must first meet
specific statutory and regulatory tests demonstrating that its monopoly market
for local telephone services is open to competition before it will be permitted
to enter the long distance market. When these tests are met, a Regional Bell
Operating Company will be permitted to engage in manufacturing activities and
the Regional Bell Operating Companies, which are our largest customers, may
become our competitors as well.

POTENTIAL PRODUCT RECALLS AND WARRANTY EXPENSES COULD ADVERSELY AFFECT OUR
ABILITY TO BECOME PROFITABLE.

         Our products are required to meet rigorous standards imposed by our
customers. Most of our products carry a limited warranty ranging from one to
seven years. In addition, our supply contracts with our major customers
typically require us to accept returns of products or indemnify such customers
against certain liabilities arising out of the use of our products. Complex
products such as those offered by us may contain undetected errors or failures
when first introduced or as new versions are released. Because we rely on new
product development to remain competitive, we cannot predict the level of these
type of claims that we will experience in the future. Despite our testing of
products and our comprehensive quality control program, there is no guaranty
that our products will not suffer from defects or other deficiencies or that we
will not experience material product recalls, product returns, warranty claims
or indemnification claims in the future. Such recalls, returns or claims and the
associated negative publicity could result in the loss of or delay in market
acceptance of our products, affect our product sales, our relationships with
customers, and our ability to generate a profit

OUR INTERNATIONAL OPERATIONS EXPOSE US TO THE RISKS OF CONDUCTING BUSINESS
OUTSIDE THE UNITED STATES.

         International revenues represented 5.5%, 9.9% and 9.1% of our revenues
in fiscal 1997, 1998 and 1999, respectively. The Company also has a relationship
with Fujitsu Telecom Europe, Ltd. (FTEL) for the supply of ADSL equipment to
British Telecom. Our international revenues are subject to the risks of
conducting business internationally, which include:

          o    unexpected changes in regulatory requirements,
          o    foreign currency fluctuations
          o    tariffs and trade barriers,
          o    potentially longer payment cycles,
          o    difficulty in accounts receivable collection,
          o    foreign taxes,
          o    burdens of complying with a variety of foreign laws and
               telecommunications standards, and
          o    the failure of the laws of foreign countries to protect our
               proprietary technology.

There can be no assurance that the risks associated with our international
operations will not materially adversely affect our business and operating
results in the future or require us to modify significantly our current business
practices.

OUR FAILURE TO MANAGE OUR GROWTH EFFECTIVELY COULD IMPAIR OUR ABILITY TO SUPPLY
AND SUPPORT THE MANUFACTURE OF LARGE VOLUMES OF DSL PRODUCTS.

         We are in the process of planning for the manufacturing capabilities
necessary to supply and support large volumes of DSL products and in the future
may become increasingly dependent on subcontractors. Reliance on third-party

<PAGE>


subcontractors involves several risks, including the potential absence of
adequate capacity and reduced control over product quality, delivery schedules,
manufacturing yields and costs. Although we believe that alternative
subcontractors or sources could be developed if necessary, the use of
subcontractors could result in material delays or interruption of supply as a
consequence of required re-tooling, retraining and other activities related to
establishing and developing a new subcontractor or supplier relationship. Any
material delays or difficulties in connection with increased manufacturing
production or the use of subcontractors could have a material adverse effect on
our business and operating results. If we are not successful in increasing our
manufacturing capacity in a timely and cost-effective manner, then the possible
transition to subcontracting will materially adversely affect our business and
operating results. Our failure to effectively manage our growth would have a
material adverse effect on our business and operating results.

THE CLASS A COMMON STOCK ISSUABLE UPON CONVERSION OF OUR CONVERTIBLE DEBENTURES
MAY SIGNIFICANTLY INCREASE THE SUPPLY OF OUR CLASS A COMMON STOCK IN THE PUBLIC
MARKET, WHICH MAY CAUSE OUR STOCK PRICE TO DECLINE.

         On April 16, 1999, we issued $20,000,000 aggregate principal amount of
convertible debentures. The convertible debentures are convertible into a number
of shares of class A common stock as is determined by dividing the principal
amount of the convertible debentures by the lesser of:

o    a variable conversion price which is initially $6.372 per share, but will
     be increased under the terms of the convertible debentures; and
o    the floating market price of our class A common stock at the time of
     conversion (except that the market price can be imposed only under specific
     conditions).

Assuming a conversion price of $6.372 per share, the convertible debentures will
be convertible into approximately 3,138,731 shares of class A common stock. If
our class A common stock trades at a price less than the variable conversion
price, then the convertible debentures will be convertible into shares of our
class A common stock at variable rates based on future trading prices of the
class A common stock and events that may occur in the future. Therefore, if the
conversion price is less than $6.372 per share, then the number of shares of
class A common stock issuable upon conversion of the convertible debentures will
be inversely proportional to the market price of the class A common stock at the
time of conversion. The number of shares of class A common stock that may
ultimately be issued upon conversion is therefore presently indeterminable and
could fluctuate significantly. Depending on market conditions at the time of
conversion, however, the number of shares issuable could prove to be
significantly greater if our stock's trading price declines. Purchasers of class
A common stock could therefore experience substantial dilution upon conversion
of the convertible debentures.

         Also, the warrants are subject to anti-dilution protection, which may
result in the issuance of more shares than originally anticipated if we issue
securities at less than market value or the applicable exercise price. These
factors may result in substantial future dilution to the holders of our class A
common stock.

WE WILL NOT BE ABLE TO SUCCESSFULLY COMPETE, DEVELOP AND SELL NEW PRODUCTS IF WE
FAIL TO RETAIN KEY PERSONNEL AND HIRE ADDITIONAL KEY PERSONNEL.

         Because of our need to continually evolve our business with new product
developments and strategies, our success is dependent, in part, on our ability
to attract and retain qualified technical, marketing, sales and management
personnel. To remain competitive in the telecommunications industry, we must
maintain top management talent, employees who are involved in the development
and testing of new products, and employees who have developed important
relationships with key customers. Because of the high demand to these types of
key employees, especially in the DSL market, it is difficult to retain existing
key employees and attract new key employees. While most of our executive
officers, have severance agreements in which the officers agreed not to compete
with us and not to solicit any of our employees for a period of one year after
termination of the officer's employment in most circumstances, we do not have


<PAGE>



similar noncompetition and nonsolicitation agreements for other employees who
are important in our product development and sales. Our inability to attract and
retain additional key employees or the loss of one or more of our current key
employees could materially adversely affect our ability to successfully develop
new products and implement our strategy.

WE RELY ON OUR INTELLECTUAL PROPERTY WHICH WE MAY BE UNABLE TO PROTECT, OR WE
MAY BE FOUND TO INFRINGE THE RIGHTS OF OTHERS.

         Our success will depend, in part, on our ability to protect trade
secrets, obtain or license patents and operate without infringing on the rights
of others. Although we regard our technology as proprietary, we have only one
patent on such technology related to Network Interface Units. We expect to seek
additional patents from time to time related to our research and development
activities. We rely on a combination of technical leadership, trade secrets,
copyright and trademark law and nondisclosure agreements to protect our
unpatented proprietary know-how. These measures, however, may not provide
meaningful protection for our trade secrets or other proprietary information.
Moreover, our business and operating results may be materially adversely
affected by competitors who independently develop substantially equivalent
technology. In addition, the laws of some foreign countries do not protect our
proprietary rights to the same extent as U.S. law. The telecommunications
industry is also characterized by the existence of an increasing number of
patents and frequent litigation based on allegations of patent and other
intellectual property infringement. From time to time we receive communications
from third parties alleging infringement of exclusive patent, copyright and
other intellectual property rights to technologies that are important to us.
There is no guaranty that third parties will not assert infringement claims
against us in the future, that assertions by such parties will not result in
costly litigation, or that we would prevail in any such litigation or be able to
license any valid and infringed patents from third parties on commercially
reasonable terms. Further, such litigation, regardless of its outcome, could
result in substantial costs to and diversion of our efforts. Any infringement
claim or other litigation against or by us could have a material adverse effect
on our business and operating results.

OUR STOCK PRICE IS VOLATILE WHICH MAY AFFECT YOUR ABILITY TO REALIZE A PROFIT
WHEN PURCHASING OUR STOCK.

         Our class A common stock price has experienced substantial volatility
in the past and is likely to remain volatile in the future due to factors such
as:

          o    Our historical and anticipated quarterly and annual operating
               results;
          o    Variations between our actual results and analyst and investor
               expectations;
          o    Announcements by us or others and developments affecting our
               business;
          o    Investor perceptions of our company and comparable public
               companies; and
          o    Conditions and trends in the data communications and
               Internet-related industries.

In particular, the stock market has from time to time experienced significant
price and volume fluctuations affecting the common stocks of technology
companies, which may include telecommunications manufacturers like Westell.
Volatility can also arise as a result of the activities of short sellers and
risk arbitrageurs regardless of our performance. This volatility may result in a
material decline in the market price of our class A common stock, and may have
little relationship to our financial results or prospects.

WE WILL NEED ADDITIONAL FINANCING IF WE DO NOT MEET OUR BUSINESS PLAN OR WE WILL
NOT BE ABLE TO FUND OUR OPERATIONS.

         We must continue to enhance and expand our product and service
offerings in order to maintain our competitive position and increase our market
share. As a result and due to our net losses, the continuing operations of our
business may require substantial capital infusions. Whether or when we can
achieve cash flow levels sufficient to support our operations cannot be



<PAGE>


accurately predicted. Unless such cash flow levels are achieved, we may require
additional borrowings or the sale of debt or equity securities, or some
combination thereof, to provide finding for our operations. In April 1999, we
completed a private placement of convertible debentures and warrants for $20
million to fund our operations. If we cannot generate sufficient cash flow from
our operations, or are unable to borrow or otherwise obtain additional funds to
finance our operations when needed, then our financial condition and operating
results would be materially adversely affected and we would not be able to
operate our business. Under the terms of the sale of the convertible debentures
and warrants, in most circumstances, we are not permitted to issue any equity
securities or any equity-like securities until October 11, 1999.


OUR PRINCIPAL STOCKHOLDERS CAN EXERCISE SIGNIFICANT INFLUENCE WHICH COULD
DISCOURAGE TRANSACTIONS INVOLVING A CHANGE OF CONTROL OF WESTELL AND MAY AFFECT
YOUR ABILITY TO RECEIVE A PREMIUM FOR CLASS A COMMON STOCK THAT YOU PURCHASE.

         At March 31, 1999, as trustees of a voting trust containing common
stock held for the benefit of the Penny family and the Simon family, Robert C.
Penny III and Melvin J. Simon have the exclusive power to vote over 75% of the
votes entitled to be cast by the holders of our common stock. In addition, all
members of the Penny family who are beneficiaries under this voting trust are
parties to a stock transfer restriction agreement which prohibits the
beneficiaries from transferring any class B common stock or their beneficial
interests in the voting trust without first offering such class B common stock
to the other Penny family members. Consequently, Westell is effectively under
the control of Messrs. Penny and Simon, as trustees, who have sufficient voting
power to elect all of the directors and to determine the outcome of most
corporate transactions or other matters submitted to the stockholders for
approval. Such control may have the effect of discouraging transactions
involving an actual or potential change of control of Westell, including
transactions in which the holders of class B common stock might otherwise
receive a premium for their shares over the then-current market price.

IF WE DO NOT ADEQUATELY ADDRESS YEAR 2000 ISSUES, WE MAY INCUR SIGNIFICANT COSTS
AND OUR BUSINESS COULD SUFFER.

         The Year 2000 issue is the result of computer programs being written
using two digits rather than four to define the applicable year. As a result,
our computer programs that have date-sensitive software and software of
companies into which our network is interconnected may recognize a date using
"00" as the year 1900 rather than the year 2000. This could result in system
failures or miscalculations causing disruptions of operations, including, among
other things, a temporary inability to process transactions, send invoices or
engage in similar normal business activities. If the system of other companies
on whose services we depend or with whom our systems interconnect are not year
2000 compliant, it could have a material adverse effect on our business,
prospects, financial condition and operating results. The year 2000 issue is
discussed at greater length in the SEC documents that are incorporated by
reference into this prospectus.




<PAGE>


ITEM 2.  PROPERTIES

         During fiscal 1997 the Company moved into approximately 185,000 square
feet of office, development and manufacturing space in Aurora, Illinois, a
suburb of Chicago. As of March 31, 1999 the Company also leases facilities in
Schaumburg, Illinois and Lombard, Illinois for Conference Plus, and Cambridge,
England and Dublin Ireland for its international operations. The Aurora facility
that the Company began occupying in December 1996 was constructed through a
majority owned Limited Liability Corporation ("LLC") with a real estate
developer. During the construction period, the Company advanced the LLC the
construction funding which as of March 31, 1997, was $14.4 million. In fiscal
1998 the LLC received proceeds of $16.2 million upon the sale of the Aurora
facility at cost. The LLC repaid the Company the advanced construction funding
during the second quarter of fiscal 1998 upon completing the sale of the
facility to a third party. The Aurora facility was subsequently leased back by
the Company in a related transaction with the same third party under a 20-year
lease that runs through 2017.

         While the Company believes its current facilities are adequate to
support its present level of operations, it believes that additional space for
expansion will be driven by the success of the DSL business. The Company
estimates that its manufacturing facilities are operating at a utilization rate
of approximately 75%.

ITEM 3.  LEGAL PROCEEDINGS


         The Company has been involved from time to time in litigation in the
normal course of business. The Company is not presently involved in any legal
proceedings that the Company believes are material to its business.


ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

         On April 20, 1998, the majority stockholder approved, by majority
written consent, an amendment to the Company's Amended and Restated Certificate
of Incorporation to increase the number of shares of Class A Common Stock,
authorized for issuance from 43,500,000 to 65,500,000 and approved an amendment
to increase the number of shares available for grant under the Company's 1995
Stock Incentive Plan to 5,000,000.




<PAGE>


                                     PART II

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

         The Company effected its initial public offering on November 30, 1995
at a price to the public of $6.50 per share. The Company's Class A Common Stock
is quoted on the NASDAQ National Market under the symbol "WSTL." The following
table sets forth for the periods indicated the high and low closing sale prices
for the Class A Common Stock as reported on the NASDAQ National Market.

                                                                High      Low
                                                            --------     ------
Fiscal Year 1998
  First Quarter.............................................25   7/8     103/4
  Second Quarter............................................27   5/8     171/4
  Third Quarter.............................................24   7/8     101/2
  Fourth Quarter............................................15   1/4     103/4

Fiscal Year 1999
  First Quarter.............................................13   7/8      87/8
  Second Quarter............................................   10         33/4
  Third Quarter.............................................  8   1/4     23/4
  Fourth Quarter............................................    9         313/16

Fiscal Year 2000
  First Quarter (through June 30, 1999)..................... 10  3/16     37/8

         As of June 30, 1999, there were approximately 589 holders of record of
the outstanding shares of Class A Common Stock.


Dividends

         The Company has never declared or paid any cash dividends on its Common
Stock and does not anticipate paying any cash dividends in the foreseeable
future. The Company currently intends to retain any future earnings to finance
the growth and development of its business.


<PAGE>


ITEM 6.  SELECTED FINANCIAL DATA.

         The following selected consolidated financial data as of March 31,
1995, 1996, 1997, 1998 and 1999 and for each of the five fiscal years in the
period ended March 31, 1999 have been derived from the Company's consolidated
financial statements, which have been audited by Arthur Andersen LLP,
independent public accountants. The data set forth below is qualified by
reference to, and should be read in conjunction with, "Management's Discussion
and Analysis of Financial Condition and Results of Operations," the Consolidated
Financial Statements and the related Notes thereto and other financial
information appearing elsewhere in this Form 10-K.

<TABLE>

                                                                        Fiscal Year Ended March 31,
                                                       -------------------------------------------------------------
                                                           1995        1996        1997        1998          1999
                                                          ------      ------      ------      ------        -----
                                                                   (in thousands, except per share data)
<S>                                                      <C>         <C>         <C>          <C>          <C>
Statement of Operations Data:
Revenues.............................................    $74,029     $83,236     $79,385      $86,351      $93,180

Cost of goods sold...................................     44,494      50,779      57,832       58,859      68,316
                                                         --------    --------    --------     -------     --------
     Gross margin....................................     29,535      32,457      21,553       27,492      24,864
                                                         --------    --------    --------     -------     --------
Operating expenses:
  Sales and marketing................................      12,169     13,744      16,214       19,296      19,442
  Research and development...........................     10,843      12,603      21,994       26,558      26,605
  General and administrative.........................      6,701       8,364       9,757       13,151      13,117
                                                                                                                 -
  Restructuring charge ..............................      --          --         --            1,383         800
                                                      ----------  ---------- -----------     --------    ---------
     Total operating expenses........................      29,713      34,711      47,965      60,388      59,964
                                                         --------     -------     -------     -------     --------
Operating loss from continuing
  operations.........................................       (178)     (2,254)   (26,412)     (32,896)    (35,100)
Other income (expense), net..........................          34      (226)       2,221       14,290         404
Interest expense.....................................        769         859         330          502         296
                                                           ------    --------    --------     -------     --------
Loss from continuing operations before
  income taxes.......................................       (913)     (3,339)   (24,521)    (19,108)     (34,992)
Benefit for income taxes.............................       (788)     (1,886)    (9,820)     (5,137)        --
                                                            -----  ----------   --------    ----------------------
Loss from continuing operations......................      (125)      (1,453)   (14,701)    (13,971)     (34,992)
Discontinued operations (loss).......................       (383)       (622)        (5)        --            --
                                                         --------  --------------------- ---------------------------
Net loss.............................................  $   (508)   $  (2,075)  $(14,706)   $(13,971)    $(34,992)
                                                       ==========  ==========  =========   ==========  ===========
Net loss per basic and diluted share: (1)
  Continuing operations..............................  $(  0.01)     $ (0.05)   $ (0.41)     $ (0.38)    $ (0.96)
  Discontinued operations............................      (0.01)      (0.02)     (0.00)      (0.00)       (0.00)
                                                           ------    --------   --------    ---------    ---------
Net loss per basic and diluted share.................  $(  0.02)     $ (0.07)   $ (0.41)     $ (0.38)    $ (0.96)
                                                       ==========    ========   ========     ========    =========
Dividends declared per share.........................   $     --    $     --    $     --    $     --      $     --
Average number of basic and diluted
   common shares outstanding (1).....................     28,952       30,846     35,940       36,348       36,427

                                                                                  March 31,
                                                          -------------------------------------------------------
                                                           1995        1996        1997        1998         1999
                                                           ----        ----        ----        ----         ----

Balance Sheet Data:
Working capital......................................     $ 1,280    $ 28,741    $ 65,105    $ 47,481    $  12,213
Total assets.........................................      40,276      64,448     108,049      98,405       64,407
Revolving promissory notes...........................      11,089      --           --           --            500
Long-term debt, including current portion............       4,129       4,427       6,487      4,420         4,814
Total stockholders' equity...........................       7,558      38,985      86,188      73,141       39,124

_______________
(1)      Adjusted to reflect the two for one stock split of the Company's Class
         A Common Stock effected June 7, 1996. See Notes 1 and 6 of Notes to
         Consolidated Financial Statements.

</TABLE>

<PAGE>


ITEM 7.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
         OF OPERATIONS.

OVERVIEW

         The Company commenced operations in 1980 as a provider of
telecommunications network transmission products that enable advanced
telecommunications services over copper telephone wires. Until fiscal 1994, the
Company derived substantially all of its revenues from its DS0 and DS1 product
lines, particularly the sale of Network Interface Units and related products,
which accounted for at least 50% of revenues in each of the last three fiscal
years. The Company introduced its first DSL products in fiscal 1993 and these
products represented 10.9%, 14.4% and 13.0% of revenues in fiscal 1997, 1998 and
1999, respectively. The Company has also provided audio teleconferencing
services since fiscal 1989 which constituted 13.0%, 16.4% and 22.9% of the
Company's revenues in fiscal 1997, 1998 and 1999, respectively. In July 1996,
the Company completed the disposition of KPINS, its consumer products claims
processing subsidiary, which is presented in the results of operations as a
discontinued operation.

         The Company's customer base is comprised primarily of the RBOCs,
independent domestic local exchange carriers and public telephone
administrations located outside the U.S. Due to the stringent quality
specifications of its customers and the regulated environment in which its
customers operate, the Company must undergo lengthy approval and procurement
processes prior to selling its products. Accordingly, the Company must make
significant up front investments in product and market development prior to
actual commencement of sales of new products. In late fiscal 1992, the Company
significantly increased its investment in new product development based on
emerging technologies, particularly ADSL, and began expanding its sales and
marketing efforts to cover new product lines. As a result of the significant
increases in research and development and sales and marketing expenses related
to new product and market development, the Company's results of operations were
adversely impacted in fiscal 1997, 1998 and 1999.

         The Company expects to continue to evaluate new product opportunities
and engage in extensive research and development activities and expects to
receive funding from certain partners to offset a portion of these development
costs. This will require the Company to continue to invest in research and
development and sales and marketing, which is expected to adversely affect
short-term results of operations. Due to the Company's significant ongoing
investment in DSL technology, management anticipates losses in each of the
fiscal 2000 quarters. The Company believes that its future revenue growth and
profitability will principally depend on its success in increasing sales of ADSL
products and developing new and enhanced DS1 and other DSL products. In view of
the Company's reliance on the emerging ADSL market for growth and the
unpredictability of orders and subsequent revenues, the Company believes that
period to period comparisons of its financial results are not necessarily
meaningful and should not be relied upon as an indication of future performance.
Revenues from DS0 products have declined in recent years as telcos continue to
move to networks that deliver higher speed from analog to digital transmission
services. The Company also expects that revenues from NIU products in its DS1
product group may decline as telcos increase the use of alternative technologies
such as HDSL. Failure to increase revenues from new products, whether due to
lack of market acceptance, competition, technological change or otherwise, would
have a material adverse effect on the Company's business and results of
operations.



<PAGE>


RESULTS OF OPERATIONS

         The following table sets forth the percentage of revenues represented
by certain items in the Company's statements of operations for the periods
indicated:

<TABLE>

                                                                                   Fiscal Year Ended March 31,
                                                                                   ---------------------------

                                                                                  1997          1998      1999
                                                                                  ----          ----      ----

<S>                                                                               <C>           <C>       <C>
Equipment .................................................................       87.0%         83.6%     77.1%
Services...................................................................       13.0          16.4      22.9
                                                                              --------        ------    -------
  Total revenues...........................................................      100.0         100.0     100.0

Cost of equipment..........................................................       64.9          59.9      59.5
Cost of services...........................................................        8.0           8.3      13.8
                                                                                 -----         -----    ------
  Total cost of goods sold.................................................       72.9          68.2      73.3
                                                                                 -----         -----     ------

    Gross margin...........................................................       27.1          31.8      26.7
                                                                                  ----         -----     -----

Operating expenses:
  Sales and marketing......................................................       20.4          22.3      20.9
  Research and development.................................................       27.7          30.8      28.5
  General and administrative...............................................       12.3          15.2      14.1
  Restructuring charge.....................................................        0.0           1.6       0.9
                                                                              --------        ------   -------

     Total operating expenses..............................................       60.4          69.9      64.4
                                                                                  ----         -----     -----

Operating loss from continuing operations..................................      (33.3)        (38.1)    (37.7)
Other income, net..........................................................        2.8          16.6       0.4
Interest expense...........................................................        0.4           0.6       0.3
                                                                                 -----         -----     -----

Loss from continuing operations before income taxes........................      (30.9)        (22.1)    (37.6)
Benefit for income taxes...................................................      (12.4)         (5.9)     (0.0)
                                                                                 ------        ------    ------

Loss from continuing operations............................................      (18.5)        (16.2)    (37.6)
Discontinued operations (loss).............................................       (0.0)         (0.0)     (0.0)
                                                                                  -----        ------    ------

Net loss...................................................................      (18.5)%       (16.2)%   (37.6)%
                                                                                ========      ========  ========

</TABLE>

FISCAL YEARS ENDED MARCH 31, 1997, 1998 AND 1999

         Revenues. Revenues were $79.4 million, $86.4 million and $93.2 million
in fiscal 1997, 1998 and 1999 respectively. Revenues increased 8.8% and 7.9% in
fiscal 1998 and 1999, respectively, from the preceding years. The fiscal 1998
increase of $7.0 million was primarily due to expanded service revenue of $3.8
million, or a 37.1% increase from the previous year, resulting from increased
audio conference calling volume from Conference Plus. The fiscal 1998 increase
was also attributed to increases of $3.8 million and $3.1 million in DSL and DS1
equipment revenues, respectively. Higher unit shipments were offset in part by
lower average unit selling prices due to changes in product mix and competitive
pricing pressures. These revenue increases were partially offset by a $3.7
million decrease in DS0 equipment revenue. The decrease in DS0 revenue, which
was anticipated, was due to lower unit shipments and lower average unit sale
prices as a result of changes in product mix as network providers continue their


<PAGE>



transition to digital products. The fiscal 1999 increase of $6.8 million was
primarily due to increased service revenue of $7.2 million, or a 50.7% increase
from the previous year, resulting from increased audio conference calling volume
from the Company's Conference Plus, Inc. subsidiary. The fiscal 1999 increase
was also attributed to an increase of $751,000 in DS1 equipment revenues. Higher
unit shipments were offset in part by lower average unit selling prices due to
changes in product mix and competitive pressures. These revenue increases were
partially offset by decreases of $1.5 million and $349,000 in DS0 and DSL
equipment revenue, respectively. The decrease in DS0 revenue was due to lower
unit shipments as network providers continue their transition to digital
products. The decrease in DSL revenue was due to lower average unit selling
prices offset in part by increased unit volume.

         Gross Margin. Gross margin as a percentage of revenues was 27.1%, 31.8%
and 26.7% in fiscal 1997, 1998 and 1999, respectively. The fiscal 1997 gross
profit margin was significantly effected by a reserve taken for ADSL Phase III
piece part inventories in the amount of $5.0 million during the third quarter of
1997. This inventory reserve was the result of the new generation product
reducing demand for the prior generation FlexCap III ADSL products. Excluding
the impact of this inventory reserve, the gross profit margin would have been
33.4% for fiscal 1997. Fiscal 1998 gross margin decreased to 31.8% from the
adjusted fiscal 1997 gross margin of 33.4%. The decrease in gross margin was
primarily the result of continued pricing pressures and product mix changes for
DS0 and DS1 products as well as aggressive pricing of DSL products to capture
and stimulate early market activity. Fiscal 1999 gross margin decreased to 26.7%
from the fiscal 1998 gross margin of 31.8%. The decrease in gross margin was
primarily the result of continued pricing pressures and product mix changes for
the DS0 and DS1 products as well as aggressive forward pricing of DSL systems.

         Sales and Marketing. Sales and marketing expenses were $16.2 million,
$19.3 million and $19.4 million in fiscal 1997, 1998 and 1999, respectively,
constituting 20.4%, 22.3% and 20.9% of revenues, respectively. The increase in
sales and marketing expenses in fiscal 1998 was primarily due to staff
additions, in both domestic and international markets, to support and promote
the Company's product lines, particularly ADSL products. Sales and marketing was
up slightly in fiscal 1999 due to increases at Conference Plus to support growth
in the teleconference service revenue. This increase was partially offset by
decreases resulting from management initiatives undertaken late fiscal 1998 to
streamline DSL sales and marketing. The Company believes that continued
investment in sales and marketing will be required to expand its product lines,
bring new products to market and service customers.

         Research and Development. Research and development expenses were $22.0
million, $26.6 million and $26.6 million in fiscal 1997, 1998 and 1999,
respectively, constituting 27.7%, 30.8% and 28.6% of revenues, respectively. The
fiscal 1998 increase in research and development expense was due primarily to
costs associated with additional personnel and increased contract development
expenses to support new and existing product development. Research and
development expenses were essentially unchanged in fiscal 1999 reflecting
positive results from management initiatives undertaken late fiscal 1998 to
streamline DSL research and development. The Company believes that a continued
investment in research and development will be required for the Company to
remain competitive.

         General and Administrative. General and administrative expenses were
$9.8 million, $13.2 million and $13.1 million in fiscal 1997, 1998 and 1999,
respectively, constituting 12.3%, 15.2% and 14.1% of revenues, respectively. The
fiscal 1998 increase in general and administration expense was due primarily to
additional personnel to handle expanded corporate infrastructure in domestic and
international markets. The increase in fiscal 1998 general and administrative
expenses also included a one-time charge of approximately $600,000 related to
retirement benefits granted to Gary F. Seamans, former Chairman and Chief
Executive Officer. The fiscal 1999 decrease was primarily due to decreases
resulting from management initiatives undertaken late fiscal 1998 to streamline
DSL general and administrative functions. These decreases were offset in part by
infrastructure increases at Conference Plus to support growing teleconference
service revenues.


<PAGE>



         Restructuring charge. The Company recognized a restructuring charge of
$1.4 million in the three months ended December 31, 1997 and $800,000 in the
three months ended March 31, 1999. These charges included personnel, facility,
and certain development contract costs related to restructuring global
operations. As of March 31, 1999, the Company has paid $1.2 million of the
restructuring costs charged in fiscal 1998 and $200,000 of the restructuring
costs charged in fiscal 1999.

         The Fiscal 1998 restructuring plan was to decrease costs and streamline
operations related to DSL products. The Fiscal 1999 restructuring plan was to
further decrease costs, primarily by reducing the workforce by approximately
11%, and focus DSL sales efforts on indirect sales to the major phone companies
through licensing and OEM arrangements with strategic partners. The Company
anticipates most of the material expenditures related to this restructuring
reserve to occur in the first quarter of fiscal 2000. The Company also expects
costs savings of approximately $5.0 million in fiscal 2000 related to this
restructuring.

         A table which summarizes the restructuring charges and their
utilization can be found in Note 9 to the Consolidated Financial Statements.

         Other income, net. In fiscal 1998, the Company recognized other income
of $12.0 million, net of expenses, related to a one-time fee received from Texas
Instruments for the break-up of the proposed Westell/Amati merger. Excluding the
effect of this one time benefit, Other income, net would have been $2.3 million
for fiscal year ended March 31, 1998. Excluding the one time item, Other income,
net for the years ended March 31, 1997, 1998 and 1999 was primarily due to
interest income earned on temporary cash investments made as a result of
investing available funds.

         Interest Expense. Interest expense was $330,000, $502,000 and $296,000
for fiscal 1997, 1998 and 1999, respectively. The fiscal 1998 increase in
interest expense was a result of additional borrowings under equipment notes
made during fiscal 1997 to finance property and equipment purchases. The fiscal
1999 decrease in interest expense was a result of reduced borrowings.

         Benefit for Income Taxes. Benefit for income taxes was $9.8 million,
$5.1 million and $0.0 in fiscal 1997, 1998 and 1999, respectively. In each of
these fiscal years, in addition to the tax benefit generated by the loss before
income taxes, the Company was able to utilize $398,000, $700,000 and $750,000
respectively, in tax credits primarily generated by increasing research and
development activities. The Company recorded valuation allowances of $2.9
million in the fourth quarter of fiscal 1998 and $12.3 million in fiscal 1999
which represents the amount that the deferred tax benefit exceeded the value of
the tax planning strategy available to the Company. The Company has
approximately $4.4 million in income tax credit carry forwards and a tax benefit
of $27.3 million related to a net operating loss carryforward that is available
to offset future taxable income. The tax credit carryforwards begin to expire in
2008 and the net operating loss carryforward begins to expire in 2012.


<PAGE>


QUARTERLY RESULTS OF OPERATIONS

         The following tables present the Company's results of operations for
each of the last eight fiscal quarters and the percentage relationship of
certain items to revenues for the respective periods. The Company believes that
the information regarding each of these quarters is prepared on the same basis
as the audited Consolidated Financial Statements of the Company appearing
elsewhere in this Form 10-K. In the opinion of management, all necessary
adjustments (consisting only of normal recurring adjustments) have been included
to present fairly the unaudited quarterly results when read in conjunction with
the audited Consolidated Financial Statements of the Company and the Notes
thereto appearing elsewhere in this Form 10-K. These quarterly results of
operations are not necessarily indicative of the results for any future period.

<TABLE>

                                                                 Quarter Ended
                     ----------------------------------------------------------------------------------------------
                                               Fiscal 1998                                              Fiscal 1999
                     ----------------------------------------------------------------------------------------------

                              June 30, Sept. 30,   Dec. 31,   Mar. 31,   June 30,  Sept. 30,   Dec. 31,  Mar. 31,
                                1997     1997       1997       1998       1998       1998       1998       1999
                                ----     ----       ----       ----       ----       ----       ----       ----
                                                                   (in thousands)
<S>                            <C>       <C>        <C>        <C>        <C>        <C>       <C>        <C>
Equipment .................    $16,336   $18,439    $18,082    $19,349    $18,386    $17,942   $18,140    $17,395
Services...................      3,001     3,251      3,540      4,353      4,627      4,718     5,245      6,727
                               -------  --------   --------   --------    --------   -------- --------    -------
   Total revenues..........     19,337    21,690     21,622     23,702     23,013     22,660    23,385     24,122

Cost of equipment..........     11,367    13,418     13,154     13,804     13,608     15,210    13,922     12,699
Cost of services...........      1,558     1,436      2,004      2,118      2,491      2,852     3,372      4,162
                               -------   -------    -------     -------    -------   -------   -------    -------
   Total cost of goods sold     12,925    14,854     15,158     15,922     16,099     18,062    17,294     16,861
                               -------   -------    -------     -------    -------   -------   -------    -------
   Gross margin..........        6,412     6,836      6,464      7,780      6,914      4,598     6,091      7,261
                              --------  --------   --------    -------   --------   --------  --------    -------

Operating expenses:
  Sales and marketing......      5,419     4,703      5,052      4,122      4,768      5,261     5,376      4,037
  Research and
    development............      6,087     6,680      7,111      6,680      6,132      6,578     6,975      6,920
  General and
    administrative.........      2,947     3,099      3,294      3,811      2,991      3,282     3,420      3,424
  Restructuring charge.....       --          --      1,383         --         --         --      --         800
                               -------   -------   --------   -------- ---------- ---------- ----------  --------

    Total operating
      expenses.............     14,453    14,482     16,840     14,613     13,891     15,121    15,771     15,181
                               -------  --------   --------    -------   --------   --------  --------    -------

Operating loss ............    (8,041)   (7,646)   (10,376)    (6,833)    (6,977)   (10,523)   (9,680)    (7,920)
                              --------   -------   --------    -------  ---------   --------   -------    -------

Other income (expense), net        494       362     12,714        720        435        348       142      (521)
Interest expense...........         63        62        122        255         89         66       115        26
                                ------    ------    -------     ------     ------     ------   -------    -------

Income (loss) before
  income taxes.............    (7,610)   (7,346)      2,216    (6,368)    (6,631)   (10,241)   (9,653)    (8,467)

Provision (benefit) for
  income taxes.............    (3,090)   (2,830)        783       --        --         --          --         --
                               ------- ---------  ---------  --------- ----------  ----------  ---------- -------

Net income (loss)..........  $ (4,520) $ (4,516)   $  1,433  $ (6,368)  $ (6,631) $ (10,241) $ (9,653)  $ (8,467)
                             ========= =========   ========  =========  ========= ========== =========  =========

</TABLE>

<PAGE>

<TABLE>

                                                                Quarter Ended
                      -------------------------------------------------------------------------------------------
                                            Fiscal 1998                                          Fiscal 1999
                      -------------------------------------------------------------------------------------------

                              June 30, Sept. 30,   Dec. 31,   Mar. 31,   June 30,  Sept. 30,  Dec. 31,   Mar. 31,
                               1997      1997       1997       1998       1998       1998      1998       1999
                               ----      ----       ----       ----       ----       ----      ----       ----

<S>                             <C>        <C>        <C>        <C>        <C>      <C>        <C>        <C>
Equipment..................     84.5%      85.0%      83.6%      81.6%      79.9%    79.2%      77.6%      72.1%
Service....................     15.5       15.0       16.4       18.4       20.1     20.8       22.4       27.9
                              ------     ------     ------     ------     ------   ------     ------     ------
  Total revenues...........    100.0      100.0      100.0      100.0      100.0    100.0      100.0      100.0

Cost of equipment sales....     58.8       61.9       60.8       58.2       59.1     67.1       59.5       52.6
Cost of services...........      8.0        6.6        9.3        8.9       10.8     12.6       14.4       17.3
Total cost of goods sold...     66.8       68.5       70.1       67.2       69.9     79.7       73.9       69.9
                                ----      -----      -----      -----      -----    -----      -----      -----
  Gross margin.............     33.2       31.5       29.9       32.8       30.1     20.3       26.1       30.1
                                ----      -----      -----      -----      -----    -----      -----      -----

Operating expenses:
  Sales and marketing......     28.0       21.7       23.4       17.4       20.7     23.2       23.0       16.7
  Research and
    development............     31.5       30.8       32.9       28.2       26.6     29.0       29.8       28.7
  General and
    administrative.........     15.3       14.3       15.2      16.1        13.0     14.5       14.6       14.2
  Restructuring charge.....      0.0        0.0        6.4        0.0        0.0      0.0        0.0        3.3
                               -----      -----      -----      -----      -----    -----      -----      -----

    Total operating
      expenses.............     74.8       66.8       77.9      61.7        60.4     66.7       67.4       62.9
                              ------      -----      -----     ------      -----    -----      -----      -----

Operating loss.............   (41.6)     (35.3)     (48.0)     (28.8)     (30.3)   (46.4)     (41.4)     (32.8)
                              ------    -------    -------    -------    -------  -------    -------    -------

Other income (expense), net      2.5        1.7       58.8        3.0        1.9      1.5        0.6      (2.2)
Interest expense...........      0.3        0.3        0.6        1.1        0.4      0.3        0.5      0.1
                               -----      -----      -----      -----      -----    -----      -----    -------

Income (loss) before
  income taxes.............   (39.4)     (33.9)     10.2       (26.9)     (28.8)   (45.2)     (41.3)     (35.1)
Provision (benefit) for
  income taxes.............   (16.0)     (13.0)      3.6        (0.0)      (0.0)    (0.0)     (0.0)       (0.0)
                             -------    -------   --------     ------    -------  -------  ---------   --------

Net income (loss)............ (23.4)%     (20.8)%    6.6%       (26.9)%    (28.8)%   (45.2)%    (41.3)%    (35.1)%
                             =========   ======== ========      =======    =======   =======   ========    =======

</TABLE>

<PAGE>


         The Company's quarterly equipment revenues have varied from quarter to
quarter due to quarterly fluctuations in DSL revenues from uneven levels of
trials and deployments. A majority of DSL shipments made in fiscal 1998 and 1999
were for trials and initial service deployments and therefore have not created
steady or predictable demand for these products on a quarter to quarter basis.
DS1 revenues have increased fairly steadily in fiscal 1998 and 1999 due to a
combination of changes in product mix and increased unit shipments offset in
part by continued competitive pricing pressures. Revenues in the DS0 product
family have declined steadily in fiscal 1998 and 1999 as telcos migrate from
lower signal level analog networks to local access networks based upon higher
signal level digital products. Service revenues have seen steady growth
throughout the eight quarters presented due primarily to increased audio
conference calling traffic volume.

         Gross margin as a percentage of revenue has also varied from quarter to
quarter. The decreases in gross margins are primarily due to competitive pricing
pressures and product mix changes in each of the Company's equipment product
lines as well as investments in manufacturing infrastructure. The decreased
gross margins in the second, third and fourth quarters of fiscal 1999 were
primarily the result of recording forward pricing losses of $1.7 million,
$800,000 and $200,000, respectively, for DSL orders received. Additionally, the
Company's Conference Plus, Inc. subsidiary opened a second facility and made
additional infrastructure enhancements to handle increased call minutes which
also impacted margins. The Company believes that its gross margin in future
periods will depend on a number of factors, including market demand for the
Company's DSL products, pricing pressures, competitive technologies and
manufacturing expenses. There can be no assurance that the Company will be able
to increase gross margins in future periods due to these factors, even if its
DSL products achieve market acceptance.

         Operating expenses increased during the first two quarters of fiscal
primarily due to the hiring of additional personnel to support the development,
introduction and promotion of DSL systems and other new products. In the third
quarter of fiscal 1998 the Company recorded a restructuring charge of $1.4
million for personnel, facility and certain development contract costs related
to restructuring global operations. Operating expenses in the fourth quarter of
fiscal 1998 decreased as a result of restructuring actions taken in the previous
quarter. Operating expenses increased in each of the first three quarters of
fiscal 1999 and decreased in the forth quarter of fiscal 1999 when compared to
the same quarter in the previous year, excluding the restructuring charges. As a
percentage of revenue, operating expenses decreased in each quarter of fiscal
1999 when compared to the same quarter in the previous year, excluding the
restructuring charges. As a result of fluctuations in the timing of revenues of
DSL products and research and development and sales and marketing expenses, the
Company currently anticipates net losses in each of the quarters of fiscal 2000.

         The Company expects to continue to experience significant fluctuations
in quarterly results of operations. The Company believes that fluctuations in
quarterly results may cause the market price of the Class A Common Stock to
fluctuate, perhaps substantially. Factors which have had an influence on and may
continue to influence the Company's results of operations in a particular
quarter include the size and timing of customer orders and subsequent shipments,
customer order deferrals in anticipation of new products, timing of product
introductions or enhancements by the Company or its competitors, market
acceptance of new products, technological changes in the telecommunications
industry, competitive pricing pressures, accuracy of customer forecasts of
end-user demand, write-offs for obsolete inventory, changes in the Company's
operating expenses, personnel changes, foreign currency fluctuations, changes in
the mix of products sold, quality control of products sold, disruption in
sources of supply, regulatory changes, capital spending, delays of payments by
customers and general economic conditions. Sales to the Company's customers
typically involve long approval and procurement cycles and can involve large
purchase commitments. Accordingly, cancellation or deferral of one or a small
number of orders could cause significant fluctuations in the Company's quarterly
results of operations. As a result, 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.


<PAGE>


         Because the Company generally ships products within a short period
after receipt of an order, the Company typically does not have a material
backlog of unfilled orders, and revenues in any quarter are substantially
dependent on orders booked in that quarter. The Company's expense levels are
based in large part on anticipated future revenues and are relatively fixed in
the short-term. Therefore, the Company may be unable to adjust spending in a
timely manner to compensate for any unexpected shortfall of orders. Accordingly,
any significant shortfall of demand in relation to the Company's expectations or
any material delay of customer orders would have an almost immediate adverse
impact on the Company's business and results of operations and on its ability to
achieve profitability.

LIQUIDITY AND CAPITAL RESOURCES

         At March 31, 1999 the Company had $6.7 million in cash and cash
equivalents consisting primarily of federal government agency instruments and
the highest rated grade corporate commercial paper. As of March 31, 1999, the
Company had $500,000 outstanding under its secured revolving promissory notes
and $4.2 million outstanding under its equipment borrowing facility. As of March
31, 1999, the Company had approximately $16.0 million available under the
secured revolving promissory note facility. The revolving promissory notes and
the equipment borrowing facility required the maintenance of a minimum cash to
current maturity ratio, a current ratio and a maximum debt to net worth ratio.
The Company is currently in compliance with all such covenants.

         The Company's operating activities used cash of $22.5 million, $4.2
million and $31.3 million in fiscal 1997, 1998 and 1999, respectively. Cash used
by operations in fiscal 1997 resulted primarily from a loss from continuing
operations before income tax of $18.3 million (net of depreciation) and working
capital required by an increase in short term investments and receivables, and a
decrease in customer deposits. Cash used by operations in fiscal 1998 resulted
primarily from a loss from continuing operations before income tax of $12.1
million (net of depreciation) offset by increases in accounts payable and
accrued compensation and a decrease in prepaid expenses. Cash used by operations
in fiscal 1999 resulted primarily from a loss from continuing operations of
$28.0 million (net of depreciation) and working capital required by increases in
prepaid expenses and receivables, and a decrease in accrued compensation offset
by an increase in accounts payable.

         Capital expenditures in fiscal 1997, 1998 and 1999 were $9.4 million,
$5.8 million and $6.9 million, respectively. These expenditures were principally
for machinery, computer and research equipment purchases. The Company expects to
spend approximately $6.0 million in fiscal 2000 for capital equipment.

         At March 31, 1999, the Company's principal sources of liquidity were
$6.7 million of cash and cash equivalents and $16.0 million under its secured
revolving promissory notes facility. Borrowings under the secured revolving
promissory notes facility (which was unused at March 31, 1998 and had $500,000
outstanding at March 31, 1999) bear interest at the bank's prime rate (8.5% and
7.5% at March 31, 1998 and 1999, respectively).

         The Company recorded forward pricing losses of $2.7 million during
fiscal 1999 for DSL orders received. These losses effected results of operations
in the quarters in which the orders were received. Substantially all of this
loss has impacted liquidity as of the March 31, 1999 as products related to $2.3
million of the reserved were shipped prior to March 31, 1999 with the remainder
of the related products being in finished goods inventory at March 31, 1999.

         The Company had a deferred tax asset of approximately $18.6 million at
March 31, 1999. This deferred tax asset relates to (i) tax credit carryforwards
of approximately $4.4 million, (ii) a net operating loss carryforward tax
benefit of approximately $27.3 million and (iii) temporary differences between
the amount of assets and liabilities for financial reporting purposes and such
amounts measured by tax laws. Of such tax credit carryforwards, the first
$243,000 of credits expire in 2008 and $722,000 of credits may be carried
forward indefinitely. The net operating loss carryforward begins to expire in
2012. Realization of deferred tax assets associated with the Company's future


<PAGE>


deductible temporary differences, net operating loss carryforwards and tax
credit carryforwards is dependent upon generating sufficient taxable income
prior to their expiration.

         Realization of deferred tax assets associated with the Company's future
deductible temporary differences, net operating loss carryforwards and tax
credit carryforwards is dependent upon generating sufficient taxable income
prior to their expiration. Although realization of the deferred tax asset is not
assured and the Company has incurred operating losses for the 1997, 1998 and
1999 fiscal years, management believes that it is more likely than not that it
will generate taxable income sufficient to realize the majority of the tax
benefit associated with future temporary differences, NOL carryforwards and tax
credit carryforwards prior to their expiration through a tax planning strategy
available to the Company. At March 31, 1998, management determined that the
strategy was no longer sufficient to realize all of the deferred tax asset and
as such the Company recorded a valuation allowance of $2.9 million and recorded
an additional 12.3 million in fiscal 1999. On a quarterly basis, management will
assess whether it remains more likely than not that the deferred tax asset will
be realized. If the tax planning strategy is not sufficient to generate taxable
income to recover the deferred tax benefit recorded, an increase in the
valuation allowance will be required through a charge to the income tax
provision. However, if the Company achieves sufficient profitability or has
available additional tax planning strategies to utilize a greater portion of the
deferred tax asset, an income tax benefit would be recorded to decrease the
valuation allowance.

         In April 1999, the Company completed a subordinated secured convertible
debenture private placement totaling $20 million. The conversion price of the
debentures is the lower of (a) a periodically reset fixed price, which is
initially $6.372 per share and which will reset on April 16, 2000 and April 16,
2001 to the ten day average market price then in effect (provided that the fixed
price may not be less than $4.4604 or greater than $6.372 per share), and (b)
the floating market price of our Class A Common Stock at time of conversion
(except that the floating market price may only be imposed under specific
conditions set forth in the securities purchase agreement under which the
debentures were sold). The reset fixed price can not fall below $4.4604. In
addition, under the terms of the debentures, additional shares are issuable due
to anti-dilution price protection provisions and/or if the Company enters into
certain major transactions (such as the sale of substantially all of our assets,
a merger or a change in actual voting control). In connection with the
financing, the Company issued five-year warrants for approximately 909,000
shares of Class A Common stock at an exercise price equal to $8.921 per share,
which is approximately 140% of the initial conversion price of the debentures.

         In June 1999, the Company entered into a strategic agreement with
Fujitsu Telecommunications Europe Limited ("FTEL") on ADSL and HDSL product
development, manufacturing, and global marketing. As part of this agreement,
FTEL will assist the Company in the funding of certain future developments of
ADSL products. Additionally, employees of Westell Europe Limited ("WEL"), the
Company's United Kingdom operations, headquartered in Cambridge, England, became
employees of FTEL. Furthermore, FTEL assumed WEL's lease of office space,
purchased certain fixed assets and inventories of WEL and earned manufacturing
rights.

YEAR 2000 COMPLIANCE ISSUE

         The Company has determined that it is required to modify and/or replace
portions of its software systems so that they will properly utilize dates beyond
December 31, 1999 (the "year 2000 compliance"). The Company believes that with
software upgrades and modifications and with the conversion to new software, the
impact of the year 2000 on its computer systems can be mitigated. However, if
the upgrades, modifications and conversions are not made, or are not made in a
timely manner, the year 2000 could have a material adverse impact on the
Company's operations. The implementation of the plan to remediate the Company's
Information Technology ("IT") systems, which included efforts to mitigate the
impact that the year 2000 will have on the Company, was substantially completed
as of March 31, 1999 (the "Project").

         The Project included upgrading system software, hardware and processes
that are not exclusively related to year 2000 compliance. The Project utilized



<PAGE>


both internal and external resources. The Company has a full-time manager
dedicated to the Project as well as addressing other year 2000 compliance
issues. The Project cost for the Company is estimated to be 1.8 million. These
costs are expensed as incurred, except for approximately $800,000 that was
capitalized unrelated to year 2000 compliance. The Company has expensed
approximately $300,000 related this Project, as of March 31, 1999 with the
remaining $700,000 to be expensed over the next two years as operating lease
payments come due. The upgrading of system software, hardware and processes was
essentially completed as of March 31, 1999, as planned and within previous cost
estimates.

         The Company has assessed how the year 2000 will impact both internal
and external non-IT systems including product compliance, machinery and
equipment, engineering support systems and tools, human resource data bases,
payroll processing, banking systems, benefit plan third party administrators,
and customer systems and vendor compliance. The Company has made an assessment
that products produced by the Company, and systems used by the Company to
manufacture products, are year 2000 compliant; however, the Company is currently
testing its products and manufacturing systems to assure that year 2000 issues
have been entirely addressed. The Company is continuing to question customers
and vendors to determine whether their systems and products are year 2000
compliant. The Company has received sufficient information from a majority of
its customers and vendors that year 2000 compliance of customers or vendors will
not materially impact the Company's operations. The Company expects to complete
the assessment of the impact of vendor and/or customer year 2000 compliance
deficiency by October 31, 1999. The Company has completed its assessment of year
2000 compliance of its engineering support systems and automated engineering
tools. The engineering systems and tools utilized by the Company that are
integral to product development schedules are upgraded annually through license
renewals. The current upgrades of the engineering support systems and automated
engineering tools are year 2000 compliant. The Company has completed its testing
of year 2000 compliance of the engineering systems and tools. Management
believes that year 2000 compliance will not have a significant impact on the
Company's development schedules. The Company's human resource database and the
payroll processing systems have been evaluated for year 2000 compliance and must
be upgraded in order to be year 2000 compliant. The cost of this upgrade will
not be significant and the Company anticipates that this upgrade will be
completed by October 31, 1999. The Company has received confirmation that its
primary banks and its benefit plan third party administrators systems are or
will be year 2000 compliant.

         The Company believes that it is proactive in assessing the impact that
the year 2000 will have on both its internal and external IT and non-IT systems.
Where material and where feasible, the cost of year 2000 compliance has been
quantified. The Company is at varying stages of evaluating the impacts of the
year 2000 on its business and its results of operations. The Company believes
that its actions, evaluations and processes currently undertaken are sufficient
to assess and mitigate the impacts that the year 2000 will have on the Company.
However, since the evaluations described above are, at this time, not complete,
the Company may discover ways in which the lack of year 2000 compliance, whether
by the Company or by third parties, could materially affect the Company's
operations.

         The Company has developed a contingency plan to address all possible
effects that the year 2000 may have on its operations. Management believes that
its actions, evaluations and processes should provide sufficient time to address
the year 2000 risks as they are revealed. Risks related to customer year 2000
noncompliance are not within the Company's control, however, and therefore, the
noncompliance of customer systems may materially adversely impact the Company's
operations. Year 2000 compliance of the Company's vendors is also not within the
control of the Company. However, the Company believes that it will have
sufficient time to mitigate vendor year 2000 noncompliance and replace such
vendors with vendors that are year 2000 compliant due to the general
availability of electrical component material in the Company's products.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK


<PAGE>



         Westell is subject to certain market risks, including foreign currency
and interest rates. The Company has foreign subsidiaries in Canada and Ireland
that develop and sell products and services in those respective countries. The
Company is exposed to potential gains and losses from foreign currency
fluctuation affecting net investments and earnings denominated in foreign
currencies. After the sale of Westell's European subsidiary in June 1999, the
Company's future primary exposure is to changes in exchange rates for the U.S.
Dollar versus the Canadian dollar and the Irish pound.

         In the 1999 fiscal year, the net change in the cumulative foreign
currency translation adjustments account, which is a component of stockholders'
equity, was an unrealized gain of $455,000. The Company also recorded a
transaction gain of $284,000 for fiscal 1998 and a transaction loss of $729,000
for fiscal 1999 in Other income (expense) for fluctuations on foreign currency
rates on intercompany accounts anticipated by management to be settled in the
foreseeable future.

         The Company does not have significant exposure to interest rate risk
related to its debt obligations, primarily U.S. Dollar denominated. The
Company's market risk is the potential loss arising from adverse changes in
interest rates. As further described in Note 2 to the financial statements
included herein at Part II, Item 8, the Company's debt consists primarily of a
floating-rate bank line-of credit. Market risk is estimated as the potential
decrease in pretax earnings resulting from a hypothetical increase in interest
rates of 10% (i.e. from approximately 8% to approximately 18%) average interest
rate on the Company's debt. If such an increase occurred, the Company would
incur approximately $450,000 per annum in additional interest expense based on
the average debt borrowed during the twelve months ended March 31, 1999. The
Company does not feel such additional expense is significant.

The Company does not currently use any derivative financial instruments relating
to the risk associated with changes in interest rates.


ITEM 8     FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

         The Company's financial statements required by Item 8, together with
the report thereon of the independent accountants dated May 11, 1999 are set
forth on pages 47 - 66 of this report. The financial statement schedules listed
under Item 14(a)2, together with the report thereon of the independent
accountants dated May 11, 1999 are set forth on pages 67 and 68 of this report
and should be read in conjunction with the financial statements.

ITEM 9.    CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
           FINANCIAL DISCLOSURE.

                           None.


                                    PART III

ITEM 10.   DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

(a)      Directors of the Company

         The information required by this Item is set forth in registrant's
         Proxy Statement for the Annual Meeting of Stockholders to be held on
         September 15, 1999 under the caption "Election of Directors," which
         information is herein by reference.

(b)      Executive officers of the Company


<PAGE>


         The information required by this Item is set forth in registrant's
         Proxy Statement for the Annual Meeting of Stockholders to be held on
         September 15, 1999 under the caption "Executive Officers," which
         information is herein by reference.


ITEM 11.  EXECUTIVE COMPENSATION

         The information required by this Item is set forth in registrant's
         Proxy Statement for the Annual Meeting of Stockholders to be held on
         September 15, 1999 under the caption "Compensation of Directors and
         Executive Officers," and "Report of the Compensation of the Board of
         Directors," which information is herein by reference.

ITEM 12.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

         The information required by this Item is set forth in registrant's
         Proxy Statement for the Annual Meeting of Stockholders to be held on
         September 15, 1999 under the caption "Ownership of the Capital Stock of
         the Company," which information is herein by reference.

ITEM 13.  CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS

         The information required by this Item is set forth in registrant's
         Proxy Statement for the Annual Meeting of Stockholders to be held on
         September 15, 1999 under the caption "Certain Relationships and Related
         Transactions," which information is herein by reference.


                                     PART IV

ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K

         (a)      (1)      Financial Statements
                           --------------------

                           The consolidated financial statements of Westell
                           Technologies, Inc. for the fiscal year ended March
                           31, 1999, together with the Report of Independent
                           Public Accountants, are set forth on pages 48 through
                           67 of this Report.

                           The supplemental financial information listed and
                           appearing hereafter should be read in conjunction
                           with the consolidated financial statements included
                           in the report.

                  (2)      Financial Statement Schedules
                           -----------------------------

                           The following are included in Part IV of this Report
                           for each of the years ended March 31, 1997, 1998 and
                           1999 as applicable:

                           Report of Independent Public Accountants - page 68

                           Schedule II - Valuation and Qualifying Accounts -
                           page 69

<PAGE>


                           Financial statement schedules not included in this
                           report have been omitted either because they are not
                           applicable or because the required information is
                           shown in the consolidated financial statements or
                           notes thereto, included in this report.

                  (3)      Exhibits
                           --------

                            3.1     Amended and Restated Certificate of
                                    Incorporation, as amended (incorporated
                                    herein by reference to Exhibit 3.2 to
                                    Westell Technologies, Inc.'s Registration
                                    Statement on Form S-1, as amended,
                                    Registration No. 33-98024).
                            3.2     Amended and Restated By-laws (incorporated
                                    herein by reference to Exhibit 3.3 to
                                    Westell Technologies, Inc.'s Registration
                                    Statement on Form S-1, as amended,
                                    Registration No. 33-98024).
                            9.1     Voting Trust Agreement dated February 23,
                                    1994, as amended (incorporated herein by
                                    reference to Exhibit 9.1 to Westell
                                    Technologies, Inc.'s Registration Statement
                                    on Form S-1, as amended, Registration No.
                                    33-98024).
                          *10.1     Form of Restricted Stock Award granted by
                                    the Company to its officers and directors
                                    other thanMelvin J. Simon (incorporated
                                    herein by reference to Exhibit 10.1 to the
                                    Westell Technologies, Inc.'s Registration
                                    Statement on Form S-1, as amended,
                                    Registration No. 33-98024).
                           10.2     Loan and Security agreement dated as of
                                    October 13, 1998 among LaSalle National
                                    Bank, Westell Technologies, Inc., Westell,
                                    Inc., Westell International, Inc., and
                                    Conference Plus, Inc. (incorporated herein
                                    by reference to Exhibit 10.1 to the
                                    Company's form 10-Q for period ended
                                    September 30, 1998).
                          *10.3     Form of Restricted Stock Awards granted by
                                    the Company to Melvin J. Simon (incorporated
                                    herein by reference to Exhibit 10.3 to
                                    Westell Technologies, Inc.'s Registration
                                    Statement on Form S-1, as amended,
                                    Registration No.
                                    33-98024).
                           10.4     Stock Transfer Restriction Agreement entered
                                    into by members of the Penny family, as
                                    amended, (incorporated herein by reference
                                    to Exhibits 10.4 and 10.16 to Westell
                                    Technologies, Inc.'s Registration Statement
                                    on Form S-1, as amended, Registration No.
                                    33-98024).
                           10.5     Form of Registration Rights Agreement among
                                    the Company and Robert C. Penny III and
                                    Melvin J. Simon, as trustees of the Voting
                                    Trust dated February 23, 1994 (incorporated
                                    herein by reference to Exhibit 10.5 to
                                    Westell Technologies, Inc.'s Registration
                                    Statement on Form S-1, as amended,
                                    Registration No. 33-98024).
                           *10.6    1995 Stock Incentive Plan (incorporated
                                    herein by reference to Exhibit 10.6 to
                                    Westell Technologies, Inc.'s Registration
                                    Statement on Form S-1, as amended,
                                    Registration No. 33-98024).
                           *10.7    Employee Stock Purchase Plan (incorporated
                                    herein by reference to Exhibit 10.7 to
                                    Westell Technologies, Inc.'s Registration
                                    Statement on Form S-1, as amended,
                                    Registration No. 33-98024).
                           10.8     (Intentionally omitted).
                           10.9     Lease Agreement dated July 15, 1986 between
                                    Kendall Point Associates, Ltd. and Westell,
                                    Inc., as amended on August 26, 1991
                                    (incorporated herein by reference to Exhibit
                                    10.9 to Westell Technologies, Inc.'s
                                    Registration Statement on Form S-1, as
                                    amended, Registration No. 33-98024).
                           10.10    Limited Liability Company Operating
                                    Agreement dated as of September 23, 1995
                                    by Westell, Inc. and Kingsland Properties,
                                    Ltd. (incorporated herein by
                                    reference to Exhibit 10.10 to Westell
                                    Technologies, Inc.'s Registration
                                    Statement on Form S-1, as amended,
                                    Registration No. 33-98024).


<PAGE>

                           10.11    Lease dated September 25, 1995 between
                                    Westell-Meridian LLC and Westell, Inc.
                                    (incorporated herein by reference to Exhibit
                                    10.11 to Westell Technologies, Inc.'s
                                    Registration Statement on Form S-1, as
                                    amended, Registration No.
                                    33-98024).
                           10.12    Term Note dated as of October 13, 1998
                                    payable to LaSalle National Bank and made by
                                    Westell Technologies, Inc., Westell, Inc.,
                                    Westell International, Inc., and Conference
                                    Plus, Inc. (incorporated herein by reference
                                    to Exhibit 10.2 to the Company's form 10-Q
                                    for period ended September 30, 1998).
                          +10.13    Cooperation and Development Agreement
                                    between Westell, Inc. and GlobeSpan
                                    Technologies Inc.
                           10.14    Agreement dated September 13, 1988 between
                                    Richard Riviere and Westell Technologies,
                                    Inc., as amended (incorporated herein by
                                    reference to Exhibit 10.14 to Westell
                                    Technologies, Inc.'s Registration Statement
                                    on Form S-1, as amended, Registration No.
                                    33-98024).
                           10.15    Revolving Note dated as of October 13, 1998
                                    payable to LaSalle National Bank and made by
                                    Westell Technologies, Inc., Westell, Inc.,
                                    Westell International, Inc., and Conference
                                    Plus, Inc. (incorporated herein by reference
                                    to Exhibit 10.2 to the Company's form 10-Q
                                    for period ended September 30, 1998).
                           10.16    Equipment Loan Note dated as of October 13,
                                    1998 payable to LaSalle National Bank and
                                    made by Westell Technologies, Inc., Westell,
                                    Inc., Westell International, Inc., and
                                    Conference Plus, Inc. (incorporated herein
                                    by reference to Exhibit 10.3 to the
                                    Company's form 10-Q for period ended
                                    September 30, 1998).
                           10.17    Lease for Three National Plaza at Woodfield
                                    dated December 24, 1991 by and between the
                                    First National Bank of Boston, as Trustee
                                    pursuant to that certain Pooling and
                                    Security Agreement dated April 1, 1988, and
                                    Conference Plus, Inc., as amended and
                                    modified. (incorporated herein by reference
                                    to the exhibit of equal number to the
                                    Company's form 10-K for fiscal year ended
                                    March 21, 1996).
                           10.18    Lease dated December 10, 1993 between
                                    LaSalle National Trust, N.A., as Trustee
                                    under Trust Agreement dated August 1, 1979,
                                    known as Trust No. 101293, and Westell
                                    Incorporated, as amended and modified.
                                    (incorporated herein by reference to the
                                    exhibit of equal number to the Company's
                                    form 10-K for fiscal year ended March 21,
                                    1996).
                           21.1     Subsidiaries of the Registrant (incorporated
                                    herein by reference to Exhibit 21.1 to
                                    Westell Technologies, Inc.'s Registration
                                    Statement on Form S-1, as amended,
                                    Registration No. 33-98024).
                           23.1     Consent of Arthur Andersen LLP.
                           **27     Financial Data Schedule.


_______________
+        Confidential treatment granted requested for certain portions of this
         document. Certain portions of this document are being filed separately
         with the Securities and Exchange Commission.
*        Management contract or compensatory plan or arrangement.
**       Previously filed.

   (b)     Reports on Form 8-K
           -------------------

          There were no reports on Form 8-K filed for the three months ended
          March 31, 1999. Subsequent to year-end, on April 20, 1999, a Form 8-K
          was filed which included a press release announcing the issuance of

<PAGE>


          $20 million subordinated convertible debentures dated April 15, 1999.
          Additionally, on June 14, 1999 a Form 8-K was filed which included a
          press release announcing an expanded strategic alliance between
          Westell and Fujitsu Telecommunications Europe Limited.

   (c)     Exhibits
           --------

           The exhibits filed as part of this Annual Report on Form 10-K are as
specified in Item 14(a)(3) herein.

   (d)     Financial Statement Schedules
           -----------------------------

           Thefinancial statement schedules filed as part of this Annual Report
              on Form 10-K are as specified in item 14(a)(2) herein.


<PAGE>


                                   SIGNATURES
                                   ----------

      Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this amendment to its
Annual Report on Form 10-K to be signed on its behalf by the undersigned,
thereunto duly authorized on August 4, 1999.

                                              WESTELL TECHNOLOGIES, INC.

                                              By       /s/ ROBERT H. GAYNOR
                                                       Robert H. Gaynor,
                                                       -----------------
                                             Chairman of the Board of Directors,
                                             and Chief Executive Officer





<PAGE>


                   INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
                             AND SUPPLEMENTARY DATA


<TABLE>

Item                                                                                                           Page
----                                                                                                           ----

<S>                                                                                                             <C>
Consolidated Financial Statements:

Report of Independent Public Accountants................................................................         47
Consolidated Balance Sheets -- March 31, 1998 and 1999..................................................         48
Consolidated Statements of Operations for the years ended March 31, 1997, 1998 and 1999.................         50
Consolidated Statements of Stockholders' Equity for the years ended March 31, 1997, 1998 and 1999.......         51
Consolidated Statements of Cash Flows for the years ended March 31, 1997, 1998 and 1999.................         52
Notes to Consolidated Financial Statements..............................................................         53


Financial Statement Schedules:

Report of Independent Public Accountant.................................................................         67
Schedule II -- Valuation and Qualifying Accounts........................................................         68

</TABLE>

<PAGE>


                    REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

To the Board of Directors and Stockholders of
Westell Technologies, Inc.:

         We have audited the accompanying consolidated balance sheets of Westell
Technologies, Inc. (a Delaware corporation) and Subsidiaries as of March 31,
1998 and 1999, and the related consolidated statements of operations,
stockholders' equity and cash flows for each of the three years in the period
ended March 31, 1999. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.

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

         In our opinion, the financial statements referred to above present
fairly, in all material respects, the financial position of Westell
Technologies, Inc. and Subsidiaries as of March 31, 1998 and 1999, and the
results of their operations and their cash flows for each of the three years in
the period ended March 31, 1999 in conformity with generally accepted accounting
principles.





                                                 ARTHUR ANDERSEN LLP


Chicago, Illinois
May 11, 1999


<PAGE>

<TABLE>

                   WESTELL TECHNOLOGIES, INC. AND SUBSIDIARIES

                           CONSOLIDATED BALANCE SHEETS

                                     ASSETS
<CAPTION>


                                                                                                   March 31,
                                                                                            --------------------
                                                                                              1998         1999
                                                                                              ----         ----
                                                                                                (in thousands)
<S>                                                                                          <C>          <C>
Current assets:
  Cash and cash equivalents..............................................................    $43,515      $6,715
  Short term investments.................................................................        684        -
  Accounts receivable (net of allowance of $730,000 and $703,000 respectively)...........     12,399      14,132
  Inventories............................................................................      9,428      10,376
  Prepaid expenses and other current assets..............................................        100       1,108
  Refundable income taxes................................................................        110          60
  Deferred income tax asset..............................................................      2,498       1,000
                                                                                           ---------   ---------

           Total current assets..........................................................     68,734      33,391
                                                                                           ---------   ---------

Property and equipment:
  Machinery and equipment................................................................     15,630      18,561
  Office, computer and research equipment................................................     17,090      18,230
  Leasehold improvements.................................................................      1,584       2,091
                                                                                           ---------   ---------
                                                                                              34,304      38,882

  Less accumulated depreciation and amortization.........................................     20,816      25,531
                                                                                           ---------   ---------

    Property and equipment, net..........................................................     13,488      13,351
                                                                                           ---------   ---------

Deferred income tax asset and other assets...............................................     16,183      17,665
                                                                                          ----------  ----------

           Total assets..................................................................  $  98,405   $  64,407
                                                                                           =========   =========




 The accompanying notes are an integral part of these Consolidated Balance Sheets.



</TABLE>

<PAGE>

<TABLE>

                   WESTELL TECHNOLOGIES, INC. AND SUBSIDIARIES

                           CONSOLIDATED BALANCE SHEETS

                      LIABILITIES AND STOCKHOLDERS' EQUITY
<CAPTION>

                                                                                                  March 31,
                                                                                           ----------------------
                                                                                              1998         1999
                                                                                              ----         ----
                                                                                                (in thousands)
<S>                                                                                          <C>         <C>
Current liabilities:
  Accounts payable.......................................................................    $ 7,472     $  7,616
  Accrued expenses.......................................................................      6,296        6,655
  Accrued compensation...................................................................      5,664        4,305
  Current portion of long-term debt......................................................      1,407        2,189
  Deferred revenue.......................................................................        414          413
                                                                                          ----------     -------

           Total current liabilities.....................................................     21,253       21,178
                                                                                           ---------   ---------

Long-term debt...........................................................................      3,013        2,625
                                                                                          ----------   ---------

Other long-term liabilities..............................................................        998        1,480
                                                                                            --------   ---------

Commitments

Stockholders' equity:
Class A common stock, par $0.01..........................................................        154          169
  Authorized -- 65,500,000 shares
  Issued and outstanding - 15,371,900 at March 31, 1998 and 16,928,650 at March 31,
    1999
Class B common stock, par $0.01..........................................................        210          195
  Authorized -- 25,000,000 shares
  Issued and outstanding -- 21,030,857 at March 31, 1998 and 19,527,569 at March 31,
    1999
Preferred stock, par $0.01...............................................................        --           --
  Authorized -- 1,000,000 shares
  Issued and outstanding -- none
Additional paid-in capital...............................................................     97,254       97,561
Cumulative translation adjustment........................................................      (213)          455
Retained deficit.........................................................................   (24,264)     (59,256)
                                                                                         ----------- -----------

      Total stockholders' equity.........................................................     73,141       39,124
                                                                                          ----------   ---------

           Total liabilities and stockholders' equity.................................... $   98,405     $ 64,407
                                                                                          ==========    ========


 The accompanying notes are an integral part of these Consolidated Balance Sheets.

</TABLE>


<PAGE>

<TABLE>

                   WESTELL TECHNOLOGIES, INC. AND SUBSIDIARIES

                      CONSOLIDATED STATEMENTS OF OPERATIONS

<CAPTION>

                                                                                    Fiscal Year Ended March 31,
                                                                               -----------------------------------
                                                                                   1997       1998        1999
                                                                                   ----       ----        ----
                                                                                         (in thousands,
                                                                                     except per share data)

<S>                                                                              <C>        <C>         <C>
Equipment revenue.............................................................   $69,066    $72,206     $71,863
Service revenue...............................................................    10,319     14,145      21,317
                                                                                --------   --------    --------
   Total revenues.............................................................    79,385     86,351      93,180

Cost of equipment sales.......................................................    51,543     51,743      55,439
Cost of services..............................................................     6,289      7,116      12,877
                                                                                --------   --------   ---------
   Total cost of goods sold...................................................    57,832     58,859      68,316
                                                                                 --------   --------    --------

    Gross margin..............................................................    21,553     27,492      24,864
Operating expenses:
  Sales and marketing.........................................................    16,214     19,296      19,442
  Research and development....................................................    21,994     26,558      26,605
  General and administrative..................................................     9,757     13,151      13,117
                                                                                                               -
  Restructuring charge........................................................     --         1,383         800
                                                                              ----------   ---------     ------

     Total operating expenses.................................................    47,965     60,388       59,964
                                                                                 --------   --------     -------

Operating loss from continuing operations.....................................   (26,412)  (32,896)     (35,100)
Other income, net.............................................................     2,221     14,290         404
Interest expense..............................................................       330        502         296
                                                                                 --------   --------    --------

Loss from continuing operations before income taxes...........................   (24,521)  (19,108)     (34,992)
Benefit for income taxes......................................................    (9,820)   (5,137)       -
                                                                                 --------  -------- ------------

Loss from continuing operations...............................................   (14,701)  (13,971)     (34,992)
Loss from discontinued operations (net of tax benefits of
  $ 3,000, $ 0 and $ 0, respectively).........................................        (5)      -           -
                                                                                   ------------------ -----------

Net loss......................................................................  $(14,706) $(13,971)    $(34,992)
                                                                                ========= =========    =========

Loss per share:
  Continuing operations.......................................................   $ (0.41)  $ (0.38)     $ (0.96)
  Discontinued operations.....................................................     (0.00)    (0.00)      (0.00)
                                                                                 --------  --------  -----------

Net loss per basic and diluted common share...................................   $ (0.41)  $ (0.38)     $ (0.96)
                                                                                 ========  ========     ========

Average number of basic and diluted common shares outstanding ................    35,940     36,348       36,427
                                                                                 ========   ========     =======


 The accompanying notes are an integral part of these Consolidated Financial Statements.


</TABLE>

<PAGE>

<TABLE>

                   WESTELL TECHNOLOGIES, INC. AND SUBSIDIARIES

                 CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

<CAPTION>

                                           Common Stock
                                           Shares Issued
                                                and                         Additional  Cumulative  Retained    Total
                          Comprehensive     Outstanding        Par Value      Paid-in   Translation Earnings   Stockholders'
                              Loss       Class A Class B    Class A Class B   Capital   Adjustment  (Deficit)   Equity
                              ----       ------- -------    ------- -------   -------   ----------  ---------   ------
                                                                      (in thousands)

<S>                          <C>          <C>       <C>    <C>      <C>      <C>        <C>       <C>        <C>
Balance, March 31, 1996.....              12,802    21,838 $    128 $    218 $ 34,285   $  (59)   $    4,413 $    38,985
  Net loss.................. $(14,706)      --        --        --       --       --        --      (14,706)    (14,706)
  Stock awards..............                --        --        --       --        68       --           --          68
  Translation adjustment....     (108)      --        --        --       --       --      (108)          --        (108)
                            ----------
Total Comprehensive Loss....  (14,814)
  Class B Stock Converted to
     Class A Stock..........                 502     (502)        5      (5)      --        --           --         --
  Issuance of Class A Common
     Stock..................               1,665      --         17      --    61,586       --           --       61,603
  Shares granted under Stock
     Incentive Plan.........                   1      --        --       --        30       --           --           30
  Shares sold under Employee
     Stock Purchase Plan....                  15      --        --       --       316       --           --          316
                                          ------    ------      ---      ---   ------     ----      -------       ------
Balance, March 31, 1997.....              14,985    21,336      150      213   96,285     (167)     (10,293)      86,188
  Net loss..................  (13,971)      --        --        --       --       --       --       (13,971)    (13,971)
  Stock awards..............                --        --        --       --        48      --           --           48
  Translation adjustment....      (46)      --        --        --       --       --       (46)         --          (46)
                            -----------
Total Comprehensive Loss....  (14,017)
  Class B Stock Converted to
     Class A Stock..........                 305     (305)        3      (3)      --        --           --         --
  Options Exercised.........                  63      --          1      --       649       --           --          650
  Shares granted under Stock
     Incentive Plan.........                   2      --        --       --        25       --           --           25
  Shares sold under Employee
     Stock Purchase Plan....                  17      --        --        --      247       --           --          247
                                          ------    ------      ---      ---   ------     ----      -------       ------
Balance, March 31, 1998.....              15,372    21,031      154      210   97,254     (213)     (24,264)      73,141
  Net loss..................  (34,992)      --        --        --       --       --       --       (34,992)    (34,992)
  Translation adjustment....       668      --        --        --       --       --       668          --           668
                            -----------
Total Comprehensive Loss.... $(34,324)
  Class B Stock Converted to
     Class A Stock..........               1,503   (1,503)       15     (15)      --        --           --         --
  Options Exercised.........                  11      --        --       --       108       --           --          108
  Shares granted under Stock
     Incentive Plan.........                --        --        --       --       --        --           --         --
  Shares sold under Employee
     Stock Purchase Plan....                  42      --        --       --       199       --           --          199
                                          ------    ------      ---      ---   ------     ----      -------       ------
Balance, March 31, 1999.....              16,928    19,528 $    169 $    195 $ 97,561   $   455   $ (59,256) $    39,124
                                          ======    ====== ======== ======== ========   =======   =========  ===========



 The accompanying notes are an integral part of these Consolidated Financial Statements.

</TABLE>

<PAGE>

<TABLE>

                   WESTELL TECHNOLOGIES, INC. AND SUBSIDIARIES

                      CONSOLIDATED STATEMENTS OF CASH FLOWS
<CAPTION>

                                                                                     Fiscal Year Ended March 31,
                                                                                ----------------------------------
                                                                                   1997       1998        1999
                                                                                   ----       ----        ----
                                                                                         (in thousands)
Cash flows from operating activities:
<S>                                                                             <C>        <C>          <C>
  Net loss....................................................................  $(14,706)  $(13,971)    $(34,992)
  Reconciliation of net loss to net cash used in
     operating activities:
       Depreciation and amortization..........................................      6,175      6,953        7,022
       Stock awards...........................................................         98         73          -
       Deferred taxes.........................................................    (9,190)    (4,714)          -
  Change in assets and liabilities:
     Increase in accounts receivable..........................................    (2,404)      (324)      (1,441)
     Decrease (increase) in inventories.......................................        177        980        (552)
     (Increase) decrease in prepaid expenses and other current assets.........      (463)      1,077      (1,008)
     Decrease in refundable income taxes......................................        124        210           50
     (Decrease) increase in accounts payable and accrued expenses.............      (513)      2,938          985
     Increase (decrease) in accrued compensation..............................        138      2,531      (1,359)
     (Decrease) increase in deferred revenues.................................    (1,928)          1          (1)
                                                                               ----------   --------  -----------

          Net cash used in operating activities...............................   (22,492)    (4,246)     (31,296)
                                                                                ---------   --------  ----------

Cash flows from investing activities:
  Purchases of property and equipment.........................................    (5,716)    (5,802)      (5,985)
  Decrease (increase) in other assets.........................................          4       (78)           16
  (Increase) decrease in short term investments...............................    (7,663)     10,166          684
  (Purchase) sale of land and building held for sale..........................   (14,741)     16,203         -
                                                                                ---------  ---------   ----------

          Net cash (used in) provided by investing activities.................   (28,116)     20,489      (5,285)
                                                                                ---------   --------    ---------

Cash flows from financing activities:
  Repayment of long-term debt and leases payable..............................    (1,543)    (2,067)        (506)
  Proceeds from issuance of Common Stock......................................     61,919        896          307
                                                                                ---------     ------   ---------

          Net cash provided by (used in) financing activities.................     60,376    (1,171)        (199)
                                                                                --------- ----------  ----------

Effect of exchange rate changes on cash.......................................         67          6         (20)
          Net increase (decrease) in cash and cash equivalents................      9,835     15,078     (36,800)
Cash and cash equivalents, beginning of period................................     18,602     28,437       43,515
                                                                                --------- ----------   ---------

Cash and cash equivalents, end of period......................................  $  28,437   $ 43,515      $ 6,715
                                                                                ==========  =========     =======

               The accompanying notes are an integral part of these Consolidated
Financial Statements.

</TABLE>

<PAGE>



                   WESTELL TECHNOLOGIES, INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:

         Description of Business

         Westell Technologies, Inc. (the "Company") is a holding company. Its
wholly owned subsidiary, Westell, Inc., designs, manufactures and distributes
telecommunications equipment which is sold primarily to major telephone
companies. Westell International, Inc., a wholly owned subsidiary of the
Company, and Westell Europe, Ltd., a wholly owned subsidiary of Westell
International, Inc., market and distribute the Westell, Inc. product line in
international markets. Conference Plus, Inc., an 88.2%-owned subsidiary,
provides teleconferencing , multipoint video conferencing, broadcast fax and
multimedia teleconferencing services to various customers. During fiscal year
1997, the Company had a majority interest in Westell-Meridian LLC, established
in fiscal 1996 for the purpose of developing a new corporate facility site that
was sold and leased back during fiscal 1998 (see Note 5).

         Principals of Consolidation

         The accompanying Consolidated Financial Statements include the accounts
of the Company and its subsidiaries. All significant intercompany accounts and
transactions have been eliminated in consolidation.

         Cash and Cash Equivalents

         Cash and cash equivalents generally consist of cash, certificates of
deposit, time deposits, commercial paper, short-term government obligations and
other money market instruments. The Company invests its excess cash in deposits
with major financial institutions, in government securities and the highest
grade commercial paper of companies from a variety of industries. These
securities have original maturity dates not exceeding three months. Such
investments are stated at cost, which approximates fair value, and are
considered cash equivalents for purposes of reporting cash flows.

         Short Term Investments

         Short term investments generally consist of certificates of deposit,
time deposits, commercial paper and short-term government obligations. These
securities have original maturity dates exceeding three months and less than one
year. Such investments are stated at cost, which approximates fair value.



<PAGE>

                   WESTELL TECHNOLOGIES, INC. AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)


         Inventories

         Inventories are stated at the lower of first-in, first-out (FIFO) cost
or market. The components of inventories are as follows:

                                                                    March 31,
                                                            -------------------
                                                              1998         1999
                                                              ----         ----
                                                                (in thousands)

        Raw materials.....................................  $ 6,237      $ 4,631
        Work in process...................................      582          328
        Finished goods....................................    5,819        8,109
        Reserve for excess and obsolete inventory.........  (3,210)      (2,692)
                                                           --------     --------

                                                             $9,428      $10,376
                                                             ======      =======

         Property and Equipment

         Property and equipment are stated at cost. Depreciation is provided
over the estimated useful lives of the assets which range from 2 to 10 years
using the straight-line method for financial reporting purposes and accelerated
methods for tax purposes. Leasehold improvements are amortized over the lives of
the respective leases, or the useful life of the asset, whichever is shorter.

         Revenue Recognition

         Revenue is generally recognized upon shipment of product. On certain
sales contracts, revenue is not recognized until specific customer product
acceptance terms have been met.

         The Company's product return policy allows customers to return unused
equipment for partial credit if the equipment is currently being manufactured.
Credit is not offered on returned products that are no longer manufactured.
         Product Warranties

         Most of the Company's products carry a limited warranty ranging from
one to seven years. The Company accrues for estimated warranty costs as products
are shipped.

         Deferred Revenue

         Deferred revenue represents prepayments for goods or services.

         Research and Development Costs

         Engineering and product development costs are charged to expense as
incurred.

<PAGE>

                   WESTELL TECHNOLOGIES, INC. AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)


         Supplemental Cash Flow Disclosures

         The following represents supplemental disclosures to the consolidated
statements of cash flows:

<TABLE>

                                                                                                March 31,
                                                                                   ---------------------------
                                                                                   1997       1998        1999
                                                                                   ----       ----        ----
                                                                                         (in thousands)

<S>                                                                                <C>         <C>      <C>
        Schedule of noncash investing and financing activities:
          Property purchased under equipment notes............................     $3,669      $  --    $  900
Cash paid (received) for:
          Interest............................................................        350        516       236
          Income taxes........................................................        125      (633)         5

</TABLE>

         Disclosures about Fair Value of Financial Instruments

         The following methods and assumptions were used to estimate the fair
value of each class of financial instrument held by the Company:

                  Cash and cash equivalents, short term investments, trade
         receivables and trade payables: the carrying amounts approximate fair
         value because of the short maturity of these items.

                  Revolving promissory notes and installment notes payable to a
         bank: due to the floating interest rate on these obligations, the
         carrying amounts approximate fair value.

         Use of Estimates

         The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and revenue and expenses during the period reported. Actual results
could differ from those estimates. Estimates are used when accounting for
allowance for uncollectible accounts receivable, inventory obsolescence, product
warranty, depreciation, employee benefit plans, taxes, and contingencies, among
other things.

         Foreign Currency Translation

         The financial position and the results of operations of the Company's
foreign subsidiary are measured using local currency as the functional currency.
Assets and liabilities of this subsidiary are translated at the exchange rate in
effect at the end of each period. Income statement accounts are translated at
the average rate of exchange prevailing during the period. Translation
adjustments arising from differences in exchange rates from period to period are
included in the foreign currency translation adjustments account in
stockholders' equity. Gains and losses attributable to intercompany foreign
accounts anticipated by management to be settled in the foreseeable future have
been included with foreign currency transaction gains or losses in other income.

         The Company recorded a transaction gain of $8,000, a gain of $13,000
and a loss of $0 in Other income (expense) for fluctuations on foreign currency
rates on accounts receivable in the fiscal years ended March 31, 1997, 1998 and


<PAGE>


                   WESTELL TECHNOLOGIES, INC. AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)


1999, respectively. The Company also recorded a transaction gain of $284,000 for
fiscal 1998 and a transaction loss of $729,000 for fiscal 1999 in Other income
(expense) for fluctuations on foreign currency rates on intercompany accounts
anticipated by management to be settled in the foreseeable future.

         Computation of Net Loss Per Share

         In February 1997, the Financial Accounting Standards Board ("FASB")
issued SFAS No. 128 which requires companies to present basic and diluted
earnings per share effective for financial statements issued for periods ending
after December 15, 1997. The computation of basic earnings per share is computed
using the weighted average number of common shares outstanding during the
period. Diluted earnings per share includes the number of additional common
shares that would have been outstanding if the dilutive potential common shares
had been issued. The effect of this computation on the number of outstanding
shares is antidilutive for the periods ended March 31, 1997, 1998 and 1999, and
therefore the net loss per basic and diluted earnings per share are the same.

         New Accounting Pronouncements:

In June 1997, the FASB issued SFAS No. 130, "Reporting Comprehensive Income".
SFAS No. 130 requires the reporting and display of comprehensive income and its
components, in a full set of general-purpose financial statements. In addition
to net income, comprehensive income includes all non-owner changes in equity.
SFAS No. 130 is effective for financial statements for fiscal years beginning
after December 15, 1997, and reclassification of financial statements for
earlier periods for comparative purposes is required. The Company adopted SFAS
No. 130 in fiscal year 1999 by displaying comprehensive income for fiscal years
1997, 1998 and 1999 within the Consolidated Statements of Stockholders' Equity.

In June 1998, the FASB issued SFAS No. 133, "Accounting for Derivation
Instruments and Hedging Activities", which addresses the accounting for
derivative instruments. SFAS No. 133 is effective for financial statements for
the Company's fiscal year ended March 31, 2001. The company does not expect that
SFAS No. 133 will have a significant effect on its current financial reporting.

NOTE 2. REVOLVING PROMISSORY NOTES:

         As of March 31, 1998, the Company had secured revolving promissory
notes with a bank, which enabled the Company to borrow up to $15.0 million,
which was due on demand, and bore interest at the bank's prime rate (8.5% at
March 31, 1998). The Company also had an equipment borrowing facility with the
same bank, which expired on December 15, 1997.

         During fiscal year 1999 the company secured a revolving promissory note
and a equipment borrowing facility with a different bank. The new revolver
enables the Company to borrow up to $16.0 million as of March 31, 1999, and is
due on demand. The new revolver bears interest at the bank's prime rate (7.5% at
March 31, 1999), and is secured by substantially all of the assets of the
Company. The new equipment borrowing facility allows the Company to borrow up to
$5.0 million as of March 31, 1999.

         The Company had no borrowings outstanding under the revolving notes as
of March 31, 1998, and had borrowings outstanding of $500,000 as of March 31,
1999. Borrowings under equipment borrowing facilities totaled $4.2 million and


<PAGE>


                   WESTELL TECHNOLOGIES, INC. AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)



$3.3 million at March 31, 1998 and 1999, respectively, and are included as
installment notes payable to a bank described in Note 3.

         Both borrowing facilities require the maintenance of a minimum cash to
current maturity ratio, a current ratio and a maximum debt to net worth ratio.
The Company was in compliance with all such covenants as of March 31, 1998 and
1999.

         Borrowings under the revolving promissory notes facility were limited
to 80% of eligible accounts receivable and 40% of eligible inventory. Given
these limitations, the Company had available borrowings of $12.9 million under
the revolving promissory notes facility as of March 31, 1999.


NOTE 3. LONG-TERM DEBT:

         Long-term debt consists of the following:

<TABLE>

                                                                                                     March 31,
                                                                                              -----------------
                                                                                              1998         1999
                                                                                              ----         ----
                                                                                                (in thousands)

        <S>                                                                                <C>            <C>
        Revolving Promissory note payable to a bank, interest at prime, secured by
            substantially all assets of the Company, due through August 1999.............   $   --        $  500
        Equipment Promissory note payable to a bank, interest at prime, secured by
             certain assets of the Company, due through August 2002......................       --           900
        Capitalized lease obligations secured by related equipment.......................        213          81
        Installment notes payable to a bank, interest at prime on March 31, 1998 and,
            LIBOR +2.5% on March 31, 1999, secured by substantially all assets
            of the Company, due through 2002.............................................      4,207       3,333
                                                                                               -----      ------
                                                                                               4,420       4,814

        Less current portion.............................................................    (1,407)     (2,189)
                                                                                            --------    --------

                                                                                              $3,013      $2,625

</TABLE>

         Future maturities of long-term debt at March 31, 1999 are as follows
(in thousands):

        1999.......................................................    $2,189
        2000.......................................................     1,633
        2001.......................................................       967
        2002.......................................................        25
                                                                      -------

                                                                       $4,814
<PAGE>


                   WESTELL TECHNOLOGIES, INC. AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)



NOTE 4. INCOME TAXES:

         The Company follows the provisions of SFAS No. 109, "Accounting for
Income Taxes." SFAS No. 109 utilizes the liability method and deferred taxes are
determined based on the differences between the financial statements and tax
basis of assets and liabilities given the provisions of the enacted tax laws.
The income tax benefits charged to net income are summarized as follows:

<TABLE>

                                                                                    Fiscal Year Ended March 31,
                                                                                  ----------------------------
                                                                                   1997       1998        1999
                                                                                   ----       ----        ----
                                                                                         (in thousands)
        Federal:
<S>                                                                            <C>          <C>         <C>
          Current............................................................. $   (540)    $  (374)    $   --
          Deferred............................................................   (8,012)     (4,098)        --
                                                                                 -------    --------    ---------

                                                                                 (8,552)     (4,472)        --
                                                                                 -------    --------    ---------

        State:
          Current.............................................................    (93)          (49)        --
          Deferred............................................................   (1,178)       (616)        --
                                                                                 -------    --------    ---------

                                                                                 (1,271)       (665)        --
                                                                                 -------   ---------    ---------

             Total............................................................  $(9,823)    $(5,137)    $   --
                                                                                ========    ========    =========
</TABLE>

         The Company utilizes the flow-through method to account for tax
credits. In fiscal 1997, 1998 and 1999, the Company recognized approximately
$398,000, $700,000 and $750,000, respectively, of tax credits.

         The statutory federal income tax rate is reconciled to the Company's
effective income tax rates below:

<TABLE>

                                                                                      Fiscal Year Ended March 31,
                                                                                      ---------------------------
                                                                                     1997        1998       1999
                                                                                     ----        ----       ----

        <S>                                                                          <C>        <C>       <C>
        Statutory federal income tax rate....................................        (34.0)%    (34.0)%   (34.0)%
        Meals and entertainment..............................................          1.0        1.6       0.7
        State income tax, net of federal tax effect..........................         (4.9)      (4.9)     (4.9)
        Income tax credits recognized........................................         (1.6)      (3.7)     (2.1)
        Stock option benefit.................................................         --        (2.3)      (0.1)
        Valuation allowance..................................................         --        15.2       40.5
        Other................................................................         (0.5)       1.2      (0.1)
                                                                                    -------   --------    ------

                                                                                     (40.0)%    (26.9)%     0.0%
                                                                                   =========  =========  =======

</TABLE>

<PAGE>


                   WESTELL TECHNOLOGIES, INC. AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)


         Components of the net deferred income tax asset are as follows:

<TABLE>

                                                                                                    March 31,
                                                                                              -------------------
                                                                                              1998         1999
                                                                                              ----         ----

                                                                                                (in thousands)
<S>                                                                                           <C>         <C>
        Deferred income tax assets:
          Allowance for doubtful accounts................................................     $  283      $  259
          Alternative minimum tax credit.................................................        446         446
          Research and development credit carryforward...................................      3,062       3,918
          Compensation accruals..........................................................        247         320
          Inventory reserves.............................................................      1,245         923
          Warranty reserve...............................................................        477         532
          Net operating loss carryforward................................................     15,565      27,276
          Other..........................................................................        148          99
                                                                                             -------   ---------

                                                                                              21,473      33,773

           Valuation allowance...........................................................    (2,900)    (15,200)
                                                                                           ---------   ---------

             Net deferred income tax asset...............................................    $18,573     $18,573
                                                                                             =======     =======
</TABLE>

         Realization of deferred tax assets associated with the Company's future
deductible temporary differences, net operating loss carryforwards and tax
credit carryforwards is dependent upon generating sufficient taxable income
prior to their expiration. Although realization of the deferred tax asset is not
assured and the Company has incurred operating losses for the 1997, 1998 and
1999 fiscal years, management believes that it is more likely than not that it
will generate taxable income sufficient to realize the portion of the tax
benefit associated with future temporary differences, NOL carryforwards and tax
credit carryforwards prior to their expiration through a tax planning strategy
available to the Company. At March 31, 1998, management determined that the
strategy was no longer sufficient to realize all of the deferred tax asset and
as such the Company recorded a valuation allowance of $2.9 million and recorded
an additional allowance of $12.3 million in 1999. On a quarterly basis,
management will assess whether it remains more likely than not that the deferred
tax asset will be realized. If the tax planning strategy is not sufficient to
generate taxable income to recover the deferred tax benefit recorded, an
increase in the valuation allowance will be required through a charge to the
income tax provision. However, if the Company achieves sufficient profitability
or has available additional tax planning strategies to utilize a greater portion
of the deferred tax asset, an income tax benefit would be recorded to decrease
the valuation allowance.

         The Company has approximately $4.4 million in income tax credit
carryforwards and a tax benefit of $27.3 million related to a net operating loss
carryforward that is available to offset taxable income in the future. The tax
credit carryforwards begin to expire in 2008 and the net operating loss
carryforward begins to expire in 2012.


NOTE 5. COMMITMENTS:

         In September 1995, the Company entered into an agreement to form a
limited liability company, Westell-Meridian LLC ("LLC"), for the purpose of
developing a 16.4 acre site in Aurora, Illinois into a 185,000 square foot


<PAGE>


                   WESTELL TECHNOLOGIES, INC. AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)


corporate facility to house manufacturing, engineering, sales, marketing and
administration. In connection therewith, the Company has a majority equity
ownership interest in the LLC. In December 1996, the Company began occupying the
constructed facility owned by the LLC (the "Aurora facility"). During the
construction period, the Company advanced the LLC the construction funding which
as of March 31, 1997, was $14.4 million. In fiscal 1998 the LLC received
proceeds of $16.2 million upon the sale of the Aurora facility at cost. The LLC
repaid the Company the advanced construction funding during the second quarter
of fiscal 1998 upon completing the sale of the Aurora facility to a third party.
The Aurora facility was leased back in a related transaction with the same third
party, whereby, the Company entered into a 20 year lease that runs through 2017.

         The Company also has lease commitments to lease other office facilities
at various locations. All of the leases require the Company to pay utilities,
insurance and real estate taxes on the facilities.


     Total minimum future rental payments at March 31, 1999 are as follows (in
thousands):

        2000........................................................     $3,145
        2001........................................................      3,080
        2002........................................................      2,759
        2003........................................................      2,634
        2004........................................................      2,639
        Thereafter..................................................     30,496
                                                                      ---------

                                                                        $44,753
                                                                        =======


NOTE 6. CAPITAL STOCK AND STOCK RESTRICTION AGREEMENTS:

Capital Stock Activity:

         On March 24, 1998 the Company filed a 14(c) information statement to
amend the Company's Amended and Restated Certificate of Incorporation to
increase the number of shares of Class A Common Stock authorized for issuance
from 43,500,000 to 65,500,000. In the same filing the Company amended the
Westell Technologies, Inc. 1995 Stock Incentive Plan to increase the number of
shares of Class A Common Stock available for grant thereunder by 5,000,000
shares of Class A Common Stock. This was adopted through a consent of the
majority shareholder on April 20, 1998.

         The Board of Directors has the authority to issue the newly authorized
Preferred Stock up to 1,000,000 shares in one or more series and to fix the
rights, preferences, privileges and restrictions thereof, including dividend
rights, conversion rights, voting rights, terms of redemption, liquidation
preferences, sinking fund terms and the number of shares constituting any series
or the designation of such series, without any further vote or action by
stockholders.

         The Company has granted restricted common shares to certain employees.
The number of restricted shares vested at March 31, 1997 and 1998 for these
stock awards was 1,613,780 and 1,706,894 shares, respectively. The Company
valued the stock awards based on independent appraisals done at the approximate
date of the grants. Compensation expense of $68,000 and $48,000 was recognized


<PAGE>



                   WESTELL TECHNOLOGIES, INC. AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)


in fiscal 1997 and 1998, respectively, based on the fair market value of the
shares granted. The shares were fully vested as of March 31, 1998, therefore
there was no vesting or compensation expense for fiscal 1999.

         On May 8, 1996, the Board of Directors authorized a two-for-one stock
split in the form of a dividend to be distributed on June 7, 1996, to
stockholders of record on May 20, 1996. All references in the financial
statements to number of shares and per share amounts of the Company's common
stock have been retroactively restated to reflect the two-for-one stock split.

Stock Restriction Agreements:

         The members of the Penny family (major stockholders) have a Stock
Transfer Restriction Agreement which prohibits, with limited exceptions, such
members from transferring their Common Stock acquired prior to November 30,
1995, without first offering such stock to the other members of the Penny
family. A total of 18,749,587 shares of Common Stock are subject to this Stock
Transfer Restriction Agreement.

NOTE 7. EMPLOYEE BENEFIT PLANS:

         401(k) Benefit Plan:

         The Company sponsors a 401(k) benefit plan (the "Plan") which covers
substantially all of its employees. The Plan is a salary reduction plan which
allows employees to defer up to 15% of wages subject to Internal Revenue Service
allowed limits. The Plan also allows for Company discretionary contributions.
The Company provided for discretionary and matching contributions to the Plan
totaling approximately $190,000, $208,000 and $395,000 for fiscal 1997, 1998 and
1999, respectively.

         Employee Stock Purchase Plan:

         The Company maintains a stock purchase plan that allows participating
employees to purchase, through payroll deductions, shares of the Company's Class
A Common Stock for 85% of the average of the high and low reported sales prices
at specified dates. Under the stock purchase plan, 217,950 shares are
authorized. As of March 31, 1997, 1998 and 1999 there were 199,060, 182,068 and
139,936 shares, respectively, available for future issuance.

         Employee Stock Incentive Plan:

         In October 1995, the Company adopted a stock incentive plan that
permits the issuance of Class A Common Stock, restricted shares of Class A
Common Stock, nonqualified stock options and incentive stock options to purchase
Class A Common Stock, performance awards and stock appreciation rights to
selected employees, officers, and non-employee directors of the Company. Under
the stock incentive plan 7,688,050 shares were authorized and there were
5,005,829 shares available for future issuance at March 31, 1999. The Company
issued 1,270 and 1,561 shares for stock awards under this plan in fiscal 1997
and 1998, respectively. Compensation expense of $30,000 and $25,000 was
recognized in fiscal 1997 and 1998, respectively, for the stock awards granted.
No stock awards were issued in fiscal 1999.



<PAGE>


                   WESTELL TECHNOLOGIES, INC. AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)


         The stock option activity under the Company's Stock Incentive Plan are
as follows:

                                                   Outstanding  Weighted Average
                                                     Options      Exercise Price
                                                     -------      --------------

        Outstanding at March 31, 1996...........         89,900        $  6.50

                  Granted.......................      2,104,250          16.98
                  Exercised.....................           --             --
                  Expired.......................           --             --
                  Canceled......................    (1,086,500)          22.08
                                                  -------------      ---------
        Outstanding at March 31, 1997...........      1,107,650           9.45

                  Granted.......................      2,079,450          14.55
                  Exercised.....................       (63,480)          10.25
                  Expired.......................           --             --
                  Canceled......................      (458,200)          12.29
                                                    -----------      ---------
        Outstanding at March 31, 1998...........      2,665,420          12.92

                  Granted.......................      3,068,876           7.12
                  Exercised.....................       (11,330)          9.53
                  Expired.......................           --             --
                  Canceled......................    (3,079,520)          12.43
                                                  -------------      ---------
        Outstanding at March 31, 1999...........      2,643,446        $  6.69


         The exercise price of the stock options granted is generally
established at the market price on the date of the grant. During fiscal 1997,
nonqualified stock options issued previously during fiscal 1997 were canceled
and reissued on July 24, 1996 at the then current market price of $21.625. On
March 12, 1997, options issued during fiscal 1997 were repriced to the then
current market price of $9.6875. On August 6, 1998 nonqualified stock options
issued to non-board members prior to August 6, 1998 were cancelled and reissued
at the then current market price of $6.219. The Company has reserved Class A
Common Stock for issuance upon exercise of these options granted.

         The Company accounts for employee stock options under APB Opinion 25,
as permitted under generally accepted accounting principles. Accordingly, no
compensation cost has been recognized in the accompanying financial statements
related to these options. Had compensation cost for these options been
determined consistent with Statement of Financial Accounting Standards No. 123
"Accounting for Stock-Based Compensation" ("SFAS 123"), which is an accounting
alternative that is permitted but not required, the Company's net loss and net
loss per share would have been $(16,963,000), $(17,742,000) and $(44,349,000)
and $(0.47), $(0.49) and $(1.22) for 1997, 1998 and 1999, respectively.




<PAGE>


                   WESTELL TECHNOLOGIES, INC. AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)



The following table summarizes information about all stock options outstanding
as of March 31, 1999:

<TABLE>

                                         Options Outstanding                                Options Exercisable
                                         -------------------                                -------------------

      Range of            Number                               Weighted-           Number            Weighted
      Exercise        Outstanding at        Remaining           Average        Exercisable at         Average
       Prices             3/31/99              Life         Exercise Price         3/31/99        Exercise Price
       ------             -------              ----         --------------         -------        --------------

   <S>                   <C>                   <C>                <C>                  <C>            <C>
   $3.10 - $6.16            30,616             9.60 yrs           $ 4.89               1,166          $ 4.14
    6.22 -  6.22         2,384,780             8.23 yrs             6.22             574,704            6.22
    6.50 - 15.69           228,050             7.89 yrs            11.88             105,399            9.49
                       -----------           ----------       ----------          ----------       ---------

   $3.10 - 15.69         2,643,446             8.22 yrs           $ 6.69             681,269          $ 6.72

</TABLE>

         The fair value of each option is estimated on the date of grant based
on the Black-Scholes option pricing model assuming, among other things, a
risk-free interest rate of 6.5% and no dividend yield; expected volatility of
73% and an expected life of 7 years. A majority of the options granted to
employees in 1997 and 1998 vest ratably over five years. Certain options vest
upon the earlier of the achievement of individual goals established or 8 years.
The weighted average fair value of the options granted during the years ended
March 31, 1997, 1998 and 1999 were $8.44, $9.70 and $4.72, respectively.

NOTE 8. SEGMENT AND RELATED INFORMATION:

         Operating Segments:
         ------------------

         Westell's reportable segments are strategic business units that offer
different products and services. They are managed separately because each
business requires different technology and market strategy. They consist of:

          1)   A telecommunications equipment manufacturer of local loop access
               products, and
          2)   A multi-point telecommunications service bureau specializing in
               audio teleconferencing, multi-point video conferencing, broadcast
               fax and multimedia teleconference services.



<PAGE>


                   WESTELL TECHNOLOGIES, INC. AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)



         Performance of these segments is evaluated utilizing, revenue,
operating income and total asset measurements. The accounting policies of the
segments are the same as those described in the summary of significant
accounting policies. Segment information for the fiscal years ended March 31,
are as follows:

<TABLE>

                                              Telecom        Telecom                         Consolidated
                                             Equipment      Services         Other a            Total
                                             ---------      --------         -------            -----
<S>                                          <C>             <C>          <C>                  <C>
1997
      Revenues..........................     $ 69,066        $ 10,319     $      --            $ 79,385
      Income (loss) from continuing
       operations before income tax.....     (28,269)           1,857         1,891            (24,521)
      Depreciation and amortization.....        5,056           1,119            --               6,175
      Total assets......................      102,348           5,701            --             108,049

1998
      Revenues..........................       72,206          14,145            --              86,351
      Income (loss) from continuing
       operations before income tax.....     (36,522)           3,626        13,788            (19,108)
      Depreciation and amortization.....        5,641           1,312            --               6,953
      Total assets......................       90,509           7,896            --              98,405

1999
      Revenues..........................       71,863          21,317            --              93,180
      Income (loss) from continuing
       operations before income tax.....     (38,554)           3,454           108            (34,992)
      Depreciation and amortization.....        5,327           1,695            --               7,022
      Total assets......................       52,774          11,633            --              64,407

          a)      Other represents Other income, net and Interest expense for
                  each period. The Company does not evaluate its segments based
                  on this information.

</TABLE>

         Enterprise-wide Information:
         ----------------------------

         The Company's revenues are primarily generated in the United States.
More than 90% of all revenues were generated in the United States for each
period presented.

         Significant Customers and Concentration of Credit:

         The Company is dependent on certain major telephone companies that
represent more than 10% of the total revenue. Sales to major customers that
exceed 10% of total revenue are as follows:
                                                          Fiscal Year Ended
                                                              March 31,
                                                    ---------------------------
                                                    1997        1998       1999
                                                    ----        ----       ----
        Customer A............................       18.3%      17.7%     16.2%
        Customer B............................       11.1        9.0      10.7



<PAGE>


                   WESTELL TECHNOLOGIES, INC. AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)



         Major telephone companies comprise a significant portion of the
Company's trade receivables. One customer represented 15.2% and 14.1% of the
trade receivables balance at March 31, 1998 and 1999, respectively.

         Geographic Information

         The Company's financial information by geographic area was as follows
for the years ended March 31:

<TABLE>

                                                                               Domestic   International   Total
                                                                               --------   -------------   -----
                                                                                         (in thousands)
<S>                                                                            <C>           <C>       <C>
1997
        Revenue..............................................................  $ 75,032      $ 4,353   $ 79,385
        Operating income (loss) from continuing operations...................   (15,606)      10,806    (26,412)
        Identifiable assets..................................................   103,008        5,041     108,049

1998
        Revenue..............................................................  $ 77,802     $  8,549   $ 86,351
        Operating loss from continuing operations............................   (23,568)     (9,928)    (32,896)
        Identifiable assets..................................................    95,849        2,556     98,405

1999
        Revenue..............................................................  $ 84,709     $  8,471   $ 93,180
        Operating loss from continuing operations............................   (26,208)     (8,892)    (35,100)
        Identifiable assets..................................................    60,691        3,716     64,407

International identifiable assets are related to Westell Europe, Ltd. operations, located in the United Kingdom.

</TABLE>

NOTE 9. RESTRUCTURING CHARGE:

         The Company recognized a restructuring charge of $1.4 million in the
three months ended December 31, 1997 and $800,000 in the three months ended
March 31, 1999. These charges included personnel, facility, and certain
development contract costs related to restructuring global operations. As of
March 31, 1999, the Company has paid $1.2 million of the restructuring costs
charged in fiscal 1998 and $200,000 of the restructuring costs charged in fiscal
1999.

         The Fiscal 1998 restructuring plan was to decrease costs and streamline
operations related to DSL products. The Fiscal 1999 restructuring plan was to
further decrease costs, primarily by reducing the workforce by approximately
11%, and focus DSL sales efforts on indirect sales to the major phone companies
through licensing and OEM arrangements with strategic partners. The Company
anticipates most of the material expenditures related to this restructuring
reserve to occur in the first quarter of fiscal 2000. The Company also expects
costs savings of approximately $5.0 million in fiscal 2000 related to this
restructuring.

The restructuring charges and their utilization are summarized as follows:

<TABLE>

                                   1998       1998         Accrued at       1999      1999         Accrued at
(Dollars in thousands)           Charge   Utilized      March 31,1998     Charge  Utilized     March 31, 1999
------------------------------ --------- ---------- ------------------ ---------- --------- ------------------
<S>                                <C>        <C>                <C>        <C>       <C>                <C>
Employee Costs.............        $561       $287               $274       $690      $363               $601
Contract Costs.............         736        647                 89         --        --                 89
Legal and Other Costs......          86         23                 63        110        19                156
============================== ========= ========== ================== ========== ========= ==================
Total......................     $ 1,383       $957               $426       $800      $382               $844
============================== ========= ========== ================== ========== ========= ==================

</TABLE>

<PAGE>


                   WESTELL TECHNOLOGIES, INC. AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)


NOTE 10. OTHER INCOME, NET:

     In fiscal 1998, the Company recognized other income of $12.0 million, net
of expenses, related to a one-time fee received from Texas Instruments for the
break-up of the proposed Westell/Amati merger. Excluding the effect of this one
time benefit, Other income, net would have been $2.3 million for fiscal year
ended March 31, 1998. Excluding the one time item, Other income, net for the
years ended March 31, 1997, 1998 and 1999 was primarily due to interest income
earned on temporary cash investments made as a result of investing available
funds.

NOTE 11. RECLASSIFICATION OF ACCOUNTS:

     Certain 1998 amounts have been reclassified in order to conform to the
current-year presentation.

NOTE 12. SUBSEQUENT EVENTS:
     In April 1999, the Company completed a subordinated secured convertible
debenture private placement totaling $20 million. The conversion price of the
debentures is the lower of (a) a periodically reset fixed price, which is
initially $6.372 per share and which will reset on April 16, 2000 and April 16,
2001 to the ten day average market price then in effect (provided that the fixed
price may not be less than $4.4604 or greater than $6.372 per share), and (b)
the floating market price of our Class A Common Stock at time of conversion
(except that the floating market price may only be imposed under specific
conditions set forth in the securities purchase agreement under which the
debentures were sold). The reset fixed price can not fall below $4.4604. In
addition, under the terms of the debentures, additional shares are issuable due
to anti-dilution price protection provisions and/or if the Company enters into
certain major transactions (such as the sale of substantially all of our assets,
a merger or a change in actual voting control). In connection with the
financing, the Company issued five-year warrants for approximately 909,000
shares of Class A Common stock at an exercise price equal to $8.921 per share,
which is approximately 140% of the initial conversion price of the debentures.




                    REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS





To the Board of Directors and Stockholders of Westell Technologies, Inc.

         We have audited, in accordance with generally accepted auditing
standards, the financial statements of Westell Technologies, Inc. and its
Subsidiaries included in this Annual Report on Form 10-K and have issued our
report thereon dated May 11, 1999. Our audit was made for the purpose of forming
an opinion on the basic financial statements taken as a whole. Schedule II,
Valuation and Qualifying Accounts, included herein is the responsibility of the
Company's management and is presented for purposes of complying with the
Securities and Exchange Commission's rules and is not part of the basic
financial statements. This schedule has been subjected to the auditing
procedures applied in the audit of the basic financial statements and, in our
opinion, fairly states in all material respects the financial data required to
be set forth therein in relation to the basic financial statements taken as a
whole.




                                                     ARTHUR ANDERSEN LLP


Chicago, Illinois
May 11, 1999


<PAGE>


                   WESTELL TECHNOLOGIES, INC. AND SUBSIDIARIES

                SCHEDULE II -- VALUATION AND QUALIFYING ACCOUNTS
<TABLE>

                         ACCOUNTS RECEIVABLE ALLOWANCES
                                 (IN THOUSANDS)

<CAPTION>

                                                                                     1997       1998        1999
                                                                                     ----       ----        ----

<S>                                                                                  <C>        <C>         <C>
Balance at beginning of year..................................................       $462       $521        $730
Provision for doubtful accounts...............................................        305        371         168
Provision for discounts, allowances and rebates...............................         --         --          --
Write-offs of doubtful accounts, net of recoveries............................      (246)      (162)       (195)
Discounts, allowances and rebates taken.......................................         --         --          --

Balance at end of year........................................................       $521       $730        $703
                                                                                     ====       ====        ====


</TABLE>



<TABLE>

                             RESTRUCTURING RESERVES
                                 (IN THOUSANDS)

<CAPTION>

                                                                                     1998       1999
                                                                                     ----       ----

<S>                                                                                <C>          <C>
Balance at beginning of year..................................................     $  --        $426
Charges to Operating expenses.................................................      1,400        800
Restructuring costs paid......................................................      (974)      (382)

Balance at end of year........................................................       $426       $844
                                                                                     ====       ====


</TABLE>