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

                                    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 (ss.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 ("telcos") 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 telcos to deliver services
primarily over existing copper telephone wires that connect end users to a
telco's central office (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. The Company's customers
include all the Regional Bell Operating Companies (the "RBOCs") as well as GTE
and other carriers. In addition, Westell sells products to several other
entities, including public telephone administrations located outside the U.S.,
independent domestic local exchange carriers, competitive access providers,
inter exchange carriers, Internet service providers and the U.S. federal
government.

        Conference Plus, Inc. (CPI), an 88% owned subsidiary, provides audio,
video, and IP multicasting conferencing services. CPI sells its services
directly to large customers, typically Fortune 100 companies and serves
customers, indirectly, through its private re-seller program. CPI is one of the
largest providers of conferencing services that is not directly affiliated with
or owned by a carrier such as AT&T or MCI/WorldCom.


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, e-mail and on-line access. For example, businesses with
multiple locations increasingly require geographically dispersed Local Area
Networks ("LANs") to be linked in sophisticated wide area networks ("WANs") 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 e-mail, video broadcasts, e-commerce and
graphically rich content over the World Wide Web, commercial services,
transaction processing, independent bulletin boards, and voice transmission.
Business and residential based end-user demand for telecommunications services
is expected to continue to grow as telcos and information service providers
increase their offerings of new interactive multimedia services, including data
applications such as high speed Internet access, LAN extension, medical imaging
and telecommuting, and video applications such as video-on-demand, distance
learning, video conferencing and work at home. These applications require
individuals to remain on the line longer than the telephone switches were
originally designed to handle. Also, the size and rate of the content demands
more bandwidth on both the backbone and access circuits. To handle the growing
volume of data communications traffic and to provide faster and higher quality
transmission, telcos and information service providers have continually upgraded




<PAGE>


the capacity and speed of their networks typically by installing more trunk
ports on the switches and adding additional bandwidth to their backbones. In
addition, the telephone companies are installing enormous numbers of second
lines at end-user sites to support this demand for access.

        Deregulation. Deregulation of the telecommunications industry has
increased the number of competitors in the local access network and has further
placed pressure on telcos to upgrade their networks and increase their
telecommunications service offerings. For example, alternative access providers
have deployed fiber and wireless systems for high volume data transmission to
business centers and other high-density metropolitan areas. As alternative
access providers' costs decline and deregulation continues, alternative access
providers are likely to create additional competition for telcos by developing
new products and services for end users. Deregulation allows interexchange
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 or "CLEC". Cable
operators are competing with telcos 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. In addition, this trend toward continued
deregulation of the telecommunications industry may further decrease the current
restrictions and regulations affecting telcos' ability to provide high bandwidth
services such as high speed Internet access and corporate LAN extensions.

        Existing Telco Infrastructure. Traditionally, telcos have provided local
access services using analog technology, which does not have the bandwidth or
functionality to support the growing demand for new services over telephone
wires. In contrast, digital technology permits high speed, high volume and more
reliable data transmission by reducing all forms of images, sounds and data to
digital signals, thereby increasing the variety and bandwidth of services that
can be provided in the local access network. To handle the growing demand for
digital traffic, telcos have deployed broadband optical fiber in their network
"backbone" interconnecting their geographically dispersed central offices.
Telcos have also used fiber to interconnect their central offices to
high-density telecommunications traffic areas. Deployment of fiber in the local
access network connecting end users to a telco's central office, however, has
proven labor intensive, complicated, time consuming and expensive. Consequently,
this "last mile" of the telco's network still predominantly consists of low
speed analog transmission over copper wire.

        Given the challenges of widespread replacement of copper wire in the
local access network, telcos 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 multiplexing format known
as T-1 (E-1 in most countries outside of the U.S.). T-1/E-1 transmission
utilizes a data rate of 1.544 (2.048 outside the U.S.) Megabits per second
("Mbps"), which can be aggregated or subdivided into channels to deliver data
communication services tailored to specific end-user requirements. However
products enabling T-1/E-1 transmission have typically required extensive
engineering and provisioning, which make them cost prohibitive for residential
and small business use.



<PAGE>



        Existing and Emerging Technologies. Systems suppliers 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, telcos introduced basic rate Integrated
         Service Digital Network ("ISDN") technology, which provides digital
         transmission at rates up to 144 Kilobits per second ("Kbps") as well as
         a means to aggregate multiple channels into a single high speed link
         over copper wire. Telcos have only recently begun to deploy basic rate
         ISDN technology widely with the emergence of nationwide standards and a
         decline in costs for basic rate ISDN service. The market penetration of
         existing basic rate ISDN technology, however, may be constrained due to
         its limited bandwidth (which does not allow telcos to offer advanced
         data and video services), its inability to provide existing telephone
         service over the same wire and its relatively high installation costs.
         In addition, as a switched service, ISDN deployment will place greater
         demands on central office switches, thereby requiring telcos to
         increase their central office switch capacity to maintain network
         reliability.

        HDSL. In 1992, telcos introduced High bit-rate Digital Subscriber Line
         ("HDSL") technology, which 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 mid-span repeaters for line lengths greater
         than 6,000 feet and the expensive and time consuming "conditioning" of
         copper wire. HDSL increases the non-repeater distance of T-1/E-1
         transmission (1.544/2.048 Mbps) over two pairs of copper wires to
         approximately 12,000 feet, which reduces the need for repeaters and
         conditioning. As a result, telcos 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.

        ADSL. The DSL technology known as Asymmetric Digital Subscriber Line
         ("ADSL") permits even greater digital transmission capacity over copper
         wire than is possible with existing HDSL and ISDN products. ADSL
         technology allows the simultaneous transmission of data at speeds up to
         8.0 Mbps in one direction and up to 1 Mbps in the reverse direction,
         while also providing standard analog telephone service (plain old
         telephone service or "POTS") over a single pair of copper wires at
         distances of up to 18,000 feet, depending on the transmission rate.
         ADSL products enable telcos to provide interactive multimedia services
         over copper wire, such as high speed Internet access, and corporate LAN
         access, while simultaneously carrying traditional telephone services,
         thus mitigating the need for the telephone companies to provision
         second lines to support these services.

        VDSL. Very High Speed Digital Subscriber Line ("VDSL") is currently
         being developed which will increase the data transmission capacity to
         up to 52.0 Mbps.

        DSLAM. A Subscriber Line Access Multiplexer ("DSLAM") is an ATM based
         multiplexer that consolidates multiple DSL access lines into a higher
         speed line back to the switching network interfaces (typically OC-3c,
         STM-1, DS-3 or E3), reducing cost and operational complexity at the
         central site. As network service providers begin deploying DSL based
         services the need for DSL line concentration at copper hub points
         increases. ATM allows DSLAM access platforms to provide support for
         current services as well as future services that require even greater
         levels of bandwidth management and quality of service.

        Integrated DLC DSL. Digital loop carrier ("DLC"), a remote mini switch
         extending central office functionality, is a hubbing point for copper
         lines in the local access network. DSL and DSLAM technology can be
         integrated into the DLC (with narrowband functions) to provide a cost
         effective mechanism for delivering integrated services in a more
         incremental manner than deployment directly from the telco central
         office site where DLC's are already deployed in the local access
         network.

        G.Lite. This technology is a version of ADSL that supports a lower set
         of speeds and can be deployed (in some instances) without a Plain Old
         Telephone Service ("POTS") splitter at the premises, thus facilitating
         "plug-and-play" access for consumers, thereby allowing the consumers to



<PAGE>


         install the technology themselves, and potentially lowering the telcos'
         initial installation costs. G.Lite is designed to eliminate the need
         for a master splitter and its associated rewiring at the customer's
         premises.

        DSL Routers (or DSL LAN modems). Similar to ISDN routers (or LAN
         modems), these devices allow multiple computers to be networked
         together on a LAN (local area network) and share access to the wide
         area network (WAN) DSL line.

        PPP over ATM. Through the use of network protocols such as
         point-to-point protocol (PPP) over ATM, DSL can deliver data much like
         traditional dial-up and ISDN products today, but at much faster speeds.
         Unlike with dial-up or ISDN systems, DSL products permit telcos to
         avoid managing Internet Protocol ("IP") addresses, end users to work
         with existing operating systems and protocol stacks on their PCs, and
         service providers to continue to provide security through
         authentication with the same billing support.

TELECOMMUNICATIONS PRODUCTS

        The Company offers a broad range of products that facilitate the
transmission of high speed digital and analog data between a telco's central
office and end-user customers. These products can be categorized into three
groups: (i) products based on DSL technologies ("DSL products"), (ii) Digital
Signal Hierarchy Level 1 based products, which are used by telcos to enable high
speed digital T-1 transmission at approximately 1.5 Mbps and E-1 transmission at
approximately 2.0 Mbps ("DS1 products"), and (iii) Digital Signal Hierarchy
Level 0 based products, which are used by telcos to deliver digital services at
speeds ranging from approximately 2.4 to 64 Kbps and analog services over a 4
Kilohertz bandwidth ("DS0 products").

        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 (see Management's Discussion and Analysis of Financial
Condition and Results of Operations):

                                               Fiscal Year Ended March 31,
                                               -------------------------------
                                               1997        1998       1999
                                               ----        ----       ----
                                                      (in thousands)
DSL products............................     $ 8,665     $12,448    $12,099
DS1 products............................      49,353      52,481     53,232
DS0 products............................       8,963       5,235      3,707



         DSL Products. The Company is a developer and provider of DSL products
and transmission systems that utilize ADSL technology. ADSL systems allow telcos
and other local access providers to provide interactive multimedia services over
existing copper wire, thus offering a more cost-effective and faster deployment
alternative to fiber optic cable in the "last mile" of the local access network.
ADSL systems enable interactive multimedia services supporting advanced data
applications including high speed Internet access, local area network ("LAN")
extension, telecommuting virtual libraries, news and information distribution,
etc.

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

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


<PAGE>

<TABLE>


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

<S>                            <C>                                              <C>
InterAccess 2                  HDSL system (replaces InterAccess introduced     T-1 or E-1 services
 ......................         in 1994) that supports 1.5 or 2.0 Mbps           provisioning. Increases
 ......................         bi-directional services over two pairs of        repeaterless distance to up
 ......................         copper wires.                                    to 12,000 feet over two pairs
                                                                                of copper wires

SuperVision(R)DSLAM             Broadband platform that consolidates DSL         Multiple services and
 ......................         access lines into a single network interface.    applications including
 ......................         SuperVision currently supports using OC-3c (or   high-speed Internet access,
 ......................         STM-1) and DS-3 interfaces back to the           remote LAN access, work at
 ......................         switching network. The access line cards         home, corporate training and
 ......................         operate at rates up to 8 Mbps downstream and     distance learning, while
 ......................         up to 1 Mbps upstream.                           providing simultaneous
                                                                                standard telephone service.

FlexCap2(TM)                   Rate Adaptive DSL (replaces fixed rate           Provides similar applications
 ......................         generation FlexCap(TM)system introduced in 1993)   as DSLAM in non ATM
 ......................         modem to modem system that operates at up to     environment. In addition,
 ......................         2.24 Mbps downstream and up to 1 Mbps            FlexCap(TM)can be configured to
 ......................         upstream. The rate adaptive capability enables   near symmetrical rates.
 ......................         the operating speed to be automatically
 ......................         provisioned based on signal quality. Uses CAP
 ......................         technology.
 ......................

</TABLE>

         Westell's FlexCap2(TM) ADSL systems use rate adaptive DSL ("RADSL")
technology and provide bi-directional capacity of up to 1 Mbps with maximum
uni-directional rate of 2.24 Mbps. RADSL allows telcos to automatically adjust
the digital transmission rate based upon the quality of the copper telephone
wire and the transmission distance. This rate adaptability allows telcos to
maximize the digital capacity of copper wire and facilitates installation of
ADSL systems, thereby increasing the utilization of poor quality copper
telephone wires which traditionally have required extensive installation and
monitoring.

         Westell's SuperVision access multiplexer facilitates the connection
between copper wire digital transmission used in the local access network and
the optical fiber transmission in the network "backbone." In addition, the
Company's SuperVision line cards provide up to 8.0 Mbps of bandwidth supporting
multiple simultaneous video-on-demand channels of information as well as
traditional telephone service. Westell's SuperVision line card can use either
CAP and DMT technology.

         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. ADSL 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. Westell continues to be active
in market and field trials as well as initial service deployments including Bell
Atlantic's initial deployment. Through its partnership with Fujitsu Telecom
Europe, Ltd. (FTEL), Westell is involved in the initial deployment of DSL
products by British Telecom. Customers using the Company's ADSL systems for
initial service deployments are not contractually bound for future deployments


<PAGE>


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 HDSL systems eliminate the need for telcos to condition
the copper wire and to install line repeaters for distances of up to 12,000
feet. Westell's HDSL systems also contain performance and monitoring functions
with remote accessibility that may supplant the need for repeaters and NIUs.
Westell currently sells its HDSL systems primarily outside the U.S. and to U.S.
federal government agencies.

         The Company's growth is dependent upon whether DSL technology gains
widespread commercial acceptance by telcos. 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 ADSL systems and the development and market acceptance of other DSL
products introduced by the Company. See Risk Factors.

         The RBOCs 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 telcos, the Company must undergo lengthy approval and
purchase processes. Evaluation can take a year or more for complex products
based on new technologies. Historically, telcos have been cautious in
implementing new technologies. Telcos' and other customers' deployment of DSL
technology may be prevented or delayed by a number of factors, including lengthy
product approval and purchase processes, decisions to defer product orders in
anticipation of new product developments, cost, regulatory barriers that prevent
or restrict telcos from providing interactive multimedia services, the lack of
sufficient programming for interactive multimedia services, the availability of
alternative technologies, such as ISDN, cable modems, optical fiber, wireless
local loop and policies that favor the use of such alternative technologies over
ADSL technology. As a result of these factors, there can be no assurance that
customers will pursue the deployment of products using ADSL technology or the
Company's products. See Risk Factors.

         The market for ADSL-based products is intensely competitive. Bids for
recent field trials and initial commercial deployments of ADSL-based products
implicitly assume "forward pricing," that is, pricing ADSL products currently to
reflect the expectation of large future volumes and anticipated reductions in
manufacturing costs. The Company has offered its ADSL-based product to telcos 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 ADSL product
sales unless and until it can reduce manufacturing costs. The Company's ability
to reduce its manufacturing costs is dependent upon (i) more cost-effective
chipset and product design, some of which is dependent upon the Company's
strategic partners, and (ii) the achievement of economies of scale. The Company
believes that, following the pronouncement of the International
Telecommunication Union ("ITU") standard for G.Lite, competition among DSL
vendors will also result in pricing pressure and "forward pricing" with respect
to G.Lite ADSL products. There can be no assurance that the Company will be able
to secure significant additional orders and reduce per unit manufacturing costs.
Accordingly, the Company could incur losses in connection with sales of ADSL
products that could have a material adverse effect on the Company's business and
operating results.

         DS1 Products. Westell's DS1 products provide telcos with cost-effective
solutions to transport, maintain and improve the reliability of T-1 services
over copper and fiber lines in the local access network.

<PAGE>


         The following table sets forth a representative list of the Company's
DS1 products and their applications:

<TABLE>

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

<S>                          <C>                                            <C>
NIU                          Network Interface Unit providing for           Facilitates the maintenance of
 ......................       maintenance of T-1 facilities.                 T-1 facilities to access
 ......................                                                      services such as frame relay
 ......................                                                      and primary rate ISDN.

NIU-PM                       Network Interface Unit with Performance        Facilitates the maintenance
 ......................       Monitoring that stores information for seven   and provides performance
 ......................       days.                                          monitoring of T-1 facilities
 ......................                                                      to access services such as
 ......................                                                      frame relay and primary rate
                                                                            ISDN.

Mountings                    Mechanical shelves used to house modules for   Provides easy installation of
 ......................       Westell and other companies DS1, DS0 and DSL   end user electronics.
 ......................       modules.

QuadJack(TM)                 Transport system that provides transmission    Provides transport and
 ......................       medium for one to four DS1 signals over        facilitates maintenance for
 ......................       fiber.                                         high-speed digital facilities.

SmartLink                    Automatic Protection System ("APS") for up     Increases the reliability of
 ......................       to 8 T-1 customer lines.                       T-1 and other high-speed
 ......................                                                      digital facilities. Used for
 ......................                                                      critical circuits such as
 ......................                                                      those used to provide service
 ......................                                                      to cellular telephone sites.

</TABLE>

         Many of the Company's DS1 products, such as its NIUs, 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 NIU products allow telcos to monitor transmission conditions
and to detect performance problems in circuits from remote locations. All of the
RBOC's and GTE have purchased the Company's NIUs. Westell also sells a third
generation real time performance monitoring NIU (PROACT(TM) NIU) which monitors
the T1 line and returns status messages once a second towards the central office
NIU products 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 telcos 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 telco's central office,
thereby significantly reducing network downtime and costly data interruption.
The Company has also developed a system controller card that monitors the
SmartLinkTM system and can be connected to the Telco's high level operating
systems as well as a span powered version of the system that does not require
local power.

         DS0 Products. Westell's DS0 products are used by telcos to deliver
digital and analog service across copper wire in the local access network at
speeds ranging from approximately 2.4 to 64 Kbps for digital transmission or 4
Kilohertz for analog transmission.


<PAGE>


         The following table sets forth a representative list of the Company's
DS0 products and their applications:

<TABLE>
           Product                                Description                             Applications
           -------                                -----------                             ------------

<S>                             <C>                                              <C>
DST...................          Data Station Termination unit providing          Point of sale, lottery and
 ......................          maintenance and equalization of data             other analog data.
 ......................          transmission.

Tandem................          Provides DSO and analog channel cross            Special services inter-office
 ......................          connections  in tandem D4 environment            cross connections.

</TABLE>

         In some circumstances, analog data lines are the only practical way to
add a terminal to an existing analog data network. Consequently, analog
transmission is often the most economical, most easily installed or the only
service available in certain locations. Westell's DST unit provides the
interface between analog transmission and an end user's modem. The Company's
other DS0 products include voice frequency channel units and mountings, which
are used to provide dedicated analog data lines, smart repeaters, which boost
analog signals, and other products which incorporate performance testing and
monitoring functions designed to improve the quality of analog transmission over
copper wire.

         Revenues from DS0 products have declined in recent years as telcos
continue to move from lower speed analog and digital transmission services to
networks that deliver higher speed services. The Company expects revenues in the
DS0 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 ("ANSI"), the International Telecommunications Union ("ITU") and the
European Telecommunications Standards Institute ("ETSI") which are responsible
for specifying transmission standards for telecommunications technologies. The
industry transmission standard for ADSL adopted by ANSI and ETSI is based upon
DMT transceiver technology. Westell incorporates DMT technology into its DSL
products. The Company has not developed a transceiver technology for its product
offerings and it is dependent transceiver technologies sourced from third
parties. The Company has established multiple strategic relationships with
transceiver technology vendors for transceiver technologies to be used in ADSL
systems by the Company. Absent the proper relationships with key transceiver
technology vendors, the Company's products may not comply with standards set
forth by ANSI and ETSI. Should customers require standards based products that
require transceiver technologies not available to the Company under reasonable
terms and conditions, the Company's business and results of operations would be
materially and adversely affected.



         The ITU is expected to complete a final determination of G.Lite in
September 1999. The effect of a G.Lite spliterless specifications on the
Company's products is unclear. The Universal ADSL Working Group (UAWG), formed
in January 1998 by leading companies in the personal computer,
telecommunications and networking industries, is in the process of establishing
splitterless ADSL specifications ("G.Lite") based upon an open, interoperable,
ITU standard. Although products based upon the expected G.Lite standard would
essentially eliminate 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 instead of the single, master splitter required by
full rate DSL products. This makes customer premises installations of the G.Lite
products potentially more expensive than full rate ADSL product installations.
The differences in the initial costs, premises wiring requirements, and data
rates between G.Lite products and full rate ADSL products could confuse the
marketplace and delay a mass market adoption of either approach. Additionally,
some of the Company's products will require design changes to achieve compliance
with the expected G.Lite standard. Further, as 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 trasceiver technology in a timely
manner for product development.

         During the last fiscal year, the DSL industry has focused on achieving
interoperability between different vendors. The expectation is that widespread
availability of interoperable equipment from different vendors 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 price pressure 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
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.

<PAGE>


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 partners. 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 a partner agreement to design and manufacture ADSL products for
Fujitsu Telecom. Fujitsu Telecom will distribute the product in Europe and other
worldwide opportunities. The Company is subject to receive royalty payments in
the event that Fujitsu chooses to manufacture the products.

         Adtran - Effective March 1998, the Company entered into an agreement
with Adtran, Inc. to develop and market certain products as a member of Adtran's
Total Access partner program. Total Access is a multi-service access system that
can provide services from 56 Kbps to over 6 Mbps via T-1, HDSL or fiber optic
media. The Total Access partner program provides for different vendors to supply
components of the Total Access System.

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

         Alcatel USA - In March 1999, the Company signed an agreement with
Alcatel USA, a Division of Alcatel Networks. The Company gained the right to use
Alcatel USA's DSLAM product to assist the Company in its development of Customer
Premise Equipment that successfully interoperates with Alcatel equipment.

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

CUSTOMERS

         The Company's principal customers historically have been U.S. telcos.
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 the RBOCs and
other independent local exchange carriers for substantially all of its revenues.
Sales to the RBOCs 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 RBOCs, the product requirements of the RBOCs, the
financial and operating success of the RBOCs, and the success of the RBOCs'
services that use the Company's products. Any attempt by an RBOC or other telco


<PAGE>


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 RBOCs 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 telcos, 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 RBOCs and Post Telephone and
Telegraphs (PTTs)], the Company sells its DSL products indirectly through its
strategic partners. See "--StrategicAlliances." These large telcos purchase
their DSL products in a portfolio with other telecommunications products.
Westell provides DSL equipment and services for the central office and telco
networks to its strategic partners who then sell those products along with other
related products to the telcos. 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 and a distribution and
service network that supports customers in more than 40 countries.

         The RBOCs 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 telcos, 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 RADSL or DSLAM.
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 telcos, telcos'
budgets and regulatory issues affecting telcos and other local access service
providers. In addition, the requirement that telcos obtain FCC approval for
certain services prior to their implementation has in the past delayed the
approval processes. See Risk Factors.

         Although the telco 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, including those
         established by Bellcore.

         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 ADSL 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


<PAGE>


         several locations in the telco's network. This stage gives telcos 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
         telco 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
         telcos' needs throughout the system as telcos 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 telco per country
with limited or few alternate carriers or independent telcos. Typically, these
telcos are highly regulated, government-owned agencies that have approval and
purchase processes similar to those followed by the RBOCs.

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
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. Certain key
components, such as integrated circuits and other electronic components, used in
the Company's products are currently available from only one source or a limited
number of suppliers. In addition, certain electronic components 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 certain of its key components, such as
integrated circuits, 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

<PAGE>



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. Any material delays or
difficulties in connection with increased manufacturing production or the use of
subcontractors could have a material adverse effect on the Company's business
and results of operations.

         A substantial portion of the Company's shipments in any fiscal period
relate to orders for certain products received in that period. Further, a
significant percentage of orders, such as NIU's, 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 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 of DS0 and DS1 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 in the DS0 market are
Adtran, Inc., Pulsecom, Tellabs, Inc. and Teltrend, Inc. Westell's principal
competitors in the DS1 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.
Certain of our competitors are large 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 integrated solutions in addition to our ADSL product offering. 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 RBOCs to engage in manufacturing activities. Therefore, RBOCs, 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


<PAGE>



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 telcos 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. Telcos 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
telcos 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 certain 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 telcos' need for T-1 repeaters and
NIUs, may result in a decrease in demand for Westell's DS1-based products. The
Company believes that the domestic market for many of its DS0-based products is
decreasing, and will likely continue to decrease, as high capacity digital
transmission becomes less expensive and more widely deployed. See Risk Factors

TELECONFERENCE SERVICES

         Conference Plus, Inc. ("CPI"), founded in 1988, is a leading provider
of fully managed, multi-point electronic meeting services utilizing
teleconferencing technologies. The Company is an 88.2% owned subsidiary of
Westell Technologies, Inc. and manages its teleconferencing services through its
operations center located in Schaumburg, Illinois and facilities in Lombard,
Illinois and Dublin, Ireland. CPI enables its customers to share information via
the telecommunications based mediums of audio, video, document and data
conferencing, thus allowing customers to increase productivity and save money by
reducing travel time, bringing down travel costs, and making 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.

         CPI services generated $10.3 million, $14.1 million and $21.3 million
in revenues in fiscal 1997, 1998 and 1999, respectively. A majority of CPI's
revenues are derived from private label commercial teleconferencing services
where customers market CPI services under their own brand name. Such companies
choose to private label audio and video teleconferencing because it provides a
complete outsource of internal and commercial services. The outsourcing of
private label conference services is also desired by network carriers and RBOCs
because it fundamentally differs from the core products of these providers.
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, CPI offers a wide range of direct
commercial teleconferencing services and multi point video conference bridging.
The audio conferencing services include; 1) operator initiated calls where the
CPI operator calls the participants, 2) operator assisted calls where the
customer dials in on their own network ("meet-me") or the customers call into a
toll free network ("800 meet-me") and, 3) fully automated services ("pass code")
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 service optioning which include, call polling, questions &
answer queuing, broadcast/listen only, integrated voice response digital
playback, conference call tape recording and playback, transcription and
reservation/resource management services.

         Conference Plus has been distinguished by receiving the first ISO 9002
certification in the audio and video conferencing services industry. Receiving
ISO 9002 certification means that Conference Plus meets the standards set by the
International Organization for Standardization to define world class service and
has set the benchmark for quality in the teleconferencing service industry.

CPI's strategic focus includes the following key objectives:


<PAGE>



         Private Label Services - Leverage leadership in private label services
              through offering flexibility in network carrier arrangements,
              superior tailored reservations, confirmation, billing and customer
              service optioning 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 - CPI currently serves its teleconferencing
              needs of customers headquartered in the United States from its
              Schaumburg, Illinois facility. As these customers globalize their
              telecommunications services, CPI 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
              which will allow for increased opportunity to service foreign
              based companies in need of teleconferencing technologies and
              services.

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

         Commitment to Service Quality, Customer Service and Low-Cost Operations
              - CPI recognizes that providing high quality service is an
              important aspect affecting CPI's 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 CPI becoming ISO 9002 certified in
              November 1997. CPI will continue to focus on total quality
              management and continuous improvement to meet and exceed customer
              expectations. In addition, CPI's focus will also include
              implementation of cost improvements to allow CPI to offer world
              class services at low cost to remain competitive in its
              teleconference service offerings.

         CPI sells its services in the U.S. principally through its domestic
in-house sales organization, through agents under contract to CPI and through
the efforts of the Company's Private Label customers. As of March 31, 1999,
CPI's 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 CPI. 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
RBOC.

         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.

<PAGE>


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 telco services and other terms on which telcos conduct their
business may impede the Company's penetration of certain markets. The
Telecommunications Act lifted certain restrictions on telcos' ability to provide
interactive multimedia services including video on demand. Under the
Telecommunications Act, new regulations have been established whereby telcos 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.

         In addition, the Telecommunications Act permits the RBOCs to engage in
manufacturing activities after the FCC authorizes an RBOC to provide long
distance services within its service territory. An RBOC 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, an RBOC will be permitted to
engage in manufacturing activities and the RBOCs, which are the Company's
largest customers, may become the Company's competitors as well. See Risk
Factors - "Government Regulation."

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
NIU's. 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 - "Proprietary Technology; Risk of Third-Party Claims of
Infringement."

         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.

         The Company's DSL products are dependent upon transceiver technology
licensed or sourced from third party suppliers. These licenses or sourcing
alliances 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 ADSL transceiver technology are not
available to the Company at commercially acceptable terms, the Company's
business and results of operations would be materially and adversely affected.



<PAGE>


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.

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

                                  RISK FACTORS



         You should carefully consider the following risk factors in addition to
the other information contained and incorporated by reference in this prospectus
before purchasing our Class A Common Stock. You should also consider the other
information in this prospectus and the additional information in our other
reports filed with the SEC and incorporated by reference into this prospectus.
The risks and uncertainties described below are not the only ones that we face.
Additional risks and uncertainties not presently known to us or that we
currently believe immaterial may also impair our business operations.

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 through each of the 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 operating losses of approximately $35.1 million, net
losses of $ 35.0 million.

         Our core DS0 and DS1 products 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. As a result, if telephone companies fail to deploy our DSL
systems, and we therefore do not receive significant revenues from DSL sales,
then our business and operating results may be materially adversely affected in
the future.

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

o    creating sustainable DSL sales opportunities either directly or in
     conjunction with strategic partners;
o    developing new and enhanced DS1 products;
o    developing other niche products for both DSL and DS1 markets;
     and
o    growing our teleconference service revenues.

We can offer no assurances that we will achieve profitability in the future.

WE DEPEND ON ADSL 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.

         Customers have only recently begun to consider implementing ADSL
products in their networks. we have shipped most of our ADSL products for trials
and early deployment. 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 deployment



<PAGE>


of our 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 ADSL sales, then our
business, operating results and financial condition will be materially adversely
affected.

PRICING PRESSURES ON PRODUCTS MAY AFFECT OUR ABILITY TO BECOME PROFITABLE

        Competition in the DSL market continues to grow. Bids for recent field
trials of ADSL-based products implicitly assume "forward pricing," (that is,
pricing ADSL products to reflect the expectation of large future volumes and
corresponding reductions in manufacturing costs) or "portfolio pricing" (that is
providing ADSL at a lower price as part of a bundle of other equipment and/or
services. We are offering DSL products based upon forward pricing. For instance
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 ADSL product sales
unless and until we can reduce manufacturing costs. We believe that
manufacturing costs may decrease when (i) more cost-effective transceiver
technologies are available, (ii) product design efficiencies are obtained, and
(iii) 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
ADSL products.

We also believe that, following the expected pronouncement of the International
Telecommunication Union standard for G.Lite in late 1999, competition will
result in pricing pressure and "forward pricing" with respect to splitterless
ADSL products.

Accordingly, we could continue to incur losses in connection with sales of DSL
products even if our DSL unit volume increases, which would have material
adverse effect on us.

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;
               o    customer order deferrals in anticipation of new products;
               o    cancellation or deferral of one or a small number of our
                    customer orders;
               o    timing of product introductions or enhancements by us or our
                    competitors;
               o    market acceptance of new products;
               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;
               o    personnel changes;
               o    foreign currency fluctuations;
               o    changes in the mix of products sold;
               o    quality control of products sold;
               o    disruption in sources of supply;
               o    regulatory changes;
               o    capital spending;
               o    delays of payments by customers; and


<PAGE>


               o    general economic conditions.

         Sales to our customers typically involve long approval and procurement
cycles and can involve large purchase commitments. Cancellation or deferral of
one or a small number of orders could cause significant fluctuations in our
quarterly operating results. As a result, 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.
Therefore, it is likely that in some future quarters our operating results will
be below the expectations of securities analysts and investors.

         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 short-term operating results. Due to
our significant ongoing investment in research and development and sales and
market development, we anticipate that our losses may extend through each of the
fiscal 2000 quarters. In view of our reliance on the emerging DSL market for
growth and the unpredictability of orders and subsequent revenues, we believe
that period to period comparisons of our operating results are not necessarily
meaningful and should not be relied upon as an indication of future performance.

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.

EVOLVING INDUSTRY STANDARDS MAY ADVERSELY AFFECT OUR DSL SALES

         Industry wide standardization organizations, such as the American
National Standards Institute in the United States and the European
Telecommunications Standards Institute, are responsible for specifying
transmission standards for telecommunications technologies. DMT technology is
the industry transmission ADSL standard adopted by these organizations. We have
not internally developed a transceiver technology for our product and are
dependent on transceiver technologies sourced from third parties. We have
established multiple strategic relationships with transceiver technology vendors
for DSL transceiver technologies to be used in our DSL systems. 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 technology not available to us
under reasonable terms and conditions, then our business and operating results.

         Various competitors and industry groups continue to introduce several
variations of DSL. The Universal ADSL Working Group has worked to establish
splitterless ADSL specifications (known as G.Lite) leading to an open,
interoperable standard. G.Lite is designed to enable simple "plug and play"
access by consumers, thereby significantly lowering telephone companies' initial
installation costs. We are dependent on our strategic transceiver technology
vendors for providing a "G.Lite" transceiver technology. Since standards have
not been established for these G.Lite versions, there can be no assurance that
these versions will be available to us in a timely manner for the purpose of
product development. Although we expect that the G.Lite specifications will be
announced by the end of 1999, there can be no assurance that the Universal ADSL
Working Group will agree upon such specifications in a timely fashion if at all.
The G.Lite standard could delay deployment of our full rate ADSL offerings by
customers.

         The attempted introduction of competing standards or alternate
implementation specifications could result in confusion in the market and delay
any decisions regarding deployment of DSL systems until various specifications
are determined by the various standards bodies. The inability to meet customer
requirements or the continual introduction of new DSL offerings could delay the
decision process of DSL system deployment. Any delay would materially adversely


<PAGE>



impact sales of our DSL product offerings and could have a material adverse
effect on our business and operating results.

THERE CAN BE NO ASSURANCE THAT WE WILL DEVELOP COMMERCIALLY SUCCESSFUL PRODUCTS
OR THAT OUR PRODUCTS WILL NOT BECOME OBSOLETE BY CHANGING TECHNOLOGY OR NEW
PRODUCTS.

         The markets for our products are characterized by intense competition,
rapid technological advances, evolving industry standards, changes in end-user
requirements, frequent new product introductions and enhancements, and evolving
telephone company service offerings. If technologies applicable to our products
(or telephone company service offerings based on our products) become obsolete
or fail to gain widespread commercial acceptance, then our business and
operating results will be materially adversely affected.

         Moreover, the introduction of products embodying new technology or
changes in telephone company services could render our existing products, as
well as products under development, obsolete and unmarketable. For example, we
believe that the continued deployment of new technologies in the U.S., such as
HDSL, in the local access network will adversely affect demand for certain of
our existing products such as our Network Interface Units, which 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 DS0-based 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. In this regard, most of our
current product offerings apply primarily to the delivery of digital
communications over copper wire in the local access network. While we have
competed successfully to date by developing high performance products for
transmission over copper wire, we expect that the increasing deployment of fiber
and wireless broadband transmission in the local access network (each of which
uses a significantly different process of delivery) will require us to develop
new products to meet the demands of these emerging transmission media.

WE MAY EXPERIENCE DELAYS IN THE DEPLOYMENT OF NEW PRODUCTS

         If we fail to deploy new and improved products, our competitive
position and financial condition would be materially and adversely affected. 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. Delays in product development
are affected by rapid technological changes in the telecommunications industry,
the Regional Bell Operating Companies' lengthy product approval and purchase
processes and our reliance on third-party technology for the development of new
products. 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 based on emerging technology or to otherwise successfully respond to
changing technology and industry standards and telephone company service
offerings.

THE MARKET IN WHICH WE OPERATE IS HIGHLY COMPETITIVE, AND WE MAY NOT BE ABLE TO
COMPETE EFFECTIVELY, ESPECIALLY AGAINST ESTABLISHED INDUSTRY COMPETITORS WITH
SIGNIFICANTLY GREATER FINANCIAL RESOURCES

         We expect competition to increase in the future especially in the
emerging ADSL market. Because we are significantly smaller than most of our
competitors, we may lack the financial resources needed to capture increased
market share. Our principal competitors in the DS0 market are Adtran, Inc.,
Pulsecom, Tellabs, Inc. and Teltrend, Inc. Our principal competitors in the DS1
market are ADC Telecommunications Inc., Applied Digital Access Inc., PairGain
Technologies, Inc. and Teltrend, Inc. Our current competitors in the ADSL market
include 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. In addition, the Telecommunications Act permits the Regional
Bell Operating Companies to engage in manufacturing activities. Therefore,



<PAGE>


Regional Bell Operating Companies, which are our largest customers, may
potentially become our competitors as well. We expect continued aggressive
tactics from many of these competitors such as:

               o    Forward pricing of products;
               o    Early announcements of competing products;
               o    "One-stop shopping" appeals;
               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 large network level system suppliers who
are much larger than us and can offer all elements of a network solution.

         In addition, the development of G.Lite products 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 ADSL
products.

         We have addressed our competition by entering into strategic alliances
to offer integrated solutions in addition to our overlay ADSL product offering.
Our ability to compete with these larger system suppliers will depend on the
success of our alliances and system solutions. Our inability to form successful
alliances and develop systems that meet customer requirements will materially
adversely affect our business and operating results.

         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 products also face competition from fiber, wireless, cable modems
and other products delivering broadband digital transmission. Rockwell
International and Nortel are collaborating on development of consumer digital
subscriber line, known as CDSL, a 1 Mbps digital modem technology. The companies
anticipate that CDSL modems will be priced, sold, and installed similarly to the
way 56 Kbps modems are handled today. Further, many telephone companies and
other local access providers have adopted policies that favor the deployment of
fiber. To the extent that telephone companies choose to install fiber and other
transmission media between the central office and the end user, we expect that
demand for our copper wire-based products will decline. 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 ADSL products will decline. In addition, the deployment of certain
products and technologies for copper wire may also reduce the demand for the
types of products currently manufactured by us such as our Network Interface
Units.

         Our subsidiary Conference Plus, Inc. also 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:

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.

INDUSTRY CONSOLIDATION COULD MAKE COMPETING MORE DIFFICULT


<PAGE>


         Consolidation of companies offering high speed local data products is
occurring through acquisitions, joint ventures and licensing arrangements
involving our competitors and our customers' competitors. We cannot assure that
we will be able to compete successfully in an increasingly consolidated
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

         We have and will continue to depend on the Regional Bell Operating
Companies and other independent local exchange carriers 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
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 our products. Any attempt by an RBOC 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 our business and operating results. In
addition, sales to our largest customers have fluctuated and are expected to
fluctuate significantly from quarter to quarter and year to year. The loss of
customers or the occurrence of sales fluctuations would materially adversely
affect our business and operating results. 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.

         SBC Communications and Pacific Telesis have recently completed a
merger, SBC Communications and Ameritech, and Bell Atlantic and GTE each have
received merger approval from the requisite percentage of their shareholders.

         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. Any loss of a major account,
would have a material adverse effect on Conference Plus, Inc. 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 AND ARE ABLE TO EXERT A HIGH DEGREE
OF INFLUENCE OVER US

        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. 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
the complexity of the product involved, priorities of telephone companies,
telephone companies' budgets and regulatory issues affecting telephone
companies. The requirement that telephone companies obtain FCC approval for
certain 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.

WE ARE DEPENDENT ON 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 licensers



<PAGE>



of third-party 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 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. The absence of or any
significant delay in the replacement of third-party technology would have a
material adverse effect on business and operating results.

         ADSL products are dependent upon CAP and DMT transceiver technologies
licensed or sourced from third party suppliers. Without a third party
transceiver technology we would not be able to produce any of our ADSL systems.
GlobeSpan Semiconductor, Inc. is currently the sole provider of the CAP
transceiver technology and we currently have entered into alliances with
Alcatel, Analog Devices, Inc (ADI), Motorola and Texas Instruments to source
their DMT transceiver technology. These licenses or sourcing alliances are
nonexclusive and have been licensed to numerous other manufacturers or will not
require a license to acquire. Consequently, if our third party transceiver
suppliers fail to deliver implementable or standards compliant transceiver
solutions to us and other alternative sources of ADSL transceiver technology 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

         Certain key components, such as 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 ADI to provide critical integrated circuits
used in the Company's ADSL products. In addition, certain electronic components
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 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, however, we have experienced delays in the
receipt of certain of our key components, such as integrated circuits, which
have resulted in delays in related product deliveries. We anticipate that
integrated circuit production capacity and availability of certain electronic
components of our suppliers may be insufficient to meet demand for such
components in the future. 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, the 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 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 SUCCESS IS DEPENDENT ON PARTNERS AND ALLIANCES

        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 ADSL line cards
enables us to access to a significant number of potential customers. We cannot
provide any assurances that these partnerships will continue in the future. A
loss of one or more partnerships and alliances could materially adversely affect
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, in turn, adversely impact our business
and operating results. For example, FCC regulatory policies affecting the



<PAGE>


availability of telephone company services and other terms on which telephone
companies conduct their business may impede our penetration of certain 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 ADSL technology. In
addition, our business and operating results may also be adversely affected by
the imposition of certain 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
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 an RBOC to provide long distance services within its service
territory. An RBOC 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, an RBOC 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 COULD ADVERSELY AFFECT OUR BUSINESS

        We have supply contracts with most of our major customers. These
contracts typically do not establish minimum purchase commitments, and they may
require us to accept returns of products or indemnify such customers against
certain liabilities arising out of the use of our products. Although, to date,
we have not experienced any significant product returns or indemnification
claims under these contracts, any such claims or returns could have a material
adverse effect on our business and operating results. While we maintain a
comprehensive quality control program, there can be no assurance that our
products will not suffer from defects or other deficiencies or that we will not
experience a material product recall in the future. Complex products such as
those offered by us may contain undetected errors or failures when first
introduced or as new versions are released. Any product recall as a result of
such errors or failures, and the associated negative publicity, could result in
the loss of or delay in market acceptance of our products.

WE MAY INCUR WARRANTY EXPENSES

        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, 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. If there are material
deficiencies or defects in the design or manufacture of our products, then the
affected products could be subject to recall. For the past five fiscal years,
our warranty expenses have been relatively insignificant. Although we maintain a
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 a material product recall in the future. Our standard limited
warranty for its ADSL products ranges from one to five years. Since our DSL
products are new, with limited time in service, we cannot predict the level of
warranty claims that we will experience for these products. Despite testing,
there is no guaranty that existing or future products based on DSL or other
technology will not contain undetected errors or failures when first introduced
or as new versions are released. Such errors or failures could result in
warranty returns in excess of those that we have historically experienced and
have a material adverse effect on our business and operating results.

RISKS DUE TO INTERNATIONAL OPERATIONS


<PAGE>



        International revenues represented 5.5%, 9.9% and 9.1% of our revenues
in fiscal 1997, 1998 and 1999, respectively. Our international revenues are
subject to the risks of conducting business internationally, which includes
unexpected changes in regulatory requirements, foreign currency fluctuations or
increased operating expenses, tariffs and trade barriers, potentially longer
payment cycles, difficulty in accounts receivable collection, foreign taxes, and
the burdens of complying with a variety of foreign laws and telecommunications
standards. Our contracts with international customers are typically denominated
in foreign currency and any decline in the value of such currency could have a
significant impact on our business and operating results. To date, we have not
engaged in hedging with respect to its foreign currency exposure but may do so
in the future. We are also subject to general geopolitical risks, such as
political and economic instability and changes in diplomatic and trade
relationships, in connection with its international operations. In addition, the
laws of certain foreign countries may not protect our proprietary technology to
the same extent, as do the laws of the U.S. 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 BUSINESS

        We are in the process of planning for the manufacturing capabilities
necessary to supply and support large volumes of DSL products and systems and in
the future may become increasingly dependent on subcontractors. In fiscal 1998,
we have entered into a subcontracting relationship with Dovatron International
for the assembly of its DSL printed circuit boards. 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. 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 not 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.

ANY LOSS OF A CONFERENCE PLUS CUSTOMER WOULD ADVERSELY AFFECT US

        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 cease this evaluation or 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 customer could have a material
adverse effect on our business and operating results.

THE CLASS A COMMON STOCK SOLD IN THIS OFFERING MAY SIGNIFICANTLY INCREASE THE
SUPPLY OF OUR CLASS A COMMON STOCK IN THE PUBLIC MARKET, WHICH MAY CAUSE OUR
STOCK PRICE TO DECLINE.

         The conversion of the Convertible Debentures and exercise of the
Warrants into the public market could materially adversely affect the market
price of the Class A Common Stock.

         On April 16, 1999, we issued $20,000,000 aggregate principal amount of
Convertible Debentures. The Convertible Debentures are convertible into such
number of shares of Class A Common Stock as is determined by dividing the
principal amount of the Convertible Debentures by the lesser of (i) a
periodically reset fixed price which is initially $6.372 per share, but will be
adjusted under the terms of the Convertible Debentures, and (ii) 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). If our Class A
Common Stock trades at a price less than the reset fixed 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


<PAGE>


price is less than $6.372, 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. 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. Depending on market conditions at the time of conversion, however,
the number of shares issuable could prove to be significantly greater in the
event of a decrease in the trading price of the Class A Common Stock. Purchasers
of Class A Common Stock could therefore experience substantial dilution upon
conversion of the Convertible Debentures. The shares of Class A Common Stock
into which the Convertible Debentures may be converted are being registered
pursuant to this Registration Statement.

         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 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 SUCCESS DEPENDS ON THE RETENTION OF KEY PERSONNEL AND OUR ABILITY TO HIRE
ADDITIONAL KEY PERSONNEL.

         Our success is dependent, in part, on our ability to attract and retain
qualified technical, marketing, sales and management personnel. Competition for
such personnel is intense and 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 business and operating results.

         In fiscal 1998, we entered into Severance Agreements with each named
executive officer and certain other executive officers. These severance
agreements provide that in the event such officer is terminated without cause or
such officer resigns for good reason, as more fully described in the Severance
Agreement, we shall pay to such officer severance payments equal to such
officer's salary and bonus for the fiscal year in which the termination occurs,
and the severance agreements also provide for the payment of certain amounts
upon the occurrence of certain events. The executive officers entering into the
severance agreements agreed not to compete with us for one year in the event
that their termination entitles them to severance payments and not to solicit
any of our employees for a period of one year after termination of such
officer's employment.

OUR STOCK PRICE IS VOLATILE


<PAGE>



         The price at which our Class A common stock will trade after this
offering is likely to continue to be volatile and may fluctuate substantially
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 data communications and Internet-related
companies. These fluctuations may result in a material decline in the market
price of our Class A common stock.

         Our common stock price has experienced substantial volatility in the
past and is likely to remain volatile in the future. Volatility can arise as a
result of the activities of shore sellers and risk arbitrageurs, and may have
little relationship to our financial results or prospects. Volatility can also
result from any divergence between our actual or anticipated financial results
and published expectations of analysts, and announcements we may make. This
occurred in 1998. We attempt to address this possible divergence through our
public announcements and reports; however, the degree of specificity we can
offer in such announcements, and the likelihood that any forward-looking
statements we make will prove correct in actual results, can and will vary. This
is due primarily to:

o the uncertainties associated with our dependence on a small number of existing
and potential customers;

               o    the impact of change in the customer mix;
               o    the actions of competitors;
               o    long and unpredictable sales cycles and customer purchasing
                    programs;
               o    the absence of unconditional minimum purchase commitments
                    from any customer;
               o    a lack of visibility into our customers' deployment plans
                    over the course of the capital equipment procurement year;
                    and
               o    the lack of reliable data on which to anticipate core demand
                    for high bandwidth transmission capacity.

         Divergence will likely occur from time to time in the future, with
resulting stock price volatility, irrespective of our overall year-to-year
performance or long-term prospects. As long as we continue to depend on
relatively ADSL and new products, there is substantial risk of widely varying
quarterly results, including the so-called "missed quarter" relative to investor
expectations.

WE MAY NEED ADDITIONAL FINANCING

         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, the continuing operations of the Company's business may
require substantial capital infusions. Whether or when we can achieve cash flow
levels sufficient to support our operations cannot be 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 the 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. Under the terms of the sale of the Convertible
Debentures and Warrants, we are not permitted to issue any equity securities or
any equity-like securities, with certain exception, until October 11, 1999.

OUR PRINCIPAL STOCKHOLDERS ARE ABLE TO EXERCISE SIGNIFICANT INFLUENCE




<PAGE>


         At March 31, 1999, as Trustees of the Voting Trust, 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 the Voting Trust are parties to
a Stock Transfer Restriction Agreement which prohibits such beneficiaries from
transferring any Class A Common Stock or their beneficial interests in the
Voting Trust acquired prior to November 30, 1995 without first offering such
Class A Common Stock to the other members of the Penny family. Consequently, we
are 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
certain types of transactions involving an actual or potential change of control
of the Company, including transactions in which the holders of Class A 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.

NO DIVIDENDS

         The Company intends to retain all future earnings for use in the
development of its business and does not anticipate paying any cash dividends in
the foreseeable future.


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.

<PAGE>



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.

<TABLE>

                                                                                 High                   Low
<S>                                                                         <C>                        <C>
Fiscal Year 1998
  First Quarter..............................................................25   7/8                  10 3/4
  Second Quarter.............................................................27   5/8                  17 1/4
  Third Quarter..............................................................24   7/8                  10 1/2
  Fourth Quarter.............................................................15   1/4                  10 3/4

Fiscal Year 1999
  First Quarter..............................................................13   7/8                   8 7/8
  Second Quarter.............................................................   10                      3 3/4
  Third Quarter..............................................................  8   1/4                  2 3/4
  Fourth Quarter.............................................................    9                      3 13/16

Fiscal Year 2000
  First Quarter (through June 22, 1999)...................................... 10  3/16                  3 7/8


</TABLE>

         As of June 24, 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 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 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 NIUs 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
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



<PAGE>


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 restructuring charges and their utilization are summarized as follows:

<TABLE>

                                   1998       1998  To be          1999      1999  To be
(Dollars in thousands)           Charge   Utilized  Utilized     Charge  Utilized   Utilized
------------------------------ --------- ---------- --------- ---------- --------- ----------
<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>


     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.

         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,



<PAGE>


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 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
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


<PAGE>


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
debenbures 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, the Company transferred substantially all of the
assets of Westell Europe Limited ("WEL"), its United Kingdom operations, to
(FTEL) and employees of WEL, headquartered in Cambridge, England, became
employees of FTEL. Additionally, 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
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



<PAGE>


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

         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.



<PAGE>


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

         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.



<PAGE>


                                     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

                           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


<PAGE>



                                    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).
                           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).

<PAGE>


                           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.

   (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
          $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
           -----------------------------

           The financial 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 report to be signed on
its behalf by the undersigned, thereunto duly authorized on June 29, 1999.

                                             WESTELL TECHNOLOGIES, INC.

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


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

<TABLE>

                 Signature                                       Title                                Date
                 ---------                                       -----                                ----
<S>                                         <C>                                                   <C>
        /s/ ROBERT H. GAYNOR                Chairman of the Board of Directors                    June 29, 1999
          Robert H. Gaynor                  and Chief Executive Officer

         /s/ MELVIN J. SIMON                Assistant Secretary and Treasurer and                 June 29, 1999
           Melvin J. Simon                  Director

       /s/ NICHOLAS C. HINDMAN              Interim Chief Financial Officer                       June 29, 1999
         Nicholas C. Hindman                 (Principal Financial Officer and
                                            Principal Accounting Officer)

      /s/ ROBERT C. PENNY III               Director                                              June 29, 1999
         Robert C. Penny III

          /s/ PAUL A. DWYER                 Director                                              June 29, 1999
            Paul A. Dwyer

        /s/ JOHN W. SEAZHOLTZ               Director                                              June 29, 1999
          John W. Seazholtz

         /s/ ORMAND J. WADE                 Director                                              June 29, 1999
           Ormand J. Wade

</TABLE>

<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)
<S>                                                                             <C>       <C>          <C>
Cash flows from operating activities:
  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.

         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.


                   WESTELL TECHNOLOGIES, INC. AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)


         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
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.


<PAGE>

                   WESTELL TECHNOLOGIES, INC. AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)


         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
$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
                                                                                              ======      ======

         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
                                                                                              ======

</TABLE>

<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)
        <S>                                                                    <C>          <C>     <C>
        Federal:
          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.


<PAGE>


                   WESTELL TECHNOLOGIES, INC. AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)


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
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.


<PAGE>


                   WESTELL TECHNOLOGIES, INC. AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)


         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
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


<PAGE>


                   WESTELL TECHNOLOGIES, INC. AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)


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.

         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
                                             Equipment             Services                Total
                                             ---------             --------                -----
<S>                                          <C>                   <C>                   <C>
1997
      Revenues..........................     $ 69,066              $ 10,319              $ 79,385
      Operating income (loss)...........     (28,269)                 1,857              (26,412)
      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
      Operating income (loss)...........     (36,522)                 3,626              (32,896)
      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
      Operating income (loss)...........     (38,554)                 3,454              (35,100)
      Depreciation and amortization.....        5,327                 1,695                 7,022
      Total assets......................       52,774                11,633                64,407

</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

         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.




<PAGE>



                   WESTELL TECHNOLOGIES, INC. AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)


         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

</TABLE>

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

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 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>

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


<PAGE>


                   WESTELL TECHNOLOGIES, INC. AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)


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
debenbures 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 fixed 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.





<PAGE>







                    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>

<TABLE>

                                     WESTELL TECHNOLOGIES, INC. AND SUBSIDIARIES

                                  SCHEDULE II -- VALUATION AND QUALIFYING ACCOUNTS

                                           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
                                                                                     ====       ====        ====






                                               RESTRUCTURING RESERVES
                                                   (IN THOUSANDS)


                                                                                     1998       1999
                                                                                     ----       ----

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>