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


                                    FORM 10-Q

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

                  For the quarterly period ended April 2, 2000

                           Commission File No. 0-27742

                               CYLINK CORPORATION
             (Exact name of registrant as specified in its charter)




          California                                         95-3891600
(State or other jurisdiction of                           (I.R.S. Employer
 incorporation or organization)                          Identification No.)



                                 3131 Jay Street
                          Santa Clara, California 95054
                    (Address of principal executive offices)


                                 (408) 855-6000
              (Registrant's telephone number, including area code)



     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
             ---         ---


         As of May 16, 2000,  there were 30,460,857  shares of the  Registrant's
common stock outstanding.


<PAGE>

<TABLE>
                               CYLINK CORPORATION
                  FORM 10-Q FOR THE QUARTER ENDED APRIL 2, 2000
                                      INDEX
<CAPTION>
                                                                                     Page
<S>      <C>                                                                          <C>
         Index                                                                         1

Part I   Financial information

Item 1   Financial Statements and Supplementary Data

         a)   Condensed  Consolidated  Balance  Sheets  at  April  2,  2000  and
              December 31, 1999                                                        2

         b)   Condensed  Consolidated  Statements  of  Operations  for the three
              months ended April 2, 2000 and March 28, 1999                            3

         c)   Condensed Consolidated Statement of Cashflows for the three months
              ended April 2, 2000 and March 28, 1999                                   4

         d)   Notes to Condensed Consolidated Financial Statements                     5

Item 2   Management's  discussion  and  analysis  of  financial  condition  and
         results of operations                                                         6

Part II  Other Information                                                            15

         Signature                                                                    17

Exhibit  Exhibit 27.1, Financial Data Schedule                                        18

</TABLE>
                                       1

<PAGE>

PART I.  FINANCIAL INFORMATION
Item 1.    Financial Statements
<TABLE>
CYLINK CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(Dollars in thousands, except per share data; unaudited)
<CAPTION>
                                                                          Apr 2,           Dec 31,
                                                                           2000             1999
                                                                        ---------        ---------
<S>                                                                     <C>              <C>
Assets
Current assets:
   Cash and cash equivalents                                            $  27,863        $  33,170
   Accounts receivable, net of allowances of $847 and $941                 17,399           16,130
   Inventories                                                             10,850            6,745
   Deferred income taxes                                                    4,371            4,367
   Other current assets                                                     2,373            1,648
                                                                        ---------        ---------
            Total current assets                                           62,856           62,060

Restricted cash                                                             1,400            1,400
Property and equipment, net                                                10,234           10,038
Acquired technology, goodwill and other intangibles, net                    2,469            3,188
Notes receivable from employees or former employees                         3,227            3,165
Other assets                                                                1,375            1,438
                                                                        ---------        ---------
                                                                        $ 81,561         $ 81,289
                                                                        =========        =========
Liabilities and Shareholders' Equity
Current liabilities:
   Current portion of lease obligations and long-term debt              $      17        $      24
   Accounts payable                                                         7,677            6,635
   Accrued liabilities                                                      9,863            9,082
   Income taxes payable                                                     1,027            1,062
   Deferred revenue                                                         2,825            2,395
                                                                        ---------        ---------
            Total current liabilities                                      21,409           19,198
                                                                        ---------        ---------

Capital lease obligations and long-term debt                                  113              112
                                                                        ---------        ---------

Commitments and Contingencies (Note 5)

Shareholders' equity:
   Preferred stock, $0.01 par value; 5,000,000 shares authorized;
      none issued and outstanding                                               -                -
   Common stock, $0.01 par value; 40,000,000 shares authorized;
      30,441,000 and 29,877,000 shares issued and outstanding                 304              299
   Additional paid-in capital                                             131,002          126,896
   Deferred compensation related to stock options                          (1,606)          (1,790)
   Accumulated other comprehensive loss                                       (62)             (82)
   Accumulated deficit                                                    (69,599)         (63,344)
                                                                        ---------        ---------
            Total shareholders' equity                                     60,039           61,979
                                                                        ---------        ---------
                                                                        $  81,561         $ 81,289
                                                                        =========        =========


<FN>
               See accompanying notes to Condensed Consolidated Financial Statements.
</FN>
</TABLE>
                                                  2

<PAGE>


CYLINK CORPORATION)

<TABLE>
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Dollars in thousands, except per share data; unaudited)
<CAPTION>

                                                                            Three Months Ended
                                                                        --------------------------
                                                                          Apr 2,          Mar 28,
                                                                           2000            1999
                                                                        ---------        ---------

<S>                                                                     <C>              <C>
 Revenue                                                                $  17,378        $  11,885
 Cost of revenue                                                            6,101            4,112
                                                                        ---------        ---------
 Gross profit                                                              11,277            7,773
                                                                        ---------        ---------

 Operating expenses:
    Research and development, net                                           4,430            3,553
    Selling and marketing                                                   8,469            5,419
    General and administrative                                              4,219            2,613
    Amortization of purchased intangibles                                     720              680
                                                                        ---------        ---------
             Total operating expenses                                      17,838           12,265
                                                                        ---------        ---------

 Loss from operations                                                      (6,561)          (4,492)

 Other income:
          Interest income, net                                                287             308
          Royalty and other income, net                                        27             119
                                                                        ---------        ---------
                                                                              314             427
                                                                        ---------        ---------

 Loss before income taxes                                                  (6,247)         (4,065)
 Provision for income taxes                                                     8             --
                                                                        ---------        ---------

 Net loss                                                               $  (6,255)       $ (4,065)
                                                                        =========        =========


 Net loss per share - basic and diluted                                 $   (0.21)         $ (0.14)
                                                                        =========        =========

 Shares used in per share calculation - basic and diluted                  30,051           29,117
                                                                        =========        =========


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

                                                 3

<PAGE>

<TABLE>
CYLINK CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in thousands; unaudited)
<CAPTION>
                                                                             Three Months Ended
                                                                        --------------------------
                                                                         April 2,        March 28,
                                                                           2000            1999
                                                                        ---------        ---------
<S>                                                                     <C>              <C>
Cash flows from operating activities:
   Net loss                                                             $  (6,255)       $  (4,065)
   Adjustments to reconcile net loss to net
      cash used in operating activities:
         Depreciation                                                         811              635
         Amortization of intangibles                                          799              683
         Deferred income taxes                                                 (4)              --
         Amortization of imputed interest on note receivable                  (62)             (66)
         Deferred compensation                                                184               87
         Changes in assets and liabilities
            Accounts receivable                                            (1,269)          (2,408)
            Inventories                                                    (4,105)           2,354
            Other assets                                                     (742)             (40)
            Accounts payable                                                1,042             (893)
            Accrued liabilities                                               782             (209)
            Income taxes payable                                              (35)              (6)
            Deferred revenue                                                  430              451
                                                                        ---------        ---------
               Net cash used in operating activities                      (8,424)           (3,477)
                                                                        ---------        ---------
Cash flows from investing activities:
   Acquisition of property and equipment                                   (1,007)            (191)
                                                                        ---------        ---------
               Net cash used in investing activities                       (1,007)            (191)
                                                                        ---------        ---------
Cash flows from financing activities:

   Proceeds from issuance of common stock, net                              4,111               28
   Other                                                                       (7)             (39)
                                                                        ---------        ---------
               Net cash provided by (used in) financing activities          4,104              (11)
                                                                        ---------        ---------
Effect of exchange rate changes on
   cash and cash equivalents                                                   20              (12)
                                                                        ---------        ---------
Net decrease in cash and cash equivalents                                  (5,307)          (3,691)
Cash and cash equivalents at beginning of year                             33,170           46,575
                                                                        ---------        ---------
Cash and cash equivalents at end of period                              $  27,863        $  42,884
                                                                        =========        =========


<FN>
               See accompanying notes to Condensed Consolidated Financial Statements.
</FN>
</TABLE>
                                                 4

<PAGE>


CYLINK CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)

1.   Basis of Presentation

     The unaudited condensed  consolidated  financial statements included herein
contain all adjustments,  consisting only of normal recurring adjustments which,
in the opinion of  management,  are  necessary to state fairly the  consolidated
financial  position,  results of operations and cash flows of Cylink Corporation
("Cylink"  or  the  "Company")  for  the  periods  presented.   These  financial
statements  should be read in conjunction with the Company's  audited  financial
statements  included in the  Company's  Annual  Report on Form 10-K for the year
ended  December 31, 1999.  Interim  results of  operations  are not  necessarily
indicative of the results to be expected for the full year.

2.   Inventories

                                         April 2,    December 31,
                                           2000          1999
                                         ------------------------
                                            (in thousands)

Raw materials                            $ 5,383       $ 2,412
Work in process and subassemblies          2,345         1,610
Finished goods                             3,122         2,723
                                         -------       -------
                                         $10,850       $ 6,745
                                         =======       =======

3.   Loss Per Share

     Basic  loss per  share is based on the  weighted-average  number  of common
shares outstanding,  excluding shares in escrow. Diluted loss per share is based
on the  weighted-average  number of shares  outstanding  and dilutive  potential
common  shares  outstanding  excluding  contingent  shares  held in escrow.  The
Company's  only  potentially   dilutive   securities  are  stock  options.   All
potentially  dilutive  securities  have been  excluded from the  computation  of
diluted loss per share as their effect is  anti-dilutive on the net loss for the
periods presented.

     As of April 2, 2000 and March 28,  1999,  the  Company  had  6,917,500  and
5,898,000 stock options  outstanding  with a weighted  average exercise price of
$6.06 and $5.21,  respectively.  These options expire on various dates beginning
in 2000 through 2008.

4.   Comprehensive Loss

     The components of comprehensive loss are as follows:

                                                    Three Months Ended
                                                 ------------------------
                                                 April 2,    December 31,
                                                    2000         1999
                                                 ------------------------
                                                     (in thousands)
Net loss                                          $(6,255)      $(4,065)
Foreign currency translation gain loss                 20           (12)
                                                  -------       -------
Total comprehensive loss                          $(6,235)      $(4,077)
                                                  =======       =======

5.   Contingencies

     Cylink is  currently  engaged in  litigation.  See Part II,  Item 1. "Legal
Proceedings."


                                       5
<PAGE>

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


     This Report on Form 10-Q includes  statements that reflect  Cylink's belief
concerning  future events and financial  performance.  Statements  which are not
purely historical in nature are called  "forward-looking  statements" within the
meaning of Section  27A of the  Securities  Act of 1933 and  Section  21E of the
Securities   Exchange  Act  of  1934.  We  sometimes  identify   forward-looking
statements with such words as "expects", "anticipates", "intends", "believes" or
similar words concerning future events.

     You should not rely on these forward-looking  statements.  They are subject
to  certain  risks and  uncertainties  that may cause  actual  results to differ
materially from past results or Cylink's predictions. For a description of these
risks see the reasons  described in Item 2 "Risk  Factors That May Affect Future
Results,"  and other  sections  of this  Report on Form 10-Q.  You  should  also
consult the risk  factors  listed from time to time in Cylink's  Reports on Form
10-K, 10-Q, and 8-K.

     All  forward-looking  statements  included  in this  document  are based on
information  available to Cylink as of the date of this Report on Form 10-Q, and
Cylink assumes no obligation to update any such forward-looking  statements,  or
to update the reasons why actual  results  could differ from those  projected in
the forward-looking statements.

RESULTS OF OPERATIONS

     The following table sets forth certain consolidated statement of operations
data as a percentage of revenue for the periods indicated:


                                                  Three months ended
                                                  ------------------
                                             April 2, 2000    March 28, 1999
                                             -------------    --------------

Revenue                                         100.0  %           100.0 %
Cost of revenue                                  35.1               34.6
                                                -----              -----
Gross profit                                     64.9               65.4
                                                -----              -----
Operating expenses:
  Research and development, net                  25.5               29.9
  Selling and marketing                          48.7               45.6
  General and administrative                     24.3               22.0
  Amortization of purchased intangibles           4.1                5.7
                                                -----              -----
     Total operating expenses                   102.6              103.2
                                                -----              -----
Loss from operations                            (37.7)             (37.8)
Other income, net                                 1.8                3.6
                                                -----              -----
Loss before income taxes                        (35.9)             (34.2)
Provision for income taxes                        --                 --
                                                -----              -----
Net loss                                        (35.9) %           (34.2) %
                                                =====              =====

     Revenue.  Revenue  increased  46% from $11.9  million for the three  months
ended March 28, 1999 to $17.4  million for the three months ended April 2, 2000.
The  increase  is  attributable  to  increases  in unit  shipments  of  existing
products,  shipment of products with higher average  selling  prices,  increased
revenues associated with maintenance and support services,  and the introduction
of revenues from professional service consulting.  International revenue was 41%
and 40% of total revenue for the first quarter of 2000 and 1999, respectively.

     The  Company's  revenue  is derived  primarily  from sales of its family of
commercial network security products,  and to a lesser extent,  from the license
of software products and from professional services,  including customer support
and consulting.  Fees for maintenance and support services of hardware  products
are charged  separately from product


                                       6
<PAGE>

revenue. Revenues derived from the sale or license of the Company's products are
recognized in accordance  with the applicable  accounting  standards,  including
Statement of Position  No.  97-2,  "Software  Revenue  Recognition."  Revenue is
recognized  when  persuasive  evidence  of a sale  arrangement  exists,  such as
receipt of a contract or purchase order, the product has been shipped, the sales
price is fixed and  determinable,  collection is probable,  and  vendor-specific
objective  evidence  exists  to  allocate  a  portion  of the  total  fee to any
undelivered  elements of the arrangement.  Such undelivered  elements  typically
consist of  maintenance  and support,  which are deferred and amortized over the
applicable period,  usually twelve months. Vendor specific objective evidence of
the value of  maintenance  and support is generally  based on the annual renewal
rate.  Concurrent  with sales, a provision is made for estimated costs to repair
or replace products under warranty arrangements.  Consulting revenues,  which to
date have been immaterial,  are recognized on a time-and-materials or percentage
of completion  basis in accordance  with the  provisions of Accounting  Research
Bulletin-45, "Long-Term Construction-Type Contracts," depending on the contract.

     Gross Profit. Gross profit increased from $7.8 million for the three months
ended March 28, 1999 to $11.3  million for the three months ended April 2, 2000.
The increase in dollars was primarily a result of the increase in revenue.  As a
percentage of sales, gross profit was approximately 65% for both quarters.

     Research  and  Development.   Research  and  development  expenses  consist
primarily of salaries and other  personnel  related  expenses,  depreciation  of
development equipment,  facilities and supplies.  Gross research and development
expenses  increased  13% from $4.0  million for the three months ended March 28,
1999 to $4.5 million for the three months  ended April 2, 2000.  Gross  research
and  development  expenses  as a  percentage  of revenue  were 34% for the first
quarter of 1999 and 26% for the first quarter 2000. The dollar increase resulted
from increased spending for development costs of new products, offset by reduced
spending  and  related  reimbursements  for  externally  funded  contracts.  The
decrease in expense as a percentage of revenue is due to the  increased  revenue
base.

     From time to time the Company receives  engineering funding for development
of  projects  to apply or  enhance  the  Company's  technology  to a  particular
customer's  need. The amounts  recognized  under these research and  development
contracts  are  offset  against  research  and  development  expenses.   Amounts
recognized under  non-recurring  engineering  contracts totaled $0.4 million for
the first  quarter of 1999 and $0.1  million for the three months ended April 2,
2000.

     Selling and Marketing.  Selling and marketing expenses consist primarily of
personnel expenses,  including sales commissions,  and expenses for advertising,
public  relations,  seminars and trade  shows.  Selling and  marketing  expenses
increased  56% from $5.4  million for the three  months  ended March 28, 1999 to
$8.5  million for the three months  ended April 2, 2000.  Selling and  marketing
expenses as a percentage  of revenue  were 46% and 49% for the first  quarter of
1999 and 2000,  respectively.  Sales expenses increased for the first quarter of
2000   primarily  due  to  the  addition  of  23  employees,   commissions   and
payroll-related  costs associated with the increased  revenue and the management
of indirect sales channels through the use of value-added  resellers.  Marketing
expenses increased due to the addition of 9 employees, consulting,  advertising,
trade shows and other marketing costs associated with new marketing  initiatives
and a Cylink awareness  promotional  campaign.  Selling and marketing  expenses,
expressed as a  percentage  of revenue,  increased  due to programs to staff our
Internet  sales  force and  marketing  initiatives  in  advance  of new  product
introduction.

     General and  Administrative.  General and  administrative  expenses consist
primarily of personnel  and related  costs,  recruitment  expenses,  information
systems costs, and audit, legal and other professional service fees. General and
administrative  expenses  increased  61% from $2.6  million for the three months
ended March 28, 1999 to $4.2  million for the three  months ended April 2, 2000.
General and administrative  expenses as a percentage of revenue were 22% and 24%
for the first quarter of 1999 and 2000, respectively. The dollar increase in the
first quarter of 2000 were primarily due to increases in information  technology
support related to our new E.R.P.  system, in legal fees for litigation defense,
in recruiting and  relocation  costs to recruit a growing  employment  base in a
very competitive job market, and in administrative costs associated with our new
professional services  organization.  The increase as a percentage of revenue is
due primarily to technology support of our worldwide E.R.P. system.

     Amortization of Goodwill and Other  Intangibles.  Amortization  relating to
goodwill and other  intangibles  was $0.7 million in each period  presented  and
relates to the  acquisition  of Algorithmic  Research,  Ltd ("ARL") in September
1997, and the acquisition of S.D.I. in the third quarter of 1999.

     Provision for Income Taxes.  No  significant  provision for or benefit from
income taxes was  recognized  in the quarter  ended April 2, 2000 as the Company
incurred  a net  operating  loss for  income tax  purposes  and the tax  benefit
therefrom was offset by an increase in the  valuation  allowance on the deferred
tax asset.

                                       7
<PAGE>

     Other Income (Expense), Net. Other income (expense), net consists primarily
of interest income and interest  expense and royalty income.  Other income,  net
decreased  from $0.4  million for the first three months of 1999 to $0.3 million
for the first three months of 2000,  principally due to the decrease in cash and
cash equivalents and reduced royalty income.

LIQUIDITY AND CAPITAL RESOURCES

     At April 2,  2000,  the  Company  had  cash and cash  equivalents  of $27.9
million, working capital of $41.4 million and minimal long-term obligations. For
the three  months ended April 2, 2000,  the Company  recorded a net loss of $6.3
million. Net cash used in operating activities for the first quarter of 2000 was
$8.4 million  consisting  primarily of the loss from operations,  an increase in
accounts receivable of $1.3 million, an increase in inventories of $4.1 million,
offset in part by increases in accounts payable and accrued  liabilities of $1.8
million and an increase in deferred  revenue of $0.4  million.  The  increase in
accounts  receivable  was due to higher than average  shipments  during the last
month of the quarter and recording,  late in the quarter,  of a receivable  from
one large contract. The revenue from this contract has been deferred, accounting
for the increase in deferred revenue. The increase in inventories was the result
of orders  built late in the quarter  for  shipment  early in the next  quarter,
advanced  purchases  of  critical  components  to  avoid  stock  shortages,  and
pre-production  component purchases for a  soon-to-be-released  new product. The
increases in accounts payable and accrued liabilities resulted from the increase
in inventory  purchasing.  Net cash used in continuing  operating activities for
the first quarter of 1999 was $3.5 million consisting primarily of the loss from
continuing  operations of $4.1 million and an increase in accounts receivable of
$2.4 million,  offset in part by a decrease in inventories of $2.4 million. Both
the increase in accounts  receivable  and the decrease in  inventories  were the
result of increased sales over the previous quarter.

     Cash used in investing  activities for the three months ended April 2, 2000
and March 28, 1999 was $1.0 million and $0.2 million, respectively, primarily to
fund the acquisition of property, plant and equipment.

     Cash provided by financing  activities  for the three months ended April 2,
2000 was $4.1 million,  resulting  from proceeds from the sale of 564,000 shares
of stock pursuant to the exercise of stock  options.  Cash provided by financing
activities for the three months ended March 29, 1999 was not material.

     The Company is currently engaged in litigation.  See Part II, Item 1 "Legal
Proceedings."  Management believes that the ultimate resolution of these matters
will not have a material adverse effect on the Company's  financial  position or
results of operations.

     The Company  believes that existing cash balances and cash  generated  from
operations,  if any, will be sufficient to fund  necessary  purchases of capital
equipment  and to  provide  working  capital  through  at least the next  twelve
months. However, the Company may require additional funds to support its working
capital requirements or for other purposes and may seek to raise such additional
funds through  public or private equity or debt financing or from other sources.
No assurance can be given that  additional  financing will be available or that,
if available, will be on terms favorable to the Company or its shareholders.


                                       8
<PAGE>

RISK FACTORS THAT MAY AFFECT FUTURE RESULTS

We have a history of losses  and expect  this to  continue  for the  foreseeable
future.

     We incurred losses from  continuing  operations in 1999 and for each of the
prior four years.  We expect to continue to incur net losses  through  2000.  We
might not increase or maintain our revenue or be profitable on a quarterly or an
annual basis in the future.

Our quarterly  operating  results may vary in the future,  which could cause our
stock price to drop.

     We have historically  experienced significant fluctuations in our operating
results on a  quarterly  basis and could  experience  such  fluctuations  in the
future. Our operating results are affected by a number of factors, many of which
are outside of our control, including the following:

     o   the timing of the  introduction  by us or by our  competitors of new or
         enhanced products;

     o   market acceptance of our new products and those of our competitors;

     o   the  timing,  cancellation  or  delay  of  customer  orders,  including
         cancellation or delay in anticipation of new product  introductions  or
         enhancements  or resulting from  uncertainty  relating to  intellectual
         property claims;

     o   changes in our pricing policies or those of our competitors;

     o   changes in operating  expenses,  including those resulting from changes
         in available  production  capacity of  independent  foundries and other
         suppliers and the availability of raw materials;

     o   delays in manufacturing due to shortages in components or unanticipated
         revisions in product design;

     o   delays in software development;

     o   expenses incurred in seeking to obtain,  enforce and defend claims with
         respect to intellectual property rights;

     o   changes in the revenue mix from products or services sold;

     o   changes in the  percentage  of products  sold  through our direct sales
         force versus indirect channels;

     o   changes  in  the  percentage  of  products  sold  in  the  U.S.  versus
         international markets;

     o   loss of an important customer;

     o   failure  to  grow  our  customer   base  in   accordance   with  market
         expectations;

     o   customer discounts and credits; and

     o   our limited ability to reduce expenses rapidly to offset any unexpected
         shortfall in revenue growth or decrease in revenue.

     We expect to  introduce a number of new  products  during the  remainder of
2000. The delay in product  availability  and/or failure of any such products to
achieve market  acceptance  when  anticipated,  or at all, would  materially and
adversely affect our financial condition and results of operations.

Pending Litigation

     See Part II, Item 1. "Legal Proceedings."

Our  sales  cycles  are long and  unpredictable,  which  makes  period-to-period
revenues difficult to predict.

     Sales of our products generally involve a significant commitment of capital
by customers, with the attendant delays frequently associated with large capital
expenditures.  For these and other reasons,  the sales cycle associated with our
products is typically  lengthy and subject to a number of significant risks over
which we have  little or no  control.  We are often  required  to ship  products
shortly  after  we  receive  orders  and,  consequently,  order  backlog  at the

                                       9
<PAGE>

beginning  of any period  has,  at times in the past,  represented  only a small
portion of that period's expected revenue.  As a result,  product revenue in any
period has been and will continue to be substantially dependent on orders booked
and shipped in that  period.  We typically  plan our  production  and  inventory
levels  based on  internal  forecasts  of  customer  demand,  which  are  highly
unpredictable and can fluctuate  substantially.  If revenue falls  significantly
below  anticipated  levels,  as it  has at  times  in the  past,  our  financial
condition and results of operations would be materially and adversely  affected.
In addition,  our operating expenses are based on anticipated revenue levels and
a high percentage of our expenses are generally  fixed in the short term.  Based
on these factors, a small fluctuation in the timing of sales can cause operating
results to vary  significantly from period to period. It is possible that in the
future our operating  results will again be below the expectations of securities
analysts  and  investors.  In  such  an  event,  or in the  event  that  adverse
conditions  prevail or are perceived to prevail generally or with respect to our
business or the market sector in which we operate, the price of our Common Stock
would likely be adversely affected.

     These  factors make it difficult to predict our financial  performance.  As
our quarterly results fluctuate,  they may fall below the expectations of public
market analysts or investors.  If this occurs, the price of our common stock may
drop.

We are dependent on recently introduced and new network security products.

     Our future results of operations will be highly dependent on the successful
completion of the design, development,  introduction,  marketing and manufacture
of the NetAuthority and NetHawk  products,  as well as successful  marketing and
manufacture of the Cylink Link  Encryptors,  PrivaCy  Manager,  PrivateWire  and
Cylink Frame Encryptor  products.  To date, we have made only limited commercial
shipments  of  certain  of such  products  and,  in some  cases,  no  commercial
shipments of certain of such products. Our development engineers employed by ARL
in Israel  delivered  NetHawk in January for beta testing with  customers in the
United  States,  and our  ability  to  commence  production  at our Santa  Clara
facilities depends on the availability and delivery schedules for components, or
suitable alternatives,  selected by our design engineers.  NetAuthority is based
on a pilot system  delivered for the first time in mid-1999  under a development
contract  with the United  States  Postal  Service.  These  products may require
additional  development  work,  enhancement,  and testing or further  refinement
before they can be introduced and made  commercially  available by us or achieve
market acceptance.  If such new and/or other recently  introduced  products have
performance,  reliability,  quality or other  shortcomings,  such products could
fail to achieve market  acceptance.  The failure by our new or existing products
to achieve or enjoy market acceptance, whether for these or other reasons, could
cause us to experience reduced orders,  higher  manufacturing  costs,  delays in
collecting  accounts  receivable and additional  warranty and service  expenses,
which in each  case  could  have a  material  adverse  effect  on our  business,
financial  condition  and results of  operations.  We also rely on a third party
original equipment manufacturer to supply our ATM Encryptor product, and we have
no assurance  this  contract will be renewed.  Should this third party  supplier
experience  a  change  of  control  or cease  operations,  we may  experience  a
temporary  reduction in product  availability  and related ATM revenues  pending
successful  renegotiation of an alternate supply contract or  re-engineering  of
the product to be manufactured by Cylink.

Competition

     Competition is intense among providers of network security systems,  and we
expect such  competition  to increase  in the  future.  Significant  competitive
factors in these markets include:

     o   the development of new products and features;

     o   product quality and performance;

     o   the   quality  and   experience   of  sales,   marketing   and  service
         organizations;

     o   product price;

     o   name recognition;

     o   perception of our stability and long-term viability; and

     o   adoption of embedded security  solutions in other vendors' hardware and
         software products.

     Many of these factors are beyond our control.

                                       10
<PAGE>

     Our competitors in the information  security markets,  including  companies
that offer products  similar to or as an alternative to the Company's  products,
include  Axent  Technologies,  Inc.,  Checkpoint  Software  Technologies,  Ltd.,
Information  Resource  Engineering,   Inc., Network  Associates,   Inc.,  Secure
Computing Corporation,  Zaxus Limited (formerly  Racal-Guardata,  Inc.), and RSA
Security,  Inc. Our PKI product,  NetAuthority,  will be competing with numerous
PKI products offered by other vendors, including Baltimore Technologies, Entrust
Technologies,  Inc., and VeriSign Inc., that already have numerous customers and
significantly  greater market recognition than the Company. When it is released,
our NetHawk VPN appliance will face  competition  from numerous other  products,
including those offered or under development by Cisco Systems,  Inc.,  Newbridge
Networks  Corporation,   Netscreen  Technologies,   Inc.  and  Nokia  Corp.  Our
professional services business competes with very large consulting organizations
such as Andersen  Consulting,  PricewaterhouseCoopers  and other  entities which
have  formidable  resources  to market and  support  their  security  consulting
businesses.  Our original  equipment  manufacturer  ("OEM")  supplier of its ATM
Encryptor  product also competes with us through  other  channels,  for sales of
this product. Our smart cards compete with numerous vendors,  including Gemplus,
S.A and Schlumberger Ltd. A number of significant  vendors,  including Microsoft
Corporation,  America On Line,  Inc.  and Cisco  Systems,  Inc.,  have  embedded
security  solutions  in their  software.  To the extent  that these  embedded or
optional  security  capabilities  provide all or a portion of the  functionality
provided by our products, our products may no longer be required by customers to
attain network security.

     Certicom  Corporation  and RSA Security,  Inc.,  license various methods of
implementing  public key  cryptography,  including  some that are different from
(and  incompatible  with) the method of  implementing  public  key  cryptography
currently used in most of the Company's products.  Although we have a license to
use all of the public key  methods  promoted  by  Certicom  and RSA DSI,  to the
extent  significant  segments of the network  security  market  adopt  technical
standards  different  from those  currently  used by us, to the exclusion of our
methods,  sales of our existing and planned  products in that market segment may
be  adversely  impacted,  which  could  have a  material  adverse  effect on our
financial condition and results of operations.

     Many of our competitors have substantially  greater  financial,  technical,
marketing, distribution and other resources, greater name recognition and longer
standing relationships with customers than we possess.  Competitors with greater
financial  resources  are  better  able to engage in more  aggressive  marketing
campaigns and  sustained  price  reductions  in order to gain market share.  Any
period of sustained price reductions would have a material adverse effect on our
financial  condition  and results of  operations.  We may not be able to compete
successfully  in the  future  and  competitive  pressures  may  result  in price
reductions,  loss of market share or otherwise have a material adverse effect on
our financial condition and results of operations.

We face the risks from tort and warranty claims that may be made against us.

     Customers  rely on our network  security  products to prevent  unauthorized
access to their networks and data transmissions. A malfunction or the inadequate
design of our products  could result in tort or warranty  claims.  A breach of a
customer's network by an unauthorized party, which is attributable to an alleged
defect in our products,  may cause substantial damages due to loss or compromise
of the customer's valuable information.  Furthermore,  there is inadequate legal
precedent for allocating  responsibility  for such losses caused by the wrongful
acts of third  parties.  Although  we attempt to reduce the risk of such  losses
through warranty  disclaimers and liability  limitation clauses in our sales and
license agreements and by maintaining product liability insurance,  there can be
no assurance  that such measures will be effective in limiting our liability for
any such damages.  Any liability for damages  resulting  from security  breaches
could be substantial  and could have a material  adverse effect on our business,
financial condition and results of operations.

     In addition,  a well-publicized  actual or perceived  security breach could
adversely affect the market's perception of security products in general, or our
products in particular, regardless of whether such breach is attributable to our
products. This could result in a decline in demand for our products, which would
have a material adverse effect on our business,  financial condition and results
of operations.

We may be unable to retain our  executive  officers and key  personnel  that are
critical to our business.

     In late 1998 Mr.  William C. Crowell,  formerly  Vice  President of Product
Strategy,  was promoted to President and Chief Executive Officer,  and Mr. Roger
A. Barnes became our Chief Financial Officer.  Our future success will depend in
large part on the abilities of Mr.  Crowell and the  contributions  by our other
executive  officers,  key  management and technical  personnel.  The loss of the
services  of one or more of our  executive  officers  or key  personnel,  or the
inability  to continue to attract and retain  qualified  personnel,  could delay
product  development  cycles or otherwise have a material  adverse effect on our
business and operating results.

                                       11
<PAGE>

We may not be able  to hire  and  retain  sufficient  technical,  marketing  and
management personnel that we need to succeed because these people are limited in
number and in high demand.

     We  recently  experienced,  and may  continue  to  experience,  substantial
fluctuations  in the number of employees and the scope of our  operations in the
network  security  business,   resulting  in  increased   responsibilities   for
management.  To manage our  business  effectively,  we will need to  continue to
improve our  operational,  financial and management  information  systems and to
hire,  train,  motivate  and manage our  employees.  Competition  is intense for
qualified  technical,  marketing and management  personnel.  In particular,  the
current  availability of qualified  engineers is quite limited,  and competition
among  companies,   academic   institutions,   government   entities  and  other
organizations for skilled and experienced engineering personnel is very intense.
We have  experienced  delays in filling  positions for engineering and marketing
personnel and expect to experience  continued difficulty in filling our need for
qualified engineers and other personnel.  There can be no assurance that we will
be able  effectively to achieve or manage any future growth,  and our failure to
do so could  delay  product  development  cycles or  otherwise  have a  material
adverse effect on our financial condition and results of operations.

Any inability to protect our intellectual  property could reduce our competitive
advantage, divert management attention, require additional intellectual property
to be developed or cause us to incur expenses to enforce our rights.

     We rely on patents, trademarks,  copyrights,  licenses and trade secret law
to establish and preserve our intellectual  property rights.  We own a number of
U.S.  patents  covering certain aspects of our network security product designs,
and have additional U.S. patent applications pending.  There can be no assurance
that any patent, trademark, copyright or license owned or held by us will not be
invalidated, circumvented or challenged, that the rights granted thereunder will
provide competitive advantages to us or that any of our pending or future patent
applications  will be issued  with the scope of the  claims  sought by us, if at
all.  Further,   there  can  be  no  assurance  that  others  will  not  develop
technologies  that are  similar or  superior to our  technology,  duplicate  our
technology or design around the patents owned by us. We may be subject to or may
initiate  interference  proceedings in the U.S. Patent Office, which can require
significant financial and management resources. In addition, the laws of certain
countries in which our products are or may be  developed,  manufactured  or sold
may not protect our products and intellectual property rights to the same extent
as the laws of the United  States.  Our  inability  to protect our  intellectual
property  adequately  could  have a  material  adverse  effect on our  financial
condition and results of operations.

     The computer, communications,  software and network security industries are
characterized by substantial  litigation regarding patent and other intellectual
property rights.  From time to time, we have received  communications from third
parties  asserting  that our  patents,  features  or  content  of certain of our
products  infringe upon the intellectual  property rights held by third parties,
and we may receive such communications in the future.  There can be no assurance
that third parties will not assert claims  against us that result in litigation.
Any  litigation,  whether  or not  determined  in our  favor,  could  result  in
significant  expense to us and could divert  management and other resources.  In
the  event  of an  adverse  ruling  in  any  litigation  involving  intellectual
property,  we might be required  to  discontinue  the use of certain  processes,
cease the manufacture,  use and sale of infringing products,  expend significant
resources  to  develop  non-infringing  technology  or  obtain  licenses  to the
infringing  technology and may suffer significant monetary damages,  which could
include treble damages.  There can be no assurance that under such circumstances
a license would be available to us on  reasonable  terms or at all. In the event
of a  successful  claim  against  us and our  failure  to  develop  or license a
substitute technology on commercially  reasonable terms, our financial condition
and results of operations would be adversely affected. There can be no assurance
that  existing  claims or any other  assertions  (or claims for  indemnity  from
customers resulting from infringement  claims) will not materially and adversely
affect our financial condition and results of operations.

If we are unable to adapt our services to rapidly changing technology, or if the
market for network security fails to develop, our business and operating results
could suffer.

     The market for our network  security  products is  characterized by rapidly
changing technology,  emerging industry standards, new product introductions and
changes in customer requirements and preferences. Our future success will depend
in part upon end-users'  demand for network  security  products in general,  and
upon our ability to enhance our existing  products and to develop and  introduce
new  products  and  technologies  that  meet  customer  requirements.   We  face
continuing  challenges  to  educate  customers  as to the value of our  security
products  and  security  consulting  services.  We believe  that many  potential
customers do not appreciate the need for security products unless and until


                                       12
<PAGE>

they have faced a major security breach.  Many potential customers prefer not to
disclose  significant  security  breaches of their  networks or are reluctant to
invest in the  development of a professional  security  architecture  to protect
their networks. This market resistance is compounded by our limited resources to
invest in marketing campaigns for our products and services.

     If we are unable  successfully  to educate  potential  customers  as to the
value of, and thereby  obtain  broad  market  acceptance  for,  our products and
services,  we will  continue  to rely  primarily  on  selling  new and  existing
products to our base of existing  customers,  which will significantly limit any
opportunity for growth. In addition, any significant advance in technologies for
attacking cryptographic systems could render some or all of our existing and new
products  obsolete or  unmarketable.  To the extent that a specific method other
than ours is adopted as the standard for  implementing  network  security in any
segment of the  network  security  market,  sales of our  existing  and  planned
products in that market  segment may be adversely  impacted,  which could have a
material  adverse  effect on our  business,  financial  condition and results of
operations. Also, network security-related products or technologies developed by
others may adversely  affect our competitive  position or render our products or
technologies noncompetitive or obsolete.

     In addition,  a portion of the sales of our network security  products will
depend upon a robust industry and  infrastructure for providing access to public
switched  networks,  such as the Internet.  The  infrastructure or complementary
products  necessary to make these networks into viable  commercial  marketplaces
may not be fully  developed,  and once developed,  these networks may not become
viable commercial marketplaces.

If our research and development activities are unsuccessful, we will not be able
to market new products and services and our business  operations  and  financial
results could be harmed.

     The  markets  for  our  products  are  characterized  by  rapidly  changing
technologies,  extensive research and new product introductions. We believe that
our future  success  will depend in part upon our ability to continue to enhance
our existing products and to develop,  manufacture and market new products. As a
result,  we expect to continue to make a significant  investment in engineering,
research  and  development.  We may not be able to  develop  and  introduce  new
products or  enhancements  to our  existing  products in a timely  manner  which
satisfy  customer  needs,  achieve  market  acceptance or address  technological
changes in our target markets. If we fail to develop products and introduce them
successfully and in a timely manner, this could adversely affect our competitive
position, financial condition and results of operations.

We face risks associated with international operations.

      We plan to  continue  to expand our foreign  sales  channels  and to enter
additional  international  markets,  both  of  which  will  require  significant
management attention and financial resources. International sales are subject to
a number of risks,  including  unexpected  changes in  regulatory  requirements,
export control laws,  tariffs and other trade  barriers,  political and economic
instability in foreign  markets,  difficulties  in the staffing,  management and
integration of foreign operations,  longer payment cycles, greater difficulty in
collecting accounts  receivable,  currency  fluctuations and potentially adverse
tax  consequences.  Since  most of our  foreign  sales are  denominated  in U.S.
dollars,  our products become less price competitive in countries in which local
currencies  decline in value  relative to the U.S.  dollar.  The  uncertainty of
monetary  exchange values has caused,  and may in the future cause, some foreign
customers  to delay  new  orders  or delay  payment  for  existing  orders.  The
long-term  impact of such  devaluation,  including  any  possible  effect on the
business outlook in other developing countries, cannot be predicted.

     Our ability to compete  successfully  in foreign  countries is dependent in
part on our ability to obtain and retain  reliable  and  experienced  in-country
distributors   and  other   strategic   partners.   We  do  not  have  long-term
relationships  with many of our  value-added  resellers  and  distributors  and,
therefore, have no assurance of a continuing relationship within a given market.

     Due to U.S. and Israeli  government  regulations  restricting the export of
cryptographic  devices and software,  including sales to foreign  governments of
certain of our network  security  products,  we are often at a  disadvantage  in
competing for  international  sales  compared to companies  located  outside the
United States and Israel that are not subject to such restrictions. Although the
Department of Commerce recently relaxed the export control laws as they apply to
sales of our products to our commercial  customers,  we still face  considerable
export controls on sales to foreign  governments and transfers of our technology
to foreign partners.  In particular,  these controls frequently hinder the close
cooperation  between  our  engineering  departments,  with  resulting  delays in
product   developments   and  releases  of  products,   such  as  NetHawk,   for
manufacturing in the United States.

                                       13
<PAGE>

We face risks from our dependence on third party subcontractors and suppliers.

     Our ability to deliver our products in a timely  manner is  dependent  upon
the availability of quality components and subsystems used in these products. We
depend in part upon subcontractors to manufacture,  assemble and deliver certain
items in a timely and  satisfactory  manner.  We obtain  certain  components and
subsystems from single, or a limited number of, sources. We rely on a single OEM
supplier for our ATM  Encryptor,  which we offer to our  customers  with our own
management  solution.  A  significant  delay in obtaining a source of supply for
components  selected by our design  engineers or interruption in the delivery of
such items could have a material  adverse effect on our financial  condition and
results of operations.

Revisions in accounting  estimates could adversely affect the calculation of our
future operating results.

     In connection  with the  acquisition of ARL in September 1997, we allocated
$63.9  million of the purchase  price to  in-process  research  and  development
("IPR&D"),  and in accordance  with  generally  accepted  accounting  principles
recorded an immediate charge off of that amount on the date of acquisition.  The
amount  allocated to IPR&D was  determined  in a manner  consistent  with widely
recognized appraisal practices.

     In a  letter  dated  September  15,  1998,  to the  American  Institute  of
Certified  Public  Accountants,  the  Chief  Accountant  of the  Securities  and
Exchange  Commission  ("SEC")  indicated  the SEC  Staff's  concerns  related to
certain appraisal  practices generally employed in determining the fair value of
IPR&D.  As a result,  it is  possible  that the SEC staff may  require  that any
enterprise that recorded an IPR&D charge revise its estimate of the value of the
IPR&D.  To the extent we are required by the SEC Staff  retroactively  to revise
our  estimate  of  the  value  of  IPR&D,  such  revision  could  result  in the
capitalization  of additional  goodwill,  the amortization of which would reduce
future operating results.


                                       14
<PAGE>

Item 3.  Quantitative and Qualitative Disclosures about Market Risk

     As of April 2,  2000,  we held a total  of $27.9  million  of cash and cash
equivalents.  These  securities  consist  primarily  of money  market  funds and
high-grade,  short-term corporate  obligations.  Certain of these securities are
subject to interest rate risk and will decline in value if market interest rates
increase. If market interest rates were to increase immediately and uniformly by
10 percent  from  levels as of April 2, 2000,  the  decline in fair value of the
portfolio would not be material.

     We transact substantially all of our revenues and costs in U.S. dollars and
our results of operations  would not be materially  affected by  fluctuations in
foreign exchange rates. Accordingly,  to date, we have not used material amounts
of derivative financial  instruments.  As of April 2, 2000, we had no fixed rate
obligations  except for capitalized  leases and long-term debt of  approximately
$130,000.  As such, the fair value of our fixed rate  obligations is not subject
to a material adverse impact from changes in interest rates.

PART II.  OTHER INFORMATION

Item 1.   Legal Proceedings

     On September  14, 1998,  Cylink  announced  that its earnings for the third
quarter  would be  below  consensus  estimates.  On  November  5,  1998,  Cylink
announced  that,  with the  assistance of its  independent  accountants,  it was
reviewing its revenue recognition practices, and Cylink announced that its first
and second  quarter  earnings  would have to be restated  and that it would have
operating  losses for each of the three quarters for the period ended  September
27, 1998.  During the review,  certain facts became known indicating  errors had
been made in the application of revenue recognition policies which also impacted
the fourth  quarter of 1997, and as a result,  1997 full-year  results have been
restated  along with first and second  quarter  1998  results.  Cylink has filed
amended Forms 10-Q for the first and second quarters of 1998 and an amended Form
10-K  for  1997.  Between  November  6,  1998 and  December  14,  1998,  several
securities class action  complaints were filed against Cylink and certain of its
current and former directors and officers in federal courts in California. These
complaints allege, among other things, that Cylink's previously issued financial
statements were materially  false and misleading and that the defendants knew or
should have known that these financial  statements  caused Cylink's common stock
price to rise  artificially.  The actions variously allege violations of Section
10(b) of the Securities  Exchange Act of 1934 (the "Exchange  Act"), as amended,
and SEC Rule 10b-5 promulgated thereunder, and Section 20 of the Exchange Act.

     The securities class action lawsuits have been ordered  consolidated into a
single  action  pending in the United  States  District  Court for the  Northern
District  of  California,  captioned  In Re Cylink  Securities  Litigation,  No.
C98-4292 (VRW). Plaintiffs have not yet filed an amended consolidated complaint.

     Cylink believes it has meritorious defenses to these actions and intends to
defend itself  vigorously.  However,  it is not feasible to predict or determine
the  final  outcome  of  these  proceedings,  and  if  the  outcome  were  to be
unfavorable,  Cylink's business,  financial condition, cash flows and results of
operations could be materially adversely affected.

                                       15
<PAGE>

Item 6.   Exhibits and Reports on Form 8-K

(a)   Exhibits Index:

         Exhibit
         Number   Description of Exhibit

         27.1     Financial Data Schedule

(b)      Reports on Form 8-K:

         None

Items 3, 4 and 5 are not applicable and have been omitted.


                                       16
<PAGE>

                                    SIGNATURE

     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.

Date: May 16, 2000                          CYLINK CORPORATION

                                           By:      /s/  ROGER A. BARNES
                                                    --------------------
                                                    Roger A. Barnes
                                                    Vice President of Finance
                                                    and Administration and
                                                    Chief Financial Officer
                                                    (Duly Authorized Officer and
                                                    Principal Financial Officer)




                                       17