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

                                    FORM 10-Q

(Mark One)

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

For the quarterly period ended December 28, 1997

                                       OR

___  TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
     EXCHANGE ACT OF 1934 For the transition period ended or

Commission File Number 0-15323

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


          Delaware                                              94-2904044      
(State or other jurisdiction                                 (I.R.S. Employer   
     of incorporation or                                  Identification Number)
        organization)                               
                     
                                800 Saginaw Drive
                             Redwood City, CA 94063
                                 (650) 366-4400
               (Address, including zip code, and telephone number
                      including area code, of registrant's
                          principal executive offices)


     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___

     The number of shares outstanding of the registrant's Common Stock, $.01 par
value, on December 28, 1997 was 21,381,524.

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

This document consists of 13 pages of which this is page 1.



<PAGE>



                      NETWORK EQUIPMENT TECHNOLOGIES, INC.



                                      INDEX

                                                                           Page
                                                                          Number
                                                                          ------

PART I.  Financial Information

     Item 1. Financial Statements

             Condensed Consolidated Balance Sheets -
             December 28, 1997 and March 31, 1997 ............................3

             Condensed Consolidated Statements of Income - Quarter 
             and Nine Months Ended December 28, 1997 and 
             December 29, 1996 ...............................................4

             Condensed Consolidated Statements of Cash Flows - 
             Nine Months Ended December 28, 1997 and December 29, 1996 .......5

             Notes to Condensed Consolidated Financial Statements ............6

     Item 2. Management's Discussion and Analysis of
             Results of Operations and Financial Condition ...................7

PART II. Other Information

     Item 6. Exhibits and Reports on Form 8-K ...............................12

SIGNATURE....................................................................13



                                        2
<PAGE>



                      NETWORK EQUIPMENT TECHNOLOGIES, INC.
                      Condensed Consolidated Balance Sheets
                             (dollars in thousands)


<TABLE>
<CAPTION>
                                                            December 28,      March 31,
                                                                1997            1997
                                                                ----            ----
                                                            (unaudited)
<S>                                                         <C>              <C>      
Assets
Current assets:
      Cash and cash equivalents                             $  43,822        $  39,141
      Temporary cash investments                              105,598           99,581
      Accounts receivable, net of allowances                                
         of $3,980 at  December 28 and                                      
         $3,910 at March 31                                    76,755           82,986
      Inventories                                              23,456           22,662
      Deferred income taxes                                     7,418            7,418
      Prepaid expenses and other assets                         7,441            6,679
                                                            ---------        ---------
           Total current assets                               264,490          258,467
Property and equipment, net                                    32,755           30,009
Software production costs, net                                  5,465            4,616
Other assets                                                   10,725            8,561
                                                            ---------        ---------
                                                            $ 313,435        $ 301,653
                                                            =========        =========
                                                                            
Liabilities and Stockholders' Equity                                        
Current liabilities:                                                        
      Accounts payable                                      $  16,103        $  23,758
      Accrued liabilities                                      39,581           39,174
                                                            ---------        ---------
           Total current liabilities                           55,684           62,932
7-1/4% convertible subordinated debentures                     25,821           25,821
Stockholders' equity:                                                       
      Preferred stock, $.01 par value                                       
           Authorized:  5,000,000 shares,                                   
           Outstanding:  none                                    --               --
      Common stock, $.01 par value                                          
           Authorized:  50,000,000 shares                                   
           Outstanding:  21,382,000 shares at December 28                   
             and 21,049,000 shares at March 31                    214              210
      Additional paid-in capital                              175,670          172,038
      Treasury stock                                           (1,430)          (2,545)
      Net unrealized gain (loss) on available-for-sale                      
           securities                                             165              (56)
      Accumulated translation adjustment                         (323)            (490)
      Retained earnings                                        57,634           43,743
                                                            ---------        ---------
           Total stockholders' equity                         231,930          212,900
                                                            ---------        ---------
                                                            $ 313,435        $ 301,653
                                                            =========        =========
</TABLE>
                                                                            
                                                                        
See Notes to Condensed Consolidated Financial Statements.



                                       3
<PAGE>


                      NETWORK EQUIPMENT TECHNOLOGIES, INC.
                   Condensed Consolidated Statements of Income
              (in thousands, except per share amounts - unaudited)


<TABLE>
<CAPTION>
                                                     Quarter Ended            Nine Months Ended
                                                 Dec. 28,      Dec. 29,     Dec. 28,     Dec. 29,
                                                   1997         1996         1997         1996
                                                   ----         ----         ----         ----
<S>                                              <C>          <C>          <C>          <C>      
Revenue:                                      
      Product revenue                            $  45,154    $  56,096    $ 148,720    $ 157,831
      Service and other revenue                     26,802       27,206       81,056       80,338
                                                 ---------    ---------    ---------    ---------
           Total revenue                            71,956       83,302      229,776      238,169
                                                 ---------    ---------    ---------    ---------

Cost of sales:
      Cost of product revenue                       17,943       23,586       57,734       66,685
      Cost of service and other revenue             16,649       17,988       50,185       52,558
                                                 ---------    ---------    ---------    ---------
           Total cost of sales                      34,592       41,574      107,919      119,243
                                                 ---------    ---------    ---------    ---------

Gross margin                                        37,364       41,728      121,857      118,926

Operating expenses:
      Sales and marketing                           20,879       20,061       63,789       57,278
      Research and development                      10,840       10,015       31,751       30,393
      General and administrative                     3,083        2,914        8,826        8,573
                                                 ---------    ---------    ---------    ---------
           Total operating expenses                 34,802       32,990      104,366       96,244
                                                 ---------    ---------    ---------    ---------

Income from operations                               2,562        8,738       17,491       22,682

Other income (expense):
      Interest income                                1,776        1,365        4,921        4,363
      Interest expense                                (517)        (537)      (1,442)      (1,779)
      Other                                           (179)        (130)        (542)        (309)
                                                 ---------    ---------    ---------    ---------

Income before income taxes                           3,642        9,436       20,428       24,957

Income tax provision                                 1,165        2,816        6,537        8,714
                                                 ---------    ---------    ---------    ---------

Income before extraordinary gain                     2,477        6,620       13,891       16,243

Extraordinary gain on repurchase of debentures        --           --           --            444
                                                 ---------    ---------    ---------    ---------

Net income                                       $   2,477    $   6,620    $  13,891    $  16,687
                                                 =========    =========    =========    =========

Basic earnings per share:
      Income before extraordinary gain           $     .12    $     .32    $     .66    $     .78
                                                 =========    =========    =========    =========
      Net income                                 $     .12    $     .32    $     .66    $     .80
                                                 =========    =========    =========    =========

Diluted earnings per share:
      Income before extraordinary gain           $     .11    $     .31    $     .63    $     .75
                                                 =========    =========    =========    =========
      Net income                                 $     .11    $     .31    $     .63    $     .77
                                                 =========    =========    =========    =========

Shares used in computation:
      Basic                                         21,313       20,861       21,191       20,856
                                                 =========    =========    =========    =========
      Diluted                                       22,084       21,408       22,070       21,614
                                                 =========    =========    =========    =========
</TABLE>


See Notes to Condensed Consolidated Financial Statements.


                                       4
<PAGE>


                      NETWORK EQUIPMENT TECHNOLOGIES, INC.
                 Condensed Consolidated Statements of Cash Flows
                           (in thousands - unaudited)

<TABLE>
<CAPTION>
                                                                            Nine Months Ended
                                                                          Dec. 28,      Dec. 29,
                                                                            1997          1996
                                                                            ----          ----
<S>                                                                      <C>          <C>      
Cash and Cash Equivalents at Beginning of Period                         $  39,141    $  52,319
                                                                         ---------    ---------
Net Cash Flows from Operating Activities:
      Net income                                                            13,891       16,687
      Adjustments to reconcile net income to cash
          provided by operations:
           Extraordinary credit--gain on repurchase of debentures             --           (444)
           Depreciation and amortization                                    13,975       12,830
           Restricted stock compensation                                       270          297
Changes in assets and liabilities:
                 Accounts receivable                                         6,323       (9,477)
                 Inventories                                                  (761)       7,571
                 Prepaid expenses and other assets                            (763)      (1,482)
                 Accounts payable                                           (7,647)      (1,113)
                 Accrued liabilities                                           979       (2,212)
                                                                         ---------    ---------
Net cash provided by operations                                             26,267       22,657
                                                                         ---------    ---------

Cash Flows from Investing Activities:
      Purchases of temporary cash investments                              (68,828)    (117,929)
      Proceeds from maturities of temporary cash investments                63,032       91,814
      Purchases of property and equipment                                  (14,985)      (8,863)
      Additions to software production costs                                (2,544)      (1,957)
      Other                                                                 (2,134)        (357)
                                                                         ---------    ---------
      Net cash used for investing activities                               (25,459)     (37,292)
                                                                         ---------    ---------

Cash Flows from Financing Activities:
      Sale of common stock                                                   3,845        3,614
      Repurchase of common stock                                              --         (2,722)
      Repayments of borrowings                                                --         (3,869)
                                                                         ---------    ---------
           Net cash provided by (used for) financing activities              3,845       (2,977)
                                                                         ---------    ---------

Effect of exchange rate changes on cash                                         28         (427)
                                                                         ---------    ---------

                 Net increase (decrease) in cash and cash equivalents        4,681      (18,039)
                                                                         ---------    ---------

Cash and Cash Equivalents at End of Period                               $  43,822    $  34,280
                                                                         =========    =========

Other Cash Flow Information:
      Cash paid for:
           Interest                                                      $   1,880    $   2,396
           Income taxes                                                  $   5,912    $   4,252
      Non-cash investing and financing activities:
           Income tax benefit arising from employee stock option plans   $     636    $   1,634
</TABLE>

See Notes to Condensed Consolidated Financial Statements.                    


                                        5
<PAGE>


                      NETWORK EQUIPMENT TECHNOLOGIES, INC.
              Notes to Condensed Consolidated Financial Statements

1.   Basis of Presentation

     The consolidated financial statements include the accounts of the Company
     and its subsidiaries. Intercompany accounts and transactions have been
     eliminated.

     In the opinion of management, the accompanying unaudited condensed
     consolidated financial statements contain all adjustments (consisting only
     of normal recurring adjustments) considered necessary to present fairly the
     financial position as of December 28, 1997, and the results of operations
     and cash flows for the quarter and nine months ended December 28, 1997 and
     December 29, 1996. These financial statements should be read in conjunction
     with the March 31, 1997 audited consolidated financial statements and notes
     thereto. The results of operations for the nine months ended December 28,
     1997 are not necessarily indicative of the results to be expected for the
     fiscal year ending March 31, 1998.

2.   Inventories

     Inventories consist of (in thousands):

                                                    December 28,       March 31,
                                                        1997             1997
                                                        ----             ----
                                                    (unaudited)

     Purchased components                              $ 4,650         $ 6,710
     Work-in-process                                    16,161          13,675
     Finished goods                                      2,645           2,277
                                                       -------         -------
                                                       $23,456         $22,662
                                                       =======         =======

3.   Earnings Per Share

     In the third quarter of fiscal 1998, the Company implemented Statement of
     Financial Accounting Standards No. 128, "Earnings per Share". This standard
     replaces previous earnings per share reporting requirements and requires
     restatement of prior periods. Basic earnings per share has been computed
     based upon the weighted average number of common shares outstanding for the
     periods presented. For diluted earnings per share, shares used in the per
     share computation include weighted average common and common equivalent
     shares outstanding. Common equivalent shares consist of shares issuable
     upon the assumed exercise of dilutive stock options and totalled 771,000
     and 547,000 for the quarters ended December 28, 1997 and December 29, 1996,
     respectively, and 879,000 and 753,000 for the nine months ended December
     28, 1997 and December 29, 1996, respectively.

4.   Recently Issued Accounting Standard

     In June 1997, the FASB adopted SFAS No. 130, "Reporting Comprehensive
     Income", which requires that an enterprise report, by major components and
     as a single total, the change in its net assets during the period from
     nonowner sources; and SFAS No. 131, "Disclosures about Segments of an
     Enterprise and Related Information", which establishes annual and interim
     reporting standards for an enterprise's business segments and related
     disclosures about its products, services, geographic areas, and major
     customers. Adoption of these statements will not impact the Company's
     consolidated financial position, results of operations or cash flows. Both
     statements are effective for the Company beginning April 1, 1998, with
     earlier application permitted.


                                       6
<PAGE>

                      MANAGEMENT'S DISCUSSION AND ANALYSIS
                OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION

This discussion and analysis should be read in conjunction with Management's
Discussion and Analysis in the Company's 1997 Annual Report to Shareholders and
Part I of the Company's Form 10-K for the fiscal year ended March 31, 1997.


RESULTS OF OPERATIONS

The following table depicts selected data derived from the Company's
Consolidated Statements of Income expressed as a percentage of revenue for the
periods presented:

<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------
                                                 Quarter Ended         Nine Months Ended
                                                 -------------         -----------------
                                               Dec. 28,   Dec. 29,    Dec. 28,   Dec. 29,
Percent of Revenue                              1997       1996        1997       1996
-----------------------------------------------------------------------------------------
<S>                                             <C>        <C>         <C>        <C>  
Product revenue                                  62.8       67.3        64.7       66.3
Service and other revenue                        37.2       32.7        35.3       33.7
                                                -----      -----       -----      -----
     Total revenue                              100.0      100.0       100.0      100.0
                                                -----      -----       -----      -----
                                                                                 
                                                                                 
Product gross margin                             60.3       58.0        61.2       57.7
Service and other revenue gross margin           37.9       33.9        38.1       34.6
                                                -----      -----       -----      -----
     Total gross margin                          51.9       50.1        53.0       49.9
                                                -----      -----       -----      -----
                                                                                 
Sales and marketing                              29.0       24.1        27.8       24.0
Research and development                         15.1       12.0        13.8       12.8
General and administrative                        4.3        3.5         3.8        3.6
                                                -----      -----       -----      -----
     Total operating expenses                    48.4       39.6        45.4       40.4
                                                -----      -----       -----      -----
                                                                                 
Income from operations                            3.5       10.5         7.6        9.5
                                                -----      -----       -----      -----
                                                                                 
Net income                                        3.4        7.9         6.0        7.0
                                                -----      -----       -----      -----
-----------------------------------------------------------------------------------------
</TABLE>

Revenue                                                                        

Total revenue for the third quarter and first nine months of fiscal 1998
decreased 13.6% and 3.5%, respectively, from the comparable periods of fiscal
1997. Product revenue for the third quarter of fiscal 1998 decreased 19.5%, or
$10.9 million, and on a year-to-date basis decreased 5.8%, or $9.1 million, from
the comparable periods of the prior year. A decrease in sales through the North
American channel from the prior year negatively impacted both the quarter and
year-to-date periods. Decreases in international product sales, partially as a
result of the recent economic events in Asia, also had a negative impact on
third quarter revenues. During the second quarter of fiscal 1998, the Company
announced and shipped a number of new products. While sales of these new
products have added incrementally to revenue, the lower-than-expected volume
coupled with issues related to a major product transition, have contributed to
the weakness of product revenue as compared to prior year periods. Management
expects the impact of the economic events in Asia and Latin America, as well as
product transition issues, to continue to impact product revenues for at least
the remainder of fiscal 1998.

Service and other revenue decreased slightly quarter-over-quarter, and increased
$.7 million for the first nine months of fiscal 1998 from the comparable periods
of fiscal 1997. The year-over-year increase was attributable to an increase in
service revenue, partially offset by a decrease in revenue from systems
integration services in support of product sales to the U.S. government.


                                       7
<PAGE>

Gross Margin

Total gross margin as a percentage of total revenue increased to 51.9% and 53.0%
for the third quarter and first nine months of fiscal 1998 from 50.1% and 49.9%,
respectively, for the comparable periods of fiscal 1997. Increases for both
periods resulted from improvements in both the product and service and other
gross margins. Product margins increased to 60.3% and 61.2% for the third
quarter and first nine months of fiscal 1998, respectively, from 58.0% and 57.7%
in the comparable periods of the prior year. The quarter-over-quarter increase
primarily resulted from a favorable channel mix, as an increased percentage of
the quarter's revenue represented sales through domestic channels and a
decreased percentage through the international channels. Additionally, both the
quarter and year-to-date product margins were positively impacted by a favorable
product mix.

Service and other gross margin increased to 37.9% and 38.1% in the third quarter
and first nine months of fiscal 1998 from 33.9% and 34.6%, respectively, in the
comparable periods of fiscal 1997. Contributing to the increase in these margins
were improvements in both the service margin and the margin on systems
integration services in support of product sales to the U.S. government, which
increased to 22.4% for the first nine months of fiscal 1998 from 19.0% for the
comparable period of fiscal 1997.

Management expects total gross margin as a percentage of total revenue to remain
fairly constant during the remainder of fiscal 1998.

Operating Expenses

Operating expenses in the third quarter and first nine months of fiscal 1998
increased $1.8 million and $8.1 million from the comparable periods of the prior
year, and increased as a percentage of total revenue to 48.4% from 39.6%
quarter-over-quarter and 45.4% from 40.4% year-over-year. Management expects
operating expenses to increase during the remainder of fiscal 1998.

Sales and marketing expense increased $.8 million and $6.5 million in the third
quarter and first nine months of fiscal 1998, respectively, from the comparable
periods of fiscal 1997. The increase in spending for both periods is primarily a
result of increased compensation expense in support of the marketing
infrastructure. On a year-to-date basis, the increase in spending also resulted
from increased trade show, advertising, travel and compensation expenses in
conjunction with new product launches. Management expects sales and marketing
spending to increase during the remainder of fiscal 1998.

Research and development expense increased $.8 million and $1.4 million in the
third quarter and first nine months of fiscal 1998, respectively, from the
comparable periods of fiscal 1997, and increased as a percentage of total
revenue to 15.1% from 12.0% quarter-over-quarter and 13.8% from 12.8%
year-over-year. The increase for both periods is primarily due to an increase in
costs associated with the purchase of capital equipment to support product
development and an increase in costs associated with efforts to recruit and
retain engineering personnel. Management plans to continue funding research and
development efforts at levels necessary to advance product programs and expects
research and development spending to remain fairly constant during the remainder
of fiscal 1998.

General and administrative expense increased $.2 million and $.3 million in the
third quarter and first nine months of fiscal 1998, respectively, from the
comparable periods of fiscal 1997, and increased slightly as a percentage of
total revenue. Management expects general and administrative expense to remain
fairly flat for the remainder of fiscal 1998.

In the fourth quarter of fiscal 1998 and the first half of fiscal 1999, the
Company will incur one-time charges relating to a move to new corporate
headquarters. These charges will consist principally of duplicate rent to be
paid for a period less than one year, moving costs incurred during the move, and
other costs related to abandoning the old facility. Management's current
estimate of these costs is not expected to exceed $5.0 million.

Non-Operating Items

Net interest income for the third quarter and first nine months of fiscal 1998
increased $.4 million and $.9 million from the comparable periods of fiscal
1997, primarily as a result of higher cash balances.


                                        8
<PAGE>


The third quarter and first nine months of fiscal 1998 included a provision for
income tax expense of $1.2 million and $6.5 million, respectively, at an
effective rate of 32% as compared to $2.8 million and $8.7 million at effective
rates of 30% and 35%, respectively, for the third quarter and first nine months
of fiscal 1997. In the third quarter of fiscal 1997, the Company decreased the
year-to-date tax rate from 38% to 35%, primarily as a result of expected U.S.
tax benefits on increased export revenue. The lower effective tax rate in fiscal
1998 is primarily due to the utilization of foreign net operating loss
carryforwards.

The results for the first nine months of fiscal 1997 also incuded an
extraordinary gain of $.4 million, or two cents per share, arising from the
repurchase of $4.7 million of convertible subordinated debentures.


BUSINESS ENVIRONMENT AND RISK FACTORS

All statements in this 10-Q that are not historical are forward-looking
statements that involve risks and uncertainties including, but not limited to,
the risks and uncertainties detailed in the Company's filings with the
Securities and Exchange Commission. Actual results may differ materially from
those projected.

Historically, the majority of the Company's revenue in each quarter results from
orders received and shipped in that quarter. Because of these ordering patterns
and potential delivery schedule changes, the Company does not believe that
backlog is indicative of future revenue levels. In addition, because a large
portion of the Company's orders historically have been received and filled in
the last month of the quarter, forecasting sales during a quarter is difficult,
and there is a significant risk of excessive or inadequate inventory if orders
do not match forecast. Furthermore, if large orders do not close when forecasted
or if near-term demand weakens for the products the Company has available to
ship, the Company's operating results for that or subsequent quarters would be
adversely affected. Economic volatility in Asia and Latin America and other
parts of the world may have a significant impact on future performance.

Expense levels are relatively fixed and are set based on expectations regarding
future revenue and margin levels. These expectations derive from making
judgments on issues such as planned revenue, future technology trends,
competitive products and services, pricing and customer requirements, a process
that involves evaluation of information that is often unclear and in conflict.
All markets for the Company's products are very competitive and dynamic and many
are susceptible to changing regulations and political conditions. The Company
has limited visibility into factors that could influence its revenue, mix of
product orders and other revenue sources and margins, particularly in
international markets that are served primarily by non-exclusive resellers.

The Company's products incorporate intellectual property and technology owned by
the Company or licensed from third parties. The Company's ability to maintain
and enhance the value of its intellectual property and technology and third
party licenses will affect future product and service offerings. Moreover, the
Company believes that operating results will depend on successful development
and introduction of new products and enhancements to existing products and
service offerings. Products recently announced by the Company are targeted at
markets that include, and are much broader than, the Company's traditional
multiservice bandwidth manager customers. The Company's ability to maintain
profitability and to achieve revenue growth is dependent on successfully
managing this product transition by migrating existing key customers to the new
products and successfully gaining sales volume from new customers in the
expanded markets. There can be no assurance that the Company will succeed in
such efforts or that customers will accept new, enhanced and existing products
and services in quantities and at prices and margins that are consistent with
the Company's expectations. The Company's success also depends on its ability to
attract and retain employees necessary to support planned development and
growth.

The Company's products include components, assemblies and subassemblies that are
currently available from single sources and, in some cases, are in short supply.
Testing and manufacturing of products designed by N.E.T. are performed at the
Company's Redwood City, California, facility. Pursuant to several types of
agreements, the Company also resells products designed or manufactured by third
parties for order fulfillment, quality control and support of their products.
Such products are generally available to end users from sources other than the
Company, and are generally sold or licensed by the Company at gross margins that
are lower than products designed and 


                                        9
<PAGE>



manufactured by the Company. There can be no assurance that these third-party
manufacturers will be able to meet the Company's future requirements for these
products, that the quality control and support provided by these manufacturers
will be adequate, or that the Company's gross margins on these products will not
be lowered further. Product availability limitations, price increases or
business interruptions could adversely impact revenue, margins and earnings.

The Company has distribution, product and technology relationships with a number
of significant customers and entities that are considered by the Company to be
strategic. Most of the Company's competitors have similar relationships with
their respective customers and other parties. Changes in the Company's
relationships or changes in similar relationships among competitors could have a
material impact on competitive and other factors described above, including the
Company's operating results. Also, litigation or other claims based on
securities, intellectual property, patent, product, regulatory or other issues
or factors could materially adversely affect the Company's business, operating
results and finances.

A significant portion of the Company's revenue comes from contracts with the
U.S. government, most of which do not include purchase commitments. There can be
no assurance that orders from the U.S. government, or from other customers, will
continue at historical levels, or that the Company will be able to obtain orders
from new customers.

Because of the factors described above, as well as others that may affect the
Company's operating results, past financial results may not be an accurate
indicator of future performance.


LIQUIDITY AND CAPITAL RESOURCES

As of December 28, 1997, the Company had cash, cash equivalents and temporary
cash investments of $149.4 million, as compared to $138.7 million as of March
31, 1997. Cash provided by operations was $26.3 million during the first nine
months of fiscal 1998, which was a $3.6 million increase from the cash provided
by operations from the comparable period of the prior year. This additional cash
was principally generated by a decrease in accounts receivable during the first
nine months of fiscal 1998 as compared to an increase in the comparable period
of fiscal 1997. This increase was partially offset by an increase in inventories
and a decrease in accounts payable.

Net cash used for investing activities of $25.5 million for the first nine
months of fiscal 1998 consisted primarily of purchases of property and equipment
of $15.0 million, net purchases of temporary cash investments of $5.8 million
and an increase in software production costs of $2.5 million.

Net cash provided by financing activities of $3.8 million for the first nine
months of fiscal 1998 pertains to the issuance of Common Stock relating to the
employee stock benefit plans.



                                       10
<PAGE>


As of December 28, 1997, the Company had available an unsecured $10.0 million
line of credit. Borrowings under this committed facility are available through
May 1998 and would bear interest at the bank's base rate (which approximates
prime). At December 28, 1997, there were no outstanding borrowings under this
facility.

In April 1997, the Company entered into a 12-year operating lease agreement
pursuant to which a new corporate headquarters facility will be built in
Fremont, California. In conjunction with the project management and design and
construction of the new facility, the Company expects to incur expenditures
during the remainder of fiscal 1998, the significant portion of which it plans
to capitalize. Management expects to fund the leasehold improvements with
available cash and investments. The Company plans to move to its new
headquarters when the buildings are completed, which is expected to occur during
the first half of fiscal 1999. The Company's current headquarters' lease expires
in October 1998.

The Company believes that current cash and cash equivalents, temporary cash
investments and cash flows from operations will be sufficient to fund
operations, including costs associated with the new headquarters' facility,
purchases of capital equipment and research and development programs currently
planned at least through the next twelve months.



                                       11
<PAGE>



                                     PART II

                                OTHER INFORMATION



Item 6. Exhibits and Reports on Form 8-K

     (a)  Exhibits

          No exhibits were required to be filed by the Company during its fiscal
          quarter ended December 28, 1997.

     (b)  Reports on Form 8-K

          No report on Form 8-K was filed by the Company during its fiscal
          quarter ended December 28, 1997.



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<PAGE>



                                    SIGNATURE


     Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this Report to be signed on its behalf by the
undersigned thereunto duly authorized.


                                        NETWORK EQUIPMENT
                                        TECHNOLOGIES, INC.




Dated:  February 10, 1998               /s/ Craig M. Gentner
                                        --------------------
                                        Craig M. Gentner
                                        Senior Vice President and
                                        Chief Financial Officer and Secretary
                                        (Principal Financial and Accounting
                                        Officer)


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