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

                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 September 27, 2002

                                       OR

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

For the transition period from ________________________to ______________________

Commission File Number 0-15323

                      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)

                            6900 Paseo Padre Parkway
                             Fremont, CA 94555-3660
                                 (510) 713-7300
               --------------------------------------------------
               (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, par
value $.01, on October 25, 2002 was 22,470,428.

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


                                     Page 1
<PAGE>

                      NETWORK EQUIPMENT TECHNOLOGIES, INC.

                                      INDEX

<TABLE>
<CAPTION>
                                                                                                           Page
                                                                                                          Number
                                                                                                          ------
<S>                                                                                                         <C>
PART I.       FINANCIAL INFORMATION

     Item 1.  Financial Statements

              Condensed Consolidated Balance Sheets at September 27, 2002 and March 29, 2002                 3

              Condensed Consolidated Statements of Operations and
              Comprehensive Loss - Quarter and Six Months ended
              September 27, 2002 and September 28, 2001                                                      4

              Condensed Consolidated Statements of Cash Flows -
              Six Months ended September 27, 2002 and September 28, 2001                                     5

              Notes to Condensed Consolidated Financial Statements                                           6

     Item 2.  Management's Discussion and Analysis of Results of Operations and Financial Condition          9

     Item 3.  Quantitative and Qualitative Disclosures about Market Risk                                    21

     Item 4.  Disclosure Controls and Procedures                                                            21

PART II. OTHER INFORMATION

     Item 1.  Legal Proceedings                                                                             22

     Item 6.  Exhibits and Reports on Form 8-K                                                              22

SIGNATURES                                                                                                  23
</TABLE>


                                     Page 2
<PAGE>

                                     PART I

FINANCIAL INFORMATION
Item 1. Financial Statements

NETWORK EQUIPMENT TECHNOLOGIES, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS

                   (In thousands, except par value- unaudited)

<TABLE>
<CAPTION>
                                                                                        September 27,      March 29,
                                                                                            2002             2002
--------------------------------------------------------------------------------------------------------------------
<S>                                                                                     <C>               <C>
Assets                                                                                                        (1)
    Current assets:
        Cash and cash equivalents                                                       $  12,584         $  15,879
        Restricted cash                                                                     1,463             3,255
        Short-term investments                                                             74,640            75,763
        Accounts receivable, net of allowances of $1,966 at September 27, 2002 and
           $1,896 at March 29, 2002                                                        18,215            19,501
        Inventories                                                                        15,638            14,804
        Prepaid expenses and other assets                                                   5,543             7,262
--------------------------------------------------------------------------------------------------------------------
            Total current assets                                                          128,083           136,464
--------------------------------------------------------------------------------------------------------------------

    Property and equipment, net                                                            37,244            37,972
    Software production costs, net                                                            222               563
    Goodwill, net                                                                              --             9,592
    Other assets                                                                            2,793             2,831
--------------------------------------------------------------------------------------------------------------------
                                                                                        $ 168,342         $ 187,422
====================================================================================================================

Liabilities and Stockholders' Equity
    Current liabilities:
        Accounts payable                                                                $   6,468         $   7,870
        Accrued liabilities                                                                18,289            21,470
        Current portion of capital lease obligation                                            --                53
--------------------------------------------------------------------------------------------------------------------
           Total current liabilities                                                       24,757            29,393
--------------------------------------------------------------------------------------------------------------------

    Long-term liabilities:
        7 1/4% redeemable convertible subordinated debentures                              24,706            24,706
        Other long-term liabilities                                                         1,844             2,016
--------------------------------------------------------------------------------------------------------------------
            Total long-term liabilities                                                    26,550            26,722
--------------------------------------------------------------------------------------------------------------------

    Stockholders' equity:
        Preferred stock, $.01 par value
            Authorized: 5,000 shares
            Outstanding: none                                                                  --                --
        Common stock, $.01 par value
            Authorized: 50,000 shares
            Outstanding: 22,467 shares at September 27, 2002 and
               22,215 shares at March 29, 2002                                                224               222
        Additional paid-in capital                                                        183,444           184,401
        Treasury stock                                                                     (3,408)           (5,581)
        Accumulated other comprehensive income (loss)                                          16              (611)
        Retained deficit                                                                  (63,241)          (47,124)
--------------------------------------------------------------------------------------------------------------------
           Total stockholders' equity                                                     117,035           131,307
--------------------------------------------------------------------------------------------------------------------
                                                                                        $ 168,342         $ 187,422
====================================================================================================================
</TABLE>

See accompanying notes to condensed consolidated financial statements

(1)   Derived from the March 29, 2002 audited consolidated financial statements


                                     Page 3
<PAGE>

NETWORK EQUIPMENT TECHNOLOGIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS

              (In thousands, except per share amounts - unaudited)

<TABLE>
<CAPTION>
                                                                 Quarter ended           Six months ended
                                                            ----------------------    ----------------------
                                                             Sep. 27,     Sep. 28,     Sep. 27,     Sep. 28,
                                                               2002         2001         2002         2001
------------------------------------------------------------------------------------------------------------
<S>                                                         <C>          <C>          <C>          <C>
Revenue:
    Product revenue                                         $ 23,095     $ 18,360     $ 45,096     $ 34,693
    Service and other revenue                                  4,971        6,491       10,198       14,027
------------------------------------------------------------------------------------------------------------
        Total revenue                                         28,066       24,851       55,294       48,720
------------------------------------------------------------------------------------------------------------
Cost of sales:
    Cost of product revenue                                   14,074       11,888       25,100       21,739
    Cost of service and other revenue                          4,801        6,208        9,733       13,430
------------------------------------------------------------------------------------------------------------
        Total cost of sales                                   18,875       18,096       34,833       35,169
------------------------------------------------------------------------------------------------------------
Gross margin                                                   9,191        6,755       20,461       13,551
Operating expenses:
    Sales and marketing                                        7,883        8,504       16,399       17,817
    Research and development                                   6,684        9,326       13,167       19,879
    General and administrative                                 2,907        3,060        5,772        6,375
    Amortization of goodwill and other intangible assets          --          861           --        1,722
    Restructuring costs                                        1,002           --        1,172           --
------------------------------------------------------------------------------------------------------------
        Total operating costs                                 18,476       21,751       36,510       45,793
------------------------------------------------------------------------------------------------------------
           Loss from operations                               (9,285)     (14,996)     (16,049)     (32,242)

Interest income                                                  616        1,863        1,363        3,621
Interest expense                                                (504)        (459)      (1,013)        (927)
Gain on sale of Federal Services Business                         --           --        5,000        2,500
Other income (expense)                                           (18)         228        2,181          (62)
------------------------------------------------------------------------------------------------------------
           Loss before income taxes                           (9,191)     (13,364)      (8,518)     (27,110)

Income tax provision (benefit)                                (2,304)          (9)      (2,329)          17
------------------------------------------------------------------------------------------------------------
        Net loss before cumulative change in
           accounting principle, relating to goodwill         (6,887)     (13,355)      (6,189)     (27,127)
------------------------------------------------------------------------------------------------------------
Cumulative effect of change in accounting principle,
     relating to goodwill                                         --           --       (9,592)          --
------------------------------------------------------------------------------------------------------------
Net loss                                                    $ (6,887)    $(13,355)    $(15,781)    $(27,127)
============================================================================================================

Loss per share:
    Basic and diluted                                       $  (0.31)    $  (0.61)    $  (0.71)    $  (1.23)
============================================================================================================

Shares used in per share computation:
    Basic and diluted                                         22,376       22,016       22,336       21,996
============================================================================================================

Consolidated Statements of Comprehensive Loss
------------------------------------------------------------------------------------------------------------
Net loss                                                    $ (6,887)    $(13,355)    $(15,781)    $(27,127)

Other comprehensive income (loss), net of tax:
    Cumulative translation adjustments                            12          (50)          54           --
    Net unrealized gains on securities,
        net of taxes of $0                                       222          362          574          149
------------------------------------------------------------------------------------------------------------

           Comprehensive loss                               $ (6,653)    $(13,043)    $(15,153)    $(26,978)
============================================================================================================
</TABLE>

See accompanying notes to condensed consolidated financial statements


                                     Page 4
<PAGE>

NETWORK EQUIPMENT TECHNOLOGIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

                           (In thousands - unaudited)

<TABLE>
<CAPTION>
                                                                      Six months ended
                                                                      ----------------
                                                                   Sep. 27,     Sep. 28,
                                                                     2002         2001
----------------------------------------------------------------------------------------
<S>                                                                <C>          <C>
Cash and cash equivalents at beginning of period                   $ 15,879     $ 20,471

Cash flows from operating activities:
    Net loss                                                        (15,781)     (27,127)
    Adjustments required to reconcile net loss to net
        cash used for operating activities:
           Depreciation and amortization                              4,722        7,171
           Amortization of goodwill and other intangibles                --        1,722
           Gain on sale of Federal Services Business                 (5,000)      (2,500)
           Loss on disposition of property and equipment                  7          304
           Gain on insurance proceeds                                (2,187)          --
           Insurance proceeds                                         3,258           --
           Cumulative effect of change in accounting principle,
               relating to goodwill                                   9,592           --
           Changes in operating assets and liabilities:
               Accounts receivable                                    1,286        8,365
               Inventories                                             (834)         675
               Prepaid expenses and other assets                        767        1,527
               Accounts payable                                      (1,432)      (1,221)
               Accrued liabilities                                   (3,529)      (5,736)
----------------------------------------------------------------------------------------
        Net cash used for operating activities                       (9,131)     (16,820)
----------------------------------------------------------------------------------------

Cash flows from investing activities:
    Purchases of short-term investments                             (35,894)     (48,872)
    Proceeds from maturities of short term investments               37,628       70,803
    Purchases of property and equipment                              (3,561)      (9,037)
    Proceeds from sale of Federal Services Business                   5,000        2,500
    (Increase) decrease in restricted cash                            1,792      (10,620)
    Other                                                                 8          192
----------------------------------------------------------------------------------------
        Net cash provided by investing activities                     4,973        4,966
----------------------------------------------------------------------------------------

Cash flows from financing activities:
    Sale of common stock                                                883        1,045
----------------------------------------------------------------------------------------
        Net cash provided by financing activities                       883        1,045
----------------------------------------------------------------------------------------

Effect of exchange rate changes on cash                                 (20)        (131)
----------------------------------------------------------------------------------------
        Net decrease in cash and cash equivalents                    (3,295)     (10,940)
----------------------------------------------------------------------------------------

Cash and cash equivalents at end of period                         $ 12,584     $  9,531
========================================================================================

Other cash flow information:
    Cash paid (refunded) during the period:
        Interest                                                   $    988     $    905
        Income taxes                                               $ (1,067)    $ (1,379)
    Non-cash investing and financing activities:
        Unrealized gain on available-for-sale securities           $    574     $    148
</TABLE>

See accompanying notes to the condensed consolidated financial statements


                                     Page 5
<PAGE>

                      NETWORK EQUIPMENT TECHNOLOGIES, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

1. BASIS OF PRESENTATION

The condensed consolidated financial statements include the accounts of Network
Equipment Technologies, Inc. and subsidiaries doing business as net.com
("net.com"or the "Company"). 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 September 27, 2002, the results of operations for the quarter and
six months ended September 27, 2002 and September 28, 2001, and the cash flows
for the six months ended September 27, 2002 and September 28, 2001. These
financial statements should be read in conjunction with the March 29, 2002
audited consolidated financial statements and notes thereto. The results of
operations for the quarter and six months ended September 27, 2002 are not
necessarily indicative of the results to be expected for the fiscal year ending
March 28, 2003.

2. INVENTORIES

Inventories are stated at lower of cost (first-in, first-out) or market and
include material, labor and manufacturing overhead costs. Inventories at
September 27, 2002 and March 29, 2002 consisted of the following:

(Dollars in thousands)                     September 27, 2002     March 29, 2002
--------------------------------------------------------------------------------

Purchased components                                  $ 5,351            $ 5,388

Work-in-process                                         7,102              8,345

Finished goods                                          3,185              1,071
--------------------------------------------------------------------------------

                                                      $15,638            $14,804
================================================================================

3. LOSS PER SHARE

Basic loss 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 potentially dilutive shares outstanding. Potentially dilutive shares consist
of shares issuable upon the assumed exercise of dilutive stock options. These
shares totaled 118,000 and 32,000 for the quarter ended September 27, 2002 and
September 28, 2001, respectively. The shares for the quarter ended September 27,
2002 and September 28, 2001 were excluded from the per share computation because
they were anti-dilutive. Additionally, there were 784,000 shares of common stock
issuable upon conversion of debentures. These shares, and the related effect of
the accrued interest on the debentures, were not included in the calculation of
diluted earnings per share for the periods September 27, 2002 and September 28,
2001, as their inclusion would have been anti-dilutive in both periods.

4. OTHER COMPREHENSIVE LOSS

Other comprehensive loss at September 27, 2002 and March 29, 2002 is comprised
of cumulative foreign translation adjustments of ($549,000) and ($602,000),
respectively, and cumulative net unrealized gains (losses) on available-for-sale
securities of $565,000 and ($9,000), respectively.

5. RESTRUCTURING COSTS

In the second quarter of fiscal 2003, net.com recorded a restructuring charge of
$1.0 million. This charge included $312,000 for severance, $563,000 for lease
write offs, $72,000 for outplacement costs and $79,000 for other restructuring
costs. The remaining liability for restructuring charges is $1.0 million at
September 27, 2002.


                                     Page 6
<PAGE>

Components of accrued restructuring charges, which are included in accrued
liabilities in the accompanying balance sheet, and changes in accrued amounts
related to this restructuring program during the first six months of fiscal 2003
and as of March 29, 2002 were as follows (in thousands):

<TABLE>
<CAPTION>
========================================================================================
                                 Employee                 Office      Other
                                Separation     Lease     Closure  Restructuring
                                  Costs      Write-off    Costs       Costs       Total
========================================================================================
<S>                              <C>         <C>         <C>         <C>         <C>
Balance at March 29, 2002        $   174     $    --     $   257     $   153     $   584
----------------------------------------------------------------------------------------
Provision                            312         563         170         127       1,172
----------------------------------------------------------------------------------------
Payments                            (227)        (21)       (283)       (209)       (740)
----------------------------------------------------------------------------------------
Balance at September 27, 2002    $   259     $   542     $   144     $    71     $ 1,016
========================================================================================
</TABLE>

net.com believes that all costs associated with its plan of business
reorganization will be paid no later than the end of fiscal 2005.

6. RECENTLY ISSUED ACCOUNTING STANDARDS

In August 2001, the Financial Accounting Standards Board (FASB) issued Statement
of Financial Accounting Standards (SFAS) No. 144, Accounting for the Impairment
or Disposal of Long-Lived Assets, which addresses financial accounting and
reporting for the impairment or disposal of long-lived assets. While SFAS No.
144 supersedes SFAS No. 121, Accounting for the Impairment of Long-Lived Assets
and for Long-Lived Assets to Be Disposed Of, it retains many of the fundamental
provisions of SFAS No. 121. SFAS No. 144 also supersedes the accounting and
reporting provisions of APB No. 30, Reporting the Results of Operations -
Reporting the Effects of Disposal of a Segment of a Business, and Extraordinary,
Unusual and Infrequently Occurring Events and Transactions, for the disposal of
a segment of a business. However, it retains the requirement in APB No. 30 to
report separately discontinued operations and extends that reporting to a
component of an entity that either has been disposed of (by sale, abandonment,
or in a distribution to owners) or is classified as held for sale. SFAS No. 144
was effective for fiscal years beginning after December 15, 2001 and interim
periods within those fiscal years. The adoption of SFAS No. 144 did not have a
material impact on net.com's consolidated financial statements.

Effective July 1, 2001, the Company adopted SFAS No. 141, Business Combinations.
SFAS 141 requires that the purchase method of accounting be used for all
business combinations initiated after June 30, 2001. The adoption of SFAS 141
did not have an impact on the results of operations, financial position or
liquidity of the Company.

In June 2002, the FASB issued SFAS 146, Accounting for Costs Associated with
Exit or Disposal Activities, which addresses financial accounting and reporting
for costs associated with exit or disposal activities and nullifies Emerging
Issues Task Force (EITF) Issue No. 94-3, "Liability Recognition for Certain
Employee Termination Benefits and Other Costs to Exit an Activity (including
Certain Costs Incurred in a Restructuring)." SFAS 146 requires that a liability
for a cost associated with an exit or disposal activity be recognized when the
liability is incurred. Under EITF 94-3, a liability for an exit cost was
recognized at the date of an entity's commitment to an exit plan. SFAS 146 also
establishes that the liability should initially be measured and recorded at fair
value. net.com will adopt the provisions of SFAS 146 for exit or disposal
activities that are initiated after December 31, 2002. The adoption of SFAS 146
will not have an impact on net.com's historical consolidated financial
statements.

7. SALE OF N.E.T. FEDERAL, INC.'S PROFESSIONAL SERVICE BUSINESS

On December 1, 2000, net.com sold the assets of its federal services business to
CACI International Inc (CACI) for cash consideration of $40.0 million. The
assets sold were comprised mainly of Federal Government service contracts,
accounts receivable, spares inventory and fixed assets. The total net gain on
the sale to date is $24.9 million. The cash received from CACI to date is $37.0
million. During the quarter ended June 28, 2002 net.com earned and recorded a
gain of $5.0 million as a result of meeting certain milestones. The remaining
$3.0 million is payable in $1.5 million installments during the first quarters
of fiscal 2004 and 2005 and is not contingent upon meeting any milestones.
Additionally, CACI and net.com as a result of the sale, have an existing
agreement whereby net.com will receive royalties based on maintenance contract
revenue.


                                     Page 7
<PAGE>

8. GOODWILL AND OTHER INTANGIBLE ASSETS - ADOPTION OF STATEMENT NO. 142

In July 2001, the FASB issued SFAS No. 142 "Goodwill and Other Intangible
Assets," which establishes financial accounting and reporting for acquired
goodwill and other intangible assets and supercedes APB Opinion No.17 ,
"Intangible Assets." net.com adopted SFAS No. 142 on March 30, 2002, the
beginning of its fiscal year. SFAS No. 142 requires that goodwill and intangible
assets that have indefinite useful lives not be amortized but, instead, tested
at least annually for impairment. Accordingly, net.com ceased amortization of
all goodwill on March 30, 2002. Intangible assets that have finite useful lives,
consisting primarily of patents, continue to be amortized over their estimated
useful lives. Any impairment loss was measured as of the date of adoption and
recognized as the cumulative effect of a change in accounting principle.

The standard requires that goodwill be tested for impairment annually. In the
year of adoption, the standard required a transitional goodwill impairment
evaluation, which was a two-step process. The first step of the goodwill
impairment test, used to identify potential impairment, compares the fair value
of a reporting unit with its carrying amount, including goodwill. If the fair
value of a reporting unit exceeds its carrying amount, goodwill of the reporting
unit is considered not impaired, thus the second step of the impairment test is
unnecessary. If the carrying amount of a reporting unit exceeds its fair value,
the second step of the goodwill impairment test shall be performed to measure
the amount of impairment loss. During the quarter ended June 28, 2002, net.com
completed this first step, which indicated that the goodwill could be impaired.

The second step of the goodwill impairment test used to measure the amount of
impairment loss compares the implied fair value of goodwill with the carrying
amount of the goodwill. If the carrying amount of the goodwill exceeds the
implied fair value of the goodwill, an impairment loss shall be recognized in
amount equal to that excess. As of June 28, 2002, net.com completed this second
step and measured and recognized a transitional impairment loss of $9.6 million
as a cumulative change in accounting principle in its statement of operations.

The following table represents the impact on net loss and basic and diluted per
share from the reduction of amortization of goodwill as if SFAS No. 142 was
adopted in the first quarter of fiscal 2002:

<TABLE>
<CAPTION>
                                                               Six months ended
                                                               ----------------
                                                             Sep. 27,     Sep. 28,
(Dollars in thousands, except for per share amounts)           2002         2001
---------------------------------------------------------------------------------
<S>                                                         <C>          <C>
Reported net loss                                           $(15,781)    $(27,127)
Workforce amortization                                            --           48
Goodwill amortization                                             --        1,674
---------------------------------------------------------------------------------
Adjusted net loss                                           $(15,781)    $(25,405)
=================================================================================

Basic and diluted loss per share:
Reported basic and diluted loss per share                   $  (0.71)    $  (1.23)
Workforce amortization per share                                  --           --
Goodwill amortization per share                                   --         0.08
---------------------------------------------------------------------------------
Adjusted basic and diluted loss per share                   $  (0.71)    $  (1.15)
=================================================================================

Common and common equivalent shares used in calculation:
Basic and diluted                                             22,336       21,996
=================================================================================
</TABLE>


                                     Page 8
<PAGE>

Item 2.

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

This discussion and analysis should be read in conjunction with Part II of our
Form 10-K for the fiscal year ended March 29, 2002.

Statements contained in this Form 10-Q which are not historical facts are
forward-looking statements within the meaning of the federal securities laws
that relate to future events of our financial performance. A forward-looking
statement may contain words such as "plans," "hopes," "believes," "estimates,"
"will continue to be," "will be," "continue to," "expect to," "anticipate that,"
"to be," or "can impact," including statements that relate to products,
customers, operations and contingent payments. Forward-looking statements are
based upon management expectations and involve risks and uncertainties that may
cause actual results to differ materially from those anticipated in the
forward-looking statements. Many factors may cause actual results to vary
including, but not limited to, the factors discussed in this Form 10-Q. net.com
expressly disclaims any obligation or undertaking to revise or publicly release
any updates or revisions to any forward-looking statement contained in this Form
10-Q. Investors should carefully review the risk factors described in this Form
10-Q along with other documents net.com files from time to time with the
Securities and Exchange Commission.

RESULTS OF OPERATIONS

The following table depicts selected data derived from our consolidated
statements of operations expressed as a percentage of revenue for the periods
presented:

<TABLE>
<CAPTION>
                                                          Quarter ended       Six months ended
                                                       -------------------   ------------------
                                                       Sep. 27,   Sep. 28,   Sep. 27,   Sep. 28,
Percent of revenue                                       2002       2001       2002       2001
----------------------------------------------------------------------------------------------
<S>                                                     <C>        <C>        <C>        <C>
Product revenue                                          82.3%      73.9%      81.6%      71.2%
Service and other revenue                                17.7       26.1       18.4       28.8
----------------------------------------------------------------------------------------------
     Total revenue                                      100.0      100.0      100.0      100.0
----------------------------------------------------------------------------------------------
Product revenue gross margin                             39.1       35.3       44.3       37.3
Service and other revenue gross margin                    3.4        4.4        4.6        4.3
----------------------------------------------------------------------------------------------
     Total gross margin                                  32.7       27.2       37.0       27.8
----------------------------------------------------------------------------------------------
Sales and marketing                                      28.1       34.2       29.7       36.6
Research and development                                 23.8       37.5       23.8       40.8
General and administrative                               10.3       12.3       10.4       13.1
Amortization of goodwill and other intangibles            0.0        3.5        0.0        3.5
Restructuring costs                                       3.6        0.0        2.1        0.0
----------------------------------------------------------------------------------------------
     Total operating costs                               65.8       87.5       66.0       94.0
----------------------------------------------------------------------------------------------
     Loss from operations                               (33.1)     (60.3)     (29.0)     (66.2)
Other income, net                                         0.0        0.9       13.0        5.0
Interest income, net                                      0.4        5.6        0.6        5.5
----------------------------------------------------------------------------------------------
Loss before income taxes                                (32.7)     (53.8)     (15.4)     (55.7)
Income tax benefit                                       (8.2)       0.0       (4.2)       0.0
----------------------------------------------------------------------------------------------
Loss before cumulative change in accounting             (24.5)     (53.8)     (11.2)     (55.7)
       principle, relating to goodwill
Cumulative effect of change in accounting principle,
        relating to goodwill                              0.0        0.0      (17.3)       0.0
----------------------------------------------------------------------------------------------
Net loss                                                (24.5)%    (53.8)%    (28.5)%    (55.7)%
==============================================================================================
</TABLE>


                                     Page 9
<PAGE>

Revenue

Total revenue for the second quarter of fiscal 2003 increased 12.9% or $3.2
million to $28.1 million from $24.9 million for the second quarter of fiscal
2002, and increased 13.5% or $6.6 million to $55.3 million from $48.7 million on
a fiscal year to date basis.

Product revenue increased 25.8% or $4.7 million to $23.1 million from $18.4
million compared to the same period in fiscal 2002, and increased 30.0% or $10.4
million to $45.1 million from $34.7 million on a fiscal year to date basis. The
increase in product revenue was primarily from Federal product revenue, which
increased $6.0 million in the second quarter and $9.0 million for the first six
months of fiscal 2003, offset by a $1.3 million decrease and a $1.0 million
increase from international product revenue in the second quarter and the first
six months of fiscal year 2003, respectively, compared to the same periods in
fiscal 2002. Product revenues are generated primarily from our circuit switched
product line, Promina. These revenues remained strong in the second quarter of
fiscal 2003 due to continued government defense initiatives, which positively
impacted our Federal business. We anticipate the Federal demand will continue
through the end of fiscal 2003. We have developed service creation products for
the broadband equipment and Internet Protocol (IP) telephony markets. The
product revenue from these products in the second quarter and first six months
of fiscal 2003 was not significant, however, we expect this revenue to increase
in the future.

Service and other revenue for the second quarter of fiscal 2003 decreased 23.4%
to $5.0 million from $6.5 million for the second quarter of fiscal 2002, and
decreased 27.3% to $10.2 million from $14.0 million on a fiscal year to date
basis. The decrease in service and other revenue is primarily the result of a
decline in the non Federal business installed base of equipment that requires
ongoing service support, in addition to the impact of our customers reducing
their operating costs by lowering their levels of service support. As part of
our new product strategy, we have developed service creation solutions that we
expect will expand our service offerings and offset part of the decline in
service and other revenue from our narrowband service offerings in the future.

Gross Margin

Total gross margin, comprised of product and service margin, increased as a
percentage of total revenue to 32.7% and 37.0% in the second quarter and first
six months of fiscal 2003, respectively, compared to 27.2% and 27.8% for the
comparable periods in fiscal 2002. Total gross margins improved primarily due to
the higher volume of product sales and the relatively flat cost of operations.

Product revenue gross margins were 39.1% and 44.3% in the second quarter and
first six months of fiscal 2003, respectively, compared to 35.3% and 37.3% for
the comparable periods in fiscal 2002. The increase in product gross margin
resulted primarily from unfavorable manufacturing variances in fiscal 2002
mainly due to lower product revenue and increased excess capacity.

Service and other revenue gross margins were 3.4% and 4.6% in the second quarter
and first six months of fiscal 2003, respectively, compared to 4.4% and 4.3% for
the comparable periods in fiscal 2002. There are a significant amount of
services costs that are fixed, and thus lower service revenues will impact
margins.

Gross margins may be adversely affected in the future due to increase in
competition, material and labor costs, subcontractor costs, change in absorption
rates and changes in the mix of products we sell. The new products we introduced
recently, our SCREAM(TM) and SHOUT IP(TM) product lines, have lower gross
margins than our Promina product line. New product introductions also may result
in excess or obsolete inventories, which may reduce our gross margin.
Furthermore, if product or related warranty costs associated with these new
products are greater than we have experienced, gross margin may be adversely
affected. In addition, if product sales decrease as a percentage of total
revenue, overall margins may decrease because service revenue has a lower margin
than product sales. Also, to the extent we expand our sales through product
resellers and strategic partnerships, we would expect to earn lower gross
margins.


                                    Page 10
<PAGE>

Operating Expenses

Operating expenses in the second quarter and first six months of fiscal 2003
decreased $3.3 million to $18.5 million, and $9.3 million to $36.5 million,
respectively, from the comparable periods in fiscal 2002. Operating expenses as
a percentage of total revenue were 65.8% and 66.0% in the second quarter and
first six months of fiscal 2003, respectively, compared to 87.5% and 94.0% in
the second quarter and first six months of fiscal 2002. Overall, lower operating
expenses are primarily a result of our continued focus on managing expenses
across all functions of the Company.

Sales and marketing expense in the second quarter and first six months of fiscal
2003 decreased $621,000 to $7.9 million and $1.4 million to $16.4 million,
respectively, from the comparable periods of fiscal 2002. Sales and marketing
expenses as a percentage of total revenue were 28.1% and 29.7% in the second
quarter and first six months of fiscal 2003, respectively, compared to 34.2% and
36.6% in the second quarter and first six months of fiscal 2002. The decrease in
spending in the second quarter of fiscal 2003 from the comparable period in
fiscal 2002 is primarily the result of a decrease in travel and entertainment
costs of $133,000, a decrease in depreciation expense of $199,000 and a decrease
in advertising costs of $154,000. The decrease in spending in the first six
months of fiscal 2003 from the comparable period in fiscal 2002 is primarily the
result of a decrease in sales meetings of $198,000, a decrease in travel and
entertainment costs of $219,000, a decrease in depreciation costs of $488,000, a
decrease in advertising costs of $126,000 and a decrease in trade show costs of
$167,000. We expect sales and marketing expenses in the future quarters to
remain constant or to decrease slightly compared to the second quarter of fiscal
2003.

Research and development expense in the second quarter and first six months of
fiscal 2003 decreased $2.6 million to $6.7 million and $6.7 million to $13.2
million, respectively, from the comparable periods in fiscal 2002. Research and
development expense as a percentage of total revenue decreased to 23.8% in the
second quarter and first six months of fiscal 2003, respectively, compared to
37.5% and 40.8% in the second quarter and first six months of fiscal 2002. The
decrease in spending in the second quarter of fiscal 2003 from the comparable
period in fiscal 2002 is primarily the result of a decrease in salary related
costs of $650,000, a decrease in consulting costs of $443,000, a decrease in
recruiting costs of $157,000, a decrease in engineering material and testing
expenses of $1.0 million and a decrease in depreciation and amortization
expenses of $425,000. The decrease in spending in the first six months of fiscal
2003 from the comparable period in fiscal 2002 is primarily the result of a
decrease in salary related costs of $1.5 million, a decrease in consulting costs
of $1.5 million, a decrease in recruiting costs of $367,000, a decrease in
engineering material and testing expenses of $2.1 million and a decrease in
depreciation and amortization expenses of $1.1 million. We expect research and
development spending in future periods to remain constant or to decrease
slightly compared to the second quarter of fiscal 2003 as we balance cost
control and the importance of new product development.

General and administrative expense in the second quarter and first six months of
fiscal 2003 decreased $153,000 to $2.9 million and $603,000 to $5.8 million,
respectively, from the comparable periods of fiscal 2002. General and
administrative expense as a percentage of total revenue were 10.3% and 10.4% in
the second quarter and first six months of fiscal 2003, respectively, compared
to 12.3% and 13.1% in the second quarter and first six months of fiscal 2002.
The decrease in spending in the second quarter of fiscal 2003 from the
comparable period in fiscal 2002 is primarily the result of decreased salary
related expenses of $129,000 and a decrease in recruiting costs of $64,000. The
decrease in spending in the first six months of fiscal 2003 from the comparable
period in fiscal 2002 is primarily the result of decreased salary related
expenses of $295,000 and a decrease in recruiting costs of $145,000.

As a result of the adoption of SFAS 142 in the first quarter of fiscal 2003,
amortization of goodwill ceased and therefore there was no amortization of
goodwill in the second quarter and first six months of fiscal 2003. Amortization
of goodwill and other intangible assets in the second quarter and first six
months of fiscal 2002 was $861,000 and $1.7 million, respectively. The
amortization expense in the second quarter and first six months of fiscal 2002
was a result of two acquisitions, FlowWise Networks, Inc.which occurred in the
third quarter of fiscal 2000 and Convergence Equipment Company which occurred in
the first quarter of fiscal 2001.


                                    Page 11
<PAGE>

SFAS 142 requires goodwill to be tested for impairment under certain
circumstances, and written down when impaired, rather than being amortized as
previous standards required. We completed our implementation test, which
resulted in a determination that goodwill was impaired, resulting in a charge of
$9.6 million in the first quarter of fiscal 2003. This charge is presented as a
cumulative effect of change in accounting principle, relating to goodwill.

In the second quarter of fiscal 2003 a restructuring charge for $1.0 million was
recorded. This restructuring charge was primarily due to the reduction in leased
office space at our sales and service facilities in Vienna and Ashburn,
Virginia, as well as severance related costs resulting from a reduction in our
workforce.

Non-Operating Items

Interest income, which is primarily related to short-term investments, decreased
$1.2 million to $616,000 and $2.3 million to $1.4 million in the second quarter
and first six months of fiscal 2003, respectively, from the comparable periods
of fiscal 2002. The decrease in interest income is the result of declining
interest rates and lower cash balances.

Interest expense increased $45,000 to $504,000 and $86,000 to $1.0 million in
the second quarter and first six months of fiscal 2003, respectively, from the
comparable periods of fiscal 2002. The most significant component of our
interest expense is the interest on the 7 1/4% convertible subordinated
debentures, which was $456,000 and $912,000 for the second quarter and the first
six months of fiscal 2003, respectively.

Gain on sale of Federal Services Business in the first six months of fiscal 2003
was $5.0 million, compared to $2.5 million in the first six months of fiscal
2002, principally a result of certain milestones being met as part of the sale
of the Federal Services Business to CACI International Inc.

Other income (expense) in the second quarter and the first six months of fiscal
2003 was an expense of $18,000 and income of $2.2 million, respectively,
compared to income of $228,000 and an expense of $62,000 in the second quarter
and first six months of fiscal 2002, respectively. Other income in the first six
months of fiscal 2003 consisted principally of a $2.2 million gain from
insurance proceeds received for construction costs associated with our new
corporate headquarters in Fremont, California. We expect to receive a final
payment of approximately $200,000 in insurance proceeds related to the new
corporate headquarters during the third quarter of fiscal 2003.

Tax provision (benefit) in the second quarter and the first six months of fiscal
2003 was a benefit of $2.3 million, compared to a benefit of $9,000 and a tax
provision of $17,000, respectively, in the second quarter and first six months
of fiscal 2002. In the second quarter of fiscal 2003, we received a
non-recurring tax benefit of $2.3 million related to prior years.

SIGNIFICANT ACCOUNTING POLICY JUDGMENTS AND ESTIMATES

The preparation of financial statements in accordance with accounting principles
generally accepted in the United States requires that we make estimates and
judgments, which affect the reported amounts of assets, liabilities, revenues
and expenses, and related disclosures of contingent assets and liabilities. On
an on-going basis, we evaluate our estimates, including those related to sales
returns, bad debts, inventories, investments, intangible assets, income taxes,
warranty obligations, restructuring charges, contingencies such as litigation,
and contract terms that have multiple elements and other complexities typical in
the telecommunications equipment industry. We base our estimates on historical
experience and other assumptions that we believe are reasonable under the
circumstances. Actual results may differ from these estimates under different
assumptions or conditions.


                                    Page 12
<PAGE>

We believe the following critical accounting policies affect the more
significant judgments and estimates used in the preparation of our financial
statements.

Revenue Recognition: We recognize revenue, generally upon shipment, when all
four of the following criteria are met:

1)    we have a contract with our customer,

2)    delivery has occurred and risk of loss passes to the customer,

3)    our price is fixed or determinable, and

4)    collection of the receivable is reasonably assured.

For transactions where we have not yet obtained customer acceptance, revenue is
generally deferred until the terms of acceptance are satisfied. Revenue for
installation or other services, except maintenance contact revenue, is
recognized upon completion of the service. Maintenance contract revenue is
recognized ratably over the period of the contract, which is typically one year.
A reserve for sales returns is established based on historical trends in product
returns. If the actual future returns differ from historical levels, our revenue
could be adversely affected.

Allowance for Doubtful Accounts: The allowance for doubtful accounts receivable
is based on our assessment of the collectibility of specific customer accounts
and the aging of accounts receivable. If there is a deterioration of a major
customer's credit worthiness or actual defaults are higher than our historical
experience, our estimates of the recoverability of amounts due us could be
adversely affected.

Inventory Provisions: Inventory purchases and commitments are based upon future
demand forecasts. If there is a significant decrease in demand for our products
or there is a higher risk of inventory obsolescence because of rapidly changing
technology and customer requirements, we may be required to increase our
inventory provision adjustments and our gross margin could be adversely
affected.

Warranty Accruals: We accrue for warranty costs based on the expected material
and labor costs to fulfill our warranty obligations. If we experience an
increase in warranty claims, which are higher than our historical experience,
our gross margin could be adversely affected.

Deferred Taxes: We have incurred tax losses in each of the last four fiscal
years and, at September 27, 2002, we have an estimated $76.3 million of federal
net operating loss carryforwards and an estimated $24.0 million of state
operating loss carryforwards expiring in the years 2020 through 2023. We have
provided a full valuation allowance against our tax assets, given the
uncertainty as to their realization. In future years, these benefits are
available to reduce or eliminate taxes on future taxable income. In addition, if
we were to be acquired by a third-party, these tax losses could be a significant
factor in their valuation of us should they be available to reduce future tax
liabilities for the acquiring company.

Impairment of Intangible Assets: On March 30, 2002, we adopted SFAS No. 142.
"Goodwill and Other Intangible Assets," and completed the analysis of our
goodwill for impairment issues. We recorded an impairment charge of $9.6 million
during the quarter ended June 28, 2002 related to goodwill.

LIQUIDITY AND CAPITAL RESOURCES

As of September 27, 2002, we had cash and cash equivalents of $12.6 million,
restricted cash of $1.5 million and short-term investments of $74.6 million for
a total of $88.7 million as compared to $94.9 million at the end of fiscal 2002.
The Company benefited in the first quarter of fiscal 2003 from the
aforementioned $5.0 million payment received from CACI and insurance proceeds of
$3.3 million. This was primarily offset by net operating losses and the related
effect on cash.


                                    Page 13
<PAGE>

Net cash used in operating activities in the first six months of fiscal 2003 was
$9.1 million compared to net cash used in operating activities of $16.8 million
in the first six months of fiscal 2002. The net decrease in cash used by
operations in the first six months of fiscal 2003 resulted primarily from a net
loss of $15.8 million, an increase in inventory of $834,000, and decreases in
accrued liabilities and accounts payable totaling $5.0 million. Net cash
provided by operations included a reduction in accounts receivable of $1.3
million, a decrease in prepaid expenses of $767,000, and the receipt of $3.3
million in cash in relation to our insurance settlement for construction defects
at our previous campus. Net non-cash operating activity included a gain on the
sale of the Federal Services Business of $5.0 million, a gain on building
insurance proceeds of $2.2 million, the adjustment for depreciation and
amortization of $4.7 million and the cumulative change in accounting principle
for our goodwill write-off of $9.6 million.

Net cash provided from investing activities was $5.0 million in the first six
months of fiscal 2003, compared to net cash provided from investing activities
of $5.0 million in the first six months of fiscal 2002. Net cash provided from
investing activities in the first six months of fiscal 2003 consisted primarily
of proceeds from maturing short term investments of $37.6 million, a decrease in
restricted cash of $1.8 million and an increase in proceeds received from the
sale of the Federal Services Business of $5.0 million. This is partially offset
by net cash used for investing activities for purchases of short-term
investments of $35.9 million and purchases of property and equipment of $3.6
million.

Net cash provided by financing activities in the first six months of fiscal 2003
was $883,000 compared to net cash provided by investing activities of $1.0
million in the first six months of fiscal 2002. The $883,000 in the first six
months of fiscal 2003 resulted from the sale of common stock from the employee
stock purchase plan.

We believe that our current cash and cash equivalents, temporary cash
investments and cash flows from operations will be sufficient to fund
operations, purchases of capital equipment and research and development programs
currently planned at least through the next 12 months.

BUSINESS ENVIRONMENT AND RISK FACTORS

Our business is subject to the risks and uncertainties described below. Although
we have tried to identify the material risks to our business, this is not a
comprehensive list. There may be additional risks not described because they
have not yet been identified or they are not material now, although they could
arise or become material in the future. Any one of the risks identified below
could materially impact our business, results of operations or financial
condition.

WE HAVE INCURRED NET LOSSES IN THE PAST AND EXPECT TO INCUR LOSSES FOR THE
FORESEEABLE FUTURE.

For each of the past four fiscal years, we have incurred net losses. Our ability
to achieve profitability on a continuing basis will depend upon the successful
design, development, testing, introduction, marketing, and broad commercial
distribution of our new products, specifically our SCREAM product line and our
SHOUT(IP) product line. We expect to continue to incur significant product
development, sales and marketing and administrative expenses as we continue to
maintain support of our existing products and customers while launching new
products. Many of our operating expenses are fixed in the short term making it
difficult to reduce expenses rapidly. At current revenue levels, our operating
expenses continue to be too high to enable us to be profitable. In order to
achieve profitability, we need to generate significant sales growth from our
SCREAM and SHOUT(IP) product lines or decrease expenses.


                                    Page 14
<PAGE>

OUR OPERATING RESULTS MAY CONTINUE TO FLUCTUATE.

Our operating results vary significantly from quarter to quarter. These
fluctuations are the result of a number of factors, including:

      o     the volume and timing of orders from and shipments to our customers;

      o     the length and variability of the sales cycle of our products;

      o     the timing of and our ability to obtain new customer contracts;

      o     the timing of new products and services;

      o     the timing and level of prototype expenses;

      o     the availability of products and services;

      o     the overall capital expenditures of our customers;

      o     the market acceptance of new and enhanced versions of our products
            and services or variations in the mix of products and services we
            sell;

      o     the availability and cost of key components;

      o     the timing of revenue recognition/deferrals;

      o     the adoption of new accounting standards;

      o     the obsolescence of inventories;

      o     the timing and size of Federal Government budget approvals; and

      o     general economic conditions as well as those specific to the
            telecommunications, Internet and related industries.

Due to the foregoing factors, we believe that quarter-to-quarter comparisons of
our operating results are not a good indication of our future performance. Any
shortfall in revenue may impact our business, results of operations and
financial condition. Investors should not rely on our results or growth for one
quarter as any indication of our future performance.

OUR STOCK PRICE MAY BE VOLATILE.

Our common stock has experienced substantial price volatility, particularly as a
result of variations between our actual or anticipated financial results and the
published expectations of analysts, and as a result of announcements by our
competitors and us. Volatility in the trading volume for our common stock
results in greater stock price volatility. Futhermore, the stock market has
experienced extreme price and volume fluctuations that have affected the market
price of many companies, in particular technology companies, and that have often
been unrelated to the operating performance of these companies. These factors,
as well as general economic, industry specific, and political conditions may
materially adversely affect the market price of our common stock in the future.
Additionally, volatility or a lack of positive performance in our stock price
may adversely affect our ability to retain key employees, all of whom have been
granted stock options.

WE ARE DEPENDENT ON REVENUE FROM THE PROMINA PRODUCT LINE UNTIL REVENUE FROM OUR
SCREAM AND SHOUT(IP) PRODUCT LINES INCREASES SUBSTANTIALLY.

Currently, we derive the majority of our product revenue from our Promina
product line, a circuit-based technology. The market for circuit-based
technology has declined and we believe that it will continue to decline in the
future as new networks will likely employ packet-based technology. The migration
from circuit to packet-based technology has happened more dramatically in the
United States commercial markets than in the Federal Government market and the
rest of the world. The decline of our business in the United States commercial
markets since fiscal 1999 continues to have a material adverse effect on our
business and results of operations. Should this decline extend into our
international and Federal Government markets in a similar fashion before we gain
traction on our new SCREAM and SHOUT(IP) product lines, our revenue may not
increase to profitable levels.


                                    Page 15
<PAGE>

A SIGNIFICANT PORTION OF OUR REVENUE IS GENERATED FROM SALES TO THE FEDERAL
GOVERNMENT.

A significant portion of our total revenue from product sales comes from
contracts with the Federal Government, most of which do not include long-term
purchase commitments. Historically, the Federal Government has been slower to
adopt new technology, such as packet-based technology, which has had the effect
of extending the product life of our older products however, the Federal
Government has purchased and is evaluating some of our new products for broader
deployment. If the Federal Government accelerated adoption of new technology,
and replacing the Promina product line in their networks with products other
than ours, our product revenue would decline sharply. We anticipate that our
past experience will result in future contracts with the Federal Government;
however, we face significant competition in this endeavor. If we fail in
renewing a significant number of Federal Government contracts or if sales to the
Federal Government decline sharply, our revenue may not increase to profitable
levels.

RECENT DECLINES IN PURCHASES BY TELECOMMUNICATIONS SERVICE PROVIDERS AND THE
OVERALL DECLINE OF PRODUCT SALES IN THIS MARKET COULD IMPACT SALES OVER THE NEXT
SEVERAL QUARTERS.

Over the last twenty-four months, the financial health of many of the
telecommunications service providers, including many of the companies classified
as competitive local exchange carriers (CLECs) began to deteriorate. In
addition, the more established service providers have cut back on equipment
purchases as part of an overall slow-down in economic growth. We believe that
many telecommunications equipment companies, including net.com, are impacted by
this decline. In addition, the timing and volume of purchases by emerging
service providers can be unpredictable due to other factors, including their
need to build a customer base and to expand their capacity while working within
their budgetary constraints. Our ability to recognize revenue from emerging
service providers will depend on the relative financial strength of the
particular customer. We may be required to write off or decrease the value of
our accounts receivable from a customer whose financial condition materially
deteriorates. Decreases in purchasing volume of emerging service providers or
changes in the financial condition of emerging service provider customers could
have a material impact on our results of operations and financial condition in
future periods. In addition, the selling cycle of our SCREAM and SHOUT(IP)
product families could be extended as our service provider customers reduce
their capital budgets.

OUR SUCCESS DEPENDS ON OUR ABILITY TO CONTINUE TO DEVELOP NEW PRODUCTS AND
PRODUCT ENHANCEMENTS THAT WILL ACHIEVE MARKET ACCEPTANCE.

Our operating results will depend to a significant extent on the successful
design, development, testing, introduction, marketing, and broad commercial
distribution of our new broadband equipment products, specifically our SCREAM
product line and to a lesser extent on our SHOUT(IP) product line. The success
of these and other new products is dependent on several factors, including
proper new product definition, competitive product cost, timely completion and
introduction of new products, differentiation of new products from those of our
competitors and market acceptance of these products. The markets for our
products are characterized by rapidly changing technology, evolving industry
standards, frequent new product introductions and evolving methods of building
and operating networks. Our SCREAM and SHOUT(IP) product lines target start-up
telecommunications companies and long established domestic carriers such as
AT&T, BellSouth, SBC Communications, Sprint, Verizon, and WorldCom. We may not
successfully identify new product opportunities, develop and bring new products
to market in a timely manner, or achieve market acceptance of our products.
Products and technologies developed by others may render our products or
technologies obsolete or non-competitive which in turn could adversely affect
our ability to achieve profitability.

OUR ABILITY TO SUCCESSFULLY COMMERCIALIZE SCREAM WILL DEPEND HEAVILY ON THE
WIDESPREAD ACCEPTANCE OF SERVICE CREATION AS A MEANS OF ACHIEVING MAXIMUM
NETWORK PRODUCTIVITY AND ON APPROPRIATE REGULATORY INCENTIVES.

Over the last five years, carriers generated revenue by adding more customers or
by offering additional services to existing customers. Offering additional
services to an existing subscriber base is generally a preferred approach to
generating additional revenue, but these services typically require network
upgrades and the purchase of expensive equipment. Over time, however, carriers'
aggressive price discounts, expensive direct marketing campaigns, and massive
capital outlays for infrastructure expansions have offset whatever incremental
revenue increases were generated by the new services and have eroded the
profitability of these companies. Since the second quarter of our fiscal 2000,
we have spent the majority of our research and development and marketing
resources to position ourselves and our SCREAM family of products as the next
generation of telecommunications equipment that will enable carriers to maximize
the delivery of new services while leveraging their existing networks and
ensuring quality of service. The future success of the SCREAM product will
depend in large measure on carriers' acceptance of service creation as the
vehicle that will deliver revenue increases and operating cost reduction sought
after by them. Failure to achieve this acceptance could affect our ability to
sell the SCREAM product and grow overall revenue.


                                    Page 16
<PAGE>

In addition, without deregulation in the United States and overseas, the
economic incentive for the incumbent carrier to actively engage in changing
their service delivery model to the service creation delivery model is low.
While the 1999 decision by the FCC not to force incumbent local exchange
carriers to unbundle their infrastructure, thus allowing incumbents to deny
competitive carriers access to their networks, has made the service creation
model viable for carrier revenue growth, it remains to be seen whether or not
the regulatory structure in other countries will set the stage for the service
creation model to take hold. Failure to achieve the regulatory structure
favorable to the service creation model overseas could affect our ability to
sell the SCREAM product overseas and to grow overall revenue.

TO SUCCESSFULLY MARKET OUR PRODUCTS, WE WILL NEED TO SIGN UP SIGNIFICANT NEW
STRATEGIC PARTNERS WHO CAN HELP SELL OUR PRODUCTS INTO THE SERVICE PROVIDER
MARKET.

In order to successfully market our products, we will need to sign up new
strategic partners, such as software application partners, systems integrators
and product original equipment manufacturers (OEMs), or resellers. The
importance of the software application partners is that they provide critical
functions, such as billing, mediation, provisioning and configuration that are
needed to create a total service creation solution for our customers. Product
OEM or resale partners will be needed to supplement and enhance our existing
direct sales force both in the United States and overseas. Service providers
rely on systems integrators to support new equipment or services into their
network. These integrators are important in the large incumbent carrier networks
and could facilitate our entry into those networks. While we have begun the
process of identifying and signing software application, system integrator and
OEM or resale partners, more partners may be necessary in all these areas for us
to be successful. In particular, we may need to find strategic partners to
assist us with the integration of security functions, such as digital
certificates, third-party firewall, intrusion detection and public key
management to meet evolving security needs, as well as to counter rival efforts
to assert differentiation in the security area. Additionally, we may need to
pursue partnerships with vendors who have optical core and core routing
technologies in order to counter the end-to-end solution providers, such as
Alcatel, Cisco, Lucent, Nortel, and Siemens, as well as to bolster our
co-marketing efforts. Failure to sign up these new strategic partners could
affect our ability to grow overall revenue.

GROSS MARGINS COULD DECLINE OVER FUTURE PERIODS.

Due to increases in competition, material and labor costs, subcontractor costs,
change in absorption rate and changes in the mix of products we sell, our gross
margins could decline in future quarters. The new products we introduced
recently have lower gross margins than our Promina product line. In addition, if
product sales decrease as a percentage of total revenue, overall margins may
decrease because service revenue has a lower margin than product sales. Also, to
the extent we expand our sales through product resellers and strategic
partnerships, we expect to earn lower gross margins.

FACTORS BEYOND OUR CONTROL COULD AFFECT OUR ABILITY TO SELL INTO INTERNATIONAL
MARKETS.

As a general rule, international sales tend to have risks that are difficult to
foresee and plan for, including political and economic stability, regulatory
changes, currency exchange rates, changes in tax rates and structures, and
collection of accounts receivable. Further, our international markets are served
primarily by non-exclusive resellers who themselves may be severely impacted by
economic or market changes within a particular country or region. Unforeseen or
unpredictable changes in international markets could have a material adverse
effect on our business, results of operations and financial condition.

THE DIVESTITURE OF OUR FEDERAL SERVICES BUSINESS MAY NOT BE SUCCESSFUL.

On December 1, 2000, we closed the sale of our federal service business to CACI,
which will continue to provide maintenance and other services to our Federal
Government customers. We continue to sell net.com products directly to the
Federal Government and, additionally, have a strategic alliance with the
acquirer, CACI, to jointly market each other's products and services. We also
rely on CACI to perform staging and integration services for net.com products
and third party products sold to our Federal Government customers. For the
divestiture to be successful, CACI must continue to provide the level of service
to which our customers have become accustomed. Should CACI experience
difficulties in providing those services, it could impact purchasing decisions
for our product and cause customers to seek products from other vendors.


                                    Page 17
<PAGE>

INCREASED COMPETITION IS LIKELY IN THE FUTURE.

The market for telecommunication equipment is highly competitive, dynamic and
characterized by rapid changes to and the convergence of technologies, and a
worldwide migration from existing circuit technology to the new packet-based
technologies. We compete directly internationally and domestically with many
different companies, some of which are large, established suppliers of
end-to-end solutions, such as Alcatel, Cisco, Lucent, Nortel, and Siemens. In
addition, there are a number of other companies that are targeting this market,
including Celox, Clarent, CoSine, Ellacoya, Juniper, Nuera, Quarry, and others.
Some of our competitors have significantly greater financial, marketing and
technical resources than we have and offer a wider range of networking products
than we offer. They are often able to devote greater resources to the
development, marketing and sale of their products and to use their equity or
significant cash reserves to acquire other companies with technology and/or
products that compete directly with ours. They often can compete favorably on
price because their large product selection allows them to bundle multiple
solutions together without significantly impacting their overall product
margins. The smaller companies have more ability than net.com to focus their
resources on a particular product development unencumbered by the requirements
to support an existing product line. As a result of the flexibility of their
market strategies, our competitors may be able to obtain strategic advantages
that may adversely affect our business, financial condition or results of
operations.

In addition, the networking equipment market has seen the constant introduction
of new technologies that has reduced the value of older technology solutions.
This has created pricing pressure on older products while increasing the
performance expectations of newer networking equipment. Moreover, broadband
technology standards are constantly evolving and alternative technologies or
technologies with greater capability are constantly introduced and sought by our
customers. It is possible that the introduction of other technologies will
either supplant our current technologies and technologies we have in development
or will require us to significantly lower our prices in order to remain
competitive. To remain competitive, we must continue to evolve our SCREAM and
SHOUT(IP) product lines to meet the ever-changing technology needs of the
networking market while ensuring that they can be sold at a competitive price.
We also must enhance our Promina product line to provide needed features that
increase their overall value proposition for the customer while keeping the
price competitive. Due to the competitive nature of the market and the relative
age of our Promina product offerings as well as the competitive pressure being
exerted on our SCREAM and SHOUT(IP) technologies, we may not be able to maintain
prices for them at levels that will sustain profitability over the short or long
term.

OUR INABILITY TO SIGN COMPETITIVE RESALE PARTNERS INTERNATIONALLY COULD
SIGNIFICANTLY AFFECT FUTURE PRODUCT AND SERVICE REVENUE.

We expect international sales will continue to account for a significant portion
of our Promina product sales (other than that sold in the Federal channel) in
future periods. Our international sales are made almost entirely through
indirect channels that include distributors and resellers worldwide. They do not
have minimum purchase requirements that they must meet. While we require them to
use their best efforts to resell our products, because our product line is
small, our distributors and resellers must often resell product lines from other
networking companies, including our competitors, such as Cisco, in order to
sustain a profit. Because of the size of Cisco and its dominant position in the
network equipment market, it is difficult for us to find a distributor or
reseller who does not resell Cisco products. Because our distributors and
resellers often have pre-existing competitive relationships, our distributors
and resellers are not always successful in promoting our products thereby
impacting the sustainability of our international product sales. If we cannot
develop relationships with distributors and resellers that can effectively
market and sell our products and services, we may not be able to meet our
forecasted revenue in future quarters.

OUR PRODUCTS HAVE LONG SALES CYCLES, MAKING IT DIFFICULT TO PREDICT WHEN A
CUSTOMER WILL PLACE AN ORDER AND WHEN TO FORECAST REVENUE FROM THE RELATED SALE.

Our products are very complex pieces of networking equipment and represent a
significant capital expenditure to our customers. The purchase of our products
can have a significant impact on how a customer designs its network and provides
services either within its own organization or to an external customer.
Consequently, our customers often engage in extensive testing and evaluation of
products before purchase. There are also numerous financial and budget
considerations and approvals that the customer often must obtain before it will
issue a purchase order. As a result, the length of our sales cycle can be quite
long, up to a year in some cases. In addition, our customers, including
resellers, have the contractual right to delay scheduled order delivery dates
with minimal penalties and to cancel orders within specified time frames without
penalty. The ability to delay or cancel orders makes it difficult to predict
whether or not an order may actually ship. Moreover, while customers may tell us
that they are planning to purchase our products, to ensure a purchase order is
placed, we often must incur substantial sales and marketing expense. If the
order is not placed in the quarter forecasted because approvals took longer than
anticipated by the customer, our sales may not meet forecast and revenues may
continue to be insufficient to meet expenses.


                                    Page 18
<PAGE>

OUR BACKLOGGED PRODUCT ORDERS HAVE BEEN UNPREDICTABLE; MAKING IT DIFFICULT FOR
US TO ACCURATELY FORECAST SALES AND CREATING A RISK OF CARRYING TOO MUCH OR TOO
LITTLE INVENTORY.

Typically, the majority of our revenue in each quarter has resulted from orders
received and shipped in that quarter. While we do not believe that backlog is
necessarily indicative of future revenue levels, our customers' ordering
patterns and the absence of backlogged orders create a significant risk that we
could carry too much or too little inventory if orders do not match forecasts.
Rather than base forecasts on orders received, we have been forced to schedule
production and commit to certain expenses based more upon forecasts of future
sales, which are difficult to predict in the telecommunications industry.
Furthermore, if large orders do not close when forecasted or if near-term demand
weakens for the products we have available to ship, our operating results for
that quarter or subsequent quarters would be materially adversely affected.

IF WE ARE UNABLE TO RETAIN EXISTING EMPLOYEES AND ATTRACT, RECRUIT AND RETAIN
KEY PERSONNEL, THEN WE MAY NOT BE ABLE TO SUCCESSFULLY MANAGE OUR BUSINESS.

Our success continues to be dependent on our being able to attract and retain
highly skilled engineers, managers and other key employees. If there is a sharp
upturn in the economy, especially in the telecommunications industry, we may not
be able to continue to attract, recruit and retain key personnel, particularly
engineers and sales and marketing employees, and therefore we may be unable to
meet important company objectives such as product delivery deadlines and sales
targets.

WE RELY ON A NUMBER OF SOLE SOURCE SUPPLIERS FOR OUR COMPONENT PARTS AND THIRD
PARTY PRODUCTS WHICH COULD AFFECT OUR ABILITY TO SHIP OUR PRODUCTS IN ATIMELY
MANNER.

We purchase key components from single source suppliers, in particular, our back
planes, ASICs and power supplies. If our sole source suppliers or we fail to
obtain components in sufficient quantities when required, delivery of our
products could be delayed resulting in decreased revenues. In addition, if one
of these suppliers were no longer able to supply a required component, we may
have to significantly reengineer the affected product. Further, variability in
demand and cyclical shortages of capacity in the semiconductor industry have
caused lead times for ordering parts to increase from time to time. If we
encounter shortages or delays in receiving ordered components or if we are not
able to accurately forecast our ordering requirements, we may be unable to ship
ordered products in a timely manner.

WE SINGLE SOURCE OUR MANUFACTURING PROCESS, A FAILURE OR DELAY BY THAT VENDOR
COULD IMPACT OUR ABILITY TO SHIP OUR PRODUCTS TIMELY.

We currently subcontract some testing and all product manufacturing to one
company, Solectron. Final test and assembly is generally performed at our
Fremont, California facility. While subcontracting creates substantial cost
efficiencies in the manufacturing process, it also exposes us to delays in
product shipments should Solectron be unable to perform under our contract.
Pursuant to our contract with Solectron, we have agreed to compensate Solectron
in the event of a termination or a cancellation of orders, discontinuance of
product or excess material created by an engineering change. Also, should
Solectron in some future period decide not to renew our contract with them, it
would be difficult for us to quickly transfer our manufacturing requirements to
another vendor, likely causing substantial delays in customer product shipments
and impacting revenue and our results of operations.


                                    Page 19
<PAGE>

OUR INTELLECTUAL PROPERTY RIGHTS MAY NOT BE ADEQUATE TO PROTECT OUR BUSINESS.

Our future success depends upon our proprietary technology. Although we attempt
to protect our proprietary technology through patents, copyrights, and trade
secrets, we cannot predict whether such protection will be adequate, or whether
our competitors can develop similar technology independently without violating
our proprietary rights. As competition in the communications equipment industry
increases and the functionality of the products in this industry further
overlap, we believe that companies in the communications equipment industry may
become increasingly subject to infringement claims. We have received and may
continue to receive notice from third parties, including some of our
competitors, claiming that we are infringing their patents or their other
proprietary rights. We cannot predict whether we will prevail in any litigation
over third-party claims, or that we will be able to license any valid and
infringed patents on commercially reasonable terms. Any of these claims, whether
with or without merit, could result in costly litigation, divert our
management's time, attention and resources, delay our product shipments or
require us to enter into royalty or licensing agreements. In addition, a
third-party may not be willing to enter into a royalty or licensing agreement on
acceptable terms, if at all. If a claim of product infringement against us is
successful and we fail to obtain a license or develop or license non-infringing
technology, we may be unable to market the affected product.

WE NEED TO CONTINUE TO LICENSE PRODUCTS FROM THIRD PARTIES.

For our Promina, SCREAM and SHOUT(IP) products, we license some of our
technology from third parties. If the relevant licensing agreement expires or is
terminated without our being able to renew that license on commercially
reasonable terms, or if we cannot obtain a license for our new and legacy
products or enhancements on our existing products we may be unable to market the
affected product.

WE FACE RISKS ASSOCIATED WITH CHANGES IN TELECOMMUNICATIONS REGULATIONS AND
TARIFFS.

Changes in domestic and international telecommunications requirements could
affect the sales of our products. In the United States, our products must comply
with various FCC requirements and regulations. In countries outside of the
United States, our products must meet various requirements of local
telecommunications authorities. Changes in tariffs or failure by us to obtain
timely approval of products could impact our ability to market the affected
product.

In addition, there are currently few laws or regulations that govern access or
commerce on the Internet. If individual countries, or groups of countries,
acting in concert, began to impose regulations or standards on Internet access
or commerce including voice-over-IP, our ability to sell our new SCREAM and
SHOUT(IP) products or other new products would be adversely impacted if the
regulations or standards resulted in decreased demand or increased costs for our
products.

In North America, the former Regional Bell Operating Companies (RBOCs) require
that Telcordia certify equipment under their Osmine program in order to ensure
interoperability with other network elements and operational support systems.
This is a very expensive and lengthy process. We have initiated plans to become
Osmine certified. Any delays or problems with attaining this certification could
have a material adverse impact on our business, operating results, and financial
condition.

WE ARE EXPOSED TO FLUCTUATIONS IN THE EXCHANGE RATES OF FOREIGN CURRENCY.

As a global concern, we face exposure to adverse movements in foreign currency
exchange rates. These exposures may change over time as business practices
evolve and could have a material adverse impact on our financial results. In
fiscal 2003, we commenced using foreign exchange contracts to hedge significant
accounts receivable and intercompany account balances denominated in foreign
currencies. Although we have established foreign exchange contracts for
non-dollar denominated sales and operating expenses in the United Kingdom,
France, and Germany, exposures remain for non-dollar denominated operating
expenses in Latin America and Asia. We will continue to monitor our exposure and
may hedge against these or any other emerging market currencies as necessary.
Market value gains and losses on hedge contracts are substantially offset by
fluctuations in the underlying balances being hedged.


                                    Page 20
<PAGE>

THE LOCATION OF OUR FACILITIES SUBJECTS US TO THE RISK OF EARTHQUAKE AND FLOODS.

Our corporate headquarters, including most of our research and development
operations and our manufacturing facilities, are located in the Silicon Valley
area of Northern California, a region known for seismic activity. These
facilities are located near the San Francisco Bay where the water table is quite
close to the surface and where tenants have experienced water intrusion problems
in the facilities nearby. In particular, unknown defects in the construction of
our new facilities combined with the proximity to water may result in future
water infiltration problems for net.com. A significant natural disaster, such as
an earthquake or flood, could have a material adverse impact on our business,
operating results, and financial condition.

LABOR STRIFE BETWEEN WEST COAST SHIPPERS AND LONGSHOREMEN COULD IMPACT OUR
ABILITY TO SHIP OUR PRODUCTS IN A TIMELY MANNER.

On September 30, 2002 the Pacific Maritime Union, which represents shippers,
locked-out the International Longshore and Warehouse Union workers on the West
Coast as a result of a labor dispute. We import some key components, such as
power supplies, and third party products and ship them via ocean transport from
the Far East or East Coast to our facilities in Fremont, California. The lockout
lasted 10 days ending when, under a Federal court order, the West Coast
longshoremen returned to work for an 80 day "cooling off" period. According to
the Pacific Maritime Union, the 10 day work stoppage has left an approximate 10
week backlog of products to be shipped. To this point, the labor dispute has not
had a material impact on our operations. However, if this dispute is not
resolved during this "cooling off" period, in the coming months we may
experience delays or stoppages in our receipt of merchandise from the Far East
as well as the East Coast, as shipments for many companies would be rerouted.
Additionally, we believe interstate trucking and air freight companies may see a
dramatic increase in demand for their services which in turn could cause us to
experience delays in the receipt of key components for net.com and third party
products. We may also have to resort to more costly alternative shipping methods
such as air transport or have to import components and third party products into
Canada or to the East Coast and truck them to our facilities in Fremont. Any
interruption in the free flow of merchandise from either the Far East or the
East Coast could have a material adverse effect on our ability to provide the
timely delivery of net.com and third party products and on our revenue and
results of operations.

Item 3.

QUANTITATIVE AND QUALITATIVE DISCLOSURES
ABOUT MARKET RISK

In the first quarter of fiscal 2003 we began using foreign exchange contracts to
hedge significant accounts receivable and intercompany account balances
denominated in foreign currencies. Market value gains and losses on these hedged
contracts are substantially offset by fluctuations in the underlying balances
being hedged. The net financial impact of foreign exchange gains and losses has
not been material. A 10% increase or decrease in the foreign currency rates
would not have a significant effect on our business, operating results and
financial condition. Our policy is to not use hedges or other derivative
financial instruments for speculative purposes.

Item 4.

DISCLOSURE CONTROLS AND PROCEDURES

In accordance with Section 302 of the Sarbanes-Oxley Act of 2002 and the
Securities Exchange Act of 1934 Section 13(a) or Section 15(d), we implemented
disclosure controls and procedures pursuant to which management under the
supervision and with the participation of the chief executive officer ("CEO")
and chief financial officer ("CFO") carried out, within 90 days prior to the
filing of this quarterly report, a review and evaluation of the effectiveness of
these controls and procedures. Based on this review, our CEO and CFO have
concluded that our disclosure controls and procedures are effective in timely
alerting them to material changes in information required to be included in our
periodic Securities and Exchange Commission filings.


                                    Page 21
<PAGE>

We intend to review and evaluate the design and effectiveness of our disclosure
controls and procedures on an ongoing basis and to improve our controls and
procedures over time and to correct any deficiencies that we may discover in the
future. Our goal is to ensure that our senior management has timely access to
all material financial and non-financial information concerning our business.
While we believe the present design of our disclosure controls and procedures is
effective to achieve our goal, future events affecting our business may cause us
to significantly modify our disclosure controls and procedures.

PART II.

OTHER INFORMATION

Item 1. Legal Proceedings

On May 4, 2000, net.com reached an agreement of settlement and release with
Vigilant Insurance Company under a commercial insurance coverage policy in
connection with a water infiltration problem affecting our former facilities.
Pursuant to the settlement, we subrogated our claims against third parties for
damages from the water infiltration problem to Vigilant. This subrogation made
it possible for Vigilant to file a complaint in the Superior Court of California
for the County of Alameda (the "Court") on January 11, 2002 against, among other
parties, South Bay Construction Company, Inc. and M. Arthur Gensler, Jr. &
Associates for recovery of damages in connection with the water infiltration
problem. On April 3, 2002, South Bay filed a cross complaint against us in this
action alleging breach of contract and negligence and seeking indemnity, a
declaratory judgment regarding the parties respective rights and obligations
under their respective contracts, and damages for breach of contract and
negligence. Vigilant entered a demurrer to the cross complaint on behalf of
net.com which the Court sustained without leave to amend on August 22, 2002. On
November 1, 2002 the Court approved a settlement and release Vigilant reached
with Gensler to which net.com was also a party. In connection with this
settlement, net.com released any claim that it might have against Gensler.

Item 4. Submission to a Vote of Security Holders

On August 13, 2002, the Company held its Annual Meeting of Stockholders. At this
meeting the stockholders voted to elect C. Nicholas Keating, Jr. and Thomas
Rambold as directors. Mr. Keating received 18,942,988 shares in favor and
206,542 votes withheld. Mr. Rambold received 18,989,752 shares in favor and
159,778 shares withheld. Continuing as directors are Dixon R. Doll, David R.
Laube, Peter Sommerer, Hubert A. J. Whyte and Hans A. Wolf. At the meeting
stockholders also voted to approve an amendment to the Company's 1998 Employee
Stock Purchase Plan to increase the number of shares available for issuance
thereunder by 1,000,000 - from 1,600,000 shares to 2,6000,000 shares. This
proposal received 17,498,462 votes in favor, 426,017 votes against and 1,225,051
votes abstained. The stockholders also voted to ratify the appointment of
Deloitte & Touche LLP as independent public accountants of the Company for the
fiscal year ending March 28, 2003, as follows: 19,109,101 votes for, 31,268
votes against, and 9,161 votes abstained.

Item 6. Exhibits and Reports on Form 8-K

      (a)   Exhibits

               99.1     Certification Pursuant to 18 U.S.C. Section 1350, as
                        adopted pursuant to Section 906 of the Sarbanes-Oxley
                        Act of 2002, filed herewith.

               99.2     Certification Pursuant to 18 U.S.C. Section 1350, as
                        adopted pursuant to Section 906 of the Sarbanes-Oxley
                        Act of 2002, filed herewith.

      (b)   Report on Form 8-K

            None


                                    Page 22
<PAGE>

                                   SIGNATURES

            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: November 8, 2002                   /s/ Hubert A.J. Whyte
                                          -------------------------------------
                                          Hubert A.J. Whyte
                                          President and Chief Executive Officer


                                          /s/ John F. McGrath, Jr.
                                          -------------------------------------
                                          John F. McGrath, Jr.
                                          Vice President and
                                          Chief Financial Officer
                                          (Principal Financial and
                                          Accounting Officer)


                                    Page 23
<PAGE>

                                  CERTIFICATION

      I, Hubert A. J. Whyte, President and Chief Executive Officer of Network
Equipment Technologies, Inc., certify that:

1. I have reviewed this quarterly report on Form 10-Q of Network Equipment
Technologies, Inc.;

2. Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this quarterly
report;

3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this quarterly report;

4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:

a) designed such disclosure controls and procedures to ensure that material
information relating to the registrant, including its consolidated subsidiaries,
is made know to us by others within those entities, particularly during the
period in which this quarterly report is being prepared;

b) evaluated the effectiveness of the registrant's disclosure controls and
procedures as of a date within 90 days prior to the filing date of this
quarterly report (the "Evaluation Date"); and

c) presented in this quarterly report our conclusions about the effectiveness of
the disclosure controls and procedures based on our evaluation as of the
Evaluation Date;

5. The registrant's other certifying officers and I have disclosed, based on our
most recent evaluation, to the registrant's auditors and the audit committee of
registrant's board of directors (or persons performing the equivalent function):

a) significant deficiencies in the design or operation of internal controls
which could adversely affect the registrant's ability to record, process,
summarize and report financial data and have identified for the registrant's
auditors any material weaknesses in internal controls; and summarize and report
financial data and have identified for the registrant's auditors any material
weaknesses in internal controls; and

b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal controls; and


                                    Page 24
<PAGE>

6. The registrant's other certifying officers and I have indicated in this
quarterly report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal controls
subsequent to the date of our most recent evaluation, including any corrective
actions with regard to significant deficiencies and material weaknesses.

         November 8, 2002

                                         /s/ Hubert A. J. Whyte
                                         -------------------------------------
                                         Hubert A. J. Whyte
                                         President and Chief Executive Officer


                                    Page 25
<PAGE>

                                  CERTIFICATION

      I, John F. McGrath, Jr., Vice President and Chief Financial Officer of
Network Equipment Technologies, Inc., certify that:

1. I have reviewed this quarterly report on Form 10-Q of Network Equipment
Technologies, Inc.;

2. Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this quarterly
report;

3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this quarterly report;

4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:

a) designed such disclosure controls and procedures to ensure that material
information relating to the registrant, including its consolidated subsidiaries,
is made know to us by others within those entities, particularly during the
period in which this quarterly report is being prepared;

b) evaluated the effectiveness of the registrant's disclosure controls and
procedures as of a date within 90 days prior to the filing date of this
quarterly report (the "Evaluation Date"); and

c) presented in this quarterly report our conclusions about the effectiveness of
the disclosure controls and procedures based on our evaluation as of the
Evaluation Date;

5. The registrant's other certifying officers and I have disclosed, based on our
most recent evaluation, to the registrant's auditors and the audit committee of
registrant's board of directors (or persons performing the equivalent function):

a) significant deficiencies in the design or operation of internal controls
which could adversely affect the registrant's ability to record, process,
summarize and report financial data and have identified for the registrant's
auditors any material weaknesses in internal controls; and summarize and report
financial data and have identified for the registrant's auditors any material
weaknesses in internal controls; and

b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal controls; and


                                    Page 26
<PAGE>

6. The registrant's other certifying officers and I have indicated in this
quarterly report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal controls
subsequent to the date of our most recent evaluation, including any corrective
actions with regard to significant deficiencies and material weaknesses.

         November 8, 2002

                                   /s/ John F. McGrath, Jr.
                                   ------------------------------------------
                                   John F. McGrath, Jr.
                                   Vice President and Chief Financial Officer


                                    Page 27