----

----

| x | Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 |
|---|-----------------------------------------------------------------------------------------|

| ¨ | Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 |
|--------|------------------------------------------------------------------------------------------|

| Delaware                 |   | 94-2904044                              |
|--------------------------|--------|-----------------------------------------|
| (State of incorporation) |   | (I.R.S. Employer Identification Number) |

----

----

----

NET

| PART I.  FINANCIAL INFORMATION |                                                                                                     |
|------------------------------------------|----------------------------------------------------------------------------------------------------------|
|                                     |                                                                                                     |   |   |
|                                     | Item 1.  Financial Statements                                                                  | 3 |
|                                     |                                                                                                     |   |   |
|                                     |                                                                                                     | Condensed Consolidated Balance Sheets at December 24, 2010 and March 26, 2010 | 3 |
|                                     |                                                                                                     |   |   |
|                                     |                                                                                                     | Condensed Consolidated Statements of Operations and Comprehensive Loss – Three and Nine Months Ended December 24, 2010 and December 25, 2009 | 4 |
|                                     |                                                                                                     |   |   |
|                                     |                                                                                                     | Condensed Consolidated Statements of Cash Flows – Nine Months Ended December 24, 2010 and December 25, 2009 | 5 |
|                                     |                                                                                                     |   |   |
|                                     |                                                                                                     | Notes to Condensed Consolidated Financial Statements | 6 |
|                                     |                                                                                                     |   |
|                                     | Item 2.  Management's Discussion and Analysis of Financial Condition and Results of Operations | 14 |
|                                     |                                                                                                     |   |
|                                     | Item 3.  Quantitative and Qualitative Disclosures about Market Risk                            | 22 |
|                                     |                                                                                                     |   |
|                                     | Item 4.  Controls and Procedures                                                               | 23 |
|                                     |                                                                                                     |   |
| PART II.  OTHER INFORMATION    |                                                                                                     |
|                                     |                                                                                                     |   |
|                                     | Item 1.  Legal Proceedings                                                                     | 23 |
|                                     |                                                                                                     |   |
|                                     | Item 1A.  Risk Factors                                                                         | 23 |
|                                     |                                                                                                     |   |
|                                     | Item 2.  Unregistered Sales of Equity Securities and Use of Proceeds                           | 23 |
|                                     |                                                                                                     |   |
|                                     | Item 3.  Defaults Upon Senior Securities                                                       | 24 |
|                                     |                                                                                                     |   |
|                                     | Item 5.  Other Information                                                                     | 24 |
|                                     |                                                                                                     |   |
|                                     | Item 6.  Exhibits                                                                              | 24 |
|                                     |                                                                                                     |   |
| SIGNATURES                               | 25                                                                                                       |

----

Index

ANC

|                                                                                                                                   |   | December24, 2010 |     | March26, 2010 |
|----------------------------------------------------------------------------------------------------------------------------------------|--------|------------------|----------|---------------|
| Current assets:                                                                                                                        |   |             |     |          |   |   |   |   |
| Cash and cash equivalents                                                                                                              |   | $                | 5,259    |          |   | $ | 4,953 |   |
| Short-term investments                                                                                                                 |   |             | 59,766   |          |   |   | 75,508 |   |
| Restricted cash                                                                                                                        |   |             | 2,192    |          |   |   | 554 |   |
| Accounts receivable, net of allowances of $235 at December 24, 2010 and $265 at March 26, 2010                                         |   |             | 9,272    |          |   |   | 13,468 |   |
| Inventories                                                                                                                            |   |             | 4,784    |          |   |   | 4,377 |   |
| Prepaid expenses and other assets                                                                                                      |   |             | 5,086    |          |   |   | 7,961 |   |
| Total current assets                                                                                                                   |   |             | 86,359   |          |   |   | 106,821 |   |
| Property and equipment, net                                                                                                            |   |             | 4,638    |          |   |   | 5,155 |   |
| Other assets                                                                                                                           |   |             | 4,426    |          |   |   | 5,710 |   |
| Total assets                                                                                                                           |   | $                | 95,423   |          |   | $ | 117,686 |   |
| Current liabilities:                                                                                                                   |   |             |     |          |   |   |   |   |
| Accounts payable                                                                                                                       |   | $                | 6,641    |          |   | $ | 7,987 |   |
| Accrued liabilities                                                                                                                    |   |             | 9,651    |          |   |   | 13,230 |   |
| Total current liabilities                                                                                                              |   |             | 16,292   |          |   |   | 21,217 |   |
| Long-term liabilities:                                                                                                                 |   |             |     |          |   |   |   |   |
| 3¾% convertible senior notes                                                                                                      |   |             | 10,500   |          |   |   | 10,500 |   |
| 7¼% redeemable convertible subordinated debentures                                                                                |   |             | 23,704   |          |   |   | 23,704 |   |
| Capital lease obligation, less current portion                                                                                         |   |             | 65       |          |   |   | 69 |   |
| Other long-term liabilities                                                                                                            |   |             | 1,158    |          |   |   | 2,092 |   |
| Total long-term liabilities                                                                                                            |   |             | 35,427   |          |   |   | 36,365 |   |
| Commitments and contingencies – See Note 8                                                                                       |   |             |     |          |   |   |   |   |
| Stockholders’ equity:                                                                                                            |   |             |     |          |   |   |   |   |
| Preferred stock ($0.01 par value; 5,000 shares authorized; none outstanding)                                                           |   |             | —  |          |   |   | — |   |
| Common stock ($0.01 par value; 75,000 shares authorized; 30,200 and 30,060 shares outstanding at December 24, 2010 and March 26, 2010) |   |             | 302      |          |   |   | 300 |   |
| Additional paid-in capital                                                                                                             |   |             | 256,494  |          |   |   | 252,105 |   |
| Treasury stock, at cost                                                                                                                |   |             | (11,236  | )             |   |   | (10,374 | ) |
| Accumulated other comprehensive loss                                                                                                   |   |             | (1,901   | )             |   |   | (1,398 | ) |
| Accumulated deficit                                                                                                                    |   |             | (199,955 | )             |   |   | (180,529 | ) |
| Total stockholders’ equity                                                                                                       |   |             | 43,704   |          |   |   | 60,104 |   |
| Total liabilities and stockholders’ equity                                                                                       |   | $                | 95,423   |          |   | $ | 117,686 |   |

----

Index

NETW

|                                                                     |   | Three Months Ended |    | Nine Months Ended |
|--------------------------------------------------------------------------|--------|--------------------|---------|-------------------|
|                                                                     |   | December24, 2010   |    | December25, 2009  |   | December24, 2010 |   | December25, 2009 |
| Revenue:                                                                 |   |               |    |              |   |   |   |   |   |   |   |   |   |   |   |   |
| Product                                                                  |   | $                  | 10,553  |              |   | $ | 12,550 |   |   | $ | 37,281 |   |   | $ | 42,835 |   |
| Service and other                                                        |   |               | 3,368   |              |   |   | 3,773 |   |   |   | 10,351 |   |   |   | 12,759 |   |
| Total revenue                                                            |   |               | 13,921  |              |   |   | 16,323 |   |   |   | 47,632 |   |   |   | 55,594 |   |
| Costs of revenue:                                                        |   |               |    |              |   |   |   |   |   |   |   |   |   |   |   |   |
| Cost of product                                                          |   |               | 6,163   |              |   |   | 6,578 |   |   |   | 19,090 |   |   |   | 21,467 |   |
| Cost of service and other                                                |   |               | 2,699   |              |   |   | 3,209 |   |   |   | 8,828 |   |   |   | 10,916 |   |
| Total cost of revenue                                                    |   |               | 8,862   |              |   |   | 9,787 |   |   |   | 27,918 |   |   |   | 32,383 |   |
| Gross margin                                                             |   |               | 5,059   |              |   |   | 6,536 |   |   |   | 19,714 |   |   |   | 23,211 |   |
| Operating expenses:                                                      |   |               |    |              |   |   |   |   |   |   |   |   |   |   |   |   |
| Sales and marketing                                                      |   |               | 5,320   |              |   |   | 4,668 |   |   |   | 15,076 |   |   |   | 14,688 |   |
| Research and development                                                 |   |               | 4,803   |              |   |   | 5,053 |   |   |   | 14,457 |   |   |   | 14,461 |   |
| General and administrative                                               |   |               | 2,237   |              |   |   | 3,583 |   |   |   | 8,149 |   |   |   | 9,168 |   |
| Restructure and other costs (recoveries)                                 |   |               | 297     |              |   |   | (7 | ) |   |   | 297 |   |   |   | 17 |   |
| Total operating expenses                                                 |   |               | 12,657  |              |   |   | 13,297 |   |   |   | 37,979 |   |   |   | 38,334 |   |
| Loss from operations                                                     |   |               | (7,598  | )                 |   |   | (6,761 | ) |   |   | (18,265 | ) |   |   | (15,123 | ) |
| Interest income                                                          |   |               | 298     |              |   |   | 330 |   |   |   | 731 |   |   |   | 1,218 |   |
| Interest expense                                                         |   |               | (554    | )                 |   |   | (555 | ) |   |   | (1,661 | ) |   |   | (1,717 | ) |
| Gain on extinguishment of debt                                           |   |               | — |              |   |   | — |   |   |   | — |   |   |   | 555 |   |
| Other income, net                                                        |   |               | 65      |              |   |   | 186 |   |   |   | 7 |   |   |   | 414 |   |
| Loss before taxes                                                        |   |               | (7,789  | )                 |   |   | (6,800 | ) |   |   | (19,188 | ) |   |   | (14,653 | ) |
| Income tax provision (benefit)                                           |   |               | 33      |              |   |   | (1 | ) |   |   | 238 |   |   |   | 43 |   |
| Net loss                                                                 |   | $                  | (7,822  | )                 |   | $ | (6,799 | ) |   | $ | (19,426 | ) |   | $ | (14,696 | ) |
| Basic and diluted net loss per share                                     |   | $                  | (0.26   | )                 |   | $ | (0.23 | ) |   | $ | (0.65 | ) |   | $ | (0.51 | ) |
| Common and common equivalent shares, basic and diluted                   |   |               | 29,848  |              |   |   | 29,280 |   |   |   | 29,814 |   |   |   | 29,101 |   |
| Condensed Consolidated Statements of Comprehensive Loss:                 |   |               |    |              |   |   |   |   |   |   |   |   |   |   |   |   |
| Net loss                                                                 |   | $                  | (7,822  | )                 |   | $ | (6,799 | ) |   | $ | (19,426 | ) |   | $ | (14,696 | ) |
| Other comprehensive loss, net of taxes:                                  |   |               |    |              |   |   |   |   |   |   |   |   |   |   |   |   |
| Foreign currency translation adjustments                                 |   |               | (23     | )                 |   |   | (217 | ) |   |   | (284 | ) |   |   | 191 |   |
| Gross unrealized holding gains (losses) on available-for-sale securities |   |               | (168    | )                 |   |   | (70 | ) |   |   | (71 | ) |   |   | 250 |   |
| Reclassification adjustments for gains included in net loss              |   |               | (57     | )                 |   |   | (164 | ) |   |   | (147 | ) |   |   | (398 | ) |
| Comprehensive loss                                                       |   | $                  | (8,070  | )                 |   | $ | (7,250 | ) |   | $ | (19,928 | ) |   | $ | (14,653 | ) |

----

Index

NETW

|                                                                                 |   | Nine Months Ended |
|--------------------------------------------------------------------------------------|--------|-------------------|
|                                                                                 |   | December24, 2010  |   | December25, 2009 |
| Cash and cash equivalents at beginning of period                                     |   | $                 | 4,953 |   |   | $ | 15,589 |   |
| Cash flows from operating activities:                                                |   |              |   |   |   |   |   |   |
| Net loss                                                                             |   |              | (19,426 | ) |   |   | (14,696 | ) |
| Adjustments required to reconcile net loss to net cash used in operating activities: |   |              |   |   |   |   |   |   |
| Depreciation, amortization, and accretion                                            |   |              | 1,946 |   |   |   | 2,558 |   |
| Stock-based compensation expense                                                     |   |              | 4,504 |   |   |   | 4,465 |   |
| Gain on extinguishment of debt                                                       |   |              | — |   |   |   | (555 | ) |
| Loss on disposition of property and equipment                                        |   |              | 28 |   |   |   | 83 |   |
| Provision for deferred income taxes                                                  |   |              | 203 |   |   |   | — |   |
| Interest earned on restricted cash                                                   |   |              | (1 | ) |   |   | (7 | ) |
| Changes in assets and liabilities:                                                   |   |              |   |   |   |   |   |   |
| Accounts receivable                                                                  |   |              | 4,196 |   |   |   | (1,578 | ) |
| Inventories                                                                          |   |              | (407 | ) |   |   | 752 |   |
| Prepaid expenses and other assets                                                    |   |              | 3,517 |   |   |   | 3,089 |   |
| Accounts payable                                                                     |   |              | (1,344 | ) |   |   | 1,434 |   |
| Accrued liabilities                                                                  |   |              | (4,611 | ) |   |   | (3,986 | ) |
| Net cash used in operating activities                                                |   |              | (11,395 | ) |   |   | (8,441 | ) |
| Cash flows from investing activities:                                                |   |              |   |   |   |   |   |   |
| Purchase of short-term investments                                                   |   |              | (33,405 | ) |   |   | (41,841 | ) |
| Proceeds from sales and maturities of short-term investments                         |   |              | 48,929 |   |   |   | 43,111 |   |
| Purchases of property and equipment                                                  |   |              | (1,284 | ) |   |   | (1,223 | ) |
| Increase in restricted cash                                                          |   |              | (1,637 | ) |   |   | (68 | ) |
| Net cash provided by (used in) investing activities                                  |   |              | 12,603 |   |   |   | (21 | ) |
| Cash flows from financing activities:                                                |   |              |   |   |   |   |   |   |
| Issuance of common stock                                                             |   |              | 289 |   |   |   | 607 |   |
| Repurchase of common stock                                                           |   |              | (863 | ) |   |   | (929 | ) |
| Payments under capital lease obligation                                              |   |              | (47 | ) |   |   | (9 | ) |
| Repurchase of 3¾% convertible senior notes                                      |   |              | — |   |   |   | (1,875 | ) |
| Net cash used in financing activities                                                |   |              | (621 | ) |   |   | (2,206 | ) |
| Effect of exchange rate changes on cash                                              |   |              | (281 | ) |   |   | 165 |   |
| Net increase (decrease) in cash and cash equivalents                                 |   |              | 306 |   |   |   | (10,503 | ) |
| Cash and cash equivalents at end of period                                           |   | $                 | 5,259 |   |   | $ | 5,086 |   |
|                                                                                 |   |              |   |   |   |   |   |   |
| Other cash flow information:                                                         |   |              |   |   |   |   |   |   |
| Cash paid during the period for:                                                     |   |              |   |   |   |   |   |   |
| Interest                                                                             |   | $                 | 2,112 |   |   | $ | 2,158 |   |
| Non-cash investing activities:                                                       |   |              |   |   |   |   |   |   |
| Net unrealized loss on available-for-sale securities                                 |   |              | (218 | ) |   |   | (148 | ) |
| Assets acquired under capital lease                                                  |   |              | 47 |   |   |   | 145 |   |
| Assets acquired through note payable                                                 |   |              | — |   |   |   | 141 |   |

----

Index

NETW

----

Index

| (in thousands)                     | AmortizedCost |   | GrossUnrealizedGains |   | GrossUnrealizedLosses |   | EstimatedMarketValue |
|------------------------------------|---------------|--------|----------------------|--------|-----------------------|--------|----------------------|
| December 24, 2010                  |          |   |                 |   |                  |   |                 |   |   |   |   |   |   |   |
| U.S. government and municipalities | $             | 22,898 |                 | $      | 70                    |   |                 | $ | (25 | ) |   | $ | 22,943 |   |
| Corporate notes and bonds          |          | 19,666 |                 |   | 74                    |   |                 |   | (18 | ) |   |   | 19,722 |   |
| Other debt securities              |          | 17,039 |                 |   | 73                    |   |                 |   | (11 | ) |   |   | 17,101 |   |
|                               | $             | 59,603 |                 | $      | 217                   |   |                 | $ | (54 | ) |   | $ | 59,766 |   |
| March 26, 2010                     |          |   |                 |   |                  |   |                 |   |   |   |   |   |   |   |
| U.S. government and municipalities | $             | 50,634 |                 | $      | 350                   |   |                 | $ | (6 | ) |   | $ | 50,978 |   |
| Corporate notes and bonds          |          | 14,657 |                 |   | 29                    |   |                 |   | (15 | ) |   |   | 14,671 |   |
| Other debt securities              |          | 9,835  |                 |   | 29                    |   |                 |   | (5 | ) |   |   | 9,859 |   |
|                               | $             | 75,126 |                 | $      | 408                   |   |                 | $ | (26 | ) |   | $ | 75,508 |   |

| (in thousands)                |   | AmortizedCost |   |   | EstimatedMarket Value |   |
|-------------------------------|--------|---------------|--------|--------|----------------------------|--------|
| Maturing in one year          |   | $             | 17,821 |   |                       | $      | 17,898 |   |
| Maturing in one to five years |   |          | 40,713 |   |                       |   | 40,795 |   |
| Maturing in five to ten years |   |          | 1,000  |   |                       |   | 1,004 |   |
| Maturing after ten years      |   |          | 69     |   |                       |   | 69 |   |
| Total                         |   | $             | 59,603 |   |                       | $      | 59,766 |   |

----

Index

| (in thousands)                        |   |                                     |   |   | Fair Value Measurements at December 24, 2010, using |   |
|---------------------------------------|--------|------------------------------------------|--------|--------|----------------------------------------------------------|--------|
|                                  |   | Balance as ofDecember 24, 2010 |   |   | Level 1                                                  |   |   | Level 2 |   |
| Assets:                               |   |                                     |   |   |                                                     |   |   |   |   |
| U.S. government and municipalities(1) |   | $                                        | 22,942 |   |                                                     | $      | 22,942 |   |   | $ | — |   |
| Corporate notes and bonds(1)          |   |                                     | 19,722 |   |                                                     |   | 19,722 |   |   |   | — |   |
| Other debt securities(1)              |   |                                     | 15,214 |   |                                                     |   | 15,214 |   |   |   | — |   |
| Foreign debt issues(1)                |   |                                     | 1,888  |   |                                                     |   | 1,888 |   |   |   | — |   |
| Foreign currency derivatives(2)       |   |                                     | 84     |   |                                                     |   | — |   |   |   | 84 |   |
| Total                                 |   | $                                        | 59,850 |   |                                                     | $      | 59,766 |   |   | $ | 84 |   |
|                                  |   |                                     |   |   |                                                     |   |   |   |   |   |   |   |
| Liabilities:                          |   |                                     |   |   |                                                     |   |   |   |   |   |   |   |
| Foreign currency derivatives(3)       |   | $                                        | 32     |   |                                                     | $      | — |   |   | $ | 32 |   |
| Total                                 |   | $                                        | 32     |   |                                                     | $      | — |   |   | $ | 32 |   |

|   | (1) | Included in short-term investments on the Company’s condensed consolidated balance sheet. |
|--------|-----|-------------------------------------------------------------------------------------------------|

|   | (2) | Included in accounts receivable on the Company’s condensed consolidated balance sheet. |
|--------|-----|----------------------------------------------------------------------------------------------|

|   | (3) | Included in accrued liabilities on the Company’s condensed consolidated balance sheet. |
|--------|-----|----------------------------------------------------------------------------------------------|

| (in thousands)       |   | December24, 2010 |   |   | March26, 2010 |   |
|----------------------|--------|------------------|--------|--------|---------------|--------|
| Purchased components |   | $                | 3,134  |   |          | $      | 2,806 |   |
| Finished goods       |   |             | 1,650  |   |          |   | 1,571 |   |
|                 |   | $                | 4,784  |   |          | $      | 4,377 |   |

----

Index

| (in thousands, except per share amounts)                               |   | Three Months Ended |   | Nine Months Ended      |
|------------------------------------------------------------------------|--------|--------------------|--------|------------------------|
|                                                                   |   | December24, 2010   |   | December 25, 2009 |   | December24, 2010 |   | December 25, 2009 |
| Numerator:                                                             |   |               |   |                   |   |   |   |   |   |   |   |   |   |   |   |   |
| Net loss                                                               |   | $                  | (7,822 | )                      |   | $ | (6,799 | ) |   | $ | (19,426 | ) |   | $ | (14,696 | ) |
| Denominator-weighted average shares of common stock outstanding:       |   |               |   |                   |   |   |   |   |   |   |   |   |   |   |   |   |
| Shares used to compute basic and diluted  net loss per share |   |               | 29,848 |                   |   |   | 29,280 |   |   |   | 29,814 |   |   |   | 29,101 |   |
| Basic and diluted net loss per share                                   |   | $                  | (0.26  | )                      |   | $ | (0.23 | ) |   | $ | (0.65 | ) |   | $ | (0.51 | ) |

----

Index

| (in thousands)               |   | RestructureAccrual |
|------------------------------|--------|--------------------|
| Balance at March 26, 2010    |   | $                  | 2,119 |   |
| Provision                    |   |               | 297 |   |
| Payments                     |   |               | (1,149 | ) |
| Other (1)                    |   |               | 93 |   |
| Balance at December 24, 2010 |   | $                  | 1,360 |   |

| (1)  | Consists primarily of accretion of implied interest on the remaining liability for lease and other exit costs associated with the Company’s former manufacturing facility which is reflected in general and administrative expense in the condensed consolidated statement of operations and comprehensive loss. |
|-----------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (in thousands)                 |   | Nine Months Ended |
|--------------------------------|--------|-------------------|
|                           |   | December24, 2010  |   | December 25, 2009 |
| Balance at beginning of period |   | $                 | 69 |   |   | $ | 82 |   |
| Charges to costs of revenue    |   |              | 68 |   |   |   | 37 |   |
| Charges to warranty accrual    |   |              | (77 | ) |   |   | (42 | ) |
| Other adjustments (1)          |   |              | 21 |   |   |   | (4 | ) |
|  Balance at end of period |   | $                 | 81 |   |   | $ | 73 |   |

| (1)  | Adjustments result from changes in warranty cost estimates related to labor costs to repair products and frequency of warranty claims. |
|-----------|----------------------------------------------------------------------------------------------------------------------------------------|

----

Index

----

Index

| (in thousands)             |   | Three Months Ended |   | Nine Months Ended |
|----------------------------|--------|--------------------|--------|-------------------|
|                       |   | December24, 2010   |   | December25, 2009  |   | December24, 2010 |   | December25, 2009 |
| Cost of revenue            |   | $                  | 220    |              |   | $ | 188 |   |   | $ | 622 |   |   | $ | 543 |   |
| Sales and marketing        |   |               | 473    |              |   |   | 392 |   |   |   | 1,270 |   |   |   | 1,309 |   |
| Research and development   |   |               | 562    |              |   |   | 434 |   |   |   | 1,566 |   |   |   | 1,207 |   |
| General and administrative |   |               | 336    |              |   |   | 721 |   |   |   | 1,046 |   |   |   | 1,406 |   |
|                       |   | $                  | 1,591  |              |   | $ | 1,735 |   |   | $ | 4,504 |   |   | $ | 4,465 |   |

----

Index

|                        |   | Three Months Ended     |    | Nine Months Ended      |
|-----------------------------|--------|------------------------|---------|------------------------|
|                        |   | December 24, 2010 |    | December 25, 2009 |   | December24, 2010 |   | December25, 2009 |
| Expected term, in years     |   |                   | 4.94    |                   |   |   | 5.16 |   |   |   | 4.94 |   |   |   | 5.04 |   |
| Expected volatility         |   |                   | 75.99   | %                      |   |   | 71.40 | % |   |   | 73.31 | % |   |   | 68.93 | % |
| Risk-free interest rate     |   |                   | 2.09    | %                      |   |   | 2.57 | % |   |   | 1.80 | % |   |   | 2.41 | % |
| Expected dividends          |   |                   | — |                   |   |   | — |   |   |   | — |   |   |   | — |   |
| Weighted-average fair value |   | $                      | 2.28    |                   |   | $ | 3.18 |   |   | $ | 2.73 |   |   | $ | 3.22 |   |

| (in thousands)                                          |   | December24, 2010 |   | March26, 2010       |
|---------------------------------------------------------|--------|------------------|--------|---------------------|
|                                                    |   | CarryingAmount   |   | EstimatedFair Value |   | CarryingAmount |   | EstimatedFair Value |
| Assets:                                                 |   |             |   |                |   |   |   |   |   |   |   |   |   |   |   |   |
| Short-term investments                                  |   | $                | 59,766 |                |   | $ | 59,766 |   |   | $ | 75,508 |   |   | $ | 75,508 |   |
| Liabilities:                                            |   |             |   |                |   |   |   |   |   |   |   |   |   |   |   |   |
| 3¾% Convertible senior notes                       |   | $                | 10,500 |                |   | $ | 8,873 |   |   | $ | 10,500 |   |   | $ | 7,980 |   |
| 7¼% Redeemable convertible subordinated debentures |   | $                | 23,704 |                |   | $ | 20,860 |   |   | $ | 23,704 |   |   | $ | 20,860 |   |

----

Index

ITE

----

Index

|                                     |   | Three Months Ended |    |   | Nine Months Ended |   |
|------------------------------------------|--------|--------------------|---------|--------|-------------------|--------|
|                                     |   | December           |    |   | December          |   |   | December |   |   | December |   |
|                                     |   | 24, 2010           |    |   | 25, 2009          |   |   | 24, 2010 |   |   | 25, 2009 |   |
|                                     |   |               |    |   |              |   |   |   |   |   |   |   |   |   |   |   |
| Percent of revenue                       |   |               |    |   |              |   |   |   |   |   |   |   |   |   |   |   |
| Product                                  |   |               | 75.8    | %      |              |   | 76.9 | % |   |   | 78.3 | % |   |   | 77.0 | % |
| Service and other                        |   |               | 24.2    |   |              |   | 23.1 |   |   |   | 21.7 |   |   |   | 23.0 |   |
| Total revenue                            |   |               | 100.0   |   |              |   | 100.0 |   |   |   | 100.0 |   |   |   | 100.0 |   |
|                                     |   |               |    |   |              |   |   |   |   |   |   |   |   |   |   |   |
| Product gross margin                     |   |               | 41.6    |   |              |   | 47.6 |   |   |   | 48.8 |   |   |   | 49.9 |   |
| Service and other gross margin           |   |               | 19.9    |   |              |   | 14.9 |   |   |   | 14.7 |   |   |   | 14.4 |   |
| Total gross margin                       |   |               | 36.3    |   |              |   | 40.0 |   |   |   | 41.4 |   |   |   | 41.8 |   |
|                                     |   |               |    |   |              |   |   |   |   |   |   |   |   |   |   |   |
| Sales and marketing                      |   |               | 38.2    |   |              |   | 28.5 |   |   |   | 31.7 |   |   |   | 26.4 |   |
| Research and development                 |   |               | 34.5    |   |              |   | 31.0 |   |   |   | 30.4 |   |   |   | 26.0 |   |
| General and administrative               |   |               | 16.0    |   |              |   | 22.0 |   |   |   | 17.0 |   |   |   | 16.5 |   |
| Restructure and other costs (recoveries) |   |               | 2.1     |   |              |   | — |   |   |   | 0.6 |   |   |   | — |   |
| Total operating expenses                 |   |               | 90.8    |   |              |   | 81.5 |   |   |   | 79.7 |   |   |   | 68.9 |   |
| Loss from operations                     |   |               | (54.5   | )      |              |   | (41.5 | ) |   |   | (38.3 | ) |   |   | (27.1 | ) |
|                                     |   |               |    |   |              |   |   |   |   |   |   |   |   |   |   |   |
| Interest expense, net                    |   |               | (2.0    | )      |              |   | (1.3 | ) |   |   | (2.0 | ) |   |   | (0.9 | ) |
| Gain on extinguishment of debt           |   |               | — |   |              |   | — |   |   |   | — |   |   |   | 1.0 |   |
| Other income, net                        |   |               | 0.5     |   |              |   | 1.1 |   |   |   | — |   |   |   | 0.7 |   |
| Loss before taxes                        |   |               | (56.0   | )      |              |   | (41.7 | ) |   |   | (40.3 | ) |   |   | (26.3 | ) |
| Income tax provision                     |   |               | 0.2     |   |              |   | 0.1 |   |   |   | 0.5 |   |   |   | 0.1 |   |
| Net loss                                 |   |               | (56.2   | )%     |              |   | (41.7 | )% |   |   | (40.8 | )% |   |   | (26.4 | )% |

|   | · | Total revenue in the third quarter was 15% lower compared to the third quarter of the prior fiscal year, and in the first nine months of fiscal 2011 was 14% lower than in the comparable prior year period. The declines in total revenue resulted principally from lower sales to government customers in the first and third quarters of fiscal 2011. |
|--------|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | Our sales to the government sector continue to account for a majority of our revenue, but fluctuate from quarter to quarter. Revenue from government customers as a percentage of total revenue for the third quarter and the first nine months of fiscal 2011 was 65.7% and 71.9%, respectively. For the comparable prior-year periods, revenue from government customers as a percentage of total revenue was 73.6% and 77.6%, respectively. Spending by government customers is dependent upon the size of budget allocations, the timely passage of the annual federal budget, and the timing of specific programs. In addition, government customers may purchase large quantities of equipment from us in a single quarter, often with orders totaling $2 to $5 million or more, and then make no purchases in other quarters, making quarterly comparisons difficult. For example, over the course of fiscal 2010, we achieved quarterly revenue ranging from $84,000 to $6.2 million for NX1000 sales from a single government program. |
|--------|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

Index

|   | · | Sales of our VoIP-based product lines increased in the aggregate in the first nine months of fiscal 2011. Product revenue from our VX series was $4.1 million in the third quarter of fiscal 2011, compared to $2.7 million in the third quarter of fiscal 2010. For the first nine months of fiscal 2011, product revenue from our VX series was $14.0 million, a 24.5% increase compared to the comparable prior-year period. The increases were due principally to greater VX series sales to commercial customers for UC implementations and to government customers for secure communications applications. Product revenue from enterprise customers for our VX series was up 49.6% for the first nine months of fiscal 2011 compared to the comparable prior-year period. Revenue from Tenor series products decreased by 21.6% and 16.7% in the third quarter and first nine months of fiscal 2011, respectively, compared to the comparable prior-year periods, as demand shifts to more-advanced products. The first product in the UX Series, our new VoIP and unified communications platform, became generally available early in the third quarter of fiscal 2011. |
|--------|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | Sales of our multi-service networking products declined from the prior year. For the first nine months of fiscal 2011, combined sales of our Promina and NX1000 products were down 37.7% from the comparable prior-year period. The reduction in 2011 is primarily from lower sales of the NX1000, which are largely concentrated to a specific customer. Promina products, which are based on time division multiplexing, continue to function well for certain applications and we have a large installed base, particularly in the Federal government. The NX1000 product is an extension of our Promina product line and allows Promina customers to add IP capabilities to their networks. Given the installed base for Promina and the addition of the NX1000 product, we expect to see continuing orders for Promina and NX1000 products for the next few years, but at a declining rate. |
|--------|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | Our sector mix and our mix of product sales fluctuate quarter to quarter. We expect our customers to move to IP-based communications, at varying speeds. Also, spending by government customers fluctuates for the reasons noted above. The following table shows elements of our sector mix and our mix of product sales: |
|--------|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (in thousands, except percentages) |   | Three Months Ended |   | Nine Months Ended |
|------------------------------------|--------|--------------------|--------|-------------------|
|                               |   | December24, 2010   |   | December25, 2009  |   | December24, 2010 |   | December25, 2009 |
| Sector mix:                        |   |               |   |              |   |   |   |   |   |   |   |   |   |   |   |   |
| Revenue from government customers  |   | $                  | 9,149  |              |   | $ | 12,016 |   |   | $ | 34,269 |   |   | $ | 43,136 |   |
| % of total revenue                 |   |               | 65.7   | %                 |   |   | 73.6 | % |   |   | 71.9 | % |   |   | 77.6 | % |
|                               |   |               |   |              |   |   |   |   |   |   |   |   |   |   |   |   |
| Mix of product sales:              |   |               |   |              |   |   |   |   |   |   |   |   |   |   |   |   |
| Promina product revenue            |   | $                  | 2,762  |              |   | $ | 3,861 |   |   | $ | 12,267 |   |   | $ | 13,292 |   |
| % of product revenue               |   |               | 26.2   | %                 |   |   | 30.8 | % |   |   | 32.9 | % |   |   | 31.0 | % |
| VoIP-based product revenue         |   | $                  | 6,860  |              |   | $ | 5,240 |   |   | $ | 21,221 |   |   | $ | 18,954 |   |
| % of product revenue               |   |               | 65.0   | %                 |   |   | 41.8 | % |   |   | 56.9 | % |   |   | 44.2 | % |

|   | · | Our arrangement with CACI International Inc. (CACI) for maintenance and other services provided to our Federal customers expired December 1, 2010. We will now perform these services ourselves and retain all revenue associated with these services, which will benefit service revenue and gross margin. Retaining all of the subject revenue beginning December 1, 2010 helped service revenue and margins in the third quarter of fiscal 2011. |
|--------|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | Expense levels were generally consistent with prior periods. Operating expense in the third quarter and first nine months of fiscal 2011 decreased 4.8% and 0.9%, respectively, compared to the comparable prior-year periods. For the first nine months of fiscal 2011, the effect of cost control measures upon operating expenses were offset by legal costs, incurred mostly in the second quarter of fiscal 2011, for an internal investigation regarding compliance with U.S. export laws. The Company continues to monitor expenses closely. On a temporary basis, since the beginning of fiscal 2010, most of our domestic employees have taken a 7.5% salary reduction, with executives taking reductions of 10% to 15%. The salary reductions have been offset by grants of restricted stock. These salary reductions with offsetting grants of equity have reduced cash consumption, while having a neutral effect upon compensation expense. |
|--------|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

Index

| (in thousands, except percentages) |   | Three Months Ended |   |   |     |   |   | Nine Months Ended |   |   |     |   |
|------------------------------------|--------|--------------------|--------|--------|----------|--------|--------|-------------------|--------|--------|----------|--------|
|                               |   | December           |   |   | December |   |   |              |   |   | December |   |   | December |   |   |   |   |
|                               |   | 24, 2010           |   |   | 25, 2009 |   |   | Change            |   |   | 24, 2010 |   |   | 25, 2009 |   |   | Change |   |
|                               |   |               |   |   |     |   |   |              |   |   |     |   |   |   |   |   |   |   |   |   |   |   |
|                               |   |               |   |   |     |   |   |              |   |   |     |   |   |   |   |   |   |   |   |   |   |   |
| Product                            |   | $                  | 10,553 |   |     | $      | 12,550 |              |   |   | (15.9    | )%     |   | $ | 37,281 |   |   | $ | 42,835 |   |   |   | (13.0 | )% |
| Service and other                  |   |               | 3,368  |   |     |   | 3,773  |              |   |   | (10.7    | )      |   |   | 10,351 |   |   |   | 12,759 |   |   |   | (18.9 | ) |
| Total revenue                      |   | $                  | 13,921 |   |     | $      | 16,323 |              |   |   | (14.7    | )%     |   | $ | 47,632 |   |   | $ | 55,594 |   |   |   | (14.3 | )% |

|                           |   | Three Months Ended |   | Nine Months Ended |
|--------------------------------|--------|--------------------|--------|-------------------|
|                           |   | December24, 2010   |   | December25, 2009  |   | December24, 2010 |   | December25, 2009 |
| Product gross margin           |   |               | 41.6   | %                 |   |   | 47.6 | % |   |   | 48.8 | % |   |   | 49.9 | % |
| Service and other gross margin |   |               | 19.9   |              |   |   | 14.9 |   |   |   | 14.7 |   |   |   | 14.4 |   |
| Total gross margin             |   |               | 36.3   | %                 |   |   | 40.0 | % |   |   | 41.4 | % |   |   | 41.8 | % |

|   | · | Product margins benefited by freight/duty refunds of $432,000 received by our United Kingdom subsidiary in the second quarter of fiscal 2011 and credited to product cost of revenue. These refunds related to overpayments of duty tax for certain sales transactions which occurred over a period from 1995 to 1999. |
|--------|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | Product margins also benefited by lower inventory reserves recorded in fiscal 2011. Inventory reserve charges for the third quarter and first nine months of fiscal 2011 were $53,000 and $386,000, respectively. For the comparable prior year periods, inventory reserve charges, which principally related to reduced demand for our NX5010 product resulting from delays in government programs, were $371,000 and $1.7 million, respectively. |
|--------|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

Index

|                                     |   | Three Months Ended |   |   |             |   |   | Nine Months Ended |   |   |             |   |
|------------------------------------------|--------|--------------------|--------|--------|------------------|--------|--------|-------------------|--------|--------|------------------|--------|
| (in thousands, except percentages)       |   | December24, 2010   |   |   | December25, 2009 |   |   | Change            |   |   | December24, 2010 |   |   | December25, 2009 |   |   | Change |   |
| Sales and marketing                      |   | $                  | 5,320  |   |             | $      | 4,668  |              |   |   | 14.0             | %      |   | $ | 15,076 |   |   | $ | 14,688 |   |   |   | 2.6 | % |
| Research and development                 |   |               | 4,803  |   |             |   | 5,053  |              |   |   | (4.9             | )      |   |   | 14,457 |   |   |   | 14,461 |   |   |   | — |   |
| General and administrative               |   |               | 2,237  |   |             |   | 3,583  |              |   |   | (37.6            | )      |   |   | 8,149 |   |   |   | 9,168 |   |   |   | (11.1 | ) |
| Restructure and other costs (recoveries) |   |               | 297    |   |             |   | (7     | )                 |   |   | (4,343           | )      |   |   | 297 |   |   |   | 17 |   |   |   | 1,647 |   |
| Total operating expenses                 |   | $                  | 12,657 |   |             | $      | 13,297 |              |   |   | (4.8             | )%     |   | $ | 37,979 |   |   | $ | 38,334 |   |   |   | (0.9 | )% |

|   | · | Employee compensation was higher by $458,000, reflecting: |
|--------|--------|-----------------------------------------------------------|

|   | · | An increase in direct payroll costs relating to new employees of $234,000. |
|--------|--------|----------------------------------------------------------------------------|

|   | · | Sales commissions, which were $200,000 higher than in the third quarter of fiscal 2010, reflecting increased bookings. |
|--------|--------|------------------------------------------------------------------------------------------------------------------------|

|   | · | An increase of $80,000 in stock compensation expense due largely to the timing of the award and vesting dates of stock grants used both to compensate employees for salary reductions and in lieu of cash merit awards. |
|--------|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | Costs for products deployed for sales and marketing purposes, such as those provided for use in Microsoft Training Centers, were higher by $45,000. |
|--------|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | Marketing materials costs and travel and entertainment costs were higher by a total of $145,000, reflecting activities for the UX Series product launch. |
|--------|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | Employee compensation was higher by $73,000, reflecting: |
|--------|--------|----------------------------------------------------------|

|   | · | Stock compensation expense, direct payroll costs and miscellaneous other payroll costs, which in total increased by $534,000 in the first nine months of fiscal 2011 principally due to higher headcount. |
|--------|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | Sales commissions, which were $93,000 higher in the first nine months of fiscal 2011, reflecting increased bookings. |
|--------|--------|----------------------------------------------------------------------------------------------------------------------|

|   | · | These increased expenses were offset by an absence of employee separation costs in fiscal 2011. In the first quarter of fiscal 2010, we incurred employee separation costs of $700,000 in connection with the retirement of our former Federal sales executive. There were no similar charges in the first nine months of fiscal 2011. |
|--------|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | Travel and entertainment costs were higher by $150,000. |
|--------|--------|---------------------------------------------------------|

|   | · | Costs for products deployed for sales and marketing purposes were higher by $134,000. |
|--------|--------|---------------------------------------------------------------------------------------|

|   | · | Costs for marketing materials for trade shows were higher by $121,000. |
|--------|--------|------------------------------------------------------------------------|

|   | · | Other costs were higher by $55,000. |
|--------|--------|-------------------------------------|

----

Index

|   | · | Employee compensation was higher by $149,000, reflecting: |
|--------|--------|-----------------------------------------------------------|

|   | · | An increase of $209,000 in consulting and temporary employee costs due to accelerated development efforts for the UX Series product. |
|--------|--------|--------------------------------------------------------------------------------------------------------------------------------------|

|   | · | An increase of $128,000 in stock compensation expense due largely to the timing of the award and vesting dates of stock grants used both to compensate employees for salary reductions and in lieu of cash merit awards. |
|--------|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | These increased expenses were offset by reduced direct payroll costs of $188,000, reflecting lower average headcount. |
|--------|--------|-----------------------------------------------------------------------------------------------------------------------|

|   | · | Engineering-related costs were lower by $188,000. In the third quarter of fiscal 2010 we incurred substantial new product development initiative costs. |
|--------|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | Allocations of shared expenses, including facilities and information technology costs, were lower by $182,000 due principally to reductions in company-wide allocated expenses. |
|--------|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | Employee compensation was higher by $1.1 million, reflecting: |
|--------|--------|---------------------------------------------------------------|

|   | · | An increase of $243,000 in direct payroll costs, largely due to higher average headcount. |
|--------|--------|-------------------------------------------------------------------------------------------|

|   | · | An increase of $359,000 of stock compensation expense for incentives tied to new product milestones. |
|--------|--------|------------------------------------------------------------------------------------------------------|

|   | · | Higher costs for consultants and temporary employees, by approximately $461,000. |
|--------|--------|----------------------------------------------------------------------------------|

|   | · | Engineering related expenses were lower by $564,000, principally because we incurred substantial costs associated with ramping up new product development in fiscal 2010 for accelerated development efforts for the UX Series product. |
|--------|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | Depreciation expense was lower by $231,000, as many of the Company’s capital assets came to the end of their depreciation lives over the past two years. |
|--------|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | Allocations of shared expenses, including facilities and information technology costs, were lower by $209,000 due to principally to reductions in company-wide allocated expenses. |
|--------|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | In the third quarter of fiscal 2010, we incurred employee separation costs of $878,000 in connection with the departure of our former Chief Financial Officer. |
|--------|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | Other payroll related costs, including stock compensation, were lower by $42,000. |
|--------|--------|-----------------------------------------------------------------------------------|

|   | · | Outside consulting costs were lower by $200,000 due principally to lower audit fees. |
|--------|--------|--------------------------------------------------------------------------------------|

|   | · | Legal costs were lower by $121,000, principally due to patent lawsuit defense costs incurred in the third quarter of fiscal 2010. |
|--------|--------|-----------------------------------------------------------------------------------------------------------------------------------|

|   | · | Allocations of shared expenses, including facilities and information technology costs, were lower by $83,000 due principally to reductions in company-wide allocated expenses. |
|--------|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | Miscellaneous other costs that included bad debt, bank fees and accretion charges for our vacated facility, were lower by $22,000. |
|--------|--------|------------------------------------------------------------------------------------------------------------------------------------|

|   | · | In the third quarter of fiscal 2010, we incurred one-time employee separation costs of $878,000 in connection with the departure of our former Chief Financial Officer. |
|--------|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | Other compensation costs, including direct pay and stock-based compensation, were lower by $169,000. |
|--------|--------|------------------------------------------------------------------------------------------------------|

|   | · | Legal fees were higher by $742,000 due principally to costs incurred in the second quarter of fiscal 2011 for an internal investigation of our export-related activities, which is being performed by outside counsel. |
|--------|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | Outside consulting costs were lower by $420,000 due principally to lower audit fees. |
|--------|--------|--------------------------------------------------------------------------------------|

----

Index

|   | · | Allocations of shared expenses, including facilities and information technology costs, were lower by $145,000 due principally to reductions in company-wide allocated expenses. |
|--------|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | Miscellaneous other costs that included bad debt, bank fees and accretion charges for our vacated facility, were lower by $148,000. |
|--------|--------|------------------------------------------------------------------------------------------------------------------------------------------|

| (in thousands, except percentages) |   | Three Months Ended     |    |                   |   | Nine Months Ended |    |             |
|------------------------------------|--------|------------------------|---------|------------------------|--------|-------------------|---------|------------------|
|                               |   | December 24, 2010 |    | December 25, 2009 |   | Change            |    | December24, 2010 |   | December25, 2009 |   | Change |
|                               |   |                   |    |                   |   |              |    |             |   |   |   |   |
| Interest income                    |   | $                      | 298     |                   |   | $                 | 330     |             |   |   | (9.7 | )% |   | $ | 731 |   |   | $ | 1,218 |   |   |   | (40.0 | )% |
| Interest expense                   |   | $                      | (554    | )                      |   | $                 | (555    | )                |   |   | (0.2 | ) |   | $ | (1,661 | ) |   | $ | (1,717 | ) |   |   | (3.3 | ) |
| Gain on extinguishment of debt     |   | $                      | — |                   |   | $                 | — |             |   |   | — |   |   | $ | — |   |   | $ | 555 |   |   |   | (100.0 | ) |
| Other income (expense), net        |   | $                      | 65      |                   |   | $                 | 186     |             |   |   | (65.1 | ) |   | $ | 7 |   |   | $ | 414 |   |   |   | (98.3 | ) |

| (in thousands)                  |   | Three Months Ended     |    | Nine Months Ended |
|---------------------------------|--------|------------------------|---------|-------------------|
|                            |   | December 24, 2010 |    | December25, 2009  |   | December 24, 2010 |   | December25, 2009 |
| Gain (loss) on foreign exchange |   | $                      | 8       |              |   | $ | 22 |   |   | $ | (136 | ) |   | $ | (6 | ) |
| Realized gain on investments    |   |                   | 57      |              |   |   | 164 |   |   |   | 147 |   |   |   | 398 |   |
| Other                           |   |                   | — |              |   |   | — |   |   |   | (4 | ) |   |   | 22 |   |
|                            |   | $                      | 65      |              |   | $ | 186 |   |   | $ | 7 |   |   | $ | 414 |   |

----

Index

| Contractual Obligations(in thousands) |   | Total  |   | 2011   |   | 2012to2013 |    | 2014to2015 |   | After2015 |
|---------------------------------------|--------|--------|--------|--------|--------|------------|---------|------------|--------|-----------|
| Long-term debt                        |   | $      | 34,204 |   |   | $          | — |       |   | $         | — |   |   | $ | 34,204 |   |   | $ | — |   |
| Interest on long-term debt            |   |   | 7,590  |   |   |       | — |       |   |      | 4,225 |   |   |   | 3,365 |   |   |   | — |   |
| Operating leases                      |   |   | 11,168 |   |   |       | 1,008   |       |   |      | 5,316 |   |   |   | 2,583 |   |   |   | 2,261 |   |
| Capital leases                        |   |   | 144    |   |   |       | 18      |       |   |      | 119 |   |   |   | 7 |   |   |   | — |   |
| Total contractual obligations         |   | $      | 53,106 |   |   | $          | 1,026   |       |   | $         | 9,660 |   |   | $ | 40,159 |   |   | $ | 2,261 |   |

----

Index

TEM

----

Index

ITEM

CEEDIN

CTO

CURI

----

Index

| Fiscal Period                         |   | Total Number of Shares Purchased (1) |    |   | Average Price Paid Per Share |   |    | Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs |   |   | Approximate Dollar Value of Shares That May Yet Be Purchased Under Publicly Announced Plans or Programs |   |
|---------------------------------------|--------|--------------------------------------|---------|--------|------------------------------|--------|---------|---------------------------------------------------------------------------------------|--------|--------|---------------------------------------------------------------------------------------------------------|--------|
| September 25 – October 22, 2010 |   |                                 | — |   |                         |   | — |                                                                                  |   |   | —                                                                                                 |   |   | $ | — |   |
| October 23 – November 19, 2010  |   |                                 | 85,076  |   |                         | $      | 3.55    |                                                                                  |   |   | —                                                                                                 |   |   | $ | — |   |
| November 20 – December 24, 2010 |   |                                 | — |   |                         |   | — |                                                                                  |   |   | —                                                                                                 |   |   | $ | — |   |
|                                  |   |                                 | 85,076  |   |                         | $      | 3.55    |                                                                                  |   |   | —                                                                                                 |   |   | $ | — |   |

| (1)   | 85,076 shares were acquired directly from employees as payment of tax withholding obligations upon vesting of restricted stock awards. |
|-----------------|----------------------------------------------------------------------------------------------------------------------------------------|

RITI

RMA

XHIB

| (a)   | Exhibits |
|-----------------|----------|

|   | 31.1 | Rule 13a-14(a) Certification (CEO)*.                                                                                                                                                                                                                  |
|--------|------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   | 31.2 | Rule 13a-14(a) Certification (Chief Financial Officer).                                                                                                                                                                                               |
|   | 32.1 | Section 1350 Certification (CEO)*.                                                                                                                                                                                                                    |
|   | 32.2 | Section 1350 Certification (Chief Financial Officer).                                                                                                                                                                                                 |
|   |      |                                                                                                                                                                                                                                                       |
|   |      | * Incorporated by reference to the same-numbered exhibits furnished with the registrant’s Quarterly Report on Form 10-Q (Commission File No. 001-10255) for the fiscal quarter ended December 24, 2010, as originally filed on February 2, 2010. |

----

Index

ATUR

| Dated:  June 6, 2011  |                                                                                                      | NETWORK EQUIPMENT TECHNOLOGIES, INC.    |   |
|--------------------------------------|-----------------------------------------------------------------------------------------------------------|-----------------------------------------|--------|
|                                 |                                                                                                      |                                    |   |
|                                 | By:                                                                                                       |     /s/ KAREN CARTE |   |
|                                 | Vice President and Chief Accounting Officer (on behalf of the registrant and as chief accounting officer) |                                    |

----