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 30, 1998


                                       OR


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


                        COMMISSION FILE NUMBER 000-23699


                              VISUAL NETWORKS, INC.
             (Exact name of registrant as specified in its charter)

                DELAWARE                         52-1837515
            (State or other                   (I.R.S. Employer
            jurisdiction of                  Identification No.)
            incorporation or
             organization)

     2092 GAITHER ROAD, ROCKVILLE, MD.              20850
     (Address of principal executive offices)     (Zip Code)


Registrant's telephone number, including area code: (301) 296-2300

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 the  filing
requirements for the past 90 days. Yes x No ---

As of  November 9, 1998,  20,032,400   shares  of the registrant's Common Stock,
par value $.01 per share, were outstanding.



<PAGE>


                              VISUAL NETWORKS, INC.

   QUARTERLY REPORT ON FORM 10-Q FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1998

                                TABLE OF CONTENTS
<TABLE>
<CAPTION>
                 <S>          <C>                                                            <C>

                 PART I.      FINANCIAL INFORMATION                                          Page

                 Item 1.      Financial Statements:
                              Consolidated Balance Sheets
                              September 30, 1998 and December 31, 1997                        3

                              Consolidated Statements of Operations
                              Three and nine months ended September 30, 1998
                              and 1997                                                        4

                              Consolidated Statements of Cash Flows
                              Nine months ended September 30, 1998 and 1997                   5

                              Notes to Consolidated Financial Statements                      6

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

                 Item 3.      Qualitative and Quantitative Disclosure about                  15
                              Market Risk

                 PART II. OTHER INFORMATION

                 Items 1. - 6.                                                               15


                 Signatures                                                                  18

</TABLE>


                                       -2-
<PAGE>


                          PART I: FINANCIAL INFORMATION

ITEM 1: FINANCIAL STATEMENTS
                              Visual Networks, Inc.

                           Consolidated Balance Sheets
                                  (unaudited)
                 (in thousands, except share and per share data)
                                  




<TABLE>
<CAPTION>
                                                                                           September     December
                                                  Assets                                      30,           31,
                                                                                             1998          1997
                                                                                          ---------     ---------
                  <S>                                                                    <C>            <C>
                  Current assets:                                                         
                    Cash and cash equivalents..........................................   $  47,702     $   8,902
                    Accounts receivable, net of allowance of $494 
                       and $412, respectively..........................................       4,663         3,559
                    Inventory..........................................................       5,054         3,724
                    Other current assets...............................................       1,579           602
                                                                                          ---------     ---------
                       Total current assets.......................... .................      58,998        16,787
                  Property and equipment, net..........................................       3,542         1,824
                                                                                          ---------     ---------
                         Total assets..................................................   $  62,540     $  18,611
                                                                                          ---------     ---------

                                   Liabilities and Stockholders' Equity


                  Current liabilities:
                    Accounts payable and accrued expenses..............................   $   8,985     $   5,794
                    Customer deposits..................................................       3,017         3,068
                    Accrued compensation...............................................       2,066         1,606
                    Deferred revenue...................................................       5,070         5,211
                    Bank line of credit................................................         ---           126
                    Loan payable to stockholder........................................         ---           500
                    Capital lease obligation...........................................         497           753
                                                                                         ----------   -----------
                         Total current liabilities.....................................      19,635        17,058
                                                                                         ==========   ===========

                  Redeemable convertible preferred stock:
                    Series B, Series C, Series D and Series E redeemable 
                      convertible cumulative preferred stock, $.01 par value, 
                      7,229,438 shares authorized in aggregate, 7,228,473 issued
                      and outstanding as of December 31, 1997(aggregate liquida-
                      tion preference of $14,484 as of December 31,997)................         ---        14,855
                                                                                         ----------   -----------

                  Stockholders' equity:
                    Preferred stock, $.01 par value, 5,000,000 shares authorized, 
                      no shares issued and outstanding.................................         ---           ---
                    Series A convertible preferred stock, $.01 par value, 347,070 
                      shares authorized, 347,070 shares issued and outstanding as 
                      of December 31, 1997  (aggregate liquidation preference of 
                      $149 as of December 31, 1997)....................................         ---             3
                    Common stock, $.01 par value, 50,000,000 shares authorized, 
                      20,005,929 and 5,005,140 shares issued and outstanding as of 
                      September 30, 1998 and December 31, 1997, respectively...........         200            50
                    Deferred compensation..............................................        (212)         (247)
                    Additional paid-in capital.........................................      73,972        12,783
                    Accumulated deficit................................................     (31,055)      (25,891)
                                                                                          ---------     ---------
                         Total stockholders' equity....................................      42,905       (13,302)
                                                                                          ---------     ---------
                         Total liabilities and stockholders' equity....................   $  62,540     $  18,611
                                                                                          =========     =========

          See accompanying notes to consolidated financial statements.

</TABLE>

                                      -3-
<PAGE>


                              Visual Networks, Inc.

                      Consolidated Statements of Operations
                                   (unaudited)
                 (in thousands, except share and per share data)

<TABLE>
<CAPTION>


                                                               For the Three Months Ended              For the Nine Months Ended
                                                                      September 30,                           September 30,
                                                          ------------------------------------    ----------------------------------
                                                                  1998               1997                1998                1997
                                                          ----------------    ----------------    ----------------    --------------
      <S>                                                     <C>                <C>                 <C>                <C>
      Revenues........................................        $    13,460        $     7,934         $    35,766         $   18,151
      Cost of goods sold..............................              4,830              2,987              13,731              7,114
                                                              -----------        -----------         -----------         -----------
      Gross profit....................................              8,630              4,947              22,035             11,037
                                                              -----------        -----------         -----------         -----------

      Operating expenses:
        Research and development......................              2,725              1,835               7,640              5,116
        Sales and marketing...........................              3,258              3,451              10,545              9,302
        General and administrative....................              1,051                830               3,167              2,290
        Merger-related costs..........................                ---                ---               7,347                ---
                                                              -----------        -----------         -----------         -----------
         Total operating expenses.....................              7,034              6,116              28,699             16,708
                                                              -----------        -----------         -----------         -----------
      Income (loss) from operations...................              1,596             (1,169)             (6,664)            (5,671)
      Interest income, net............................                615                  2               1,670                 68
                                                              -----------        -----------         -----------         -----------
      Net income (loss)...............................              2,211             (1,167)             (4,994)            (5,603)
      Preferred dividends and accretion...............                ---               (365)               (144)            (1,094)
                                                              ------------       ------------        ------------        -----------
      Net income (loss) applicable to common
      shareholders....................................             $2,211            $(1,532)            $(5,138)           $(6,697)
                                                              ============        ============       ============       ============

      Basic net income (loss) per common share........             $ 0.11            $ (0.31)            $ (0.29)           $ (1.36)
                                                              ===========         ============       ============       ============
      Diluted net income (loss) per common share......             $ 0.10            $ (0.31)            $ (0.29)           $ (1.36)
                                                              ============        ============       ============       ============
      Pro forma diluted income (loss) per common share             $ 0.10            $ (0.07)            $ (0.26)           $ (0.36)
                                                              ============        ============       ============       ============

      Basic  weighted average shares outstanding......         19,965,302          4,966,027          17,629,587          4,919,623
                                                              ------------       ------------        ------------        -----------
      Diluted weighted average shares outstanding.....         21,596,540          4,966,027          17,629,587          4,919,623
                                                             ------------        ------------        ------------        -----------
      Pro forma diluted weighted average shares
         outstanding..................................         21,596,540         15,571,762          19,261,239         15,525,358
                                                             ============        ============        ============       ============


          See accompanying notes to consolidated financial statements.
</TABLE>


                                      -4-
<PAGE>


                              Visual Networks, Inc.

                      Consolidated Statements of Cash Flows
                                   (unaudited)
                                 (in thousands)
<TABLE>
<CAPTION>
                                                                                       For the nine months ended
                                                                                             September 30,
                                                                                       1998               1997
                                                                                -----------------  ---------------
                <S>                                                                  <C>           <C>

                 Cash flows from operating activities:
                 Net loss.....................................................       $ (4,994)     $      (5,603)
                 Adjustments to reconcile net loss to net cash
                   used in operating activities:
                      Depreciation and amortization...........................            930                711
                      Loss on disposal of property and equipment..............            ---                131
                 Changes in assets and liabilities:
                      Accounts receivable.....................................         (1,104)              (598)
                      Inventory...............................................         (1,330)              (883)
                      Other current assets....................................           (936)              (212)
                      Accounts payable and accrued expenses...................          3,191              2,682
                      Customer deposits.......................................            (51)               ---
                      Accrued compensation....................................            460                 22
                      Deferred revenue........................................           (141)             2,734
                                                                                     --------           --------
                           Net cash used in operating activities..............         (3,975)            (1,016)
                                                                                     --------           --------

                 Cash flows from investing activities:
                      Proceeds from sale leaseback transactions...............            ---                544
                      Expenditures for property and equipment.................         (2,611)            (1,030)
                                                                                     --------           --------
                           Net cash used in investing activities..............         (2,611)              (486)
                                                                                     --------           --------

                 Cash flows from financing activities:
                      Exercise of stock options...............................            414                 17
                      Proceeds from issuance of common stock, net of issuance
                           costs..............................................         45,384                 94
                      Repayments under credit agreements......................           (126)              (848)
                      Payment of Series A dividends...........................            (30)               ---
                      Principal payments on capital lease obligations.........           (256)              (191)
                                                                                     --------           ---------
                           Net cash provided by (used in) financing activities         45,386               (928)
                                                                                     --------           ---------

                 Net increase (decrease) in cash and cash equivalents.........         38,800             (2,430)
                 Cash and cash equivalents, beginning of period...............          8,902              7,551
                                                                                     --------           ---------
                 Cash and cash equivalents, end of period.....................       $ 47,702           $  5,121
                                                                                     --------           ---------

                 Supplemental cash flow information:                                
                                                                                     
                 Cash paid for interest.......................................       $    149           $     96
                                                                                     --------           ---------
                 Cash paid for income taxes...................................       $    513           $    ---
                                                                                     ========           =========
</TABLE>

          See accompanying notes to consolidated financial statements.


                                      -5-
<PAGE>
                              VISUAL NETWORKS, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                               SEPTEMBER 30, 1998
                                   (unaudited)

(1)  Nature of Operations and Summary of Significant Accounting Policies:

    Visual Networks,  Inc. ("Visual" or the "Company") is engaged in developing,
manufacturing and marketing  wide-area-network service level management systems.
Visual's  operations are subject to certain risks and  uncertainties,  including
among others,  successful  implementation  of the Visual sales and  distribution
model, dependence on significant customers, rapidly changing technology, current
and potential competitors with greater financial, technological, production, and
marketing resources, dependence on sole and limited source suppliers, dependence
on key management  personnel,  limited  protection of intellectual  property and
proprietary rights, integration of its recent acquisition of Net2Net Corporation
("Net2Net"),  uncertainty of future  profitability and possible  fluctuations in
financial results.

    Financial Statement Presentation

      The  preparation  of financial  statements  in conformity  with  generally
accepted  accounting  principles  requires  management  to  make  estimates  and
assumptions  that affect the  reported  amounts of assets and  liabilities,  the
disclosure of contingent  assets and  liabilities  at the date of statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.

       These  financial  statements  are unaudited and have been prepared by the
Company  pursuant to the rules and  regulations  of the  Securities and Exchange
Commission  regarding  interim  financial  reporting.  Accordingly,  they do not
include all of the  information  and  footnotes  required by generally  accepted
accounting  principles for complete  financial  statements,  and it is suggested
that  these  financial  statements  be read in  conjunction  with the  financial
statements  and  the  notes  thereto,  included  in the  Company's  registration
statement  on Form S-1 dated  August 5, 1998 and its Annual  Report on Form 10-K
for the year  ended  December  31,  1997.  In the  opinion  of  management,  the
comparative financial statements for the fiscal periods presented herein include
all  adjustments  that are normal and  recurring  which are necessary for a fair
statement of results for the interim periods.  The results of operations for the
three and nine months ended September 30, 1998 are not necessarily indicative of
the results for the entire year ending December 31, 1998.

      On May 15, 1998, Visual acquired Net2Net in a merger transaction accounted
for as a pooling of interests.  Net2Net is engaged in developing,  manufacturing
and marketing  Asynchronous Transfer Mode ("ATM")  wide-area-network  management
and analysis systems.  The accompanying  consolidated  financial statements have
been  retroactively  restated to reflect the  combined  financial  position  and
combined results of operations and cash flows for all periods presented,  giving
effect to the acquisition as if it had occurred at the beginning of the earliest
period  presented.  For the three months ended  September  30, 1997,  Visual had
previously  reported  revenues of $7,017,000 as compared to combined revenues of
$7,934,000  and a net income of $536,000  as compared to a combined  net loss of
$1,167,000.

    Cash and Cash Equivalents

    The  Company  considers  all  highly  liquid  instruments  with an  original
maturity of three months or less at the time of purchase to be cash equivalents.

    Fair Value of Financial Instruments

    The carrying  values of current assets and current  liabilities  approximate
fair value because of the relatively short maturities of these instruments.

                                      -6-
<PAGE>
                             VISUAL NETWORKS, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                               SEPTEMBER 30, 1998
                                   (unaudited)

    Revenue Recognition

    The Company  generally  recognizes  revenue  from the sale or license of its
products upon delivery and passage of title to the  customer.  Where  agreements
provide for evaluation or customer  acceptance,  the Company  recognizes revenue
upon the completion of the  evaluation  process and acceptance of the product by
the customer.  Maintenance  contracts call for the Company to provide  technical
support  and  software  updates to  customers.  The Company  recognizes  product
support and maintenance revenue,  including  maintenance revenue that is bundled
with  product  sales,  ratably  over  the  term of the  contract  period,  which
generally ranges from one to three years.

    Inventory

    Inventory  is stated  at the lower of cost or market.  Inventory consists of
the following (in thousands):
<TABLE>
<CAPTION>
                                  <S>              <C>             <C>

                                                   December 31,    September 30,
                                                      1997            1998
                                                   ----------      ------------
                                  Raw materials...   $  439            $ 781   
                                  Work-in-progress      635            1,270
                                  Finished goods..    2,650            3,003
                                                     ------          -------
                                                     $3,724          $ 5,054
                                                     ======          =======
</TABLE>

    Income Taxes

     The  Company  accounts  for income  taxes in  accordance  with  Statment of
Financial  Accounting  Standards  ("SFAS") No. 109 "Accounting for Income Taxes"
("SFAS No. 109").  Under SFAS No. 109,  deferred tax assets and  liabilities are
computed based on the difference between the financial  statement and income tax
bases of assets and  liabilities  using the enacted  marginal tax rate. SFAS No.
109 requires that the net deferred tax asset be reduced by a valuation allowance
if, based on the weight of available  evidence,  it is more likely than not that
some portion or all of the net deferred tax asset will not be realized.

    Basic and Diluted Net Loss per Common Share

     In March 1997, the Financial  Accounting  Standards  Board ("FASB")  issued
SFAS No. 128,  "Earnings per Share" ("SFAS No. 128"). SFAS No. 128 requires dual
presentation  of basic and diluted  earnings  (loss) per share.  Basic  earnings
(loss) per share  includes  no dilution  and is computed by dividing  net income
(loss) available to common shareholders by the weighted average number of common
shares outstanding for the period.  Diluted income (loss) per share includes the
potential  dilution that could occur if  securities or other  contracts to issue
common stock were exercised or converted into common stock.

    Options to purchase  2,060,470  shares of common stock that were outstanding
at September 30, 1998 were not included in the  computation  of diluted loss per
share for the nine months  ended  September  30, 1998 as their  effect  would be
anti-dilutive.  The treasury  stock effect of these options has been included in
the  computation  of diluted  net income  per share for the three  months  ended
September 30, 1998.  Options to purchase  1,808,743  shares of common stock that
were  outstanding at September 30, 1997 were not included in the  computation of
diluted loss per share for the three and nine months ended September 30, 1997 as
their effect would be  anti-dilutive.  The effect of preferred stock convertible
into 10,605,735 shares of common stock as of September 30, 1997 was not included
in the computation of diluted loss per share for the three and nine months ended
September 30, 1997 as such effect would have been  anti-dilutive.  The effect of
the conversion of the preferred stock into 10,605,735  shares of common stock is
included in the  computation of basic loss per share from the date of conversion
on February 11, 1998 for the nine months  ended  September  30, 1998.  Pro forma
basic and diluted weighted average shares  outstanding for each period presented
assumes the conversion of all of the Company's outstanding convertible preferred
stock into common stock as of January 1, 1997.

                                      -7-
<PAGE>
                             VISUAL NETWORKS, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                               SEPTEMBER 30, 1998
                                   (unaudited)

    Reclassifications

    Certain prior year amounts have been  reclassified to conform to the current
year presentation.

(2)  Credit Agreements and Notes Payable:

     Effective  June 30, 1998,  the Company  amended its bank credit  agreement.
This revolving line of credit, as amended (the "Revolving  Line"),  provides for
borrowings  up  to  the  lesser  of  $7,000,000  or  80%  of  eligible  accounts
receivable. The Revolving Line matures on April 5, 1999 and borrowings under the
Revolving Line bear interest at the prime rate. Borrowings are collateralized by
inventory and accounts receivable.  The Revolving Line also contains restrictive
covenants,  including, but not limited to, restrictions related to liquidity and
net worth,  as well as  restrictions  related to  acquisitions,  disposition  of
assets, distributions and investments. As of September 30, 1998, the Company had
no  borrowings  against  the  Revolving  Line,  and in the  three  months  ended
September 30, 1998, a letter of credit for $190,000 that had been issued against
the Revolving Line was cancelled.

     Effective as of December 31, 1997,  Net2Net issued a $500,000  subordinated
note payable to a  stockholder  bearing  interest at a per annum rate of 15%. In
July 1998,  this note was satisfied by issuing  16,848 shares of common stock to
the holder of the note.  The fair value of the shares  issued  approximated  the
carrying  value of the note plus accrued but unpaid  interest.  Accordingly,  no
gain or loss was recognized on this transaction.

(3)  New Accounting Pronouncements

     In June  1997,  the FASB  issued  SFAS No.  130,  "Reporting  Comprehensive
Income" and No. 131,  "Disclosures  about  Segments of an Enterprise and Related
Information."  The  Company  adopted  SFAS  No.  130 for the nine  months  ended
September  30,  1998  and will  adopt  SFAS No.  131  with the  issuance  of its
financial  statements  for the year ending  December 31,  1998.  The adoption of
these  new  pronouncements  will not have a  material  impact  on the  Company's
results of operations, financial position or cash flows.

(4)  Initial Public Offering

    In February 1998, the Company  completed an initial public offering  ("IPO")
of 4,025,000 shares of common stock,  resulting in net proceeds of approximately
$45.4  million.  All of the shares  sold were  issued  and sold by the  Company.
Concurrent with the closing of the offering,  the outstanding shares of Series A
convertible  preferred  stock and  Series B, C, D and E  redeemable  convertible
preferred  stock were  converted  into 485,890 and  10,119,845  shares of common
stock, respectively.

(5)  Net2Net Merger

       In May 1998,  Visual issued  2,056,204 shares of common stock in exchange
for all of the outstanding  preferred and common stock of Net2Net.  In addition,
outstanding  Net2Net  stock  options  were  converted  into  options to purchase
189,733  shares of  common stock.  In  connection  with  the  acquisition,   the
Company  recorded  merger-related  costs in the three months ended June 30, 1998
for  transaction  costs,  integration  expenses  and  restructuring  charges  of
approximately $7,347,000. Transaction costs totaled approximately $4,391,000 and
consisted primarily of fees for investment bankers,  attorneys,  accountants and
other direct costs necessary to complete the transaction.  Integration  expenses
totaled $207,000 and represented  incremental and non-recurring  costs necessary
to integrate  Net2Net and Visual.  These costs were  expensed as  incurred.  The
restructuring charge totaled  approximately  $2,749,000 and related primarily to
the  consolidation  of  the  Company's   manufacturing,   sales,  marketing  and
administrative  functions and the discontinuance of certain product  development
efforts.  This  consolidation  will  include a  reduction  of  approximately  20
employees,  which  will  result in  severance  and  out-placement  costs.  Other
restructuring  costs  related to the  termination  of lease  agreements or other
contractual  arrangements  with no future  benefit.  Approximately  $510,000 was
charged against this reserve during the three months ended September 30, 1998.
                                      

                                       -8-

<PAGE>

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

Overview

    The Company was  incorporated  in Maryland in August 1993 as Avail Networks,
Inc. and  reincorporated  in Delaware in December 1994 as Visual Networks,  Inc.
From incorporation  through December 1994, the Company's principal objective was
to secure  sufficient  equity  financing  to enable the  Company  to  accelerate
product  development  efforts.  The Company  secured its initial round of equity
financing in December 1994.

    During  1995  and  1996,  the  Company  devoted  substantial   resources  to
developing  Visual UpTime for Frame Relay deployment and to developing sales and
marketing functions and general and administrative infrastructure. Visual UpTime
was first shipped in mid-1995.  The Company began generating significant revenue
from sales of Visual UpTime during 1996.

     During 1995 and 1996, most of the Company's  sales were to subscribers.  In
August 1996, the Company  entered into a master  reseller  agreement with Sprint
Corporation  ("Sprint"),  resulting  in the shipment of the  Company's  products
through  Sprint to  subscribers.  In August  1997,  the Company  entered  into a
similar master reseller agreement with MCI Communications  Corp. ("MCI"),  which
also  resulted  in  the  shipment  of  the  Company's  products  through  MCI to
subscribers.  In December 1997, the Company entered into an agreement with AT&T,
which provides for the sale of the Company's  products to AT&T for deployment as
part of AT&T's  infrastructure.  During 1997 and 1998,  the  Company  focused on
selling   Visual  UpTime   directly  to  providers  as  part  of  their  network
infrastructure.

      On May 15, 1998,  Visual acquired  Net2Net in a merger  accounted for as a
pooling of  interests.  The  combination  with  Net2Net  will  affect the future
results of  operations  reported by the  Company  (see Notes 1, 2 and 5 of Notes
to Consolidated Financial Statements).

    The Company  generally  recognizes  revenue  from the sale or license of its
products upon delivery and passage of title to the  customer.  Where  agreements
provide for the  evaluation  or  customer  acceptance,  the  Company  recognizes
revenue upon the  completion  of the  evaluation  process and  acceptance of the
product by the customer.  Maintenance  contracts call for the Company to provide
technical  support and software  updates to  customers.  The Company  recognizes
product support and maintenance revenue,  including  maintenance revenue that is
bundled with product sales,  ratably over the term of the contract period, which
generally ranges from one to three years.

     The Company  currently  contracts  with third  parties  for  manufacturing,
warehousing  and  shipping of its  product in  addition to having  manufacturing
operations that perform final  assembly,  testing and shipping of its product at
its  facilities in Rockville,  Maryland and Hudson,  Massachusetts.  The Company
anticipates maintaining a portion of its internal manufacturing function for the
foreseeable  future  at its  Rockville,  Maryland  facility.


Results of Operations  for the Three Months Ended  September  30, 1998 Compared
with the Three Months Ended  September 30, 1997

    Revenue.  The  Company  recognized  $13.5  million in revenue  for the three
months ended  September 30, 1998, a 69.6%  increase over revenue of $7.9 million
reported  for the three months ended  September  30, 1997.  The increase was due
primarily  to the  continued  acceptance  of Visual  UpTime  in the Frame  Relay
market,  with a  significant  increase  in sales to  providers  and, to a lesser
extent,  the increase in sales of the Company's network analysis tools. Sales to
providers  accounted for approximately 65% of revenue for the three months ended
September 30, 1998 as compared to  approximately  46% for the three months ended
September 30, 1997.

     Gross  Profit.  Cost  of  goods  sold  consists  of  subcontracting  costs,
component  parts,  direct  compensation  costs,  warranty and other  contractual
obligations,  royalties,  license fees and other  overhead  expenses  related to
manufacturing  operations.  Gross  profit was $8.6  million for the three months
ended September 30, 1998, as compared to $4.9 million for the three months ended
September  30,  1997,  an increase of $3.7  million.  Gross  margin was 64.1% of
revenue for the three months ended  September  30, 1998, as compared to 62.4% of
revenue for the three months  ended  September  30, 1997.  The increase in gross
margin percentage was due primarily to product cost reductions and to changes in
product sales mix. The Company's future gross margins may be adversely  affected
by a number of  factors,  including  product  mix,  the  proportion  of sales to
providers,  competitive  pricing,  manufacturing  volumes  and  an  increase  in
component costs.

    Research and Development Expense.  Research and development expense consists
of  compensation  for research and development  staff,  depreciation of test and
development equipment, certain software development costs and costs of prototype
materials.  Research  and  development  expense  was $2.7  million for the three
months ended September 30, 1998 as compared to $1.8 million for the three months
ended September 30, 1997, an increase of $0.9 million.  The increase in research
and development expense was due primarily to increased staffing levels and, to a
lesser extent, purchases of materials used in the development of new or enhanced
products.  Research and  development  expense was 20.2% and 23.1% of revenue for
the three months ended  September 30, 1998 and 1997,  respectively.  The Company
expects that  research and  development  expenditures  will increase in absolute
dollars,  and may decrease as a percentage  of revenue,  during the remainder of
1998 and  thereafter.  The increase in absolute  dollars will support  continued
development of new enhanced products and the exploration of new or complementary
technologies.

                                      -9-
<PAGE>

    Sales  and  Marketing  Expense.  Sales and  marketing  expense  consists  of
compensation for the sales and marketing staff, commissions,  pre-sales support,
travel and  entertainment,  trade shows and other  marketing  programs.
Sales  and  marketing  expense  was $3.3  million  for the  three  months  ended
September  30,  1998,  as compared to $3.5  million for the three  months  ended
September  30,  1997,  a decrease  of $0.2  million.  The  decrease in sales and
marketing  expense  was due  primarily  to the  consolidation  of  Visual's  and
Net2Net's  sales and  marketing  functions,  with a  corresponding  decrease  in
employees subsequent to the May 15, 1998 acquisition of Net2Net by Visual. Sales
and marketing  expense was 24.2% and 43.5% of revenue for the three months ended
September 30, 1998 and 1997,  respectively.  The Company  expects that sales and
marketing  expenditures will increase in absolute dollars, and may decrease as a
percentage  of  revenue,  during  the  remainder  of 1998 and  thereafter.  This
increase in absolute dollars is expected to be incurred as additional  personnel
are hired,  field offices are opened and  promotional  expenditures  increase to
allow the  Company to  increase  its  market  penetration  and to pursue  market
opportunities.

     General and  Administrative  Expense.  General and  administrative  expense
consists of finance,  administration and general management activities.  General
and administrative expense was $1.1 million for the three months ended September
30, 1998 as compared to $0.8 million for the three months  ended  September  30,
1997,  an increase of $0.3 million.  The increase in general and  administrative
expense  was due  primarily  to  increased  staffing  levels and costs  incurred
related to a planned  secondary  public offering that was cancelled in September
1998.  These  increases  were partially  offset by reductions in  administrative
expenses  during the three months ended  September 30, 1998  resulting  from the
consolidation of Visual's and Net2Net's  administrative functions as part of the
Company's  restructuring  plan  that  included  a  reduction  in the  number  of
employees.  General and administrative expense was 7.8% and 10.5% of revenue for
the three months ended  September 30, 1998 and 1997,  respectively.  The Company
expects that general and  administrative  expenditures will increase in absolute
dollars,  and may decrease as a percentage  of revenue,  during the remainder of
1998 and thereafter. The increase in absolute dollars is expected to be required
for the expansion of the Company's  administrative staff and internal systems to
support expanding operations.

     Interest  Income,  Net.  Interest  income,  net, for the three months ended
September  30, 1998 was  approximately  $0.6 million as compared to zero for the
three months ended  September 30, 1997. The increase was due to the  significant
increase  in  cash  and  cash  equivalents resulting  from  the  proceeds of the
Company's IPO in February 1998.

    Net Income (Loss).  Net income for the three months ended September 30, 1998
was $2.2  million as compared to a net loss of $1.2 million for the three months
ended  September 30, 1997,  an increase of $3.4  million.  Increases in revenue,
gross profit and interest  income  achieved in the three months ended  September
30, 1998 offset the increased operating expenses described above.


Results of Operations  for the Nine Months Ended  September  30, 1998  Compared
with the Nine Months Ended  September 30, 1997

    Revenue. The Company recognized $35.8 million in revenue for the nine months
ended  September  30,  1998,  a 97.0%  increase  over  revenue of $18.2  million
reported for the nine months  ended  September  30,  1997.  The increase was due
primarily  to the  continued  acceptance  of Visual  UpTime  in the Frame  Relay
market,  with a  significant  increase  in sales to  providers  and, to a lesser
extent,  the increase in sales of the Company's network analysis tools. Sales to
providers  accounted for  approximately 62% of revenue for the nine months ended
September  30, 1998 as compared to  approximately  37% for the nine months ended
September 30, 1997.

    Gross  Profit.  Gross  profit was $22.0  million for the nine  months  ended
September  30,  1998,  as  compared to $11.0  million for the nine months  ended
September  30,  1997,  an increase of $11.0  million.  Gross margin was 61.6% of
revenue for the nine months ended  September  30, 1998,  as compared to 60.8% of
revenue for the nine months  ended  September  30,  1997.  The increase in gross
margin percentage was due primarily to product cost reductions and to changes in
product sales mix. The Company's future gross margins may be adversely  affected
by a number of  factors,  including  product  mix,  the  proportion  of sales to
providers,  competitive  pricing,  manufacturing  volumes  and  an  increase  in
component costs.

                                      -10-
<PAGE>
                              
    Research and Development Expense.  Research and development expense was $7.6
million for the nine months ended September 30, 1998 as compared to $5.1 million
for the nine months ended  September 30, 1997, an increase of $2.5 million.  The
increase in research  and  development  expense was due  primarily  to increased
staffing  levels and, to a lesser  extent,  purchases of  materials  used in the
development of new or enhanced  products.  Research and development  expense was
21.4% and 28.2% of revenue  for the nine  months  ended  September  30, 1998 and
1997,   respectively.   The  Company   expects  that  research  and  development
expenditures will increase in absolute dollars, and may decrease as a percentage
of  revenue,  during the  remainder  of 1998 and  thereafter.  The  increase  in
absolute dollars will support continued development of new enhanced products and
the exploration of new or complementary technologies.

     Sales and Marketing Expense.  Sales and marketing expense was $10.6 million
for the nine months ended  September  30, 1998,  as compared to $9.3 million for
the nine months ended  September  30,  1997,  an increase of $1.3  million.  The
increase in sales and marketing expense was due primarily to increased  staffing
levels and related costs,  such as  commissions.  These increases were partially
offset  by  reductions  in  sales  and  marketing  expenses  resulting  from the
consolidation of Visual's and Net2Net's sales and marketing functions as part of
the  Company's  restructuring  plan that  included a reduction  in the number of
employees.  Sales and  marketing  expense was 29.5% and 51.2% of revenue for the
nine months ended September 30, 1998 and 1997, respectively. The Company expects
that sales and marketing expenditures will increase in absolute dollars, and may
decrease  as  a  percentage  of  revenue,  during  the  remainder  of  1998  and
thereafter.  This  increase  in  absolute  dollars is expected to be incurred as
additional  personnel  are hired,  field  offices  are  opened  and  promotional
expenditures  increase to allow the Company to increase  its market  penetration
and to pursue market opportunities.

     General and Administrative Expense.  General and administrative expense was
$3.2  million for the nine months ended  September  30, 1998 as compared to $2.3
million  for the nine  months  ended  September  30,  1997,  an increase of $0.9
million. The increase in general and administrative expense was due primarily to
increased  staffing  levels and to costs  incurred in 1998  related to a planned
secondary  public offering that was cancelled in September 1998. These increases
were partially offset by reductions in  administrative  expenses  resulting from
the consolidation of Visual's and Net2Net's  administrative functions as part of
the  Company's  restructuring  plan that  included a reduction  in the number of
employees.  General and administrative expense was 8.9% and 12.6% of revenue for
the nine months ended  September  30, 1998 and 1997,  respectively.  The Company
expects that general and  administrative  expenditures will increase in absolute
dollars,  and may decrease as a percentage  of revenue,  during the remainder of
1998 and thereafter. The increase in absolute dollars is expected to be required
for the expansion of the Company's  administrative staff and internal systems to
support expanding operations.

     Merger-related  Costs.  In  connection  with the Net2Net  acquisition,  the
Company recorded  merger-related costs of $7.3 million consisting of transaction
costs, integration expenses and restructuring charges. Transaction costs of $4.4
million  consisted  primarily  of  fees  for  investment   bankers,   attorneys,
accountants  and  other  direct  costs.  Integration  expenses  of $0.2  million
consisted of incremental and non-recurring  costs necessary to integrate Net2Net
and  Visual.  The  restructuring  charge  of $2.7  million  includes  severance,
outplacement  and other costs relating  primarily to the  elimination of certain
field  offices,  the  consolidation  of  the  Company's  manufacturing,   sales,
marketing and administrative functions and the discontinuance of certain product
development efforts.

     Interest  Income,  Net.  Interest  income,  net,  for the nine months ended
September 30, 1998 was  approximately  $1.7 million as compared to $0.07 million
for the nine months  ended  September  30,  1997.  The  increase  was due to the
significant increase in cash and cash equivalents resulting from the proceeds of
the Company's IPO in February 1998.

     Net Loss.  Net loss for the nine months  ended  September 30, 1998 was $5.0
million as  compared to a net loss of $5.6  million  for the nine  months  ended
September  30, 1997,  a decrease of $0.6  million.  Increases in revenue,  gross
profit and  interest  income  achieved  during 1998 offset  increased  operating
expenses and the effect of the merger-related costs described above.

                                      -11-
<PAGE>
                             
Liquidity and Capital Resources

    At  September  30, 1998,  the  Company's  combined  balance of cash and cash
equivalents  was $47.7  million as compared to $8.9  million as of December  31,
1997.  This  increase  is  primarily  attributable  to the $45.4  million in net
proceeds  that the Company  received from the sale of common stock in its IPO in
February 1998. Cash used in operating activities totaled $4.0 million during the
nine months ended September 30, 1998 and was primarily to fund operating  losses
of  Net2Net,  to pay  for  merger-related  costs  associated  with  the  Net2Net
acquisition,  and to finance  increases in accounts  receivable and inventories.
Capital  expenditures  were  approximately  $2.6 million  during the nine months
ended September 30, 1998.

     On May 15, 1998, Visual acquired Net2Net in a stock  transaction  accounted
for as a pooling of interests.  The Company incurred  merger-related  costs of
approximately $7.3 million.  The payment of these costs has resulted to be a use
of cash by the Company during the nine months ended  September 30, 1998 and will
continue to be a use of cash by the Company during the remainder of 1998.

     The Company  requires  substantial  working  capital to fund its  business,
particularly  to  finance  inventories,   accounts   receivable,   research  and
development  activities  and capital  expenditures.  The Company  currently  has
commitments  for capital  expenditures  for the  remainder  of 1998 that are not
expected to exceed $1.0 million.  The Company's future capital requirements will
depend on many factors, including the rate of revenue growth, if any, the timing
and extent of spending to support product  development  efforts and expansion of
sales and  marketing,  the timing and extent of  spending  to support  continued
expansion of internal systrems and networks,  the timing of introductions of new
products and  enhancements  to existing  products and market  acceptance  of the
Company's  products.  There can be no assurance that  additional  equity or debt
financing, if required, will be available on acceptable terms, if at all.

     In addition to the Company's cash and cash equivalents, the Company's other
principal source of liquidity is its bank credit  facility.  The credit facility
includes a revolving line of credit providing for borrowings up to the lesser of
$7.0 million or 80% of eligible  accounts  receivable  (as defined in the credit
facility). The agreement entitles a bank to a security interest in the Company's
inventory and accounts receivable.  The agreement contains restrictive financial
covenants,  including, but not limited to, restrictions related to liquidity and
net worth,  as well as  restrictions  related to  acquisitions,  dispositions of
assets, distributions and investments.  Interest is payable monthly at the prime
rate. As of September 30, 1998, there were no borrowings  outstanding  under the
bank credit facility.

FACTORS THAT MAY AFFECT FUTURE RESULTS

Year 2000 Compliance

General

    Many of the world's  computer systems  (including  those in  non-information
technology  equipment and systems) currently record years in a two-digit format.
If not  addressed,  such computer  systems will be unable to properly  interpret
dates  beyond  the year 1999,  which  could lead to  business  disruptions.  The
potential  costs and  uncertainties  associated  with the Year 2000  issue  will
depend on a number of factors,  including  software,  hardware and the nature of
the industry in which a company operates.

     Visual has instituted a  company-wide  project for addressing the Year 2000
issue (the "Project"). The Project is divided into four major sections - Product
Compliance,  Oracle  Implementation and System Infrastructure  Upgrades,  Vendor
Compliance  and  Customer  Assessment.  Each  of  these  sections  is  discussed
separately  below. The Company has engaged third party  consultants to assist in
program  management of the Project and in testing of critical  business systems.
The Project is on schedule for completion by the end of the third quarter, 1999.

Product Compliance

     Visual  believes  that the  products  that it  currently  is shipping  have
already  achieved  Year 2000  compliance  as  defined  within  the  requirements
established  by  the  U.S.   Government  detailed  in  the  Federal  Acquisition
Regulations (FAR) Section 39 - Final.  Should a Year 2000 compliance issue arise
in the future,  Visual will take whatever steps it deems necessary to correct it
in currently shipping product for current maintenance customers.

     Although all  previously  shipped  products  are believed to be  compliant,
Visual does not commit to perform tests on product  versions that the company no
longer is shipping.  Should such non-shipping  products be found  non-compliant,
Visual will not update them to make them compliant.

     The Company does not guarantee and specifically disclaims any liability for
the Year 2000  compliance  of  operating  systems,  hardware,  software or other
products not developed by the Company.

                                     -12-
<PAGE>
                             
Oracle Implementation & System Infrastructure Upgrades

     Early in 1998, in order to improve access to business  information  through
scaleable,  integrated  computing  systems  across the  company,  Visual began a
business  systems  replacement  project.  The new  Oracle  Enterprise  Resources
Planning (ERP)  application  software packages that will replace the core legacy
systems,  are expected to make  approximately  75 percent of Visual systems Year
2000 compliant.  This replacement effort is on track for  implementation  during
the  first  quarter  of 1999  with  several  applications  already  successfully
implemented.

     Following  replacement of the core systems with Oracle software in January,
1999 the Company will seek to achieve Year 2000 compliance for minor application
software,  computer hardware,  network equipment and miscellaneous components of
our internal business systems.  Visual anticipates that this effort will be less
significant  compared  to the  replacement  of  core  applications  with  Oracle
software.

     The  Company  intends to achieve  Year 2000  compliance  for its  remaining
internal  systems  as soon as  possible  after the  Oracle  implementation.  The
Company's  limited  number of  personal  computers  and  application  systems is
anticipated to facilitate  rapid progress toward full Year 2000 compliance after
Oracle is successfully implemented.

     Visual intends to continue to work to achieve Year 2000  compliance for its
systems using a methodology that incorporates the following steps:

     Update the  inventory  of computer  hardware,  software  and  miscellaneous
network components.

     Evaluate application development environment compliance,

     Conduct overall assessment of systems infrastructure compliance,

     Complete business risk analysis,

     Take remedial actions (upgrade, repair, replace, retire or retain),

     Develop appropriate contingency plans, and

     Develop  and   implement   regimes  to  test  Year  2000   compliance   for
        mission-critical systems.

     The Company currently anticipates  completion of this process by the end of
the third  quarter 1999 in order to avoid Year 2000 impact on  remaining  legacy
systems.

Vendor Compliance

     This section includes the process of identifying and prioritizing  critical
suppliers at the direct interface level and communicating  with them about their
plans and  progress in  addressing  the Year 2000  problem.  This  process  will
include  not  only  component  part  suppliers  for  Visual  products,  but also
providers of insurance, financial and other services.

     The Company's vendor compliance program will include the following steps:

     Catalog and classify all vendors,

     On-site review and testing of out-sourced services or systems,

     Review responses from vendors to determine the level of compliance,

     Determine the timing, method and cost of vendor solutions,

     Assess vendor Year 2000 compliance and business risks, and

     Develop remedial actions or contingency plans, as necessary.

     Achievement of vendor Year 2000 compliance is anticipated to be an on-going
effort  during  1999.  The  current  target to achieve  compliance  or  complete
contingency plans is the end of the third quarter 1999.

                                     - 13 -
<PAGE>
                             
Customer Assessment

     The  Company is  developing  a program to assess the impact  that Year 2000
issues  may  have  upon its  customers  and  their  purchasing  decisions.  Many
companies are expending  significant resources to correct or patch their current
software  systems for Year 2000  compliance.  These  expenditures  may result in
reduced funds available to purchase system products such as those offered by the
Company.  Conversely,  Year 2000 issues may cause other  companies to accelerate
purchases,  thereby  causing an increase in  short-term  demand and a consequent
decrease  in  long-term  demand for  system  products.  Additionally,  Year 2000
compliance  issues  could cause a  significant  number of  companies,  including
current  customers of the Company,  to re-evaluate their current systems' needs,
and as a result,  consider switching to other systems or suppliers.  The Company
expects to complete  its  customer  assessment  by the end of the third  quarter
1999.

Costs

     The estimated total cost of the Year 2000 compliance project,  exclusive of
the  Oracle ERP  implementation,  is  approximately  $300,000.  These  costs are
expected to be incurred  beginning in the fourth  quarter of 1998 and throughout
1999. These costs will be incurred primarily for the use of outside consultants,
setting up Year 2000  testing  environments,  and the  replacement  of  existing
software and hardware.

Risks

     The  failure to correct a material  Year 2000  problem  could  result in an
interruption  in,  or a  failure  of,  certain  normal  business  activities  or
operations. Such failures could materially and adversely affect Visual's results
of  operations,  liquidity and  financial  condition.  Moreover,  even if Visual
successfully remediates its Year 2000 issues, it can be materially and adversely
affected by failures of third  parties to remediate  their own Year 2000 issues.
The failure of third  parties  with which Visual has  financial  or  operational
relationships  (such as its customers and vendors) to remediate  their  computer
and non-information technology systems issues in a timely manner could result in
a material  financial  risk to Visual.  In addition,  Visual  believes  that the
purchasing  patterns of customers and potential  customers may be  significantly
affected by Year 2000  issues.  Due to the general  uncertainty  inherent in the
Year  2000  problem,  resulting  in part from the  uncertainty  of the Year 2000
readiness of third-party customers and vendors, Visual is unable to determine at
this time whether the  consequences  of Year 2000  failures will have a material
impact on the Company's results of operations, liquidity or financial condition.
Accordingly,  Visual may experience business interruption or shutdown, financial
loss, damage to Visual's  reputation and legal liability.  Visual believes that,
with the implementation of new business systems and completion of the Project as
scheduled,  the possibility of significant  interruptions  of normal  operations
should be reduced.

     The Company's  expectations about future costs and the timely completion of
its Year 2000  Project are  subject to  uncertainties  that could  cause  actual
results to differ  materially from what has been discussed  above.  Factors that
could  influence  the  amount  of  future  costs  and the  effective  timing  of
remediation  efforts  include  the  success  of Visual in  identifying  computer
programs and  non-information  technology  systems that contain  two-digit  year
codes,  the nature and amount of programming and testing  required to upgrade or
replace each of the affected  programs  and systems,  the rate and  magnitude of
related labor and consulting costs, and the success of the Company's vendors and
customers in addressing the Year 2000 issue.


                                     - 14 -
<PAGE>
                            
Factors That May Affect Future Results

    The Company  raised  $45.4  million  (net of  issuance  costs) in its IPO in
February  1998.  The Company also has a $7.0 million line of credit with a bank.
As of September 30, 1998, there were no borrowings  outstanding  under this bank
credit facility.  The Company requires  substantial  working capital to fund its
business, particularly to finance inventories, accounts receivable, research and
development  activities and capital  expenditures.  The Company's future capital
requirements will depend on many factors,  including the rate of revenue growth,
if any, the timing and extent of spending to support product development efforts
and  expansion  of sales  and  marketing,  the  timing of  introductions  of new
products and  enhancements  to existing  products and market  acceptance  of the
Company's products. The Company believes that its current cash position combined
with the  $7.0  million  line of  credit  are  sufficient  to meet  its  capital
expenditures and working capital  requirements for the next 18 to 24 months. The
Company may  consider  from time to time  various  alternatives  and may seek to
raise  additional  capital  through  equity or debt  financing  or to enter into
strategic  agreements.  There  can be no  assurance,  however,  that any of such
financing  alternatives will be available on terms acceptable to the Company, if
at all.

    The market for the Company's  products is growing  rapidly and the Company's
business environment is characterized by rapid technological changes, changes in
customer requirements and new emerging market segments. Consequently, to compete
effectively,  the  Company  must make  frequent  new product  introductions  and
enhancements  and deploy sales and marketing  resources to take advantage of new
business  opportunities.  The Company's  operations  are also subject to certain
other risks and uncertainties  including,  among other things, the effectiveness
of actual and potential competition,  the success of the Company's relationships
with its current  strategic  partners,  the  continued  development  of reseller
relationships  with  new  service  providers,  and  the  risks  associated  with
acquisitions  and  international  expansion.   Failure  to  meet  any  of  these
challenges could adversely affect future operating results.

    Although a  significant  majority of the  Company's  sales to date have been
made to  customers  in the United  States and  Canada,  the  Company  intends to
increase its sales efforts in international  markets.  The Company plans to sell
its products to international  customers at prices  denominated in U.S. dollars.
However,  if the  Company  experiences  material  levels of sales at prices  not
denominated in U.S.  dollars,  the Company  intends to adopt a strategy to hedge
against currency fluctuations.

    The  preparation  of  financial  statements  in  conformity  with  generally
accepted  accounting  principles  requires  management  to  make  estimates  and
assumptions  that  affect the  reported  amounts of assets and  liabilities  and
disclosure of  contingent  assets and  liabilities  at the date of the financial
statements  and the  reported  amounts  of  revenues  and  expenses  during  the
reporting period. Actual results could differ from those estimates.

    The foregoing  discussion  contains  forward-looking  information within the
meaning of Section  27A of the  Securities  Act of 1933 and  Section  21E of the
Securities  Exchange Act of 1934,  and is subject to the safe harbor  created by
those  sections.  The Company  assumes no obligations to update the  information
contained in this press release. The Company's future results may be impacted by
various  important  factors  including,  but not  limited  to,  its  ability  to
implement its provider deployment model, its lengthy sales cycle,  dependence on
its major customers,  risks associated with rapid  technological  change and the
emerging  services  market,  potential  fluctuations in quarterly  results,  its
dependence on sole and limited source  suppliers and  fluctuations  in component
pricing and its  dependence on key employees and other risk factors set forth in
the Company's Annual Report on Form 10-K for the year ended December 31, 1997.


Item 3.   Qualitative and Quantitative Disclosure about Market Rish

          Not applicable

<TABLE>
<CAPTION>
                                     <S>      <C>                                          <C>

                                              PART II-- OTHER INFORMATION

                                     Item 1.  Legal Proceedings                            None

                                     Item 2.  Changes in Securities                        None

                                     Item 3.  Defaults upon Senior Securities              None

                                     Item 4.  Submission of Matters to Vote of Security    None
                                              Holders

                                     Item 5.  Other Information                            None
</TABLE>

                                      -15-
<PAGE>


                              Item 6       (a) Exhibits
<TABLE>
<CAPTION>
                                <S>        <C>
                                Exhibit
                                Number     Description
                                    3.1*   Restated Certificate of Incorporation of the Registrant.
                                    3.2*   Restated By-Laws of the Registrant.
                                   10.1*   1994 Stock Option Plan.
                                   10.2*   1997 Omnibus Stock Plan.
                                   10.3*   Amended and Restated 1997 Directors' Stock Option Plan.
                                   10.4*   Third Amended and Restated Stockholders and Registration Rights Agreement,  
                                           dated as of  September  19,  1996,  by  and among the Company and certain
                                           stockholders.
                                   10.5*+  Reseller/Integration Agreement, dated August 29, 1997, by and Between the
                                           Company  and  MCI   Telecommunication Corporation.
                                   10.6*+  Master Reseller Agreement, dated as of August 23, 1996,
                                           between Sprint/United Management Company and the Company.
                                   10.7*+  General Agreement for the Procurement of Equipment, Services and Supplies
                                           and the Licensing of Software,  dated as of December 3,1997, between the
                                           Company and AT&T Corp.
                                   10.8*   Lease   Agreement,   dated   December 12,1996, by and  between the Company
                                           and  The  Equitable   Fire  Assurance Society of The United States.
                                   10.9*   Lease   Amendment,   dated  September 2, 1997, by and between  the Company
                                           and  The  Equitable   Fire  Assurance Society of The United States
                                           (relating to Exhibit 10.8).
                                   10.10*  Loan  and  Security  Agreement  dated April 5, 1996, by and between Silicon
                                           Valley Bank and the Company.
                                   10.11*  Revolving  Promissory  Note issued by the  Company  on  April 5,  1996,  to
                                           Silicon Valley Bank.
                                   10.11.1*Equipment Term Note No. 1 issued by the Company on April 5, 1996, to Silicon Valley Bank.
                                   10.11.2*First  Amendment to Loan and Security Agreement  dated November 8, 1996, by
                                           and between  Silicon  Valley Bank and the  Company (relating to Exhibit 10.10).
                                   10.11.3*Second Amendment to Loan and Security Agreement dated February 27, 1997, by
                                           and between  Silicon  Valley Bank and the  Company (relating to Exhibit 10.10).
                                   10.12*  Standby  Letter of Credit Agreement,dated December 10,1996 by and Between the Company 
                                           and Silicon Valley Bank.
                                   10.12.1*Amendment No. 1 to Standby  Letter of Credit   Agreement   dated  September
                                           5,1997,  by and  between  the Company and Silicon  Valley Bank (relating to
                                           Exhibit 10.12).
                                   10.13*  Employment  Agreement  dated December 15, 1994, by and between the Company
                                           and Scott E. Stouffer, as amended.
                                   10.14*  Employment  Agreement  dated December 15, 1994, by and between the Company
                                           and Robert Troutman, as amended.
                                   10.15*  Terms of  Employment  dated  June 11, 1997, by and between the Company and
                                           Peter J. Minihane, as amended.
                                   10.16*  Terms of  Employment  dated  March 5, 1997, by and between the Company and
                                           Henri A. Cheli, as amended.
                                   10.17*  Terms of  Employment  dated  November 12, 1996, by and between the Company
                                           and Gregory J. Langford, as amended.



                                      -16-
<PAGE>



                                10.18*     Loan  and  Security  Agreement  dated January 8, 1998, by and between
                                           Silicon Valley Bank and the Company.
                                10.18.1*   Revolving  Promissory  Note issued by the Company as of January 8, 1998, to
                                           Silicon Valley Bank.
                                10.18.2@   First  Amendment to Loan and Security Agreement dated June 30,1998,  by and
                                           between  Silicon  Valley Bank and the Company.
                                10.18.3@   Amended   and   Restated    Revolving Promissory Note issued by the Company
                                           as of June 30, 1998, to Silicon Valley Bank.
                                10.19**    Agreement  and Plan of  Merger  dated April  15,  1998,  by and  among  the
                                           Company, Visual Acquisition, Inc. and Net2Net.
                                10.20***   Net2Net 1994 Stock Plan, assumed by by the Company.
                                11.1       Statement of computation the Company.of loss per share.
                                27         Financial Data Schedule.
</TABLE>

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

@ Incorporated herein by reference to the Company's Registration Statement on
Form S-1, No. 333-58443.

* Incorporated herein by reference to the Company's Registration Statement on
Form S-1, No. 333-41517.

** Incorporated herein by reference to Exhibit 2.1 to the Company's Current Form
on Form 8-K dated May 19, 1998.

*** Incorporated herein by reference to Exhibit 10.1 to the Company's
Registration Statement on Form S-8, No. 333-53153.

+ Portions of this Exhibit were omitted and have been filed  separately with the
Secretary of the Commission pursuant to the Registrant's  Application Requesting
Confidential  Treatment  under Rule 406 of the Act,  filed on December 22, 1997,
January 28, 1998 and February 4, 1998.

(b) Reports on Form 8-K

                  None.


                                      -17-
<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.


                              Visual Networks, Inc.

November 16, 1998             By: /s/ Scott E. Stouffer
                              -------------------------
                              Scott E. Stouffer
                              Chief Executive Officer and President

November 16, 1998             By: /s/ Peter J. Minihane
                              -------------------------
                              Peter J. Minihane
                              Executive Vice President, Chief Financial Officer
                              and Treasurer (principal financial and
                              accounting officer)

                                      -18-