<PAGE>   1
================================================================================

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


                                    FORM 10-Q


(MARK ONE)

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

                  FOR THE QUARTERLY PERIOD ENDED MARCH 31,1999

                                       OR

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

               FOR THE TRANSITION PERIOD FROM ________ TO ________

                        COMMISSION FILE NUMBER : 0-23023

                               MMC NETWORKS, INC.
             (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)

<TABLE>
<S>                                     <C>
        DELAWARE                                   77-0319809
 (STATE OR OTHER JURISDICTION OF        (I.R.S. EMPLOYER IDENTIFICATION NO.)
 INCORPORATION OR ORGANIZATION)
</TABLE>


                              1134 E. ARQUES AVENUE
                               SUNNYVALE, CA 94086
                         (ADDRESS OF PRINCIPAL OFFICES)
                                   (ZIP CODE)

                                 (408) 731-1600
              (REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE)



INDICATE BY CHECK MARK WHETHER THE REGISTRANT (1) HAS FILED ALL REPORTS REQUIRED
TO BE FILED BY SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 DURING
THE PRECEDING 12 MONTHS (OR FOR SUCH SHORTER PERIOD THAT THE REGISTRANT WAS
REQUIRED TO FILE SUCH REPORTS), AND (2) HAS BEEN SUBJECT TO SUCH FILING
REQUIREMENTS FOR THE PAST 90 DAYS.

                                YES [X]   NO [ ]

THE NUMBER OF SHARES OUTSTANDING OF THE ISSUER'S COMMON STOCK AS OF APRIL 30,
1999 WAS 30,512,179.

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



<PAGE>   2

                               MMC NETWORKS, INC.
                          QUARTERLY REPORT ON FORM 10-Q
                                      INDEX

<TABLE>
<S>                                                                                           <C>
PART I.   FINANCIAL INFORMATION

          Item 1.  Financial Statements

                   Condensed Consolidated Balance Sheets at March 31, 1999 and
                        December 31, 1998...................................................   3

                   Condensed Consolidated Statements of Operations for the three months
                        ended March 31, 1999 and 1998.......................................   4

                   Condensed Consolidated Statements of Cash Flows for the three
                        months ended March 31, 1999 and 1998................................   5

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

          Item 2.  Management's Discussion and Analysis of Financial Condition  and Results
                        Operations of.......................................................   8


PART II.  OTHER INFORMATION

          Item 1.  Legal Proceedings........................................................  16

          Item 2.  Changes in Securities....................................................  16

          Item 3.  Defaults Upon Senior Notes...............................................  16

          Item 4.  Submission of Matters to a Vote of Security Holders......................  16

          Item 5.  Other Information........................................................  16

          Item 6.  Exhibits and Reports on Form 8-K.........................................  16

SIGNATURES..................................................................................  17
</TABLE>



                                        2
<PAGE>   3
                               MMC NETWORKS, INC.
                      CONDENSED CONSOLIDATED BALANCE SHEETS
                      (IN THOUSANDS, EXCEPT PER SHARE DATA)
                                   (UNAUDITED)


PART I.  FINANCIAL INFORMATION
ITEM 1.  FINANCIAL STATEMENTS

<TABLE>
<CAPTION>
                                                                               MARCH 31,       DECEMBER 31,
                                                                                 1999            1998
                                                                             -------------    -----------
<S>                                                                              <C>             <C>      
ASSETS
Current assets:
     Cash and cash equivalents...............................................    $43,810         $31,452  
     Short-term investments..................................................     14,406          21,726 
     Accounts receivable, net of allowance of $222 and $172..................      9,720          10,582 
     Inventories.............................................................      1,143             630 
     Prepaid expenses and other current assets...............................      3,050           3,372 
                                                                                 -------         -------
        Total current assets.................................................     72,129          67,762 
Property and equipment, net..................................................      5,179           5,487 
Other assets.................................................................        156             135
                                                                                 -------         -------
 .............................................................................    $77,464         $73,384
                                                                                 =======         =======

LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
     Accounts payable........................................................    $ 4,254         $ 4,400 
     Accrued expenses........................................................      6,346           5,753 
     Capital lease obligations...............................................        200             286 
                                                                                 -------         -------
        Total current liabilities............................................     10,800          10,439 
                                                                                 -------         -------

Stockholders' equity:
     Preferred Stock: $0.001 par value; 10,000 shares authorized; no shares
          issued or outstanding                                                        -               -
     Common Stock: $0.001 par value; 100,000 shares authorized; 30,425
          and 30,135 shares issued and outstanding...........................         26              26 
     Additional paid-in capital..............................................     55,962          55,520
     Notes receivable from stockholders......................................       (107)           (107)
     Retained earnings.......................................................     10,783           7,506 
                                                                                 -------         ------- 
        Total stockholders' equity...........................................     66,664          62,945 
                                                                                 -------         -------
                                                                                 $77,464         $73,384
                                                                                 =======         =======
</TABLE>


   THE ACOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONDENSED CONSOLIDATED
                              FINANCIAL STATEMENTS.



                                        3
<PAGE>   4

                               MMC NETWORKS, INC.
                 CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
                      (IN THOUSANDS, EXCEPT PER SHARE DATA)
                                   (UNAUDITED)


<TABLE>
<CAPTION>
                                                                          THREE MONTHS ENDED
                                                                              MARCH 31,
                                                                  ------------------------------
                                                                         1999            1998
                                                                      ----------       ---------
<S>                                                                     <C>              <C>    
Revenues...........................................................     $ 16,110         $ 9,623
Cost of revenues...................................................        4,801           2,936
                                                                      ----------       ---------
              Gross profit.........................................       11,309           6,687
                                                                      ----------       ---------
Operating expenses:                                                
        Research and development, net..............................        4,454           3,144
        Selling, general and administrative........................        2,392           2,097
                                                                      ----------       ---------
              Total operating expenses.............................        6,846           5,241
                                                                      ----------       ---------
Operating income...................................................        4,463           1,446
                                                                      ----------       ---------
Other income (expense):                                            
        Interest income............................................          665             529
        Interest expense...........................................          (11)            (19)
                                                                      ----------       ---------
              Total other income...................................          654             510
                                                                      ----------       ---------
Income before income taxes.........................................        5,117           1,956
Provision for income taxes.........................................        1,840             700
                                                                      ----------       ---------
Net income.........................................................      $ 3,277          $1,256
                                                                      ==========       =========
Basic income per share.............................................       $ 0.11          $ 0.04
                                                                      ==========       =========
Shares used to compute basic income per share......................       30,329          29,276
                                                                      ==========       =========
Diluted income per share...........................................       $ 0.10          $ 0.04
                                                                      ==========       =========
Shares used to compute diluted income per share....................       33,499          33,717
                                                                      ==========       =========
</TABLE>


   THE ACOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONDENSED CONSOLIDATED
                              FINANCIAL STATEMENTS.



                                        4
<PAGE>   5

                               MMC NETWORKS, INC.
                 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                                 (IN THOUSANDS)
                                   (UNAUDITED)


<TABLE>
<CAPTION>
                                                                          THREE MONTHS ENDED MARCH 31,
                                                                         ------------------------------
                                                                               1999            1998
                                                                             ----------     ---------
<S>                                                                             <C>           <C>    
Cash flows from operating activities:
    Net income.............................................................     $ 3,277       $ 1,256
    Adjustments to reconcile net income to net cash                     
       provided by operating activities:                                
         Depreciation and amortization.....................................         688           462
         Changes in assets and liabilities:                             
            Accounts receivable............................................         862          (587)
            Inventories....................................................        (513)          (50)
            Prepaid expenses and other assets..............................         301           (19)
            Accounts payable...............................................        (146)         (175)
            Accrued expenses...............................................         593           766
                                                                             ----------     ---------
              Net cash provided by operating activities....................       5,062         1,653
                                                                             ----------     ---------
Cash flows from investing activities:
    Sale (purchase) of short-term investments..............................       7,320       (34,319)
    Acquisition of property and equipment..................................        (380)         (945)
                                                                             ----------     ---------   
              Net cash provided by (used in) investing activities..........       6,940       (35,264)
                                                                             ----------     ---------
Cash flows from financing activities:
    Proceeds from exercise of stock options and other......................         442            32 
    Proceeds from the repayment of notes receivable from stockholders......           -             9 
    Principal payments on capital lease obligations........................         (86)          (89)
                                                                             ----------     ---------
              Net cash provided by (used in) financing activities..........         356           (48) 
                                                                             ----------     ---------
Net increase (decrease) in cash and cash equivalents.......................      12,358       (33,659)
Cash and cash equivalents at beginning of period...........................      31,452        45,401
                                                                             ----------     ---------
Cash and cash equivalents at end of period.................................     $43,810      $ 11,742
                                                                             ==========     =========
SUPPLEMENTAL DISCLOSURE:                                                
    Cash paid for interest.................................................     $    11      $     19
    Cash paid for income taxes.............................................     $ 1,287      $    233
</TABLE>


   THE ACOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONDENSED CONSOLIDATED
                              FINANCIAL STATEMENTS.



                                        5
<PAGE>   6

                               MMC NETWORKS, INC.

            NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


NOTE 1 - BASIS OF PRESENTATION
In the opinion of management, the accompanying unaudited consolidated financial
information reflects all adjustments, including only normal recurring
adjustments, necessary for the fair presentation of the financial position,
results of operations and cash flows for MMC Networks, Inc. ("the Company") for
the periods presented. Certain information and footnote disclosures normally
included in consolidated financial statements prepared in accordance with
generally accepted accounting principles have been omitted pursuant to the rules
and regulations of the Securities and Exchange Commission. These condensed
consolidated financial statements should be read in conjunction with the audited
consolidated financial statements and notes thereto included in the Company's
Annual Report on Form 10-K filed with the Securities and Exchange Commission for
the year ended December 31, 1998. Results for the interim periods are not
necessarily indicative of results for the entire year.

NOTE 2 - EARNINGS PER SHARE
The following table reconciles the numerator and denominator of the basic and
diluted EPS computations for the three months ended March 31, 1999 and 1998:

<TABLE>
<CAPTION>
                                                     1999                                     1998
                                      -----------------------------------       ----------------------------------
                                                                Per Share                                Per Share
                                        Income        Shares     Amount           Income       Shares     Amount
                                      ---------     ---------   ---------       ---------    --------    ---------
                                                          (in thousands, except per share data)
<S>                                     <C>            <C>         <C>            <C>          <C>          <C>   
Basic income per share:
Net income available to
     common stockholders............    $ 3,277        30,329      $ 0.11         $ 1,256      29,276       $ 0.04
                                                                   ======                                   ======

Effect of dilutive securities:
Warrants............................          -             5                           -          30
Stock options.......................          -         3,165                           -       4,411
                                        -------        ------                     -------      ------

Diluted income per share:
Net income available to
     common stockholders............    $ 3,277        33,499      $ 0.10         $ 1,256      33,717       $ 0.04
                                        =======        ======      ======         =======      ======       ======
</TABLE>


At March 31, 1999 and 1998, options to purchase a total of
951,500 and 51,000 shares of Common Stock with average exercise prices of $16.55
and $18.69, respectively, are considered anti-dilutive because the options'
exercise prices were greater than the average fair market value of the Company's
Common Stock for the three months then ended and, as such, are excluded from the
calculation of diluted net income per share.

NOTE 3 - COMPOSITION OF INVENTORIES

<TABLE>
<CAPTION>
                                                                         MARCH 31,
                                                               --------------------------
                                                                   1999          1998
                                                               ------------   -----------
                                                                      (IN THOUSANDS)
<S>                                                               <C>            <C>   
Inventories:
       Work in process.......................................     $   480        $    -
       Finished goods........................................         663           630
                                                                  -------        ------
                                                                  $ 1,143        $  630
                                                                  =======        ======
</TABLE>



                                        6
<PAGE>   7

                               MMC NETWORKS, INC.

            NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


NOTE 4 - EQUITY
On January 15, 1999 a warrant to purchase 33,963 shares of Common Stock at an
exercise price of $1.77 was exercised. As consideration for the exercise, 3,277
shares of the Company's Common Stock otherwise issuable upon exercise of such
warrant with a value of $60,000 were surrendered resulting in no net proceeds to
the Company.

NOTE 5 - FINANCING AGREEMENTS
During the first half of 1998, the Company established two credit facilities
with a bank, a loan agreement and a non-recourse receivables purchase agreement.
The loan agreement allows the Company to borrow up to $8.0 million. Borrowings
bear interest at the bank's prime rate. The agreement requires that the Company
comply with certain financial covenants. In the event of default, all
outstanding borrowings will accrue interest at a rate of five percentage points
above the rate effective immediately prior to any such default. The loan
agreement expired in May 1999 and was renewed for one year on the same terms.
The non-recourse receivables purchase agreement expired in February 1999, and
the Company did not renew the agreement. To date, the Company has not utilized
either credit facility.



                                        7
<PAGE>   8

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
        OF OPERATIONS

The following information should be read in conjunction with the interim
condensed consolidated financial statements and the notes thereto included in
Part I, Item 1 of this Quarterly Report on Form 10-Q and the consolidated
financial statements and notes thereto contained in the Company's Annual Report
on Form 10-K for the year ended December 31, 1998.

This Management's Discussion and Analysis of Financial Condition and Results of
Operations contains forward-looking statements which reflect the Company's
current views with respect to future events which may impact the Company's
results of operations and financial condition. In this report, the words
"anticipates", "believes", "expects", "intends" and similar expressions identify
forward-looking statements. These forward-looking statements are subject to
risks and uncertainties and other factors, including those set forth below under
the caption "Factors Affecting Future Results", which could cause the actual
future results to differ materially from historical results or those described
in the forward-looking statements. Readers are urged to carefully review the
disclosures made by the Company in this Report and in the section entitled
"Management's Discussion and Analysis of Results of Operations and Financial
Condition - Factors Affecting Future Results" of the Company's Annual Report on
Form 10-K previously filed with the Securities and Exchange Commission that
describe certain risks and factors that may affect the Company's business and
not to place undue reliance on these forward-looking statements, which speak
only as of the date hereof.

BACKGROUND
MMC Networks, Inc. (the "Company" or "MMC Networks") is a leading developer and
supplier of Network Processors, which are high-performance, open-architecture,
software-programmable processors optimized for network applications. The
Company's Network Processors form the core silicon "engines" of LAN and WAN
switches and routers and are designed to allow network equipment vendors to
rapidly develop high-performance, feature-rich, cost-effective products
supporting a broad range of networking functions.

The Company's current products, the AF5400, AF5500, ATMS2000 and PS1000 Network
Processors, provide the core functionality of high-performance Gigabit Ethernet,
Fast Ethernet and Asynchronous Transfer Mode ("ATM") networking equipment. The
Company believes that network equipment vendors are able to reduce design and
development costs and accelerate product development cycles for high-performance
routers and switches by using the Company's products. All of the Company's
products are based on the Company's proprietary ViXTM architecture, which
enables network equipment vendors to easily and cost-effectively implement
high-performance, value-added features in their switch and router products. MMC
Networks' customers employ the Company's Network Processors to develop and
market multi-gigabit, wire-speed switches, routers, access concentrators,
firewalls and gateways with advanced features such as Layer 3 switching,
internetworking of LANs and WANs, security, class of service, quality of service
and network management.

The Company was incorporated in California in September 1992 and reincorporated
in Delaware in October 1997. The Company's principal executive offices are
located at 1134 East Arques Avenue, Sunnyvale, California 94086, and its
telephone number is (408) 731-1600.



                                        8
<PAGE>   9

RESULTS OF OPERATIONS
The following table sets forth certain statement of operations data expressed as
a percentage of the Company's revenue for the interim periods presented.

<TABLE>
<CAPTION>
                                                             THREE MONTHS ENDED MARCH 31,
                                                            -----------------------------
                                                                   1999         1998
                                                               ----------    --------
<S>                                                                 <C>         <C>   
              STATEMENT OF OPERATIONS DATA:                  
              Revenues.....................................         100.0%      100.0%
              Cost of revenues.............................          29.8%       30.5%
                                                               ----------    --------
                     Gross profit..........................          70.2%       69.5%
                                                               ----------    --------
              Operating expenses:                                                       
                 Research and development, net.............          27.6%       32.7%
                 Selling, general and administrative.......          14.9%       21.8%
                                                               ----------    --------
                     Total operating expenses..............          42.5%       54.5%
                                                               ----------    --------

              Operating income.............................          27.7%       15.0%
              Interest income, net.........................           4.0%        5.3%
                                                               ----------    --------
              Income before income taxes...................          31.7%       20.3%
              Provision for income taxes...................          11.4%        7.2%
                                                               ==========    ========
              Net income...................................          20.3%       13.1%
                                                               ==========    ========
</TABLE>

Revenues
Revenues increased by 18.2% to $16.1 million in the first quarter of 1999 from
$13.6 million in the fourth quarter of 1998 and increased by 67.4% from $9.6
million in the first quarter of 1998. Despite a marginal decline in average
sales prices of the Company's products, increased unit shipments from the fourth
quarter of 1998 to the first quarter of 1999 resulted in increased sales across
all product lines. The increase of the first quarter of 1999 over the first
quarter of 1998 is due to the increase in sales resulting from the shift into
volume production of the AF5500 product outpacing the decline in the sales of
the PS1000 product. The decline in sales of the PS1000 product was due to poor
sales of the products of the Company's customers incorporating the PS1000 and to
the economic weakness in Japan and Asia which affected the Company's customers
in those areas.

Cost of Revenues; Gross Profit
Cost of revenues increased to $4.8 million in the first quarter of 1999 as
compared to $3.9 million in the fourth quarter of 1998 and $2.9 million in the
first quarter of 1998. The increase in cost of revenues compared to prior
periods reflects the increase in unit shipments from period to period associated
with the overall increase in sales of the Company's network processors to new
and existing customers. Gross profit as a percentage of total revenues stayed
relatively constant at 70.2% for the first quarter of 1999, 71.4% for the fourth
quarter of 1998 and 69.5% for the first quarter of 1998.

Research and Development Expenses, net
Research and development expenses, net, increased by 41.7% to $4.5 million in
the first quarter of 1999 as compared to $3.1 million in the first quarter of
1998. The increase in research and development expenses, net from period to
period is due to increased new product development activity including the
establishment of a wholly owned subsidiary in Israel during the second quarter
of 1998. MMC Networks Israel Ltd. ("MMCIL") functions as a design center aimed
at increasing the number of new products under development. On occasion, the
Company has received partial or complete reimbursement for expenses incurred
under certain contracts with its customers. These reimbursements are recorded as
an offset against research and development expenses.

Research and development expenses as a percentage of total revenues were 27.6%
in the first quarter of 1999 as compared to 32.7% in the first quarter of 1998.
This percentage decrease resulted from revenues growing faster than research and
development expenses, net. Research and development expenses are 



                                        9
<PAGE>   10

expected to continue to increase in absolute dollars during the remainder of
1999.

Selling, General and Administrative Expenses
Selling, general and administrative expenses increased by 14.1% to $2.4 million
in the first quarter of 1999 as compared to $2.1 million in the first quarter of
1998. The increase in absolute dollars of selling, general and administrative
expenses from period to period consisted of increased sales commissions
resulting from higher revenues, increased selling and marketing costs associated
with new products and increased costs associated with additional personnel.
Selling, general and administrative expenses decreased as a percentage of
revenues to 14.9% in the first quarter of 1999 from 21.8% in the first quarter
of 1998 as revenue growth surpassed the increase in selling, general and
administrative expenses. The Company expects selling, general and administrative
expenses to increase in absolute dollars over the remainder of 1999.

Interest Income, net
Interest income, net reflects interest earned on average cash, cash equivalents
and short-term investment balances, which is partially offset by interest
expense on borrowings against lease lines to finance the acquisition of capital
equipment. Interest income, net increased to $0.7 million for the three months
ended March 31, 1999 from $0.5 million for the three months ended March 31,
1998. This increase is primarily due to increased cash and investment balances
from period to period resulting from cash flow from operations.

Provision for Income Taxes
The provision for income taxes increased to $1.8 million in the first quarter of
1999 from $0.7 million in the first quarter of 1998 due to the increase in
pre-tax income from period to period. The effective tax rates for the two
periods were 36.0% and 35.8%, respectively. Management expects the effective tax
rate for the remainder of 1999 to remain at approximately 36.0%.

LIQUIDITY AND CAPITAL RESOURCES
As of March 31, 1999, the Company's cash, cash equivalents and short-term
investments totaled $58.2 million, and the Company's working capital was $61.3
million. Cash and cash equivalents totaled $43.8 million at March 31, 1999, up
from $31.5 million at December 31, 1998. The net increase in cash and cash
equivalents during the period was primarily attributable to the cash provided by
operating and investing activities. Net cash totaling $5.1 million was provided
by operating activities during the three months ended March 31, 1999. This
positive cash flow was primarily due to net operating income adjusted for
depreciation and amortization of $4.0 million. Cash provided by investing
activities of $6.9 million for the three months ended March 31, 1999 consisted
of the sale of short-term investments of $7.3 million offset by the acquisition
of property and equipment of $0.4 million.

During the first half of 1998, the Company established two credit facilities
with a bank, a loan agreement and a non-recourse receivables purchase agreement.
The loan agreement allows the Company to borrow up to $8.0 million. Borrowings
bear interest at the bank's prime rate. The agreement requires that the Company
comply with certain financial covenants. In the event of default, all
outstanding borrowings will accrue interest at a rate of five percentage points
above the rate effective immediately prior to any such default. The loan
agreement expired in May 1999 and was renewed for one year on the same terms.
The non-recourse receivables purchase agreement expired in February 1999, and
the Company did not renew the agreement. To date, the Company has not utilized
either credit facility.

The Company believes that its existing cash balances together with the borrowing
capacity under its loan agreement and cash flow from future operations will be
sufficient to meet the Company's capital requirements through the next twelve
months, although the Company could be required, or could elect, to seek to raise
additional capital before such time. This is a forward-looking statement and the
actual period of time for which the Company's resources will be sufficient 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 the expansion
of sales and marketing efforts, the timing and size of business or technology
acquisitions, the timing of introductions of new products and enhancements to
existing products and market acceptance of



                                       10
<PAGE>   11

the Company's products. There can be no assurance that additional equity or debt
financing, if required, will be available on acceptable terms or at all.

IMPACT OF YEAR 2000 ISSUE
The Year 2000 Issue is the result of computer programs being written using two
digits rather than four to define the applicable year. Any computer programs
that have date-sensitive software may recognize a date using "00" as the year
1900 rather than the year 2000. This could result in a system failure or
miscalculations causing disruptions of operations, including among other things
a temporary inability to process transactions, send invoices or engage in
similar normal business activities.

The Company has completed testing its products, including semiconductors,
software, and reference design systems, and believes them to be Year 2000
compliant. However, the Company can not be sure that errors will not be
discovered in the future.

The Company is pursuing a plan to identify and address other Year 2000 issues
(the "Plan"). One component of the Plan is designed to identify and assess the
risks associated with the Company's information technology ("IT") systems and
non-IT systems. This component of the Plan is composed of three phases: (1)
identification and assessment of risks, (2) implementation and (3) testing.
Based on documentation supplied by the Company's computer hardware and software
vendors, phase 1 and 2 have been completed with respect to the Company's
critical IT systems and phase 3 is expected to be completed by June 1999. With
respect to non-critical IT systems, phase 1 and 2 have been completed and phase
3 is expected to be completed by June of 1999. For non-IT systems such as
facilities and laboratory test equipment, phase 1 and 2 have been completed and
phase 3 is expected to be completed by June of 1999. The Company does not intend
to create a contingency plan but will reassess the need for a contingency plan
as each major phase of the Plan is completed.

Another component of the Plan is to identify and assess the risks associated
with the Year 2000 readiness of the Company's suppliers, including critical
service suppliers such as banks. The Company believes that these risks are the
greater risks associated with preparing for the Year 2000 given the Company's
reliance upon its suppliers' ability to adequately resolve potential Year 2000
issues on a timely basis. This component of the Plan is composed of three
phases: (1) identification and assessment of risks, (2) survey of significant or
critical suppliers regarding their Year 2000 preparedness and (3) contingency
planning. The Company has completed phase 1, and phases 2 and 3 are expected to
be completed by June of 1999. As part of the contingency planning, the Company
may be required to find alternative suppliers to replace suppliers identified as
having Year 2000 compliance issues or suppliers whose published reports and or
response to the Company's survey are not timely, accurate or complete. There can
be no assurance that the Company will be able to adequately address Year 2000
compliance of its vendors, to find suitable alternate suppliers and contract
with them on terms reasonable to the Company, or at all, and that such inability
will not have a material adverse effect on the Company's business, financial
condition and results of operations.

Based on the status of the Company's Year 2000 efforts to date, the Company does
not anticipate total expenses for implementing the Plan to exceed $50,000,
excluding expenses related to internal IT staff. All expenses in this effort are
expensed as incurred. However, the Company may discover additional Year 2000
problems, may not be able to develop, implement, or test contingency plans, or
may find that the expenses associated with these activities exceed current
expectations. In many cases, the Company is relying on assurances from suppliers
and vendors that new and upgraded IT systems and other products will be Year
2000 compliant. The Company can not be sure that its tests of third-party
products will be adequate or that, if problems are identified, they will be
adequately addressed by the third party on a timely basis. Because the Company
uses a variety of IT systems and has additional systems embedded in its
infrastructure, it can not be sure that all of its systems will work together in
a Year 2000-compliant fashion. Furthermore, the Company can not be sure that it
will not suffer business interruptions, either because of its own Year 2000
problems or those of its customers or suppliers whose Year 2000 problems may
make it difficult or impossible for them to fulfill their commitments to the
Company. If the Company fails to satisfactorily resolve Year 2000 issues in a
timely manner, it could also be exposed to liability to third parties.



                                       11
<PAGE>   12

FACTORS AFFECTING FUTURE RESULTS
Past financial performance should not be considered a reliable indicator of
future performance and investors should not use historical trends to anticipate
results or trends in future periods. The Company operates in a rapidly changing
environment that involves a number of risks and uncertainties, some of which are
beyond the Company's control. In addition to the uncertainties describes
elsewhere in this report and in the Company's Annual Report on Form 10-K for the
year ended December 31, 1998 under the section entitled "Factors Affecting
Future Results", these include:

Fluctuations in Operating Results
Fluctuations in the Company's revenues, operating expenses and operating income
have occurred in the past and are likely to occur in the future due to a variety
of factors, any of which may have a material adverse effect on the Company's
operating results. In addition, the Company's quarterly results of operations
may vary significantly due to general business conditions in the networking
equipment and semiconductor industries, changes in demand for the network
equipment products of the Company's customers, the timing and amount of orders
from the Company's network equipment vendor customers, cancellations or delays
of customer product orders, new product introductions by the Company or its
competitors, cancellations, changes or delays of deliveries of products to the
Company by its suppliers, increases in the costs of products from the Company's
suppliers, fluctuations in product life cycles, price erosion, competition,
changes in the mix of products sold by the Company, availability of
semiconductor foundry capacity, variances in the timing and amount of
nonrecurring engineering funding and operating expenses, seasonal fluctuations
in demand, intellectual property disputes and general economic conditions.

In addition, in the past the Company has recognized a substantial portion of its
revenues in the last month of a quarter. Since a large portion of the Company's
operating expenses, including rent, salaries and capital lease expenses, is
fixed and difficult to reduce or modify, if revenue does not meet the Company's
expectations, the material adverse effect of any revenue shortfall will be
magnified by the fixed nature of these operating expenses. All of the above
factors are difficult for the Company to forecast, and these and other factors
could have a material adverse effect on the Company's business, financial
condition and results of operations.

Customer Concentration
Significant customers are those customers accounting for more than 10% of the
Company's total revenues. Significant customers for the three months ended March
31, 1999 were Cisco Systems, Inc. ("Cisco") and International Business Machines
Corporation ("IBM") accounting for 53% and 19% of total revenues, respectively.
Significant customers for the three months ended March 31, 1998 were Cisco,
Mitsui Comtek Corp., a non-stocking sales representative for Japan ("Mitsui"),
Cabletron and the U.S. Computer Division of Hitachi ("Hitachi") accounting for
30%, 27%, 11% and 10% of total revenues, respectively. Cabletron has not been a
significant customer since the first quarter of 1998.

The Company's customer base is highly concentrated. A relatively small number of
customers has accounted for a significant portion of the Company's revenues to
date, and the Company expects that this trend will continue for the foreseeable
future. Each of the Company's network equipment vendor customers, including
Cisco, IBM, Mitsui, Hitachi and Lucent Technologies (which was the Company's
third largest customer in the first quarter of 1999) can cease incorporating the
Company's products with limited notice to the Company and with little or no
penalty. The Company has no minimum purchase agreements with its customers.

The Company's future operating results are currently substantially dependent on
Cisco's competitive position in the networking equipment market. The loss of one
or more of the Company's customers in general and Cisco in particular, the
possibility that the introduction of the customer's product may not be
successful, the possibility that design wins with customers do not result in
significant production levels or the inability of the Company to successfully
develop relationships with additional significant network equipment vendors
could have a material adverse effect on the Company's business, financial
condition and results of operations.



                                       12
<PAGE>   13

New Product Development and Technological Change
The data networking and semiconductor industries are characterized by rapidly
changing technology, frequent product introductions and evolving industry
standards. Accordingly, the Company's future performance depends on a number of
factors, including the Company's ability to identify emerging technological
trends in its target markets, develop and maintain competitive products, enhance
its products by adding innovative features that differentiate its products from
those of competitors, bring products to market on a timely basis at competitive
prices, properly identify target markets and respond effectively to new
technological changes or new product announcements by others. No assurance can
be given that the Company's design and introduction schedules for any additions
and enhancements to its existing and future products will be met, that these
products will achieve market acceptance, or that the Company will be able to
sell these products at prices that are favorable to the Company. In evaluating
new product decisions, the Company must anticipate well in advance future demand
for product features and performance characteristics, as well as available
supporting technologies, manufacturing capacity, industry standards and
competitive product offerings. The technical innovations required for the
Company to remain competitive must be completed before developments in
networking technologies or standards render them obsolete and must be
sufficiently compelling to induce network equipment vendors to favor them over
alternative technologies. To remain competitive, the Company must design new
products and sometimes redesign existing products to be manufactured on newer
wafer process technologies that provide smaller circuit dimensions. There is no
assurance that the suppliers of these new technologies can deliver them on
schedule or that the Company can complete its designs on the new processes on
schedule. Moreover, the Company must generally incur substantial research and
development costs before the technical feasibility and commercial viability of a
product line can be ascertained. There can be no assurance that revenues from
future products or product enhancements will be sufficient to recover the
development costs associated with such products or enhancements, or that the
Company will be able to secure the financial resources necessary to fund future
development. The inability of the Company and its products to achieve market
acceptance from network equipment vendors and to adequately address any of the
factors discussed above could have a material adverse effect on the Company's
business, financial condition and results of operations.

Dependence on Independent Manufacturers
Currently, the Company outsources all manufacturing, assembly and testing of its
network processors. The Company purchases both fully assembled and tested
products on a turnkey basis and wafers which it then consigns to subcontract
assembly and test providers. For products purchased in wafer form, the Company
assumes the risk of yield loss in subsequent manufacturing steps. The Company
has not entered into any volume purchase agreements with its suppliers for the
purchase of the wafers. Only one of the Company's products is currently
manufactured by more than one supplier. The Company depends on its suppliers to
deliver sufficient quantities of finished product to the Company in a timely
manner. Since the Company places its orders on a purchase order basis and does
not have a long-term volume purchase agreement with any of its existing
suppliers, these suppliers may allocate, and in the past have allocated,
capacity to the production of other products while reducing deliveries to the
Company on short notice. Currently the Company must place orders approximately
eight to 10 weeks in advance of expected delivery. In the future, this required
lead time may increase, making it more difficult for the Company to meet
customer demand. Any sudden increase in customer demand not anticipated by the
Company in advance could result in the inability to deliver product on a timely
basis and, as such, may reduce the Company's product revenues or increase the
Company's cost of revenues and could have a material adverse effect on the
Company's business, financial condition and results of operations. In addition,
the Company places orders based on forecast demand to ensure enough lead time to
be able to meet anticipated customer orders. Any sudden decrease in the
anticipated customer demand could have a material adverse effect on the
Company's business, financial condition and results of operations. If capacity
becomes less available in the future, the Company may be required to place
orders earlier than eight to 10 weeks in advance of expected delivery. As the
Company increases the volume of its wafer purchases in place of turnkey
purchases, the Company will need to continue to invest in the capital and
engineering resources necessary for production under this manufacturing flow.



                                       13
<PAGE>   14

Competition
The data networking and semiconductor industries are intensely competitive and
are characterized by constant technological change, rapid rates of product
obsolescence and price erosion. The Company's products compete with
semiconductor solutions from companies such as Texas Instruments, Lucent
Technologies, PMC-Sierra, Intel Corporation and Broadcom. In addition, the
Company expects significant competition in the future from other major
semiconductor suppliers. For example, Intel Corporation and Texas Instruments
have recently entered or indicated an intent to enter the network processor
market. The Company also may face competition from suppliers of products based
on new or emerging technologies. In addition, many of the Company's existing and
potential customers internally develop ASICs, general purpose processors,
network processors and other devices which attempt to perform all or a portion
of the functions performed by the Company's products. Many of the Company's
current and prospective competitors offer broader product lines and have
significantly greater financial, technical, manufacturing and marketing
resources than the Company. Failure of the Company to compete successfully could
have a material adverse effect on its operating results.

Protection of Intellectual Property
The Company relies primarily on a combination of nondisclosure agreements and
other contractual provisions as well as patent, trademark, trade secret and
copyright law to protect its proprietary rights. There can be no assurance that
any patents will issue pursuant to the Company's current or future patent
applications or that patents issued pursuant to such applications will not be
invalidated, circumvented, challenged or licensed to others. In addition, there
can be no assurance that the rights granted under any such patents will provide
competitive advantages to the Company or be adequate to safeguard and maintain
the Company's proprietary rights. Failure of the Company to enforce and protect
its intellectual property rights could have a material adverse effect on the
Company's business, financial condition and results of operations. There can be
no assurance that such intellectual property rights can be successfully asserted
in the future or will not be invalidated, circumvented or challenged. From time
to time, third parties, including competitors of the Company, may assert patent,
copyright and other intellectual property rights to technologies that are
important to the Company. There can be no assurance that third parties will not
assert infringement claims against the Company in the future, that assertions by
third parties will not result in costly litigation or that the Company would
prevail in any such litigation or be able to license any valid and infringed
patents from third parties on commercially reasonable terms, if at all.

Risks Associated with Expansion of International Business Activities
Substantially all of the Company's sales to date have been to customers located
in the United States, including sales to U.S.-based affiliates of non-U.S.
network equipment vendors. If the Company's international sales increase, the
Company will be subject to additional risks inherent in international
operations. All of the Company's international sales to date are U.S.
dollar-denominated. As a result, an increase in the value of the U.S. dollar
relative to foreign currencies could make the Company's products less
competitive in international markets. In addition, the Company procures the
majority of its manufacturing, assembly and test services from suppliers located
outside the United States. International business activities may be limited or
disrupted by the imposition of governmental controls, export license
requirements, restrictions on the export of critical technology, currency
exchange fluctuations, political instability, trade restrictions and changes in
tariffs. Demand for the Company's products could also be adversely affected by
seasonality of international sales and economic conditions in the Company's
primary overseas markets. These international factors could have a material
adverse effect on future sales of the Company's products to international
customers and, consequently, on the Company's business, financial condition and
results of operations. As a percentage of total revenues, sales to Mitsui have
declined to less than 10% for the three months ended March 31, 1999 as compared
to 27% for the three months ended March 31, 1998. Sales to Mitsui may remain at
this lower level or decline further due to the economic downturn in Japan and
Asia in general, and could have an adverse effect on the Company's revenues in
the future.

Expected Volatility of Stock Price.
In recent years the stock market in general, and the market for shares of high
technology, data networking 



                                       14
<PAGE>   15

and semiconductor companies in particular, have experienced extreme price
fluctuations, which have often been unrelated to the operating performance of
affected companies. The trading price of the Company's Common Stock has been,
and is expected to continue to be, subject to extreme fluctuations in response
to both business-related issues, such as quarterly variations in operating
results, announcements of new products by the Company or its competitors, the
gain or loss of significant network equipment vendor customers, and stock
market-related influences, such as changes in analysts' estimates, the presence
or absence of short-selling of the Company's Common Stock and events affecting
other companies that the market deems to be comparable to the Company. In
addition, technology stocks have from time to time experienced extreme price and
volume fluctuations that often have been unrelated or disproportionate to the
operating performance of these companies. These broad market fluctuations have
affected and are expected to continue to adversely affect the market price of
the Company's Common Stock. Moreover, the trading prices of many high
technology, data networking and semiconductor stocks are at or near their
historical highs and reflect price/earnings ratios substantially above
historical norms.



                                       15
<PAGE>   16

PART II.  OTHER INFORMATION
ITEM 1.  LEGAL PROCEEDINGS
Not Applicable.

ITEM 2.  CHANGES IN SECURITIES
The effective date of the Company's first registration statement, filed on Form
S-1 under the Securities Act of 1933 (No. 333-34005), was October 29, 1997 (the
"Registration Statement"). The class of securities registered was Common Stock.
The offering commenced on October 29, 1997 and all securities were sold in the
offering. The managing underwriters for the offering were Morgan Stanley Dean
Witter Discover & Co., Deutsche Morgan Grenfell and Wessels, Arnold & Henderson.

A total of 4,025,000 shares were registered pursuant to the Registration
Statement, all of which the Company sold for its own account, for an aggregate
offering price of $44.3 million.

The Company incurred expenses of approximately $4.2 million for the offering, of
which $3.1 million represented underwriting discounts and commissions and $1.1
million represented other expenses. All such expenses were direct or indirect
payments to others. The net offering proceeds to the Company after total
expenses were approximately $40.1 million.

As of March 31, 1999, the Company had used the net proceeds from the offering as
follows: $0.1 million for plants, buildings and facilities, $4.3 million for the
purchase and installation of machinery, equipment and purchased software, $0.4
million for the repayment of indebtedness and lease obligations, $20.9 million
for working capital, and $14.4 million for temporary investments. The remaining
net proceeds remain in cash and cash equivalents. None of the proceeds were used
for direct or indirect payments to directors, officers, general partners of the
Company or their associates or to persons owning ten (10) percent or more of any
class of equity securities of the Company; or to affiliates of the Company. The
use of the proceeds from the offering does not represent a material change in
the use of proceeds described in the prospectus.

ITEM 3.  DEFAULTS UPON SENIOR SECURITIES
Not Applicable.

ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not Applicable.

ITEM 5.  OTHER INFORMATION
Not Applicable.

ITEM 6.  EXHIBITS AND REPORTS ON FORM 8-K

(a)  Exhibits

<TABLE>
<CAPTION>
           Exhibit No.              Description of Exhibit  
           -----------              ----------------------
<S>                                 <C>            
           10.1                     Loan Modification Agreement dated May 4, 1999, by and
                                    between Silicon Valley Bank and the Registrant.

           27.1                     Financial Data Schedule as of March 31, 1999 and for the
                                    3 months then ended.
</TABLE>


(b)  Reports on Form 8-K

     The Company filed no reports on Form 8-K during the three months
     ended March 31, 1999.



                                       16
<PAGE>   17

                                   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.


  Dated: May 10, 1999                   MMC NETWORKS, INC.


                                        By: /s/ Douglas C. Spreng
                                           -------------------------------------
                                            Douglas C. Spreng
                                            President, Chief Executive Officer
                                            and Director (Principal Executive
                                            Officer)


                                        By: /s/ Uday Bellary  
                                           -------------------------------------
                                            Uday Bellary
                                            Vice President, Finance,
                                            Chief Financial Officer and
                                            Assistant Secretary (Principal
                                            Financial and Accounting Officer)



                                       17
<PAGE>   18
                               INDEX TO EXHIBITS
 


<TABLE>
<CAPTION>


Exhibit
Number                            Description
------                            -----------
<S>                          <C> 
10.1                         Loan Modification Agreement dated May 4, 1999, by and between 
                             Silicon Valley Bank and the Registrant.
 
27.1                         Financial Data Schedule as of March 31, 1999 and for the 3 months
                             then ended.
</TABLE>