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This manually signed original report consists of 40 sequentially numbered pages.
The exhibit index is contained on pages 36 and 37 of this report.
                UNITED STATES SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549


                                    FORM 10-K

                Annual report pursuant to Section 13 or 15(d) of
                   the Securities Exchange Act of 1934 for the
                      fiscal year ended December 31, 1996.

                         Commission file number: 0-23296

                               CIDCO INCORPORATED
             (Exact Name of Registrant as Specified in its Charter)

                Delaware                                    13-3500734
     (State or other jurisdiction of                     (I.R.S. employer
     incorporation or organization)                   identification number)

                               220 Cochrane Circle
                              Morgan Hill, CA 95037
              (Address of principal executive offices and zip code)

                                 (408) 779-1162
              (Registrant's telephone number, including area code)

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


        Securities registered pursuant to Section 12(b) of the Act: None

Securities registered pursuant to Section 12(g) of the Act: Common Stock, par
value $.01

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
                           _______          ______
Indicate by check mark if disclosure of delinquent  filers  pursuant to Item 405
of Regulation  S-K is not contained  herein,  and will not be contained,  to the
best  of  the  Registrant's   knowledge,  in  definitive  proxy  or  information
statements  incorporated  by  reference  in Part  III of this  Form  10-K or any
amendment to this Form 10-K. ( )

Aggregate  market  value  of the  voting  stock  held by  non-affiliates  of the
Registrant  based on the closing sale price of such stock at $14.38 on March 13,
1997: $207,685,000

Number of shares outstanding of the Registrant's Common Stock on March 13, 1997:
14,442,622
                       DOCUMENTS INCORPORATED BY REFERENCE

Registrant's   definitive  Proxy  Statement  for  its  1997  Annual  Meeting  of
Shareholders  is  incorporated by reference into Part III (Items 11, 12, and 13)
hereof.

--------------------------------------------------------------------------------
<PAGE>

                               CIDCO INCORPORATED

                                      INDEX

PART I.                                                                    Page

        Item   1.  Business ..................................................3

        Item   2.  Properties ...............................................11

        Item   3.  Legal Proceedings ........................................11

        Item   4.  Submission of Matters to a Vote of Security Holders ......11


PART II.

        Item 5.  Market for Registrant's Common Stock and Related Stockholder
                           Matters ..........................................12

        Item 6.  Selected Financial Data ....................................13

        Item 7.  Management's Discussion and Analysis of Financial Condition
                           and Results of Operations.........................14

        Item 8.  Financial Statements and Supplementary Data ................18

        Item 9.  Changes in and Disagreements With Accountants on Accounting
                           and Financial Disclosure .........................32


PART III.

        Item 10. Directors and Executive Officers of the Registrant .........33

        Item 11. Executive Compensation .....................................35

        Item 12. Security  Ownership  of  Certain  Beneficial  Owners  and
                           Management........................................35
        Item 13. Certain Relationships and Related Transactions .............35


PART IV.

       Item 14.  Exhibits,  Financial  Statement  Schedules  and  Reports  on
                           Form 8-K...36


SIGNATURES ..................................................................38

<PAGE>


                                     Part I.


Item   1.     Business

         CIDCO  Incorporated  ("Cidco" or the "Company")  designs,  develops and
markets  subscriber   telephone  equipment  that  supports  intelligent  network
services  being  promoted  by  telephone  operating  companies  ("telcos").  The
Company's  first  area of  focus  has been  Caller  ID, a  service  that  allows
subscribers  to view the  telephone  number and name of the calling party before
the call is answered.  The Company's  Caller ID products  connect  directly into
subscribers' telephone lines, receive complex network signaling and display call
information on a liquid crystal display  ("LCD").  Since the introduction of its
first  Caller ID unit in 1989,  the Company  has become the leading  provider of
Caller ID equipment, having sold more than fourteen million units.

         The Company has  developed or is  currently  developing a number of new
products  for  existing  and future  telephone  services,  including a family of
intelligent feature telephones, first introduced in September 1994. These phones
support an entire package of network services  including Caller ID, Call Return,
Call Forwarding, and Voice Mail in a single device. In addition, the Company has
introduced a display unit that combines two of the most popular services, Caller
ID and  Call  Waiting,  into a unit  which  essentially  provides  "visual  call
waiting".

         The Company's most recent products  include a screenphone  with a large
display  capable of  accommodating  Bellcore Analog Display  Services  Interface
("ADSI") scripts, which enable phone companies to provide sophisticated advanced
telephone  transaction  and  e-mail  services;  and  the  iPhone,  developed  in
conjunction  with InfoGear  Technology,  which provides  Internet access without
using a computer.

          Cidco sells its  products to  individual  subscribers  through  direct
fulfillment   relationships  with  certain  regional  Bell  operating  companies
("RBOCs"),  to telcos directly,  to major national and regional retailers and to
original equipment manufacturers  ("OEMs").  Cidco's customers include Ameritech
Services,   Inc.   ("Ameritech"),   A&A  Int'l  (Radio  Shack),   Bell  Atlantic
Teleproducts ("Bell Atlantic"),  Bell South Corporation ("Bell South"),  K-Mart,
GTE, SBC Communications,  Inc.  ("Southwestern  Bell"), US West  Communications,
Inc. ("US West"), Telia Systems A.B., and Walgreens.

Industry Background

         Prior to its  court-mandated  break-up  in 1984,  AT&T was a  regulated
monopoly that provided local and long distance services,  and customer telephone
equipment to over two-thirds of the telephone  subscribers in the United States.
Today's  competitive  telecommunications  industry has evolved  principally as a
result of AT&T's  divestiture of the RBOCs. The RBOCs,  which currently  account
for approximately 77% of local telephone access lines in the United States,  and
independent  telcos,  such as GTE,  provide standard dial tone service and local
telephone  access lines.  Interexchange  carriers,  such as AT&T,  MCI Corp. and
Sprint,  provide long distance  services.  Since the divestiture,  AT&T (and its
recently spun off affiliate Lucent Technologies) has continued to sell switching
equipment and telephone  equipment,  while the RBOCs have been  prohibited  from
manufacturing  any  type of  telephony  equipment.  This  prohibition  has  been
eliminated by the  Telecommunications  Act of 1996,  although final implementing
regulations  have not yet been issued by the Federal  Communications  Commission
("FCC"). The RBOCs have been permitted to sell telephony equipment  manufactured
by others bearing the RBOC's tradename and may purchase  network  equipment from
vendors other than AT&T.  Consumers are no longer  required to lease  telephones
from  AT&T  and  now  purchase  telephone  equipment  from  numerous  suppliers,
including retail stores. The AT&T divestiture, therefore, resulted in not only a
more  deregulated  telephone  service  industry,  but  also a more  dynamic  and
competitive telephony equipment industry in the United States.

         The RBOCs and the independent telcos have approached  saturation levels
for the  installation  of local  telephone  access lines,  thus limiting  future
growth of their core  business.  In order to supplement  growth in revenues from
standard dial tone service within their respective  service areas, the RBOCs and
the independent telcos have offered  intelligent network services for which they
can charge their subscribers  additional  monthly fees. In addition,  the telcos
have used these services to respond to increased  competition  from  alternative
service providers such as cellular companies, cable companies, data transmission
companies and competitive access providers by differentiating their services and
creating consumer awareness and customer loyalty.
<PAGE>

         Although  services  such as call  waiting,  call  forwarding  and speed
dialing have been available for over ten years,  more recent  investments by the
telcos to upgrade their networks and accommodate new signaling technologies have
enabled the rapid  introduction of intelligent  network  services known as CLASS
(custom local area signaling services). These services include:

      o  Caller ID, which displays information about an incoming call (including
         the number and name of the caller and the time and date of the call) on
         a display  screen built into the  telephone or a separate  display unit
         connected to the telephone;

      o  Repeat  Dialing,  which  continues  to  dial a busy  number  until  the
         connection is made;

      o  Selective  Call Forward,  which lets the subscriber  preselect  certain
         numbers to be forwarded to another number;

      o  Automatic Call Back, which  automatically  dials the number of the last
         incoming call;

      o  Selective  Call  Block,   which  lets  the  subscriber  select  certain
         telephone numbers to be blocked;

      o  Distinctive  Ringing,  which lets the subscriber  preselect  numbers to
         ring with a distinctive-sounding ring;

      o  Call  Trace,  which  allows a  subscriber  to have a call traced by the
         telephone company; and

      o  Caller ID on Call  Waiting,  which  allows  the  subscriber  to utilize
         Caller ID service to identify an incoming call while already engaged in
         a telephone conversation.

         In addition to these CLASS  services,  the Company  believes  important
future  services  will  include  information  services,   transaction  services,
messaging services and call management services, accessed via ADSI protocols and
the Internet.

         The  ability  of  telcos  to  achieve  high   penetration   levels  for
intelligent network services,  especially Caller ID, is dependent, in part, upon
the  availability of a new generation of subscriber  telephone  equipment.  Most
existing telephones  discourage use of these current and future services because
they require  subscribers  to remember and dial sequences of symbols and numbers
to access the  services.  Such  telephones  are also  incapable of receiving the
complex  network  signaling  required  for  Caller ID service  and other  future
services and do not have a display  screen and controls for viewing and managing
call  information.  Therefore,  a market for a new generation of  user-friendly,
intelligent, network-compatible subscriber telephone equipment has emerged.

         This new  generation of  subscriber  telephone  equipment  must operate
reliably over a wide range of telephone  network  conditions.  Although  general
specifications  exist  for  Caller ID and other  intelligent  network  services,
network  variations among telcos often require  manufacturers to debug and field
test their products on various telephone  networks in order to ensure that their
equipment  operates  properly  throughout  these  networks  and  meets  the high
standards of reliability and compatibility required by the telcos.

         Traditional consumer telephone suppliers,  which sell primarily through
retailers, have focused on the types of high volume "generic" equipment that are
most  suitable  for  such  a  distribution  channel.  However,  the  market  for
intelligent   network  subscriber   telephone   equipment  currently  relies  in
significant  part on specialized  distribution  arrangements  and requires close
working   relationships  with  the  RBOCs  and  independent  telcos  to  address
compatibility  issues  promptly as they arise.  This created an opportunity  for
entrants in the market for intelligent network subscriber equipment.

<PAGE>

Caller ID Service

         Caller ID service, first introduced by New Jersey Bell in 1987, was the
first intelligent  network service to require specialized  subscriber  telephone
equipment.  Caller  ID not only  requires  compatibility  with  complex  network
signaling,  but  also a  screen  on  which to  display  Caller  ID  information.
Originally,  Caller ID service  provided only the number of the party initiating
the call and transmitted data only within local area networks  ("LATA"s).  Since
the  early   1990's,   certain   telcos  have   offered  both  number  and  name
identification.  In December  1995,  the FCC mandated  that Caller ID service be
supported  nationally.  California  instituted  Caller ID  service  in mid 1996,
making the service  available  in all 50 states,  the  District of Columbia  and
Puerto Rico.  Additionally,  Caller ID on Call Waiting was first  introduced  in
late 1995.  This service  allows the  subscriber to utilize Caller ID service to
identify  a  second   incoming  call  while  already   engaged  in  a  telephone
conversation.

         Penetration for Caller ID service has increased as necessary  approvals
by state public  utility  commissions  have been obtained and as the telcos have
upgraded their switches and  implemented new signaling  technologies.  Caller ID
service is also currently available in most of Canada and has been introduced in
Mexico, Hong Kong, Israel, New Zealand,  Australia,  Chili,  France,  Singapore,
Sweden and the United Kingdom.  During 1997, Caller ID service is expected to be
introduced in a number of additional countries.


Strategy

         The  Company's  objective is to envision,  produce and  distribute  the
range of  products  that will  become the primary  telephony  and  communication
appliances  utilized by customers of telephone operating  companies.  To achieve
this objective, the Company has developed the following strategy:

 Leverage relationships with RBOCs, and independent telcos

         The  Company   believes   that  it  has   established   close   working
relationships  with  certain  RBOCs and  independent  telcos,  which  enable the
Company to design its products to be  compatible  with the existing and evolving
telco networks.  These relationships allow the Company to understand  variations
between  networks  and to design its  products to operate  reliably  over a wide
range of network conditions. In addition, these relationships permit the Company
to design products to meet emerging  standards and to respond to new intelligent
network services being introduced.

 Enhance and expand distribution relationships with RBOCs

         The Company has developed direct fulfillment relationships with certain
RBOCs, which allow it to market its equipment together with intelligent  network
services and leverage the efforts of the RBOCs to market these  services.  Cidco
has experienced  accelerated  sales growth in regions where it maintains  direct
fulfillment  relationships.  These fulfillment  arrangements differ by RBOC, but
typically allow subscribers to purchase equipment with Caller ID service through
one  phone  call  to  an  RBOC  sales  representative.   In  general,  the  RBOC
representative  takes the  customer's  order for a Cidco product or connects the
subscriber  to a Cidco sales  representative  through an on-line  transfer.  The
Company  intends to develop direct  fulfillment  relationships  with  additional
RBOC's and to  leverage  existing  and future  fulfillment  relationships  as it
introduces new products.

 Expanded cooperative marketing efforts

The Company has  initiated  joint  marketing  efforts  with  several  RBOC's and
independent  telco's to attract new subscribers.  Through these programs,  Cidco
contacts  potential  customers  using outbound  telemarketing,  direct  response
television and direct mail promotions. The RBOC pays the Company a commission to
acquire new Caller ID service  subscribers.  Frequently  these programs  involve
offering the subscriber a free Caller ID adjunct unit provided by the Company if
they sign up to receive  Caller ID  service.  An  increasing  proportion  of the
Company's  sales of adjunct  Caller ID units are being  generated by these Cidco
direct marketing programs.
<PAGE>

 Design high quality, innovative products

         Besides  requiring  compatibility  with the telcos'  networks,  Cidco's
customers also demand high quality products that are innovative, easy to use and
have consumer appeal. The design, functionality and aesthetic characteristics of
Caller ID and advanced telephone products can impact acceptance of Caller ID and
other services by customers and have become important  criteria to the telcos in
choosing companies with which to develop direct fulfillment relationships. Cidco
believes  that  its  ability  to  satisfy  technological  and  ergonomic  design
requirements  is one of the  factors  that  has  enabled  it to  develop  direct
fulfillment  relationships  with most RBOCs and independent  telcos. The Company
intends to  continue to  emphasize  quality,  innovation  and ease of use in its
product design.

 Provide high quality support and service

         The Company  believes its ability to provide  high quality  support and
service has  contributed to its success in developing and retaining its RBOC and
telco  relationships.  The Company  intends to continue to provide  high quality
support and service to telco  subscribers,  who expect the same level of support
and service that they receive from the telcos.

 Be a low cost producer of intelligent network subscriber telephone equipment

         The Company  has  benefited  from its  ability to reduce  manufacturing
costs by engineering products for high volume assembly and by stressing low cost
manufacturing design while maintaining quality, consistency and reliability. The
Company has sold more than  fourteen  million  Caller ID  products to date,  and
believes   that  its  acquired   knowledge   will  permit  it  to  maintain  low
manufacturing costs for its products, in the current market conditions.


Products

         The Company  introduced  its first Caller ID unit in 1989.  Since 1989,
the Company has broadened  its Caller ID product  family to include a variety of
models  including  stand-alone  display  units and  screenphones  with Caller ID
capability  built in. To date,  all of the Company's  sales have been  generated
from its Caller ID based  products.  These  products  include  Caller ID Feature
Phones and a Caller ID Cordless Phone,  which together  accounted for 27 percent
of  sales  during  the  year  ended  December  31,  1996.   Additional  advanced
screenphone  products and an Internet  access  telephone  will be  introduced in
1997.

         Cidco's  Caller ID and  screenphone  products  display all  transmitted
information  before  the  incoming  phone  call is  answered  and store the call
information in memory.  Among the features  available on the Company's  products
are backlit  screens for easy viewing,  memory  capacity for up to 100 calls,  a
"blocked  call/new call" light,  bilingual display and a "message waiting alert"
light that  indicates  to a network  voice mail  subscriber  that new voice mail
messages have been received.  The Company  pioneered OTV(R) (one-time  viewing),
which allows the screen on the  Company's  Caller ID units to display all Caller
ID information at one time. Additionally,  the Company's latest product includes
Caller ID on Call Waiting.  This allows the caller to utilize  Caller ID service
to  identify  an  incoming  call while  already  engaged  in  another  telephone
conversation.  The  Company's  Caller  ID units  are  compatible  with the major
switches currently in use in the United States,  including those manufactured by
AT&T, Northern Telecom, Siemens A.G. and L.M. Ericsson.

         The  Company's  family of Caller ID  products  includes  the  following
principal models:
<TABLE>

                  Memory                                                      Typical
Model No.        Capacity         Product Features                          Retail Price
<CAPTION>
<S>              <C>              <C>                                       <C>

PA-25            25 Calls         OTV(R)(One-Time  Viewing);
                                  New Call/Blocked  Call; LCD               $30.00 - $40.00
                                  Contrast Adjustment; Compact
                                  design

JA-25            25 Calls         OTV(R), New Call/Blocked Call
                                  Light;  LCD  Contrast Adjustment          $40.00 - $50.00

<PAGE>

JA-60            60 Calls         OTV(R), New Call/Blocked Call
                                  Light; Bilingual English/Spanish;         $50.00 - $60.00
                                  LCD Contrast Adjustment

SB-99            99 Calls         OTV(R),   New   Call/Blocked              $60.00 - $70.00
                                  Call   Light;   Bilingual
                                  English/Spanish; LCD Contrast
                                  Adjustment; Back light Display;
                                  Message Waiting Alert Light

CW-99            99 Calls         OTV(R), Caller ID/Call Waiting;           $80.00 - $90.00
(Caller ID                        MEC (Multiple extension        
on Call                           capability);  New Call/Blocked  
Waiting Adjunct)                  Call Light;  Bilingual English/
                                  Spanish; LCD  Contrast  Adjustment; 
                                  Message Waiting Alert Light

SA-100A-27       100 Calls        OTV(R),  Two Line Capability;             $90.00 - $100.00
                                  New  Call/Blocked Call Light; 
                                  Bilingual English/Spanish; LCD 
                                  Contrast Adjustment

CT-25R           25 Calls         OTV(R), New Call/Blocked Call             $90.00 - $100.00
(Caller ID                        Light; Bilingual English/Spanish;
Feature Phone)                    LCD Contrast Adjustment; 20 Speed
                                  LCD Memory

CT-100           30 Calls         OTV(R), New  Call/Blocked  Call           $120.00 - $140.00
(Caller ID                        Light; Message  Waiting Alert Light;
Speakerphone)                     LCD Call Contrast  Adjustment;
                                  3-way Calling; Forwarding;  Volume  
                                  Adjustment; Busy Redial; 50 Number 
                                  Directory

CL-500CWi        25 Calls         OTV(R); Bilingual  English/Spanish;       $180.00 - $210.00
(Caller ID                        One-touch access to Voice Mail;    
Cordless Phone)                   Repeat Dialing;  Call Forwarding;  
                                  Caller ID/Call  Waiting;  Message  
                                  Waiting  Indication/Visual Message 
                                  Waiting; Line in Use Indicator Light;
                                  Charge Indicator Light 

CST-2000         50 Calls         Message  Waiting  display;  Platform      $250.00 - $300.00
(ADSI                             for visual voice mail, home banking,  
Screenphone)                      stock quotes,  etc.; 14 one touch 
                                  Speed Dial keys; Directory stores 100 
                                  entries alphabetically; Redial list saves 
                                  and redials last 7 dialed numbers; Auto 
                                  name-matching from Directory or Speed 
                                  Dial List.
</TABLE>

Distribution

         The Company's  distribution  strategy is to make its products available
to potential end users through multiple  distribution  channels.  These channels
are:

 Direct Fulfillment Arrangements

         The  Company  currently  has  direct   fulfillment   arrangements  with
Southwestern  Bell,  Ameritech,  US West and, in 1997, Nynex. In most instances,
the RBOC sales representatives sell both network services and Cidco equipment to
customers  and  transmit  equipment  orders to Cidco  electronically  on a daily
basis. The Company then ships its equipment  directly to the customers and bills
the RBOC,  which,  in turn,  bills its customers.  As part of these  fulfillment
relationships,  Cidco provides toll free after-sales service and support to help
the customer understand how to utilize the Caller ID service and equipment.

         The Company  continually seeks to strengthen its current RBOC marketing
alliances and to develop new alliances. The Company has found through experience
that sales of Caller ID  service  and  equipment  are more  successful  when the
customer can purchase both Caller ID service and equipment from a single source,
especially  when  payment  for  equipment  can be made on an  installment  basis
through  the  customer's  phone  bill.  The  Company  has  found  that  customer
satisfaction  with  Caller ID service is  enhanced  when the  customer  receives
Caller ID equipment  promptly  after ordering the service and is provided a toll
free number for after-sales service and support.  For these reasons, the Company
believes its inbound telemarketing and fulfillment arrangements will continue to
be an important marketing channel for its products.
<PAGE>

 Joint Marketing Arrangements

         The  Company  has  expanded  its  cooperative  marketing  efforts  with
Southwestern  Bell , Bell  Atlantic,  US West and,  in 1997,  GTE.  Under  these
efforts, the Company coordinates sales campaigns involving the use of television
and radio advertising, consumer mailings and telemarketing to sell RBOC services
which utilize the Company's products. Sales attributed to these direct marketing
efforts are an increasing portion of adjunct business.

 Direct Sales to Telcos

         Through its direct  sales force,  the Company  sells Caller ID units in
quantity to a number of telcos,  either  under the Cidco name or the  respective
telcos'  logo.  The  Company  sells its  products  directly to most of the major
independent  telcos in the United States,  including GTE; as well as to Canadian
and international telephone companies.

 Retail/OEM Sales

         The Company  sells to national,  regional and local  retailers  and OEM
customers.  A substantial portion of the Company's retail sales are made through
manufacturers' representatives or distributors with the support of the Company's
sales  personnel.  Cidco's OEM customer  include Lucent  Technologies  and Radio
Shack. The Company's major U.S. retail customers include K-Mart,  Target Stores,
Walgreens Company, Office Depot and Price/Costco.

 Significant Customers

         For the year ended  December  31,  1996,  sales to  Southwestern  Bell,
Ameritech (or their Caller ID service subscribers) and Bell Atlantic represented
36.5%, 19.2% and 11.8%, respectively,  of the Company's sales. In 1995, sales to
Ameritech and Southwestern Bell represented 32.3%, and 32.1%,  respectively,  of
the Company's sales.


Product Development

         The Company's product  development  efforts are focused on new products
that support  additional  intelligent  network services,  product  enhancements,
international  standards  compliance  and the continued  improvement of hardware
components  to reduce  manufacturing  costs.  For  example,  in 1996 the Company
introduced an ADSI telephone, a Caller ID on Call Waiting corded telephone and a
cordless  Caller ID on Call Waiting  telephone.  The ADSI technology will enable
subscribers to utilize current  intelligent network services for call management
and future informational and transactional services.

         The Company's  product  development group is experienced in engineering
products for high-volume assembly, stressing low-cost manufacturing design while
maintaining quality, consistency and reliability. The Company's products utilize
proprietary electrical, mechanical and software design. The Company's ability to
emulate various  telephone switch signaling  characteristics  through  specially
designed test  equipment in its  development  facility,  together with its field
test program, enable it to develop products that are compatible with the various
telephone  networks.  This  capability  is  crucial to the  Company's  continued
success.

         In 1996,  the  Company  invested  in  InfoGear  Technology  Corporation
("InfoGear").  The Company also entered into a joint development  agreement with
InfoGear to develop the iPhone. The iPhone is a high-end telephone that combines
access to advanced  telephone  services,  the  Internet  and e-mail in a single,
easy-to-use  platform.  Under the agreement,  the Company  contributed  advanced
telephony technology and manufacturing and marketing  expertise,  while InfoGear
provided the client/server software and user interface. The iPhone was conceived
by  engineers  at National  Semiconductor  Corporation,  who have  licensed  the
technology to InfoGear and are also equity shareholders in InfoGear.
<PAGE>

         In  1994,  1995  and  1996,  the  Company's  research  and  development
expenditures  were $5.2 million,  $9.7 million and $13.2 million,  respectively.
Research  and  development  expenses  primarily  have  represented  salaries for
research and development  personnel,  associated  personnel benefits and tooling
and supplies for research and development activities.

         At December 31, 1996, 63 employees were engaged in product development.
There can be no assurance that the Company's  product  development  efforts will
result in commercially  successful products, or that the Company's products will
not be rendered obsolete by changing technology or new product  introductions by
others.


Manufacturing

         The  Company's  manufacturing  operations  are limited to the  testing,
quality control and shipping of finished  products.  The Company  presently uses
third party contract assembly companies located in Bangkok and Korat,  Thailand;
Batam,  Indonesia;  Dan Shui Zhen, Canton,  China; and Jahoz Bahan,  Malaysia to
manufacture  its  products.  All of  these  manufacturers  have  been  certified
pursuant  to  ISO  9002.  The  Company's   manufacturers  perform  comprehensive
inspection,  testing and  statistical  process  control  testing,  utilizing the
Company's internally designed automated testing equipment.  To date, the Company
has not experienced significant product warranty returns.

         Many of the key components used in the Company's products are currently
being  purchased  from single  sources.  The Company has developed a proprietary
microcontroller  which is produced by an independent foundry Company in multiple
locations under contract with the Company to ensure adequate supply. The Company
uses unique Application  Specific Integrated Circuits ("ASIC") in its individual
products.  The  inability  to obtain  sufficient  quantities  of  components  or
comparable  products  as  required,  or  to  develop  alternative  manufacturing
capability  if  and as  required  in the  future,  could  result  in  delays  or
reductions in product  shipments that could  materially and adversely affect the
Company's business, operating results and financial condition.

Competition

         The market for the Company's products is highly competitive and subject
to rapid technological  change. At present, the Company's principal  competitors
in  the  market  for  Caller  ID  display  units  are  Intellidata  Technologies
Corporation,  Bell South Products,  Nortel,  Southwestern Bell Freedom Phone and
Thomson  ("GE").  The  Company's  Caller ID products also compete with Caller ID
telephones  manufactured by AT&T, Nortel,  Panasonic,  Sony, Thomson and others.
The Company expects  competition to increase in the future from existing and new
competitors,  possibly  including current  customers.  Most of these current and
potential  competitors  have  substantially  greater  financial,  marketing  and
technical resources than the Company. Increased competition could materially and
adversely  affect the Company's  results of operations  through price reductions
and loss of market  share.  There can be no  assurance  that the Company will be
able to continue to compete  successfully  against its existing  competitors  or
that it will be able to compete successfully against new competitors.

         The Company  believes  that the  principal  competitive  factors in its
market  are  knowledge  of the  requirements  of  the  various  telcos,  product
reliability,  product design,  customer  service and support,  and product price
relative to performance.  The Company believes it presently  competes  favorably
with respect to each of these factors.


Government Regulation

         The sale of Caller ID  services by telcos is subject to  regulation  by
state public utilities  commissions and other regulatory  authorities.  Protests
from  special  interest  groups that object to Caller ID on the basis of privacy
have  been  effective  in  slowing  down the  regulatory  approval  process.  To
facilitate the  implementation  of Caller ID service,  many telephone  companies
already offer or plan to offer a "call blocking"  service.  Under call blocking,
callers can block the display of their numbers on a per-line or per-call  basis.
To  date,  all  50  states  and  Washington  D.C.  have  implemented  Caller  ID
regulations with per-call blocking, per-line blocking or both.

<PAGE>
Patents, Proprietary Rights and Licenses

         The  Company  has  acquired  one  patent  related  to  core  Caller  ID
technology,  and has  two  patents  issued  on its new  Caller  ID/Call  Waiting
extension protocol.  The Company currently has eight patent applications on file
with the US Patent  and  Trademark  Office  and  several  foreign  filed  patent
applications  based on its US filings.  The Company is  presently  initiating  a
licensing program under its current patent portfolio.

         The  Company  relies  to a  certain  extent  on  trade  secret  laws to
establish  and  maintain  those  proprietary  rights  which it believes  are not
reverse  engineerable  by third  parties.  Although  the  Company  has  obtained
confidentiality  agreements  from  all  of  its  employees,  including  its  key
executives  and  engineers  in its product  development  group,  there can be no
assurance that third parties will not independently  develop the same or similar
technology,  obtain unauthorized access to the Company's proprietary  technology
or misuse the technology to which the Company has granted access. It is for this
reason the Company has organized an internal  legal  department  and is actively
pursuing patent protection for its Research and Development efforts.

         A portion of the messaging  technology used in the Company's  Caller ID
products is based on a patent licensed from AT&T on a non-exclusive  basis. AT&T
reserved the right to use the technology for all purposes relating to businesses
of AT&T and its subsidiaries, and receives royalties from sales of the Company's
Caller ID  products  other than to itself or the  RBOCs.  The  Company  incurred
royalties of $1.4 million,  $1.9 million and $1.2 million to AT&T in 1994,  1995
and 1996, respectively. The AT&T license agreement has no expiration date but is
terminable by either party.  If the AT&T license was  terminated and the Company
was unable to negotiate a new patent  license  agreement,  the Company  would no
longer be  authorized  to  manufacture  or sell Caller ID products in the United
States which fall within the scope of the AT&T  patent,  other than to the RBOCs
or AT&T.

     The Company has a  nontransferable,  nonexclusive  license  agreement  with
Nortel to utilize  Nortel's  patents for Caller ID on Call  Waiting  technology.
Under the agreement,  the Company will pay royalties to Nortel for each licensed
product  sold,  leased or put into use by the Company other than direct sales to
Nortel  beginning  January 1, 1997.  The agreement  also provided for a one-time
payment in full  satisfaction of royalties on all units  incorporating  Nortel's
patents  which  were  sold by the  Company  prior to  January  1,  1997.  Future
royalties  are  payable at a variable  rate based on product  type and number of
units sold.

     The Company has a  nontransferable,  exclusive license agreement with Focus
Semiconductor ("Focus") to utilize patents for Caller ID technology incorporated
in a part used in virtually all products  sold by the Company.  The Company pays
royalties to Focus for each part included in the Company's products beginning in
October  1996.  Royalties  are payable at a variable rate based on the number of
parts used. Total Focus royalty expense incurred in 1996 was $397,000.

         The telecommunications  industry is characterized by the existence of a
large number of patents and frequent  litigation  based on allegations of patent
infringement.  In the course of its business, the Company has been approached by
parties  alleging  infringement  by its product or technology of the proprietary
rights of  others.  In an effort to reduce the  potential  for  litigation,  the
Company on occasion is using its own patent portfolio as a basis for negotiating
a cross  license  with patent  holders for  technology  which the Company  deems
valuable to the Company in the future.  For other  claims of  infringement,  the
Company  utilizes  its  research and  development  to design  around the claimed
technology,  or relies on contract indemnification to resolve the matter. In the
opinion  of  management,  the  outcome of such  claims  will not have a material
adverse  effect on the  results of  operations  or  financial  condition  of the
Company.

         Additionally,  there can be no  assurance  that third  parties will not
assert  infringement claims against the Company in the future in connection with
its  products,  that any such  assertion  of  infringement  will not  result  in
litigation,  or that the Company would prevail in such  litigation or be able to
license  any  valid and  infringed  patents  of third  parties  on  commercially
reasonable  terms.  Furthermore,  litigation,  regardless of its outcome,  could
result in  substantial  cost to and  diversion  of effort  by the  Company.  Any
infringement  claims or  litigation  against the Company  could  materially  and
adversely  affect the Company's  business,  results of operations  and financial
condition.

<PAGE>

Employees

         At December 31, 1996, the Company  employed 416 full-time  persons,  of
whom 63 were engaged in product development,  50 in sales and marketing,  138 in
customer  service,  128  in  operations  and  37  in  management,   finance  and
administration.  The Company has no  collective  bargaining  agreement  with its
employees and believes that its relationship with its employees is good.


Item  2. Properties

         The Company's principal administrative,  development,  distribution and
support  facility is located in Morgan Hill,  California  and consists of a five
building campus of  approximately  123,000 square feet under leases which expire
between  January 1999 and March 2006. The Company owns a 3.24 acre parcel in the
same business park. The Company also leases  approximately  6,000 square feet of
office  space in  Valhalla,  New York,  1,500  square  feet of  office  space in
Chicago,  Illinois, and 1,200 square feet of office space in St. Louis, Missouri
for its sales and customer training activities. These leases expire in May 2000,
April 1999 and May 1999, respectively.

Item  3. Legal Proceedings

         In the  course  of its  business,  the  Company  has  been  named  as a
defendant in certain  actions and could incur an  uninsured  liability in one or
more of them. The amount of any such liability is not determinable or estimable.
However,  in the opinion of management,  the outcome of such litigation will not
have a  material  adverse  effect on the  results  of  operations  or  financial
condition of the Company.


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

         Not applicable.

<PAGE>


                                    Part II.


Item  5. Market for Registrant's Common Stock and Related Stockholder Matters

         Since the initial  public  offering of the  Company's  Common  Stock on
March 3, 1994,  the Common Stock has been traded on the Nasdaq  National  Market
under the symbol CDCO.

         The following  table sets forth for the periods  indicated the high and
low closing sales price per share of Common Stock on the Nasdaq  National Market
as reported by Nasdaq:

1995                                                       High           Low
----                                                      ------         ------
1st Quarter .........................................     $34.25         $23.25
2nd Quarter..........................................     $37.63         $26.38
3rd Quarter..........................................     $39.50         $29.50
4th Quarter..........................................     $36.50         $22.25

1996
----
1st Quarter..........................................     $38.00         $25.88
2nd Quarter..........................................     $41.00         $30.50
3rd Quarter..........................................     $36.00         $15.75
4th Quarter..........................................     $20.13         $16.81

         As of  December  31,  1996,  there  were 104  holders  of record of the
Company's  Common Stock,  which does not include those  beneficial  owners whose
shares are held in street or nominee name.

         After  completion  of the  announced  stock  buyback of up to 1,000,000
shares of the Company's  Common Stock,  the Company intends to retain all of its
earnings to finance  future growth.  The Company does not anticipate  paying any
cash dividends in the foreseeable future.

    Effective January 27, 1997, the Company adopted a Shareholder's  Rights Plan
wherein stock rights will be  distributed as a dividend at the rate of one right
for each share of Common Stock held on February  14,  1997,  the record date for
such dividend.  The key terms of the Shareholders  Rights Plan will be activated
if any person acquires 15 percent or more of the Company's  Common Stock without
the approval of the Company's  Board of  Directors.  Once the Plan is activated,
each right will  entitle the holder to purchase at a price of $95, a fraction of
a share of Preferred  Stock which is  equivalent  to $190 worth of the Company's
Common Stock at the then current market value. Any person  currently  holding 15
percent or more of the stock will be "grandfathered" for existing holdings.  The
Company's  Board of Directors has retained the right to amend the  Shareholder's
Rights Plan at any time prior to its activation.

<PAGE>


Item   6.     Selected Financial Data
<TABLE>
<CAPTION>
  (in thousands, except per share data)                                 Year ended December 31,
                                                  --------------------------------------------------------------
                                                          1996         1995         1994          1993      1992
                                                  ------------ ------------ ------------   ----------- ---------
Statement of Operations Data:
<S>                                                <C>          <C>          <C>           <C>         <C>

  Sales .......................................    $   215,197  $   193,668  $   100,290   $    34,993 $  15,704
  Research and development (1) ................         13,170        9,709        5,175         3,740     1,157
  Income (loss) from operations (1) ...........         27,236       36,491       19,124         6,772      (149)
  Net income (loss) (2) .......................         18,523       22,613       11,657         4,145      (146)
  Earnings per share (2) ......................    $      1.21  $      1.51  $      0.90   $      0.38 $      --
  Weighted average shares......................         16,893       14,979       13,020        10,777        --
  Dividends ...................................    $        --  $        --  $       --    $     2,389 $      --
</TABLE>

<TABLE>
                                                                         As of December 31,
                                                   -------------------------------------------------------------
                                                          1996         1995         1994          1993      1992
                                                   -----------  -----------  -----------   ----------- ---------
<CAPTION>                                          
Balance Sheet Data:
  <S>                                              <C>          <C>          <C>           <C>         <C>
  Cash and cash equivalents ...................    $    26,509  $    19,290  $    28,224   $       475 $   1,027
  Short-term investments ......................         38,560       21,342       19,936            --        --
  Working capital .............................        110,469       91,355       74,003         6,257       361
  Total assets ................................        152,613      127,151      108,598        15,423     4,353
  Mandatorily redeemable Preferred Stock ......             --           --           --        18,740        --
  Stockholders' equity (deficit) ..............    $   128,846  $   106,214  $    81,306   $   (11,258)$     745
</TABLE>

QUARTERLY DATA:
                                           Year ended December 31, 1996
                                 ----------------------------------------------
                                    First      Second       Third        Fourth
                                   Quarter     Quarter     Quarter      Quarter
                                 ---------   ---------   ---------    ---------
  Sales ........................ $  51,686   $  60,446   $  45,959    $  57,106
  Gross margin .................    22,623      26,526      22,892       23,339
  Income (loss) from operations     10,550      10,051       7,600         (965)
  Net income ...................     6,570       6,365       5,340          248
  Earnings per share ........... $    0.44   $    0.42   $    0.33    $    0.02

                                            Year ended December 31, 1995
                                  ---------------------------------------------
                                    First      Second       Third        Fourth
                                   Quarter     Quarter     Quarter      Quarter
                                  --------   ---------   ---------     --------
  Sales ........................  $ 49,542   $  46,161   $  46,611     $ 51,354
  Gross margin .................    22,120      19,212      23,207       21,057
  Income from operations .......    10,267       8,257       9,424        8,543
  Net income ...................     6,431       5,181       5,805        5,196
  Earnings per share ...........     $0.43   $    0.35   $    0.39     $   0.35

 (1)  Research and development includes a one-time charge of $1,770,000 in May
       1993 related to the settlement of an engineering contract.

 (2)   Because of the Company's  Subchapter S status through April 30, 1993, net
       income  (loss)  through the second  quarter of 1993  reflects a pro forma
       provision  (benefit)  for income taxes as if the Company had been subject
       to federal  income and  California  franchise  taxation as a Subchapter C
       corporation for that period.

<PAGE>
Item  7. Management's Discussion and Analysis of Financial Condition and Results
         of Operations

HISTORICAL BACKGROUND

         Cidco was  incorporated  in July 1988 to  design,  develop  and  market
subscriber  telephone equipment that supports intelligent network services being
introduced  by Regional Bell  Operating  Companies  ("RBOC").  The Company began
operations in 1989,  funding its business with a capital  investment made by its
founders.  Prior to its  initial  public  offering  in March  1994,  the Company
financed  its  growth  principally   through  internally   generated  funds  and
short-term borrowings.

         In March 1994,  the Company  closed an initial  public  offering of its
common  stock and had two  subsequent  public  offerings  in 1994  resulting  in
capital infusions to the Company totaling  approximately  $59.4 million,  net of
stock offering costs, Preferred Stock redemptions and debt repayment.

         The Company's sales and distribution  channels include direct marketing
fulfillment programs, standard fulfillment of telephone company orders, and bulk
sales directly to telephone companies, retail stores, international accounts and
OEM customers.  Direct marketing fulfillment programs are sales campaigns run by
the Company  involving the use of  television  and radio  advertising,  consumer
mailings and  telemarketing  to sell RBOC  services  which utilize the Company's
products.  In 1996,  direct  marketing  programs  resulted  in net  sales of $54
million.  Fulfillment sales, excluding the direct marketing programs, occur when
the  Company  receives  an order  either  electronically  or  through an on-line
transfer  of the  customer  by the RBOC,  and the  Company  ships the  requested
product directly to the customer. In the case of standard fulfillment sales, the
RBOC  generates the order by performing  the  marketing  activities  themselves.
Standard fulfillment sales accounted for 43%, 68% and 50% of sales in 1996, 1995
and 1994,  respectively.  Direct marketing fulfillment sales totaled 25%, 2% and
0% of sales in 1996, 1995 and 1994, respectively.

         The discussion  and analysis which follows  contains trend analysis and
other  forward-looking  statements  within the  meaning  of  Section  21E of the
Securities  Exchange Act of 1934.  Actual results could differ  materially  from
those  projected in the  forward-looking  statements  as a result of the factors
that may affect future results set forth below and elsewhere in this report.


RESULTS OF OPERATIONS

         The following table sets forth for the periods indicated the percentage
of sales represented by certain line items in the Company's income statement:

                                                  Year ended December 31,
                                               1996         1995        1994
                                               ----         ----        ----
Sales .....................................    100.0%       100.0%      100.0%
Cost of sales .............................     55.7         55.8        55.1
                                               -----        -----       -----
Gross margin ..............................     44.3         44.2        44.9
                                               -----        -----       -----
Operating expenses:
  Research and development ................      6.1          5.0         5.1
  Selling and marketing ...................     22.2         17.4        17.4
  General and administrative ..............      3.4          3.0         3.3
                                               -----        -----       -----
                                                31.7         25.4        25.8
                                               -----        -----       -----
Income from operations ....................     12.6         18.8        19.1
                                               -----        -----       -----
Other income (expense), net:
  Interest income..........................      3.1          0.6         0.6
  Interest expense.........................     (1.4)          --          --
                                               -----        -----       -----
                                                 1.7          0.6         0.6
                                               -----        -----       -----
Income before income taxes ................     14.3         19.4        19.7
Provision for income taxes ................      5.7          7.7         8.1
                                               -----        -----       -----
Net income ................................      8.6%        11.7%       11.6%
                                               =====        =====       ===== 
<PAGE>


1996 COMPARED TO 1995

 Sales
         Sales are recognized  upon shipment of the product to the customer less
reserves for anticipated  returns or retention of certain  services  provided by
the RBOC, and customer credit  worthiness.  The Company's sales increased 11% to
$215.2 million in 1996 from $193.7 million in 1995, primarily due to higher unit
sales of the Company's integrated corded and cordless feature phones, which were
sold primarily  through  Ameritech and  Southwestern  Bell. The average  selling
price of units sold increased  slightly,  as unit sales of phones increased as a
percentage of sales,  while adjunct volumes remained  relatively  constant.  The
total  fulfillment  business  remained  constant at approximately  70% of sales.
However,  the  Company's  direct  marketing  programs  accounted  for 37% of the
fulfillment  sales channel in 1996.  In 1995,  these direct  marketing  programs
accounted for only 3% of the fulfillment sales channel.  The Company anticipates
that these direct marketing programs will continue to be a significant source of
sales  throughout  1997.  Additionally,  the Company has negotiated  significant
contracts  with  GTE for  direct  marketing  programs  and  Nynex  for  standard
fulfillment business, both of which will begin shipping in 1997.

 Gross margin
         Cost of sales  primarily  includes the cost of finished goods purchased
from the  Company's  offshore  contract  manufacturers,  as well as,  all  costs
associated with procuring and warehousing the Company's inventory, and royalties
payable on licensed technology used in the Company's  products.  Royalty expense
in 1996 was $2.1 million  compared with $1.9 million in 1995.  Gross margin as a
percentage of sales increased  nominally to 44.3% in 1996 from 44.2% in 1995. In
1996,  direct  marketing  program sales increased gross margins;  however,  this
increase was offset by a $2.5  million  provision  for bad debt  recorded in the
fourth quarter of 1996 when the Company became aware of the additional  reserves
needed in excess of the original estimates. The Company expects gross margins to
vary in the future due to changes in product and  distribution  mix. The Company
believes gross margins may increase in 1997 with the anticipated level of direct
marketing programs, which typically have higher gross margins,  although pricing
pressures in certain distribution channels may offset these increases.

 Research and development expenses
         Research and  development  expenses  represent  primarily  salaries for
personnel,  personnel  benefits,  and  tooling and  supplies  for  research  and
development  activities.  The  Company's  policy is to expense all  research and
development  expenditures as incurred except for certain investments in tooling.
Research and  development  expenses  increased 36% to $13.2 million in 1996 from
$9.7 million in 1995,  due primarily to increased  spending on personnel and new
development  projects  such as ADSI,  cordless  telephones  and advanced  screen
phones which provide access to the Internet.  Research and development  expenses
as a  percentage  of sales  increased  to 6.1% in 1996  from  5.0% in 1995.  The
Company expects that research and development  expenses as a percentage of sales
will continue at approximately the current level in 1997.

 Selling and marketing expenses
         Selling and marketing  expenses  represent  primarily  personnel costs,
telephone and electronic data exchange  expenses,  promotional  costs and travel
expenses. Selling and marketing expenses increased to $47.7 million in 1996 from
$33.6  million in 1995 and as a percentage  of sales  increased to 22.2% in 1996
from  17.4%  in  1995.  These  increases  were due  principally  to the  Company
significantly  expanding  promotion  of  intelligent  network  services  through
several direct mail,  direct  response  television and  telemarketing  campaigns
resulting in increased  advertising and telemarketing  agency costs. The Company
anticipates  that selling and  marketing  expenses as a percentage of sales will
increase  significantly in 1997 due to the anticipated level of direct marketing
activities.

 General and administrative expenses
         General  and  administrative  expenses  represent  primarily  salaries,
benefits  and other  expenses  associated  with the finance  and  administrative
functions of the Company.  General and administrative expenses increased to $7.3
million in 1996 from $5.8 million in 1995. General and  administrative  expenses
increased  as a  percentage  of sales to 3.4% in 1996 from  3.0% in 1995.  These
increases  reflect  higher  spending  on legal  costs,  information  systems and
administrative  staff  required to support  the  Company's  growth.  The Company
believes that general and administrative  expenses as a percentage of sales will
continue at approximately the current level in 1997.

<PAGE>

Other income (expense), net
         Other  income in 1996  principally  reflects  interest  income from the
investment of available cash balances which were substantially higher on average
in 1996 than in 1995.  Other expense consists of interest expense related to the
issuance of long-term debt, which was repaid at the end of 1996.

Provision for income taxes
         The provision for income taxes in 1996 and 1995 reflects a rate of 40%.


1995 COMPARED TO 1994

Sales
         The Company's sales increased 93% to $193.7 million in 1995 from $100.3
million  in 1994,  resulting  primarily  from  higher  unit  sales  through  the
Company's  direct  fulfillment  programs,  as Ameritech  and  Southwestern  Bell
continued to promote Caller ID heavily. In particular,  higher unit sales of the
Company's integrated feature phones contributed substantially to the increase in
sales, as Ameritech and Southwestern  Bell promoted a combination of intelligent
network services utilizing these phones.

 Gross margin
         Gross margin as a percentage of sales  decreased to 44.2% from 44.9% in
1994.  This  decrease  was  primarily  a  result  of the  Company  building  the
infrastructure to handle the volume of shipments and corresponding  returns that
occur through certain promotions aimed at direct fulfillment customers.  Royalty
expense in 1995 was $1.9 million as compared with $1.4 million in 1994.

 Research and development expenses
         Research and development expenses increased 88% to $9.7 million in 1995
from $5.2  million in 1994,  resulting  primarily  from  increased  spending  on
personnel and new  development  projects  such as ADSI and cordless  telephones.
Research and  development  expenses as a percentage of sales decreased from 5.1%
in 1994 to 5.0% in 1995, primarily due to the rapid increase in sales.

 Selling and marketing expenses
         Selling and marketing  expenses increased from $17.4 million in 1994 to
$33.6 million in 1995,  due  principally to the cost of supporting the Company's
rapidly  growing  fulfillment  sales  activities  and to  investments  in  other
marketing channels. In particular, the Company continued its high level of sales
support  resulting  in  increased  personnel  costs.  Additionally,  the Company
initiated the promotion of intelligent  network  services through several direct
mail  and  telemarketing   campaigns  resulting  in  increased  advertising  and
telemarketing  agency  costs.  As a percentage  of sales,  selling and marketing
expenses remained the same at 17.4%.

 General and administrative expenses
         General and administrative expenses increased from $3.3 million in 1994
to  $5.8  million  in  1995,  reflecting  additional  administrative  staff  and
professional staff required to support the rapid growth of the Company.  General
and administrative expenses decreased as a percentage of sales from 3.3% in 1994
to 3.0% in 1995.

Other income (expense), net
         Other  income  (expense),  net in 1995  principally  reflects  interest
income from the investment of available  cash balances which were  substantially
higher on average in 1995 than in 1994.

Provision for income taxes
         The  provision  for income taxes in 1995  reflects a rate of 40%,  down
from 41% in 1994.

<PAGE>


LIQUIDITY AND CAPITAL RESOURCES

         The Company's cash and cash  equivalents  increased $7.2 million during
1996 primarily  from cash  generated from  operations of $28.9 million offset by
the purchase of  short-term  investments  of $17.4  million and  acquisition  of
property and equipment of $5.5 million.  Cash generated from operations of $28.9
million  resulted  primarily  from earnings of $18.5 million,  depreciation  and
amortization  of $5.5  million  and an  increase  in  accounts  payable  of $5.5
million.

         The Company had working capital of $110.5 million at December 31, 1996,
as compared to $91.4 million at December 31, 1995.  The Company's  current ratio
improved from 5.4 to 1, as of December 31, 1995, to 5.6 to 1, as of December 31,
1996.

         In May 1996, the Company  renegotiated  its line of credit,  increasing
the amount of the line to $25  million,  none of which has been drawn down.  The
interest rate on the line of credit is prime less 0.25%.  The line is secured by
substantially  all of the Company's assets. As of December 31, 1996, the Company
had not barrowed any funds under the line.

         In June 1996,  the  Company  issued $150  million of 3.75%  convertible
subordinated  notes due June 30,  2003.  The  notes  were  convertible  into the
Company's  Common  Stock at a  conversion  rate of one share of Common Stock for
each  $41.00 in  principal  amount of the notes.  The note  agreement  contained
covenants which,  among other matters,  restricted or limited the ability of the
Company  to pay  dividends  or incur  indebtedness.  Interest  on the  notes was
payable quarterly  commencing  September 30, 1996. The notes were fully redeemed
on December 30, 1996.

         On January 27, 1997, the Company  announced its plans to purchase up to
1 million shares of its  outstanding  Common Stock. As of February 28, 1997, the
Company had  repurchased  691,600 shares at an aggregate  purchase price of $8.7
million.

         The Company plans to continue to invest in its  infrastructure  to gain
efficiencies  and meet the  demands of growth.  The  Company  believes  its 1997
capital  expenditures  will  be  approximately  $7  million.  The  1997  capital
expenditures  are  expected to be funded from  available  working  capital.  The
planned  expenditure  level  is  subject  to  adjustment  as  changing  economic
conditions  necessitate.  The  Company  believes  its current  cash,  short-term
investments  and line of credit will satisfy the Company's  working  capital and
capital expenditure requirements through the end of 1997.

 Inflation
         Management  believes  inflation  has not had a  material  effect on the
Company's operations or on its financial condition.


FACTORS THAT MAY AFFECT FUTURE RESULTS

         The  Company  is  not  certain  whether  it  has  experienced  or  will
experience  seasonality  in its sales or  operating  results due to the emerging
nature  of  its  markets  and  rapidly  changing  sales  mix.  The  Company  has
experienced and may in the future experience  significant  fluctuations in sales
and operating  results from quarter to quarter due to a combination  of factors.
These factors  include:  the timing of the initiation of Caller ID, Caller ID on
Call Waiting and ADSI service by a telco on a system-wide or regional basis; the
timing of  significant  orders for the Company's  products;  the extent to which
telcos  promote  Caller  ID  service  and   fluctuations  in  such   promotional
activities;  the success of the  Company's  own direct  marketing  programs,  in
particular,  deriving  adequate  sales and volumes and control of related costs;
the  addition or loss of  distribution  channels  or  outlets;  changes in telco
service charges for Caller ID service; new product  introductions by the Company
or its competitors;  technical difficulties with telco networks;  changes in the
Company's product mix or sales mix by distribution channel that may affect sales
prices,  margins or both;  further  expansion  of the  Company's  marketing  and
service operations; disruptions in sources of supply; changes in material costs;
regulatory changes; general economic conditions and other factors. The Company's
operating  expenses are based on anticipated sales levels, and a high percentage
of such expenses are relatively  fixed.  Because the Company has minimal backlog
and its sales in each  quarter  result  primarily  from orders  received in that
quarter, variations in the timing of major orders for the Company's products can
cause significant fluctuations in operating results from quarter to quarter.


<PAGE>


Item   8.     Financial Statements and Supplementary Data

Index to Financial Statements:

Financial Statements:                                                     Page

           Report of Independent Accountants ...............................18
           Balance Sheet at December 31, 1996 and 1995 .....................19
           Income Statement for the three years
             ended December 31, 1996 .......................................20
           Statement of Stockholders' Equity (Deficit) for
             the three years ended December 31, 1996 .......................21
           Statement of Cash Flows for
             the three years ended December 31, 1996 .......................22
           Notes to Financial Statements ...................................23

Financial Statement Schedule:

           Schedule II - Valuation and Qualifying Accounts .................31

           All other financial  statement schedules are omitted because the
             information called for is not present in amounts sufficient to
             require submission of the schedules or because the information
             is shown  either  in the  financial  statements  or the  notes
             thereto.



                        REPORT OF INDEPENDENT ACCOUNTANTS

To the Board of Directors and Stockholders of
  CIDCO Incorporated

In our  opinion,  the  financial  statments  listed in the above  index  present
fairly, in all material  respects,  the financial position of CIDCO Incorporated
at December 31, 1996 and 1995,  and the results of its  operations  and its cash
flows for each of the three years in the period  ended  December  31,  1996,  in
conformity  with  generally  accepted  accounting  principles.  These  financial
statements   are  the   responsibility   of  the   Company's   management;   our
responsibility  is to express an opinion on these financial  statements based on
our audits.  We conducted  our audits of these  statements  in  accordance  with
generally accepted auditing standards which require that we plan and perform the
audit to obtain reasonable  assurance about whether the financial statements are
free of material  misstatement.  An audit includes  examining,  on a test basis,
evidence  supporting the amounts and  disclosures  in the financial  statements,
assessing the  accounting  principles  used and  significant  estimates  made by
management,  and evaluating the overall  financial  statement  presentation.  We
believe  that our audits  provide a reasonable  basis for the opinion  expressed
above.





PRICE WATERHOUSE LLP
San Jose, California
January 27, 1997


<PAGE>

                               CIDCO INCORPORATED
                                  BALANCE SHEET
                      (in thousands, except per share data)
                                                                  December 31,
                                                                 1996       1995
                                                                 ----       ----
ASSETS
Current assets:
   Cash and cash equivalents .............................   $ 26,509   $ 19,290
   Short-term investments ................................     38,560     21,342
   Accounts receivable, net of allowances for
    doubtful accounts of $2,966 and $3,150 ...............     48,242     49,624
   Inventories ...........................................     14,555     17,916
   Deferred tax asset ....................................      5,086      2,974
   Other current assets ..................................      1,284      1,146
                                                             --------   --------

     Total current assets ................................    134,236    112,292
Property and equipment, net ..............................     14,118     14,112
Other assets .............................................      4,259        747
                                                             --------   --------
                                                             $152,613   $127,151
                                                             ========   ========

LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
   Accounts payable ......................................   $ 16,880   $ 11,373
   Accrued liabilities ...................................      6,211      8,422
   Accrued taxes payable .................................        676      1,142
                                                             --------   --------
     Total current liabilities ...........................     23,767     20,937
                                                             ========   ========

Commitments (Note 8)
Stockholders' equity:
   Common stock, $.01 par value; 35,000 shares authorized,
     14,399 and 14,133 shares issued and outstanding .....        144        141
   Additional paid-in capital ............................     87,725     83,449
   Retained earnings .....................................     40,977     22,624
                                                             --------   --------
      Total stockholders' equity .........................    128,846    106,214
                                                             --------   --------
                                                             $152,613   $127,151
                                                             ========   ========

   The accompanying notes are an integral part of these financial statements.

<PAGE>

                                INCOME STATEMENT
                      (in thousands, except per share data)

                                                 Year ended December 31,
                                               1996           1995          1994
                                               ----           ----          ----

Sales ...............................     $ 215,197      $ 193,668     $ 100,290
Cost of sales .......................       119,817        108,072        55,227
                                          ---------      ---------     ---------
Gross margin ........................        95,380         85,596        45,063
                                          ---------      ---------     ---------
Operating expenses:
    Research and development ........        13,170          9,709         5,175
    Selling and marketing ...........        47,720         33,634        17,438
    General and administrative ......         7,254          5,762         3,326
                                          ---------      ---------     ---------
                                             68,144         49,105        25,939
                                          ---------      ---------     ---------
Income from operations ..............        27,236         36,491        19,124
                                          ---------      ---------     ---------
Interest income (expense), net:
    Interest income .................         6,729          1,197           634
    Interest expense ................        (3,093)            --            --
                                                                       ---------
                                              3,636          1,197           634
                                          ---------      ---------     ---------
Income before income taxes ..........        30,872         37,688        19,758
Provision for income taxes ..........        12,349         15,075         8,101
                                          ---------      ---------     ---------
Net income ..........................     $  18,523      $  22,613     $  11,657
                                          =========      =========     =========
Earnings per share ..................     $    1.21      $    1.51     $    0.90
                                          =========      =========     =========
Weighted average shares .............        16,893         14,979        13,020
                                          =========      =========     =========

 The accompanying notes are an integral part of these financial statements.
<PAGE>

                   STATEMENT OF STOCKHOLDERS' EQUITY (DEFICIT)
                                 (in thousands)
<TABLE>
<CAPTION>
                                                                                 Accretion of     Retained
                                                                   Additional  Preferred Stock    Earnings           Total
                                                 Common Stock       Paid-in      Redemption     (Accumulated     Stockholder's
                                              Shares     Amount     Capital        Values          Deficit)     Equity (Deficit)
                                              ------     ------     -------      --------        ---------      ---------------
<S>                                            <C>       <C>       <C>           <C>            <C>            <C>  
Balance at December 31, 1993.................  9,000     $   90    $      --     $  (1,937)     $   (9,411)    $ (11,258)

   Issuance of Common Stock..................  4,950         50      81,083                                       81,133
   Unrealized losses from investments........                                                        (195)         (195)
   Tax benefit from exercise of
     stock options...........................                         374                                            374
   Accretion of Preferred Stock
     redemption values.......................                                         (549)                         (549)
   Redemption of Preferred Stock.............                                        2,486          (2,486)           --
   Employee stock options exercised..........     83         --         144                                          144
   Net income................................                                                       11,657        11,657
                                              ------     ------      ------        ------           ------        ------

Balance at December 31, 1994................  14,033        140       81,601            --            (435)       81,306

   Unrealized gains from investments.........                                                          446           446
   Tax benefit from exercise of
     stock options...........................                         1,114                                        1,114
   Employee stock options exercised..........     85          1         445                                          446
   Employee stock purchase plan..............     15         --         289                                          289
   Net income................................                                                       22,613        22,613
                                              ------     ------      ------         ------          ------        ------

Balance at December 31, 1995................  14,133        141      83,449             --          22,624       106,214
   Unrealized gains from investments.........                                                         (170)         (170)
   Tax benefit from exercise of  
     stock options...........................                         1,828                                        1,828
   Employee stock options exercised..........    241          3       1,883                                        1,886
   Employee stock purchase plan..............     25         --         565                                          565
   Net income................................                                                       18,523        18,523
                                              ------     ------      ------         ------          ------       -------

Balance at December 31, 1996................  14,399     $  144   $  87,725      $      --       $  40,977     $ 128,846
                                              ======     ======   =========      =========       =========     =========
<FN>
   The accompanying notes are an integral part of these financial statements.
</FN>
</TABLE>
<PAGE>

                               CIDCO INCORPORATED


                             STATEMENT OF CASH FLOWS
                                 (in thousands)
<TABLE>
<CAPTION>
                                                                                 Year ended December 31,
                                                                        1996             1995              1994
                                                                        ----             ----              ----
<S>                                                                 <C>               <C>              <C>    
Cash flows provided by (used in) operating activities:
   Net income .............................................         $   18,523        $   22,613       $   11,657
   Adjustments to reconcile net income to net cash
     provided by (used in) operating activities:
     Depreciation and amortization.........................              5,525             3,597            1,018
     Equity in losses of affiliate.........................                428                --               --
     Deferred income taxes ................................             (2,584)           (1,830)          (1,405)
     Changes in assets and liabilities:
       Accounts receivable ................................              1,382           (14,744)         (26,631)
       Inventories ........................................              3,361            (3,425)          (9,838)
       Other current assets ...............................               (138)              702           (1,538)
       Other assets .......................................               (468)              145              (75)
       Accounts payable ...................................              5,507            (8,381)          15,685
       Accrued liabilities ................................             (2,211)            3,010            3,940
       Accrued taxes payable...............................               (466)             (984)           2,125
                                                                    ----------       -----------       ----------
           Net cash provided by (used in) operating activities          28,859               703           (5,062)
                                                                    ----------        ----------       ----------
Cash flows used in investing activities:
   Acquisition of property and equipment ..................             (5,531)          (10,526)          (7,021)
   Purchase of equity interest in affiliate................             (3,000)               --               --
   Purchase of short-term investments, net ................            (17,388)             (960)         (20,131)
                                                                    ----------        ----------       ----------
           Net cash used in investing activities ..........            (25,919)          (11,486)         (27,152)
                                                                    ----------        ----------       ----------
Cash flows provided by (used in) financing activities:
   Issuance of Common Stock, net of issuance costs.........              2,451               735           81,278
   Proceeds from issuance of long-term debt................            150,000                --               --
   Repayment of long-term debt.............................           (150,000)               --               --
   Tax benefit from exercise of stock options..............              1,828             1,114              374
   Repayment of bank borrowings............................                 --                --           (2,400)
   Redemption of Series A Senior Preferred Stock ..........                 --                --          (13,778)
   Redemption of Series B Junior Preferred Stock ..........                 --                --           (5,511)
                                                                    ----------        ----------       ----------
           Net cash provided by financing activities ......              4,279             1,849           59,963
                                                                    ----------        ----------       ----------
Net increase (decrease) in cash and cash equivalents ......              7,219            (8,934)          27,749
Cash and cash equivalents at beginning of year ............             19,290            28,224              475
                                                                    ----------        ----------       ----------

Cash and cash equivalents at end of year ..................         $   26,509        $   19,290       $   28,224
                                                                    ==========        ==========       ==========
Supplemental disclosure of cash flow information:
   Cash paid during the year for interest .................         $    3,093        $      154       $       27
                                                                    ==========        ==========       ==========
   Cash paid during the year for income taxes .............         $   13,625        $   17,117       $    7,380
                                                                    ==========        ==========       ==========
Supplemental disclosure of non-cash investing and 
   financing activities:
   
   Accretion  of  mandatorily  redeemable  Series A Senior
      and  Series B Junior Preferred Stock redemption values
                                                                            --                --       $      549
<FN>
   The accompanying notes are an integral part of these financial statements.
</FN>
</TABLE>
<PAGE>

                               CIDCO INCORPORATED


                          NOTES TO FINANCIAL STATEMENTS

NOTE 1.   THE COMPANY

     CIDCO  Incorporated  (the  "Company"),  a  Delaware  corporation,  designs,
develops and markets  subscriber  telephone  equipment for use with  intelligent
network  services.  The Company started its operations in June 1989. The Company
sells its  products  to  individual  customers  through  its direct  fulfillment
relationships with certain Regional Bell Operating Companies ("RBOC"), to telcos
directly, to major national and regional retail chains and to OEMs.


NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Cash equivalents
     The Company  considers  all highly  liquid  instruments  with a maturity of
three months or less when purchased to be cash equivalents.

Short-term investments
     The Company  classifies  its  investment  securities as available for sale.
Realized  gains or losses are determined on the specific  identification  method
and are  reflected  in  income.  Net  unrealized  gains or losses  are  recorded
directly in stockholders'  equity except those unrealized losses that are deemed
to be other than temporary which are reflected in the income statement.

Inventories
     Inventories  are  stated  at the  lower  of  cost  or  market,  cost  being
determined  using the standard cost method (which  approximates  first in, first
out). Substantially all of the Company's inventories consist of finished goods.

Property and equipment
     Property and equipment are stated at cost.  Depreciation  is computed using
the  straight-line  method based upon the estimated  useful lives of the assets,
ranging  from three to five years.  Leasehold  improvements  are stated at cost.
Amortization is computed using the  straight-line  method and the shorter of the
remaining lease term or the estimated useful lives of the improvements.

Investments in affiliates
      Investments in affiliates, where the Company owns more than 20 percent but
not in excess of 50 percent, are accounted for using the equity method.

New accounting standard
     Effective  January 1, 1996,  the Company  adopted  Statement  of  Financial
Accounting  Standards  No. 121 ("SFAS 121")  "Accounting  for the  Impairment of
Long-Lived  Assets and for  Long-Lived  Assets to Be Disposed Of." The statement
requires that long-lived  assets and certain  identifiable  intangibles held and
used by an entity be  reviewed  for  impairment  whenever  events or  changes in
circumstances  indicate  that  the  carrying  amount  of an  asset  may  not  be
recoverable.  The statement  also requires  that  long-lived  assets and certain
identifiable  intangibles to be disposed of be reported at the lower of carrying
amount or fair value less cost to sell,  except for assets  that are  covered by
APB  Opinion  No.  30.  Adoption  of SFAS  121 did not have  any  impact  on the
Company's results of operations or financial position.

Warranty costs
     Anticipated  costs related to product  warranties  are charged to income as
sales are  recognized.  The Company  has not  experienced  significant  warranty
claims to date.

Revenue recognition
     Direct sales and sales through fulfillment arrangements are recognized upon
shipment of the product to the customer. Allowances are established to recognize
any risk related to the creditworthiness of customers and for estimated returns.
Sales through  certain  promotions  aimed at direct  fulfillment  customers have
certain rights of return or are dependent on the customer's retention of certain
services  provided by the RBOC.  The Company  reserves for estimated  returns or
retention from all direct fulfillment customers,  including these promotions, at
the time of shipment.
<PAGE>

Advertising costs
     Advertising  costs are  expensed  as incurred  as defined by  Statement  of
Position 93-7,  "Reporting on Advertising  Costs."  Advertising  costs for 1996,
1995 and 1994 were $20.7 million, $4.5 million and $2.3 million, respectively.

Income taxes
     The Company accounts for income taxes using the liability method.  Deferred
income  taxes are  provided  for  temporary  differences  between the  financial
reporting basis and the tax basis of the Company's assets and liabilities at the
tax rate expected to be in effect when the temporary differences reverse.

Earnings per share
     Earnings  per share  represent  net income,  adjusted to add back  interest
expense on the convertible  notes net of taxes when  applicable,  divided by the
weighted  average  number of shares of Common  Stock and  dilutive  Common Stock
equivalents  outstanding  during the period.  Common Stock  equivalents  include
shares  issuable  upon the exercise of stock options  (using the treasury  stock
method) and shares issuable upon  conversion of the convertible  notes described
in Note 7. Stock  options,  granted  between  May 4, 1993 and March 10,  1994 at
prices  lower than the  initial  public  offering  price,  are  included  in the
calculation as if they were  outstanding  from inception of the Company  through
March 10, 1994.

Stock-based compensation
     The Company accounts for stock-based compensation using the intrinsic value
method  prescribed  in  Accounting  Principles  Board  Opinion  ("APB")  No. 25,
"Accounting  for Stock Issued to Employees,"  and related  interpretations.  The
Company provides additional pro forma disclosures as required under Statement of
Financial Accounting Standards No. 123 ("SFAS 123"), "Accounting for Stock-Based
Compensation." See Note 9.

Concentrations of credit risk
     Financial  instruments that potentially  subject the Company to significant
concentrations  of credit risk consist  primarily of cash and cash  equivalents,
short-term investments and accounts receivable. The Company limits the amount of
credit exposure to any one financial institution and financial  instrument.  The
Company's  trade  accounts  receivable  are derived  primarily from sales in the
United States,  Canada,  Europe and the Far East. The Company maintains reserves
for  potential  credit  losses;  historically,  such  losses  have  been  within
management's expectations.

Use of estimates and assumptions
     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.


NOTE 3.   BALANCE SHEET COMPONENTS

                                                                 December 31,
                                                             ------------------
                                                             1996          1995
                                                             ----          ----
                                                               (in thousands)
   Property and equipment, net:
       Land ..........................................  $      866     $    866
       Computers and office equipment ................      14,432       10,317
       Furniture and fixtures ........................       2,123        1,795
       Leasehold improvements ........................       7,181        6,093
                                                        ----------     --------
                                                            24,602       19,071
       Less accumulated depreciation and amortization      (10,484)      (4,959)
                                                        ----------     --------
                                                        $   14,118     $ 14,112
                                                        ==========     ========
   Accrued liabilities:
       Accrued compensation...........................  $    1,799     $  2,795
       Accrued referral fees..........................          31        2,521
       Other..........................................       4,381        3,106
                                                        ----------     --------
                                                        $    6,211     $  8,422
                                                        ==========     ========
<PAGE>

NOTE 4.   SHORT-TERM INVESTMENTS

     The Company's short-term  investments consist primarily of municipal bonds.
As of December  31,  1996,  approximately  $13 million of such  investments  had
maturities of greater than one year. However,  all such securities mature within
three years. The cost and fair value of the Company's short-term investments are
as follows (in thousands):

                                                                December 31,
                                                         ----------------------
                                                             1996          1995
                                                         --------      --------
Fair value............................................   $ 38,560      $ 21,342
Cost..................................................     38,426        20,924
                                                         --------      --------
Unrealized gains......................................   $    134      $    418
                                                         ========      ========


NOTE 5. INVESTMENT IN AFFILIATE

     During 1996, the Company  acquired for $3 million in cash a 33% interest in
the outstanding stock of InfoGear Technology ("InfoGear"), a company involved in
the development of an Internet phone. The Company's equity in losses of InfoGear
for the period ended  December 31, 1996 was  approximately  $428,000,  which has
been  included as a component of research and  development  expense for the year
ended  December  31,  1996.  The Company has an  exclusive  right to  distribute
through RBOC channels any product  developed by InfoGear for the 18 month period
beginning with the first commercial shipment of such product. As of December 31,
1996,  the Company's net investment in InfoGear  totaled $2.6 million,  which is
included as a component of other assets.


NOTE 6.   LINE OF CREDIT

     In May 1996, the Company  renegotiated  its line of credit,  increasing the
amount of the line from $20 million to $25  million.  Borrowings  under the line
bear  interest at 0.25%  below the bank's base rate and the  interest is payable
monthly.  The  bank's  base  rate was  8.25% per  annum at  December  31,  1996.
Borrowings  under the line are  secured by  substantially  all of the  Company's
assets.  As of December 31,  1996,  the Company had not borrowed any funds under
the line.


NOTE 7.   LONG-TERM DEBT

     On June 28,  1996,  the Company  issued $150  million of 3.75%  convertible
subordinated  notes due June 30,  2003.  The  notes  were  convertible  into the
Company's  Common  Stock at a  conversion  rate of one share of Common Stock for
each  $41.00 in  principal  amount of the notes.  The note  agreement  contained
covenants which,  among other matters,  restricted or limited the ability of the
Company  to pay  dividends  or incur  indebtedness.  Interest  on the  notes was
payable quarterly  commencing  September 30, 1996. The notes were fully redeemed
on December 30, 1996.


NOTE 8.   LEASES AND COMMITMENTS

Leases
     The  Company  leases  its   headquarters,   call  center  and  distribution
facilities in Morgan Hill, California,  under operating leases which expire from
1999 through 2006. The Company also leases sales  facilities in New York,  under
an agreement  which expires in May 2000, in Illinois,  under an agreement  which
expires in April 1999 and in Missouri,  under an agreement  which expires in May
1999.

<PAGE>

     Future minimum lease payments under  non-cancelable  leases at December 31,
1996 were as follows (in thousands):

Year ending December 31,
1997............................................................     $   1,377
1998............................................................         1,422
1999............................................................         1,200
2000............................................................           855
2001............................................................           763
Thereafter......................................................         2,290
                                                                     ---------
Total minimum lease payments....................................     $   8,607
                                                                     =========


     Rent  expense for 1996,  1995 and 1994 was $1.4  million,  $1.1 million and
$638,000, respectively.

Licenses
     The Company has a nontransferable, nonexclusive license agreement with AT&T
to utilize  AT&T's  patent  related to data  display  devices.  The Company pays
royalties to AT&T for each licensed product sold,  leased or put into use by the
Company other than direct sales to AT&T, the Regional Bell  Operating  Companies
and other AT&T  licensees  under the patent.  Royalties are payable at a rate of
one dollar per unit.  Total AT&T royalty expense incurred in 1996, 1995 and 1994
was $1.2 million, $1.9 million and $1.4 million, respectively.

     The Company has a  nontransferable,  nonexclusive  license  agreement  with
Nortel to utilize  Nortel's  patents for Caller ID on Call  Waiting  technology.
Under the agreement,  the Company will pay royalties to Nortel for each licensed
product  sold,  leased or put into use by the Company other than direct sales to
Nortel  beginning  January 1, 1997.  The agreement  also provided for a one-time
payment in full  satisfaction of royalties on all units  incorporating  Nortel's
patents  which  were  sold by the  Company  prior to  January  1,  1997.  Future
royalties  are  payable at a variable  rate based on product  type and number of
units sold.

     The Company has a  nontransferable,  exclusive license agreement with Focus
Semiconductor ("Focus") to utilize patents for Caller ID technology incorporated
in a part used in virtually all products  sold by the Company.  The Company pays
royalties to Focus for each part included in the Company's products beginning in
October  1996.  Royalties  are payable at a variable rate based on the number of
parts used. Total Focus royalty expense incurred in 1996 was $397,000.

401(k) plan
     Effective in 1993,  the Company  implemented  a Savings and Profit  Sharing
Plan (the "401(k)  Plan") which  qualifies as a thrift plan under section 401(k)
of the Internal  Revenue  Code.  All  employees  who have  completed one year of
service  and are 21 years of age or older on or  before  the  semi-annual  entry
periods are eligible to  participate  in the 401(k) Plan. The 401(k) Plan allows
participants  to  contribute  up to 12% of the  total  compensation  that  would
otherwise  be paid to the  participant,  not to exceed  the  amount  allowed  by
applicable Internal Revenue Service guidelines.  For each year, the Company will
contribute  for each  participant  a matching  contribution  equal to 25% of the
participant's  before-tax  contributions for the year not to exceed 1% of his or
her  compensation.  In  addition,  the  Company  may  choose  to  make  elective
contributions  to the 401(k) Plan for a particular  plan year.  The Company made
contributions  of $76,000,  $43,000 and $32,000 to the 401(k) Plan for the years
ended December 31, 1996, 1995 and 1994, respectively.

Pending litigation
     In the course of its business, the Company has been named as a defendant in
certain  actions and could incur an uninsured  liability in one or more of them.
The amount of any such liability is not determinable or estimable.  However,  in
the opinion of  management,  the outcome of such  litigation  is not expected to
have a  material  adverse  effect on the  results  of  operations  or  financial
condition of the Company.

<PAGE>

NOTE 9.   COMMON STOCK AND STOCK PLAN

Common stock
     The Company is authorized to issue up to 35 million shares of Common Stock,
each with a par value of $0.01 per share.  Holders of Common  Stock are entitled
to one vote per share on all matters voted on by the Company's stockholders.  In
March 1994, the Company completed an initial public offering (the "Offering") of
3.4 million  shares of Common Stock and realized net proceeds of $45.9  million.
In  conjunction  with  the  Offering,  all  outstanding  shares  of  mandatorily
redeemable  Preferred Stock were redeemed for $19.3 million. In August 1994, the
Company completed a second public offering of 3.5 million shares of Common Stock
at a price of $22 per  share.  Of such  shares,  selling  stockholders  sold 3.4
million  shares and the Company sold 100,000 shares and realized net proceeds of
$1.7 million.  In December  1994,  the Company  completed an  additional  public
offering of 1.9 million  shares of Common  Stock at a price of $23.75 per share.
Of such shares,  the Company  sold 1.5 million  shares for net proceeds of $33.5
million and selling stockholders sold 375,650 shares.

Directors' stock option plan
     In January 1994, the Company's  stockholders  approved the 1994  Directors'
Stock Option Plan (the  "Directors'  Option Plan"). A total of 100,000 shares of
Common Stock have been reserved for issuance under the  Directors'  Option Plan,
which  provides for the granting of stock options to  non-employee  directors of
the Company.  Such options vest  immediately with respect to 20% of such shares,
with the remainder vesting in four equal annual installments commencing one year
after the date of grant.  In January 1994,  the Company  granted one director an
option  under the  Directors'  Option Plan to purchase  33,350  shares of Common
Stock at an exercise  price of $11.20 per share.  No options were granted  under
the Director's Option Plan during 1995 or 1996.

Stock option plan
     In May 1993,  the Company  adopted a stock  option plan (the "Stock  Option
Plan") under which  employees and consultants may be granted options to purchase
shares of Common  Stock at prices at least equal to the fair market value of the
Company's  Common Stock on the date of grant.  The options expire ten years from
the date of grant.  A total of 1.0 million  shares of Common Stock were reserved
for  issuance  under  the Stock  Option  Plan,  which  expires  ten years  after
adoption.  Options  generally  vest in  annual  increments  of 33 1/3%  per year
commencing  one  year  from  the  date  of  grant.  The  Stock  Option  Plan  is
administered  by the  Compensation  Committee of the Board of  Directors,  which
determines the vesting provisions,  the form of payment for shares and all other
terms of the options.  In January  1994,  the Board of Directors  increased  the
number of shares  authorized  under the Stock Option Plan to 1.4 million shares.
In May 1995,  the  stockholders  approved an amendment to increase the number of
shares authorized under the Stock Option Plan to 2.15 million shares.

     The following table summarizes stock option activity under the Stock Option
Plan:
<TABLE>
<CAPTION>
                                                                   Options Outstanding
                                                                   ------------------
                                                  Shares
                                                 Available                 Weighted Average
                                                 for Grant       Shares      Exercise Price
                                                 ---------       ------      --------------
<S>                                                 <C>         <C>             <C>
  Balance at December 31, 1993..................    25,300      974,700         $   1.48

     Additional shares authorized, January 1994.   400,000           --               --
     Options granted............................  (233,500)    (233,500)        $  21.44
     Options exercised..........................        --      (82,896)        $   1.76
     Options canceled...........................     6,000       (6,000)        $  17.40
                                                   -------    ---------         --------
  Balance at December 31, 1994..................   197,800    1,119,304         $   5.54

     Additional shares authorized, May 1995.....   750,000           --               --
     Options granted............................  (475,750)     475,750         $  30.46
     Options exercised..........................        --      (85,183)        $   5.34
     Options canceled...........................    13,417      (13,417)        $  27.73
                                                   -------    ---------         --------
  Balance at December 31, 1995..................   485,467    1,496,454         $  13.27
     Options granted............................  (509,800)     509,800         $  25.48
     Options exercised..........................        --     (240,465)        $   7.80
     Options canceled...........................   126,883     (126,883)        $  28.55
                                                   -------    ---------         --------
  Balance at December 31, 1996..................   102,550    1,638,906         $  16.69
                                                   -------    ---------         --------
</TABLE>
<PAGE>
The  following  table   summarizes   information   concerning   outstanding  and
exercisable options as of December 31, 1996:
<TABLE>
<CAPTION>

                                       Options Outstanding                                Options Exercisable
                         ---------------------------------------------------              -------------------
                                         Weighted Average   Weighted Average                    Weighted Average
    Range of Exercise       Number          Remaining           Exercise           Number           Exercise
        Prices           Outstanding     Contractual Life          Price         Exercisable          Price
    -----------------    -----------     ----------------    ---------------     -----------    ----------------
<S>                       <C>                  <C>             <C>                 <C>                 <C> 
   $  1.00  - $  1.00       609,132            6.35            $   1.00            609,132        $    1.00
   $  4.00  - $ 24.90       413,629            8.84            $  17.52             97,641        $   13.89
   $ 24.95  - $ 34.70       464,645            8.70            $  30.40             90,425        $   28.61
   $ 35.12  - $ 38.33       151,500            8.61            $  35.47             41,688        $   35.31
                          ---------            ----                                -------
   $  1.00  - $ 38.33     1,638,906            7.85            $  16.69            838,886        $    7.18
                          =========            ====                                =======
</TABLE>
Employee stock purchase plan
     The Company's 1994 Employee Stock Purchase Plan (the "Stock Purchase Plan")
was adopted by the Board of Directors and approved by the Company's stockholders
in January  1994.  Under the Stock  Purchase  Plan,  an  eligible  employee  may
purchase shares of Common Stock from the Company  through payroll  deductions of
up to 10% of his or her base compensation,  at a price per share equal to 85% of
the lesser of the fair  market  value of the  Company's  Common  Stock as of the
first day or the last day of each six-month  offering period. The first offering
period ended on December 31, 1994 and new offering periods commence on January 1
and July 1 of each year  thereafter.  The Company has reserved 200,000 shares of
Common  Stock for issuance  under the Stock  Purchase  Plan.  As of December 31,
1996, approximately 40,192 shares have been issued under the Stock Purchase Plan
at an aggregate purchase price of $854,000.

Pro forma net income and earnings per share
     Had stock-based  compensation  cost for the Company's Stock Option Plan and
Stock Purchase Plan been  determined  based on the fair value at the grant dates
using the  Black-Scholes  model as  prescribed  by SFAS No. 123,  the  Company's
results for the year ended December 31, 1996 and 1995 would have been as follows
(in thousands):

                                                         1996             1995
                                                     --------        ---------
Net income as reported............................   $ 18,523        $  22,613
Pro forma net income..............................   $ 16,219        $  21,424
Earnings per share as reported....................   $   1.21        $    1.51
Pro forma earnings per share......................   $   1.08        $    1.44

     The pro forma effect on net income and earnings per share for 1996 and 1995
is not  representative  of the pro forma  effect on net  income in future  years
because  it does not take  into  consideration  pro forma  compensation  expense
related to grants made prior to 1995.

     The fair value of each option grant is estimated on the date of grant using
the Black-Scholes model with the following weighted average assumptions:
                                                          1996            1995
                                                          ----            ----
Stock option plan:
   Expected dividend yield.........................        0.0%            0.0%
   Expected stock price volatility.................         65%             61%
   Risk free interest rate.........................       5.78%           6.13%
   Expected life of options (years)................        2.3             2.3
Stock purchase plan:
   Expected dividend yield.........................         0.0%           0.0%
   Expected stock price volatility.................          71%            59%
   Risk free interest rate.........................        5.29%          5.75%
   Expected life of option (years).................         0.5            0.5

     The weighted  average  estimated  grant date fair value, as defined by SFAS
123,  for options  granted  under the Stock Option Plan during 1996 and 1995 was
$10.62 and $12.58, respectively.  The weighted average estimated grant date fair
value,  as defined by SFAS 123,  for  purchase  rights  granted  under the Stock
Purchase Plan during 1996 and 1995 was $10.88 and $9.81, respectively.

<PAGE>

NOTE 10.   MANDATORILY REDEEMABLE PREFERRED STOCK

     In March  1994,  the  Company  completed  an initial  public  offering.  In
conjunction with the offering,  all outstanding shares of mandatorily redeemable
Preferred  Stock were redeemed for $19.3  million.  There were 175,000 shares of
non-voting  Preferred  Stock  authorized,  of  which  125,000  shares  had  been
designated as Series A Senior Preferred Stock ("Series A") and 50,000 shares had
been designated as Series B Junior Preferred Stock ("Series B").

     The holders of Preferred Stock were entitled to receive dividends of $12.00
per share per annum  compounded  annually  prior and in preference to holders of
Common Stock. In addition,  the holders of Series A received dividends prior and
in preference to the holders of Series B. All dividends were cumulative  whether
or not declared by the Board of Directors.

     The Company was  required to redeem  125,000  shares of Series A and 50,000
shares of Series B Preferred Stock outstanding at a redemption price of $100 per
share plus any accrued but unpaid dividends upon a liquidity event as defined in
the  Preferred  Stock  agreement,  including  the  closing of an initial  public
offering. As of the redemption,  cumulative dividends totaling $1.8 million were
charged as an accretion of the outstanding Preferred Stock redemption value with
a corresponding  increase in the value of the outstanding  Preferred  Stock. The
total  accretion of $2.5 million also included the  amortization of the issuance
costs of the Series A of $697,000.


NOTE 11.   PROVISION FOR INCOME TAXES

     The provision for income taxes consists of the following (in thousands):
                                              Year ended December 31,
                                     -------------------------------------
                                          1996          1995          1994
                                     --------       --------       -------
  Current:
    Federal......................... $ 12,229       $ 13,768       $ 7,444
    State...........................    2,704          3,137         1,844
                                     --------       --------       -------
                                       14,933         16,905         9,288
                                     --------       --------       -------
  Deferred:
    Federal.........................   (2,002)        (1,582)       (1,019)
    State...........................     (582)          (248)         (168)
                                     --------       --------      --------
                                       (2,584)        (1,830)       (1,187)
                                     --------       --------      --------
                                     $ 12,349       $ 15,075       $ 8,101
                                     ========       ========       =======

     The  difference  between  income taxes at the statutory  federal income tax
rate and income taxes reported in the income statement are as follows:
                                                       Year ended December 31,
                                                       -----------------------
                                                      1996      1995       1994
                                                      ----      ----       ----
  Federal statutory tax rate........................  35.0%      35.0%     35.0%
  State income taxes, net of federal benefit........   4.5        5.0       5.3
  Research and development tax credits..............  (0.7)      (0.8)     (1.0)
  Other.............................................   1.2        0.8       1.7
                                                      ----       ----      ----
                                                      40.0%      40.0%     41.0%
                                                      ====       ====      ==== 

<PAGE>

     Deferred income taxes result from temporary  differences in the recognition
of certain  expenses for financial and income tax  reporting  purposes.  The net
deferred tax asset consists of the following (in thousands):
                                                             December 31,
                                                       -----------------------
Deferred tax asset:                                        1996           1995
                                                       --------       --------
  State taxes.......................................   $    717       $    825
  Non-deductible reserves...........................      3,887          2,121
  Inventory basis difference........................        577             84
  Depreciation......................................      1,027            580
  Other.............................................          9              3
                                                       --------       --------
Gross deferred tax asset............................      6,217          3,613
Gross deferred tax liability........................       (104)           (84)
                                                       --------       --------
Net deferred tax asset..............................   $  6,113       $  3,529
                                                       ========       ========


NOTE 12. SIGNIFICANT CUSTOMERS

     The Company's sales to significant customers as a percentage of total sales
 are as follows:
                                                     Year ended December 31,
                                                   --------------------------
Customer                                           1996       1995       1994
                                                   ----       ----       ----
A..............................................    36.5%      32.1%     25.2%
B..............................................    19.2%      32.3%     23.4%
C..............................................    11.8%        *          *

     The  Company's  accounts  receivable  from  significant  customers  are  as
follows:
                                                               December 31,
                                                           -------------------
Customer                                                   1996           1995
                                                           ----           ----
 A.....................................................    31.9%         28.0%
B......................................................    28.0%         49.5%
 C.....................................................    20.6%           *

     *Amounts less than 10% have been omitted from the above tables.

NOTE 13. SUBSEQUENT EVENTS

    On January 21, 1997, the Company offered Stock Option Plan  participants the
right to replace any remaining  unexcercised  stock options with an equal number
of options at an  exercise  price of $12.43,  the closing  market  price on such
date.  The  replacement  options vest in annual  increments  of 33 1/3% per year
commencing January 21, 1998.

    Effective January 27, 1997, the Company adopted a Shareholder's  Rights Plan
wherein stock rights will be  distributed as a dividend at the rate of one right
for each share of Common Stock held on February  14,  1997,  the record date for
such dividend.  The key terms of the Shareholders  Rights Plan will be activated
if any person acquires 15 percent or more of the Company's  Common Stock without
the approval of the Company's  Board of  Directors.  Once the Plan is activated,
each right will  entitle the holder to purchase at a price of $95, a fraction of
a share of Preferred  Stock which is  equivalent  to $190 worth of the Company's
Common Stock at the then current market value. Any person  currently  holding 15
percent or more of the stock will be "grandfathered" for existing holdings.  The
Company's  Board of Directors has retained the right to amend the  Shareholder's
Rights Plan at any time prior to its activation.

<PAGE>

SCHEDULE II:  VALUATION AND QUALIFYING ACCOUNTS

<TABLE>
<CAPTION>
                                           Balance at                              Balance at
                                            beginning                                end
(in thousands)                              of year    Additions     Deductions     of year
                                            -------    ---------     ----------    ---------
<S>                                         <C>         <C>          <C>           <C>
Year ended December 31, 1994:
     Allowance for doubtful accounts....   $     372    $   4,316    $  (2,826)    $   1,862

Year ended December 31, 1995:
     Allowance for doubtful accounts....   $   1,862    $  12,084    $ (10,796)    $   3,150

Year ended December 31, 1996:
     Allowance for doubtful accounts....   $   3,150    $  11,768    $ (11,952)    $   2,966
</TABLE>

<PAGE>

Item 9.  Changes  in and  Disagreements  with  Accountants  on  Accounting  and
         Financial Disclosure

         Not applicable.

<PAGE>

                                    Part III.


Item 10.      Directors and Executive Officers of Registrant

The executive officers and directors of the Company are as follows:

  Name                  Age  Position
  Robert L. Diamond ..  64   Chairman of the Board and Director
  Paul G. Locklin.....  51   President, Chief Executive Officer and Director
  Richard D. Kent ....  40   Vice President Finance and Administration
                                   and Chief Financial Officer
  Marv Tseu...........  48   Executive Vice President, Sales and Marketing
  Ian G. A. Laing.....  39   Executive Vice President, Research and Development
  Timothy J. Dooley...  40   Vice President, Sales
  Thomas C. Bristovish  46   Vice President, Sales
  Edward J. Forker....  47   Vice President, Sales
  Mark A. Sherman.....  42   Vice President, Operations
  Scott C. McDonald...  43   Director
  Ernest K. Jacquet     49   Director
  Richard M. Moley ...  57   Director
  Daniel L. Eilers....  41   Director

          Mr.  Diamond,  a co-founder  of the Company,  has been chairman of the
board,  and a  director  since its  incorporation  in 1988.  From 1971  until he
co-founded  Cidco,  Mr.  Diamond  was  president  of  Robert  Diamond  Inc.,  an
engineering  consulting  and  manufacturers'  representative  firm.  Mr. Diamond
received a BSEE degree from Worcester Polytechnic Institute, with high honors.

         Mr. Locklin,  a co-founder of the Company,  has been  president,  chief
executive  officer  and a director of the  Company  since 1988.  From 1972 until
1986, Mr. Locklin  served as president and chief  executive  officer of PCI Pte.
Ltd.  ("PCI"),  an international  electronics  manufacturer  that specialized in
liquid  crystal  displays,  wire bondable  printed  circuit  substrates and high
volume  contract  assembly.  From 1986 until he co-founded  Cidco,  Mr.  Locklin
served as president of the U.S.  subsidiary of PCI. Mr. Locklin  received a B.S.
degree in marketing from California State University at Hayward.

          Mr. Kent joined the Company in June 1994 as corporate  controller  and
in June 1995,  became chief  accounting  officer as well. In December  1996, Mr.
Kent was promoted to chief  financial  officer and vice president of finance and
administration.  From  October  1990  until  starting  at  Cidco,  he  served as
corporate  controller of Radius, Inc., a computer peripheral  manufacturer.  Mr.
Kent is a Certified Public  Accountant.  He holds a B.S. degree in Business from
the University of California at Berkeley and graduated with honors.

          Mr.  Tseu  joined  Cidco  in July  1996 to  serve  as  executive  vice
president of sales and  marketing.  Prior to joining  Cidco,  Mr. Tseu served as
vice president of marketing and sales at Plantronics,  Inc. Prior to his time at
Plantronics,  Mr. Tseu was an area manager for AT&T Consumer  Products  Division
and spent twelve years with Pacific  Telephone  Company (now Pacific  Bell).  He
earned his B.S. degree in economics from Stanford University.

         Mr.  Laing  joined  Cidco  in June  1996 to  serve  as  executive  vice
president of research and development.  Prior to joining Cidco, Mr. Laing served
as director of product  development for consumer products at AT&T where he spent
most of his career.  He spent this past year at an  acclaimed  Sloan  Fellowship
Management Program at Stanford  University,  where he had earned his M.S. degree
in electrical engineering.

          Mr. Dooley has been Cidco's vice  president of sales since April 1994,
when he was promoted  from  director of business  developement,  the post he had
held since  joining  the Company in July 1991.  Prior to working for Cidco,  Mr.
Dooley served in product and  marketing  management  positions  for GTE,  Sylvan
Learning  Corporation and Kenworth Truck Company. He is a graduate of Washington
State University and holds a B.A. degree in Business Administration.
<PAGE>

          Mr.  Bristovish  has served as Cidco's  vice  president of sales since
joining the Company in April 1994.  Prior to working for Cidco,  he spent eleven
years at Colonial Data, a leading telecommunications manufacturer, where he most
recently  held the position  senior vice  president:  sales and  marketing.  Mr.
Bristovish holds a BSEE degree from University of Connecticut and graduated with
honors.

          Mr.   Forker   joined  Cidco  in  June  1995  as  vice   president  of
international sales. He heads up the Company's international  subsidiary,  Cidco
Worldwide,  and  oversees  its branch  office in  Singapore.  From 1992 unitl he
joined Cidco, Mr. Forker held the position of worldwide telecommunications sales
manager for Bay Networks,  Inc. From 1987 to 1992,  Mr. Forker served at Digital
Equipment Corporation,  achieving the position of worldwide business development
manager for  financial  and  professional  services.  Mr. Forker holds a B.A. in
Liberal Arts from the University of St. Thomas.

          Mr. Sherman, with Cidco since September 1994, was named vice president
of  operations  for the Company in August  1995.  Mr.  Sherman has over 15 years
experience in operations  principally in the high technoloy  industry.  Prior to
joining  Cidco,  he  held  senior   management   positions  at  KAO  Infosystems
Corporation,  from  1993  to  1994,  and at NeXT  Computer  form  1991 to  1993.
Mr.Sherman holds a B.A. from Univeristy of Southern Florida.
         
          Mr. McDonald  became a director of the Company in January 1997.  Prior
to joining the board,  Mr.  McDonald was employed by the Company  since  October
1993; most recently as executive vice  president,  chief operating and financial
officer.  From  March  1993  through  September  1993,  he was  employed  by PSI
Integration,  Inc., as  president.  From  February  1989 to February  1993,  Mr.
McDonald  served as chief  financial  officer and vice  president of finance and
administration of Integrated  Systems,  Inc. Mr. McDonald received a B.S. degree
in  Accounting  from Akron  University  and an M.B.A.  degree  from  Golden Gate
University.

<PAGE>

          Mr.  Jacquet has been a director of the Company since May 1993.  Since
April 1990, he has been a general partner of Summit Partners,  a venture capital
partnership  that is the general partner of Summit Ventures III, L.P. and Summit
Investors  II, L.P. Mr.  Jacquet also serves as a director of several  privately
held companies.  Mr. Jacquet received B.S.E. and M.S.E. degrees, cum laude, from
the University of Michigan and an M.B.A. degree from Stanford Business School.

         Mr. Moley became a director of the Company in January 1994. In 1996, he
became senior vice president of Cisco Systems, Inc. as part of the Cisco Systems
purchase of  Stratacom,  Inc.,  where he had been  chairman of the board,  chief
executive  officer and president.  Mr. Moley also serves as a director of Linear
Technology  Corporation,  a  company  engaged  in the  design,  manufacture  and
marketing of high performance linear integrated  circuits.  Mr. Moley received a
B.S. degree from Manchester  University,  England,  an MSEE degree from Stanford
University and an M.B.A. degree from the University of Santa Clara.

         Mr. Eilers recently joined Cidco's board of directors. Mr. Eilers spent
ten years at Apple  Computer,  Inc.,  where he held  positions  as  senior  vice
president of worldwide  marketing and customer  solutions and vice  president of
strategy and corporate development.  Mr. Eilers has also served as the president
and chief executive  officer of Claris  Corporation and, most recently,  was the
president  and chief  executive  officer of NAT Systems  International,  Inc., a
privately held enterprise software company.

         The Company's  Certificate of  Incorporation  provides for its Board of
Directors  to be divided  into three  classes,  as nearly  equal in number as is
reasonably  possible,  serving staggered terms. At each year's annual meeting of
stockholders,  one class of directors will be elected for a three-year term. The
initial  terms of Messrs.  Diamond  and  Locklin  will expire at the 1997 annual
meeting at which they will be  nominated  for  re-election.  The current term of
Messrs.  Eilers and  McDonald  will  expire at the 1998  annual  meeting and the
current  term of  Messrs.  Moley and  Jacquet  will  expire  at the 1999  annual
meeting.

         Officers serve at the  discretion of the Board of Directors.  The Board
of Directors has a Compensation  Committee which  determines the compensation of
the Company's  officers,  an Audit Committee which reviews the results and scope
of  the  audit  and  other  services  provided  by  the  Company's   independent
accountants and a Stock Option  Committee  which  administers the Company's 1993
Stock Option Plan. Messrs.  McDonald,  Jacquet and Moley serve as the members of
the Compensation and Audit Committees and Messrs. Moley and Jacquet serve as the
members of the Stock Option Committee.  There are no family  relationships among
any of the executive officers or directors of the Company.

<PAGE>

Item 11.      Executive Compensation

         The information under the captions "Executive  Compensation" and "Stock
Options and Bonuses" in the Proxy Statement for the Company's  Annual Meeting of
Stockholders to be held on May 14, 1997 (the "Proxy  Statement") is incorporated
herein by reference.


Item 12.      Security Ownership of Certain Beneficial Owners and Management

         The  information   under  the  caption  "Stock   Ownership  of  Certain
Beneficial Owners" of the Proxy Statement is incorporated herein by reference.


Item 13.      Certain Relationships and Related Transactions

         The information  under the caption "Certain  Transactions" of the Proxy
Statement is incorporated herein by reference.


         With the  exception  of the  information  specifically  stated as being
incorporated by reference from the Company's Proxy Statement in Part III of this
Annual Report on Form 10-K, the Company's Proxy Statement is not to be deemed as
filed  as part of this  report.  The  Proxy  Statement  will be  filed  with the
Securities and Exchange  Commission within 120 days of the Company's fiscal year
end.

<PAGE>

                                    PART IV.


ITEM 14.  Exhibits, Financial Statement Schedules and Reports on Form 8-K

         (a)  (1) FINANCIAL STATEMENTS

                  See Item 8 of this Report.


              (2) FINANCIAL STATEMENT SCHEDULES

                  See Item 8 of this Report.


<TABLE>
              (3) INDEX TO EXHIBITS
<CAPTION>
    Exhibits                                                                    Page
    <S>     <C>                                                                 <C> 
    3.1     Amended and Restated Certificate of Incorporation. (1)              --

    3.2     Amended and Restated By-Laws (1).                                   --

    4.1     Second  Amendment  to  Revolving  Credit Loan  Agreement  dated
            October 13, 1995 between Registrant and Comerica Bank. (4)          --

    10.4    Patent  License  Agreement  dated as of May 1, 1989 between the
            Registrant and American Telephone and Telegraph Company. (1)        --

    10.5    Form of Indemnification Agreement. (1)                              --

    10.6    Employment  Agreement  dated as of January 11, 1994 between the
            Registrant and Robert L. Diamond. (1)                               --

    10.7    Employment  Agreement  dated as of January 11, 1994 between the
            Registrant and Paul G. Locklin. (1)                                 --

    10.13   Agreement  effective  as  of  December  21,  1992  between  the
            Registrant and SBC Communications, Inc. (1), (2)                    --

    10.14   Lease dated August 15, 1993 between  Thoits Bros.,  Inc. and
            the Registrant for 220 Cochrane Circle. (1)                         --

    10.16   Lease dated May 31, 1994, between Thoits Bros., Inc. and the
            Registrant  for 225 Cochrane  Circle,  Units A, B, C, D, and E.
            (4)                                                                 --

    10.17   Sublease dated November 18, 1994,  between Thoits Bros. and the
            Registrant for 180 Cochrane Circle. (3)                             --

    10.18   Lease dated November 1, 1994,  between  Thoits Bros.,  Inc. and
            the Registrant for 105 Cochrane  Circle,  Units A, B, C, D, and
            E. (3)                                                              --
    10.19   Registrant's  Amended and Restated 1993 Stock Option Plan.  (1)     --

    10.20   Registrant's 1994 Directors' Stock Option Plan. (1)                 --

    10.21   Registrant's 1994 employee stock purchase plan. (1)                 --

    10.22   Agreement  dated  January 1, 1995  between the  Registrant  and
            Ameritech Services Inc. (5)                                         --

    10.23   Standard  Form  of  Office  Lease  between  Registrant  and 400
            Columbus Avenue, LLC dated May 19, 1995. (5)                        --

    11.1    Computation of Earnings Per Share.
                                                                                39

    23      Consent of Independent Accountants.                                 40
</TABLE>

        (1)  Incorporated  herein by  reference  to the  Company's  registration
             statement on Form S-1, File No. 33-74114.
        (2)  Confidential  treatment  has been  granted  with respect to certain
             portions of this document.
        (3)  Incorporated herein by reference to the Company's Form 10-K for the
             year ended December 31, 1994.
        (4)  Incorporated herein by reference to the Company's Form 10-Q for the
             quarter ended September 30, 1995.
        (5)  Incorporated herein by reference to the Company's Form 10-Q for the
             quarter ended June 30, 1996.

       (b)  REPORTS ON FORM 8-K.

              The Company  filed one report on Form 8-K during the three  months
              ended  December  31, 1996  related to the  redemption  of the $150
              million  convertible  note due to ID Holding  Partnership L.P. (an
              affiliate of Forestmann Little & Co.).

<PAGE>

                                   SIGNATURES


         Pursuant to the  requirements  of Section 13 or 15(d) 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  on the 14th day of
March, 1997.

                                                        CIDCO INCORPORATED


                                                  By: /s/Paul G. Locklin
                                                        --------------------
                                                        Paul G. Locklin
                                                        Chairman of the Board


         Pursuant to the  requirements  of the Securities  Exchange Act of 1934,
this  report has been  signed  below by the  following  persons on behalf of the
Registrant and in the capacities indicated, each on the 14th day of March, 1997.



/s/      Paul G. Locklin                  President and Chief Executive Officer
  ------------------------
Paul G. Locklin


/s/      Robert L. Diamond                Chairman of the Board
   -----------------------
Robert L. Diamond


/s/      Richard D. Kent                 Vice President Finance and
   -----------------------               Administration, Chief Financial Officer
Richard D. Kent


/s/      Scott C. McDonald               Director
  ------------------------
Scott C. McDonald


/s/      Richard M. Moley                Director
  ------------------------
Richard M. Moley


/s/      Ernest K. Jacquet               Director
  ------------------------
Ernest K. Jacquet


                                         Director
--------------------------
Daniel L. Eilers

<PAGE>



                                                                   EXHIBIT 11.1


                               CIDCO INCORPORATED
                        COMPUTATION OF EARNINGS PER SHARE
                  (in thousands, except per share amounts) (1)
<TABLE>
<CAPTION>
                                                                           Year ended December 31,
                                                                ----------------------------------------
                                                                     1996           1995            1994
                                                                ---------      ---------       ---------
<S>                                                             <C>            <C>             <C>      
Net income as reported.......................................   $  18,523      $  22,613       $  11,657
Adjustment to net income due to convertible note.............       1,856             --              --
                                                                ---------      ---------       ---------
Net income as adjusted.......................................   $  20,379      $  22,613       $  11,657
                                                                =========      =========       =========
Weighted average shares outstanding..........................      14,284         14,135          11,922
Shares issuable on exercise of options granted
   between May 4, 1993 and March 10, 1994 (2)................          --             --             183
Shares issuable on exercise of options.......................         750            844             728
Shares issuable on conversion of note........................       1,859             --              --
Incremental shares outstanding in lieu of Preferred Stock (3)          --             --             187
                                                                ---------      ---------       ---------

Weighted average shares outstanding..........................      16,893         14,979          13,020
                                                                =========      =========       =========

Earnings per share...........................................   $    1.21      $    1.51       $    0.90
                                                                =========      =========       =========
</TABLE>

     (1)  This  Exhibit  should  be  read  with  Note 2 of  Notes  to  Financial
          Statements.

     (2)   Stock options  granted  between May 4, 1993 and March 10, 1994 (using
           the treasury stock method and the initial public offering price) have
           been  included  in the  computation  of common and common  equivalent
           shares  as if they  were  outstanding  for all  periods  through  the
           effective date of the initial public offering.

     (3)   The computation of common and common  equivalent  shares assumes that
           the  number  of shares of  Common  Stock  required  to be sold at the
           initial public offering price to raise sufficient  proceeds to redeem
           the outstanding  mandatorily  redeemable  Preferred Stock  (including
           accrued but unpaid dividends  thereon) were outstanding from the date
           the Preferred Stock was issued (May 1993) until March 10, 1994.


<PAGE>

                       CONSENT OF INDEPENDENT ACCOUNTANTS


         We hereby consent to the incorporation by reference in the Registration
Statement on Form S-8 (No. 33-78992) of CIDCO  Incorporated of our report dated
January 27, 1997  appearing on page 18 of the  Company's  Annual  Report on Form
10-K for the year ended December 31, 1996.



PRICE WATERHOUSE LLP
San Jose, California
March 24, 1997