<PAGE>

                               UNITED STATES

                     SECURITIES AND EXCHANGE COMMISSION

                          Washington D.C.  20549

                                FORM 10-Q

(Mark One)

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

                  For the Quarterly Period Ended March 31, 1997

                                   OR

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

         For the Transition Period from _____________ to _____________

                      Commission File Number:  1-12491

                            LARSCOM INCORPORATED
            (Exact name of registrant as specified in its charter)

         Delaware                                   94-2362692

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

                           4600 PATRICK HENRY DRIVE
                           SANTA CLARA, CA   95054
                                (408) 988-6600

   (Address of principal executive offices, zip code and telephone number)

Indicate by check mark whether the registrant (1) has filed all reports 
required to be filed by Section 13 or 15(d) of the Securities Exchange 
Act of 1934 during the preceding 12 months (or for such shorter period 
that the registrant was required to file such reports), and (2) has been 
subject to such filing requirements for the past 90 days. Yes  X   No 
                                                             -----   -----

The number of the registrant's shares outstanding as of April 30, 1997, was 
8,075,518 of Class A Common Stock and 10,000,000 of Class B Common Stock.

<PAGE>

                                LARSCOM INCORPORATED
                                     FORM 10-Q
                                 TABLE OF CONTENTS

PART I:  FINANCIAL INFORMATION............................................. 3

ITEM I:  FINANCIAL STATEMENTS.............................................. 3

   CONDENSED CONSOLIDATED BALANCE SHEETS................................... 3

   CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS......................... 4

   CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS......................... 5

   NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS.................... 6

ITEM 2:   MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
          RESULTS OF OPERATIONS............................................ 8

PART II:  OTHER INFORMATION................................................16

ITEM 1:  LEGAL PROCEEDINGS:................................................16

ITEM 2:  CHANGES IN SECURITIES: ...........................................16

ITEM 3:  DEFAULTS UPON SENIOR SECURITIES: .................................16

ITEM 4:  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS: .............16

ITEM 5:  OTHER INFORMATION: ...............................................16

ITEM 6:  EXHIBITS AND REPORTS ON FORM 8-K: ................................16

   A: Exhibits ............................................................16

   B: Form 8-K ............................................................16

   SIGNATURES .............................................................17

   EXHIBIT 11.1 Statement Regarding Computation of Net Income per Share ...18

   EXHIBIT 27 Financial Data Schedule .....................................19

                                       2

<PAGE>

PART I:       FINANCIAL INFORMATION

ITEM I:       FINANCIAL STATEMENTS
                                           

                                 LARSCOM INCORPORATED
                        CONDENSED CONSOLIDATED BALANCE SHEETS
                                    (In thousands)

                                       ASSETS

<TABLE>
<CAPTION>
                                                             MARCH 31,       DECEMBER 31,
                                                               1997              1996
                                                           -------------     ------------
                                                                     (Unaudited)
<S>                                                        <C>               <C>
Current assets: 
 Cash and cash equivalents                                 $      50,832     $     46,403
 Accounts receivable, net                                          9,079            9,478
 Inventories                                                      11,079            8,654
 Deferred income taxes                                             2,026            2,026
 Prepaid expenses and other current assets                           837              722
                                                           -------------     ------------
   Total current assets                                           73,853           67,283
 Property and equipment, net                                       5,194            5,530
 Other assets                                                        210              230
                                                           -------------     ------------
   Total assets                                            $      79,257     $     73,043
                                                           -------------     ------------
                                                           -------------     ------------


                       LIABILITIES AND STOCKHOLDERS' EQUITY 

Current liabilities:                                                               
 Accounts payable                                          $       3,664     $      2,569
 Accrued expenses and other current liabilities                    5,460            7,441
 Income tax payable                                                  570                -      
 Due to Axel Johnson                                               2,392            1,329
                                                           -------------     ------------
   Total current liabilities                                      12,086           11,339      
                                                           -------------     ------------

 Deferred income taxes                                               259              259
                                                           -------------     ------------

Commitments and contingencies (Note 4)                                 -                -

 Stockholders' equity: 
 Class A Common Stock                                                 81               70      
 Class B Common Stock                                                100              107 
 Additional paid-in capital                                       80,521           76,392 
 Accumulated deficit                                             (13,790)         (15,124)
                                                           -------------     ------------
   Total stockholders' equity                                     66,912           61,445 
                                                           -------------     ------------
   Total liabilities and stockholders' equity              $      79,257     $     73,043 
                                                           -------------     ------------
                                                           -------------     ------------
</TABLE>

                                       3

<PAGE>

                                LARSCOM INCORPORATED 
                   CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
                         (In thousands, except per share data) 

<TABLE>
<CAPTION>
                                                         THREE MONTHS ENDED MARCH 31, 
                                                         ----------------------------
                                                             1997            1996
                                                         -----------      -----------
                                                                   (Unaudited)
 <S>                                                       <C>            <C>
 Revenues                                                  $  16,410      $  11,848 
 Cost of revenues                                              7,394          5,426 
  Gross profit                                                 9,016          6,422 
                                                           ---------      ---------
 Operating expenses: 
  Research and development                                     2,216          1,756 
  Selling, general and administrative                          5,180          4,060 
                                                           ---------      ---------
   Total operating expenses                                    7,396          5,816 
                                                           ---------      ---------

 Income from operations                                        1,620            606 
 Interest expense charged by Axel Johnson Inc.                   (19)             - 
 Interest income                                                 451              - 
                                                           ---------      ---------
 Income before income taxes                                    2,052            606 
 Provision for income taxes                                      718            249 
                                                           ---------      ---------
 Net income                                                $   1,334      $     357 
                                                           ---------      ---------
                                                           ---------      ---------

 Net income per share (1)                                  $    0.07      $    0.03 

 Shares used to compute net income per share                  17,996         14,193 
</TABLE>

----------
(1)  Net income per share for the three months ended March 31, 1996 is
supplemental and is calculated as described in Note 1 of the Notes to the
Consolidated Financial Statements included under Item 8 of the Company's Report
on Form 10-K for the year ended December 31, 1996.


                                      4

<PAGE>

                                 LARSCOM INCORPORATED 
                   CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                                    (In thousands)

<TABLE>
<CAPTION>
                                                                    THREE MONTHS ENDED MARCH 31,
                                                                    ----------------------------
                                                                        1997             1996
                                                                    ------------     -----------
                                                                              (Unaudited) 
<S>                                                                   <C>             <C>
Cash flows from operating activities:
 Net income                                                           $  1,334        $     357 
 Depreciation and amortization                                             783              622 
Net increase in working capital                                         (2,150)          (3,549)
                                                                      --------        ---------
Net cash used by operating activities                                      (33)          (2,570)
                                                                      --------        ---------
Cash flows from investing activities: 
 Purchase of property and equipment                                       (428)            (315)
                                                                      --------        ---------
Net cash used by investing activities                                     (428)            (315)
                                                                      --------        ---------
Cash flows from financing activities: 
 Advances from Axel Johnson                                              1,063            2,887 
 Proceeds from issuance of Class A Common Stock                          3,827                - 
                                                                      --------        ---------
Net cash provided by financing activities                                4,890            2,887 
                                                                      --------        ---------
Increase in cash and cash equivalents                                    4,429                2 
Cash and cash equivalents at beginning of period                        46,403               30 
                                                                      --------        ---------
Cash and cash equivalents at end of period                            $ 50,832        $      32 
                                                                      --------        ---------
                                                                      --------        ---------
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION 
Interest paid                                                         $     19        $       - 
                                                                      --------        ---------
Income taxes paid                                                     $    148        $     249 
                                                                      --------        ---------

SUPPLEMENTAL DISCLOSURE OF NON-CASH FINANCING ACTIVITIES 
Shares issued in connection with cancellation of the Company's  
   Long-Term Incentive Plans                                          $    306        $       -
                                                                      --------        ---------
</TABLE>

                                      5

<PAGE>

                             LARSCOM INCORPORATED

               NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1--BASIS OF PRESENTATION:

    The condensed  consolidated  financial  statements for the three months 
ended March 31, 1997 and 1996 presented in this Quarterly Report on Form 10-Q 
are unaudited.  In the opinion of management, these statements include all 
adjustments (consisting only of normal recurring adjustments) necessary for a 
fair statement of the results for the interim periods presented.  The 
condensed consolidated financial statements should be read in conjunction 
with the audited consolidated financial statements and notes thereto  
included in Larscom Incorporated's (the "Company") Report on Form 10-K for 
the year ended December 31, 1996. The results of operations for the first 
three months of 1997 are not necessarily indicative of the results to be 
expected for the full year.

NOTE 2--INVENTORIES:

Inventories consist of the following:


                                 MARCH 31,     DECEMBER 31, 
                                   1997            1996
                                 ---------     ------------
(In thousands)
Inventories: 
 Raw materials                   $  2,289       $  1,508 
 Work in process                    3,115          1,823 
 Finished goods                     5,675          5,323 
                                 --------       --------
                                 $ 11,079       $  8,654 
                                 --------       --------
                                 --------       --------

NOTE 3--COMMON STOCK OFFERING:

    In December 1996, the Company completed an initial public offering of 
7,000,000 shares of Class A Common Stock at a price of $12 per share of which 
5,800,000 were sold by the Company and 1,200,000 shares were sold by Axel 
Johnson Inc.  After deducting the underwriting discount of $4,872,000 and 
issuance costs of $1,449,000, the Company received net proceeds of 
$63,279,000 in December 1996.  Subsequent to December 31, 1996, the 
underwriters exercised their over-allotment option to sell additional shares 
and sold an additional 1,050,000 shares of which 350,000 were sold by the 
Company and 700,000 were sold by Axel Johnson Inc.  Net proceeds to the 
Company in January 1997 were $3,827,000 after deducting the underwriting 
discount of $294,000 and additional issuance costs of $79,000.

    In March 1997, 25,518 shares were issued to certain employees at a cost 
of $12 per share in connection with the cancellation of the Company's 
Long-Term Incentive Plans.

NOTE 4--COMMITMENTS AND CONTINGENCIES:

       There are potential unasserted claims against the Company relating to 
pricing deficiencies under two product supply contracts subject to General 
Services Administration ("GSA") regulations.  Management has completed an 
assessment of its performance under the GSA contracts, assessed its potential 
liability with the assistance of the Company's outside experts and legal 
counsel, and voluntarily disclosed the identified pricing deficiencies to the 
GSA contracting officer responsible for the Company's contracts.

                                   6

<PAGE>

                           LARSCOM INCORPORATED

             NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Although the ultimate resolution of this matter potentially could involve 
purchase price rebates and associated legal, audit and other costs of up to 
an aggregate of approximately $1,300,000 or more, management believes, after 
consultation with its outside experts and legal counsel, that the Company's 
exposure for this matter is not likely to exceed $800,000, which includes 
estimated purchase price rebates and associated legal, audit and other costs, 
and prior to December 31, 1996, the Company established a reserve for this 
amount less an initial payment of $268,000 made in December 1996.  In 
management's opinion, the ultimate resolution of this matter will not have a 
material adverse effect on the Company's financial position or results of 
operations.

    In its distribution agreements, the Company typically agrees to indemnify 
its customers for any expenses or liabilities resulting from claimed 
infringements of patents, trademarks or copyrights of third parties.  

NOTE 5--NEW LEASE COMMITMENTS:

    On March 20, 1997, the Company entered into an operating lease under 
which the Company agreed to pay approximately $155,000 per month for 119,000 
square feet of space located close to the Company's current facilities in 
Santa Clara, California.  The lease commences in August 1997 and lasts for 
seven years.  The Company has an option to extend the lease for a period of 
five years subject to certain conditions.  These facilities are intended to 
replace the Company's current facilities.

    The Company intends to terminate the lease on its current facility in 
Santa Clara which expires in January 1998.

NOTE 6--RECENT ACCOUNTING PRONOUNCEMENTS:

    In February 1997, the Financial  Accounting Standards Board issued 
Statement of Financial  Accounting  Standard ("SFAS") No. 128 "Earnings per 
Share" which establishes  a different  method of computing  net income per 
share than is currently  required under the provisions of Accounting  
Principles Board Opinion ("APB") No. 15.  Under SFAS No. 128,  the Company 
will be required to present both basic net income per share and diluted net 
income per share.  As the Company did not have any common stock equivalents 
during the  quarters  ended March 31, 1997 and  1996, the basic net income  
per share and diluted net income per share for these quarters are expected to 
be the same as the earnings per share that are currently disclosed under APB 
No. 15.  The Company plans to adopt SFAS No. 128 in its fiscal quarter ending 
December  31,  1997 and at that time all  historical  net  income per share 
data presented will be restated to conform to the provisions of SFAS No. 128.

                                      7

<PAGE>

                             LARSCOM INCORPORATED

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

    The statements contained in this report on Form 10-Q that are not purely 
historical are forward-looking statements within the meaning of Section 27A 
of the Securities Act of 1933, as amended, and Section 21E of the Securities 
Exchange Act of 1934, as amended, including statements regarding the 
Company's expectations, hopes, intentions or strategies regarding the future. 
All forward-looking statements included in this document are based on 
information available to the Company on the date hereof, and the Company 
assumes no obligation to update any such forward-looking statements. The 
forward-looking statements contained herein are subject to certain factors 
that could cause actual results to differ materially from those in such 
forward-looking statements.  Such factors include but are not limited to the 
factors set forth in the Company's 1996 Annual Report on Form 10-K and this 
Quarterly Report on Form 10-Q.

RESULTS OF OPERATIONS

    The Company's products can be split into two main categories -- broadband 
and digital access, based upon the bandwidth of the products supplied.  The 
Company sells these products primarily through a direct sales force and to a 
lesser extent through a variety of resellers including original equipment 
manufacturers, value added resellers, system integrators and distributors.  
An increasing proportion of the Company's sales are made to a limited number 
of network service providers ("NSPs").  The other significant trend in 
revenues is that broadband product sales represent an increasing percentage 
of total revenues.

    REVENUES.  Revenues of $16,410,000 for the three months ended March 31, 
1997, grew by 39% over revenues of $11,848,000 during the comparable period 
in 1996. During the three months ended March 31, 1997, broadband product 
sales were 35% of total revenues, as compared to 19% of total revenues in the 
three months ended March 31, 1996.  The increase in broadband and digital 
access product sales is due to higher unit sales to NSPs. 

    GROSS PROFIT.  As a percentage of revenues, gross profit for the three 
months ended March 31, 1997 increased to  55% as compared to 54% in the same 
period in 1996.  This increase was primarily the result of higher sales of 
higher margin broadband products partially offset by lower average unit 
selling prices of digital access products.  Costs per unit remained 
relatively stable for digital access products but decreased slightly for 
broadband products due to the Company's ability to purchase certain 
components overseas at lower costs.  

    RESEARCH AND DEVELOPMENT.  Research and development expenses increased 
26% to $2,216,000 in the first three months of 1997 from $1,756,000 in the 
first three months of 1996.  The growth in research and development expenses 
in the 1997 period as compared to 1996 was due primarily to higher personnel 
related costs associated with the development of the Company's broadband 
product line. The Company expects that research and development expense will 
continue to increase in absolute dollars.

    SELLING, GENERAL AND ADMINISTRATIVE.  Selling, general and administrative 
expenses increased 28% to $5,180,000 during  the three months ended March 31, 
1997 as compared to $4,060,000 in the comparable 1996 period.  The increase 
in absolute dollars was due to additional personnel costs associated with 
expansion of the Company's sales and marketing resources, as well as higher 
selling expenses, in particular commissions, associated with higher revenues. 
The Company anticipates that selling, general and administrative expenses 
will increase in absolute dollars in the future as a result of the Company's 
continued investment in the expansion of its sales, service and support 
organizations, the development of its distribution channels (particularly 
outside the United States) as well as the legal, accounting, human resources 
and administrative expenses associated with being a public company.    

                                       8

<PAGE>

                                LARSCOM INCORPORATED

    Selling, general and administrative expenses include charges from Axel 
Johnson Inc. ("Axel Johnson") for legal, accounting, tax, treasury and 
administrative services of $155,000 and $132,000 during the three months 
ended March 31, 1997 and 1996, respectively.

    INTEREST EXPENSE CHARGED BY AXEL JOHNSON.  Interest expense includes 
charges for the unused portion of the line of credit available under the 
Credit Agreement that the Company entered into with Axel Johnson in December 
1996.  See Liquidity and Capital Resources for more details.

    INTEREST INCOME.  Interest income of $451,000 for the three months ended 
March 31, 1997 was derived from the Company's cash and cash equivalents on 
hand during the quarter. 

    PROVISION FOR INCOME TAXES.  The effective tax rate of 35% for the three 
months ended March 31, 1997 differs from the federal statutory rate primarily 
due to state taxes which were offset by non-taxable interest income received 
on the Company's cash equivalents.  The effective rate of 41% for the three 
months ended March 31, 1996 differed from the federal statutory rate of 34% 
primarily as a result of state taxes and to a lesser extent non-deductible 
goodwill amortization which were partially offset by research and development 
tax credits.  The tax rate of 35% for the three months ended March 31, 1997 
was lower than the rate for the same period in 1996 primarily as a result of 
non-taxable interest income.

LIQUIDITY AND CAPITAL RESOURCES

    Since its acquisition by Axel Johnson in 1987 and until its initial 
public offering in December 1996, the Company met its operating and capital 
requirements primarily from cash flow from operations and advances from Axel 
Johnson.

    The Company's operating activities used $33,000 of cash during the three 
months ended March 31, 1997 as compared to $2,570,000 in the same period in 
1996.  The cash used during the 1997 period was primarily a result of an 
increase in inventory and decreases in accrued expenses and other current 
liabilities which have been offset by net income and increases in accounts 
payable.

    In December 1996, the Company sold 5,800,000 shares of Class A Common 
Stock at a price per share of $12 in its initial public offering ("IPO").  
The  net proceeds of the IPO were $63,279,000 after issuance costs of 
$1,449,000 and the underwriting discount of $4,872,000.  In January 1997, the 
underwriters exercised their option to sell an additional 350,000 shares and 
the Company received net proceeds of  $3,827,000 after deducting the 
underwriting discount of $294,000 and additional issuance costs of $79,000.

    Upon consummation of the IPO, the Company entered into a credit agreement 
with Axel Johnson (the "Credit Agreement") under which the Company  has 
available a revolving line of credit of $15,000,000.  As of March 31, 1997, 
there were no amounts outstanding under this line of credit.  The Credit 
Agreement contains various representations, covenants and events of default 
typical for financing a business of a similar size and nature.  The events of 
default under the Credit Agreement include any failure to pay punctually any 
principal or interest due under the Credit Agreement, any act of insolvency 
of the Company and any sale by the Company of all or substantially all of its 
assets.  Upon an event of default, any borrowings under the line of credit 
shall become payable in full. 

    Capital expenditures in 1996 of $3,131,000 were principally for the 
purchase of computers, software and test equipment.  The Company expects 
capital expenditures during 1997 to be approximately $4,000,000 of which 
$428,000 was spent in the three months ended March 31, 1997.  As of March 31, 
1997, the Company's working capital was $61,767,000.

                                      9

<PAGE>

                              LARSCOM INCORPORATED

    The Company believes that working capital, together with the Company's 
line of credit and funds generated from operations will provide adequate 
liquidity to meet the Company's operating and capital requirements for at 
least the next twelve months.  However, there can be no assurance that future 
events, such as the potential use of cash to fund acquisitions, will not 
require the Company to seek additional capital at an earlier date or, if so 
required, that adequate capital will be available on terms acceptable to the 
Company, or at all.

    On March 20, 1997, the Company entered into an operating lease under 
which the Company agreed to pay approximately $155,000 per month for 119,000 
square feet of space located close to the Company's current facilities in 
Santa Clara, California.  The lease commences in August 1997 and lasts for 
seven years.  The Company has an option to extend the lease for a period of 
five years subject to certain conditions.  These facilities are intended to 
replace the Company's current facilities.

    The effects of inflation on the Company's revenues and operating income 
have not been material. 

RECENT ACCOUNTING PRONOUNCEMENTS

    In February 1997, the Financial  Accounting Standards Board issued 
Statement of Financial  Accounting  Standard ("SFAS") No. 128 "Earnings per 
Share" which establishes  a different  method of computing  net income 
per share than is currently  required under the provisions of Accounting  
Principles Board Opinion ("APB") No. 15.  Under SFAS No. 128,  the Company 
will be required to present both basic net income per share and diluted net 
income per share.  As the Company did not have any common stock equivalents 
during the  quarters ended  March 31, 1997 and  1996, the basic net income  
per share and diluted net income per share for these  quarters is expected to 
be the same as the earnings per share that is currently disclosed under APB 
No. 15.  The Company plans to adopt SFAS No. 128 in its fiscal quarter ending 
December  31,  1997 and at that time all  historical  net  income per share 
data presented will be restated to conform to the provisions of SFAS No. 128.


                                       10

<PAGE>

                               LARSCOM INCORPORATED

CERTAIN FACTORS AFFECTING FUTURE OPERATING RESULTS

    Certain of the statements above are forward-looking statements.  In 
addition, the Company may from time to time make oral forward-looking 
statements.  The following are important factors that could cause actual 
results to differ materially from those projected in any such forward-looking 
statements.

CUSTOMER CONCENTRATION.  The Company believes that its relationships with 
large customers, particularly the NSPs and telecommunication companies, will 
be critical to its future success.  A small number of customers have 
accounted for a majority of the Company's revenues in each of the past 
several years.  During the three months ended March 31, 1997, two customers 
accounted for 29% and 13% of revenue, respectively.  During the three months 
ended March 31, 1996, the same two customers accounted for 30% and 15% of 
revenue, respectively.   None of the Company's customers are contractually 
obliged to purchase any quantity of products in any particular period, and 
product sales to major customers have varied widely from quarter to quarter 
and year to year.  There can be no assurance that the Company's current 
customers will continue to place orders with the Company, that orders from 
existing customers will continue at the levels of previous periods or that 
the Company will be able to obtain orders from new customers.  Loss of, or a 
material reduction in orders by, one or more of the Company's major customers 
could have a material adverse effect on the Company's business and operating 
results.

DEPENDENCE ON RECENTLY INTRODUCED PRODUCTS AND PRODUCTS UNDER DEVELOPMENT.  
The Company's future operating results are highly dependent on continuing 
market acceptance of the Company's newest products, particularly in the 
broadband area. Broadband product sales represented 31% of revenues during 
1996 and 35% of revenues in the first quarter of 1997.  Broadband product 
sales are expected to continue to increase as a percentage of overall 
revenues in the longer term although the proportion of broadband sales to 
total revenues may vary from quarter to quarter.  There can be no assurance 
that these products or any future products will continue to achieve 
widespread market acceptance.  In addition, the Company has in the past 
experienced delays in the development of new products and the enhancement of 
existing products, and such delays may occur in the future.  The Company's 
potential inability to develop and introduce new products or versions in a 
timely manner, due to resource constraints or technological or other reasons, 
or to achieve timely and widespread market acceptance of its new products or 
releases could have a material adverse effect on the Company's business and 
operating results.
 
RAPID TECHNOLOGICAL CHANGE.  The telecommunications equipment industry is 
characterized by rapidly changing technologies and frequent new product 
introductions.  The rapid development of new technologies increases the risk 
that current or new competitors could develop products that would reduce the 
competitiveness of the Company's products.  The Company's success will depend 
to a substantial degree upon its ability to respond to changes in technology 
and customer requirements.  This will require the timely selection, 
development and marketing of new products and enhancements on a cost 
effective basis.  There can be no assurance that the Company will be 
successful in developing, introducing or 

                                       11

<PAGE>

                              LARSCOM INCORPORATED

managing the transition to new or enhanced products or that any such products 
will be responsive to technological changes or will gain market acceptance.  
If the Company were to be unsuccessful or to incur significant delays in 
developing and introducing such new products or enhancements, the Company's 
business and operating results could be materially adversely affected.

NO RECENT INDEPENDENT OPERATING HISTORY.  The Company was a wholly owned 
subsidiary of Axel Johnson from 1987 until the date of the Company's IPO in 
December 1996 and, accordingly, has had very little independent operating 
history.  As a result the Company has been and will continue to be required 
to further develop financial, management, administrative and other resources 
previously provided by Axel Johnson which are necessary to operate 
successfully as an independent public company. Although the Company and Axel 
Johnson have entered into several agreements that are intended to ease the 
Company's transition to being an independent public company, there can be no 
assurance that the Company will be able to manage this transition or to 
develop these independent resources successfully. Even though the Company has 
access, subject to certain conditions, to a $15,000,000 credit facility 
provided by Axel Johnson, there can be no assurance that alternative sources 
of financing will be available upon the expiration or termination of such 
facility or that additional sources of funding will be available on terms 
favorable to the Company if the Company's borrowing requirements exceed the 
amount of the facility.

FLUCTUATIONS IN QUARTERLY OPERATING RESULTS; ABSENCE OF SIGNIFICANT BACKLOG. 
The Company's operating results have fluctuated significantly in the past and 
may fluctuate in the future on a quarterly and annual basis as a result of a 
number of factors, many of which are beyond the Company's control.  In 1995 
and 1996, the Company experienced a shift in the purchasing behavior of its 
customers which resulted in higher second and third quarter sales relative to 
fourth quarter sales.  These purchasing patterns and resulting cyclicality 
could continue in the future.  Moreover, the Company's sales historically 
have been concentrated in a small number of customers.  Therefore, sales for 
a given quarter may depend to a significant degree upon product shipments to 
a limited number of customers.  Sales to individual large customers are often 
related to the customer's specific equipment deployment projects, the timing 
of which is subject to change on limited notice.  The Company has experienced 
both acceleration and slowdown in orders related to such projects, causing 
changes in the sales level of a given quarter relative to both the preceding 
and subsequent quarters. 

    For example, since 1994, sales to MCI, IBM/Advantis, AT&T and other 
current customers have occasionally varied by $1,000,000 or more from quarter 
to quarter. Since most of the Company's sales are in the form of large orders 
with short delivery times to a limited number of customers, the Company's 
ability to predict revenues is limited.  In addition, announcements by the 
Company or its competitors of new products and technologies could cause 
customers to defer purchases of the Company's existing products.  In the 
event that anticipated orders from major customers fail to materialize, or 
delivery schedules are deferred or canceled as a result of the above factors 
or other unanticipated factors, the Company's business and operating results 
could be materially adversely affected.  As a result, the Company believes 
that period-to-period comparisons of its operating results are not 
necessarily meaningful and should not be relied upon as indicative of future 
performance. 

    The Company's backlog at any point in time is typically limited. 
Accordingly, sales in any quarter are largely dependent on orders received 
during that quarter.  Furthermore, the Company's agreements with its 
customers typically provide that they may change delivery schedules and 
cancel orders within specified timeframes, typically up to 30 days prior to 
the scheduled shipment date, without penalty.  The Company's customers have 
in the past built, and may in the future build, significant inventory to 
facilitate more rapid deployment of anticipated major projects or for other 
reasons.  Decisions by such customers to reduce their inventory levels could 
lead to reductions in purchases from the Company.  Therefore, customer 
decisions to delay delivery, cancel orders or reduce purchases could have a 
material adverse effect on the Company's business and operating results. 

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                            LARSCOM INCORPORATED

    The Company's gross margin is affected by a number of factors, including 
product mix, product pricing, cost of components and manufacturing costs.  
For example, a price reduction of a particular product in response to 
competitive pressure, which is not offset by a reduction in production costs 
or by sales of other products with higher gross margins, would decrease the 
Company's overall gross margin and could have a material adverse effect on 
the Company's business and operating results.  The Company's anticipated 
increase in overall spending in future periods to pursue new market 
opportunities may also affect operating margins.  The Company establishes its 
expenditure levels for product development and other operating expenses based 
on projected sales levels and margins, however, expenses are relatively fixed 
in the short term.  Accordingly, if sales are below expectations in any given 
period, the adverse impact of the revenue shortfall on the Company's 
operating results may be greater due to the Company's inability to adjust 
spending in the short term to compensate for the shortfall. 

    Results in any period could also be affected by changes in market demand, 
competitive market conditions, market acceptance of new or existing products, 
the cost and availability of components, the mix of the Company's customer 
base and sales channels, the mix of products sold, sales promotion activities 
by the Company, the Company's ability to expand its sales and marketing 
organization effectively, the Company's ability to attract and retain key 
technical and managerial employees and general economic conditions.  Due to 
all of the foregoing factors, the Company's operating results in one or more 
future periods may be subject to significant fluctuations. In the event this 
results in the Company's financial performance being below the expectations 
of public market analysts and investors, the price of the Company's Class A 
Common Stock could be materially adversely affected.

CONTROL BY AXEL JOHNSON.  Holders of Class A Common Stock are entitled to one 
vote per share and holders of Class B Common Stock are entitled to four votes 
per share, subject to adjustment, to preserve the initial voting ratio.  Axel 
Johnson owns all of the issued and outstanding Class B Common Stock of the 
Company.  As a result, Axel Johnson has sufficient voting power to control 
the direction and policies of the Company, including mergers, consolidations, 
the sale of all or substantially all of the assets of the Company and the 
election of the Board of Directors of the Company, and to prevent or cause a 
change in control of the Company.  In addition, the authorized but unissued 
capital stock of the Company includes 5,000,000 shares of preferred stock 
(the "Preferred Stock").  The Board of Directors is authorized to provide for 
the issuance of Preferred Stock in one or more series and to fix the 
designations, preferences, powers and relative, participating, optional or 
other rights and restrictions thereof.  Accordingly, the Company may issue a 
series of Preferred Stock in the future that will have preference over both 
classes of the Company's Common Stock with respect to the payment of 
dividends and upon liquidation, dissolution or winding up or which could 
otherwise adversely affect holders of the Common Stock or discourage or make 
difficult any attempt to obtain control of the Company. Such control by Axel 
Johnson, or prospective holders of Preferred Stock, may have the effect of 
discouraging certain types of transactions involving an actual or potential 
change of control of the Company, including transactions in which the holders 
of Class A Common Stock might otherwise receive a premium for their shares 
over the then current  market price.

RISKS ASSOCIATED WITH ENTRY INTO INTERNATIONAL MARKETS.  The Company has had 
minimal sales to international customers to date, and has had little 
experience in international markets.  The conduct of business outside the 
U.S. is subject to certain risks, including unexpected changes in regulatory 
requirements and tariffs, difficulties in staffing and managing foreign 
operations, longer payment cycles, greater difficulty in accounts receivable 
collection, currency fluctuations, expropriation and potentially adverse tax 
consequences.  In addition, in order to sell its products internationally, 
the Company must meet standards established by telecommunications authorities 
in various countries, as well as recommendations of the International 
Telecommunications Union.  A delay in obtaining, or the failure to obtain, 
certification of its products in countries outside the U.S. could impair the 
Company's marketing and sales efforts in such countries, which could have a 
material adverse effect on the Company's business and operating results.

                                       13

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                              LARSCOM INCORPORATED

MANAGEMENT OF EXPANDING OPERATIONS.  The growth in the Company's business has 
placed a significant strain on the Company's personnel, management and other 
resources, and is expected to continue to do so. To manage any future 
expansion effectively, the Company must attract, train, motivate and manage 
new employees successfully, integrate new management and employees into its 
overall operations and continue to improve its operational, financial and 
management systems, particularly as the Company transitions from services 
provided to date by Axel Johnson.  Availability of qualified sales and 
technical personnel is limited, and competition for experienced sales and 
technical personnel in the telecommunications  equipment industry is intense. 
Moreover, the Company expects to increase significantly the size of its 
domestic and international sales support staff and expand the scope of its 
sales and marketing activities. The Company's failure to manage any expansion 
effectively, including the above factors, could have a material adverse 
effect on the Company's business and operating results.

COMPLIANCE WITH REGULATIONS AND EVOLVING INDUSTRY STANDARDS.  The market for 
the Company's products is characterized by the need to meet a significant 
number of communications  regulations  and standards, some of which are 
evolving as new technologies are deployed. In the U.S., the Company's 
products must comply with various regulations defined by the Federal 
Communications Commission and standards established by Underwriters 
Laboratories, as well as industry standards established by various 
organizations.  As standards for new services such as ATM evolve, the Company 
may be required to modify its existing products or develop and support new 
versions of its products.  The failure of the Company's products to comply, 
or delays in compliance, with the various existing and evolving industry 
standards could delay introduction of the Company's products, which in turn 
could have a material adverse effect on the Company's business and operating 
results.

RISKS ASSOCIATED WITH POTENTIAL ACQUISITIONS.  An important element of the 
Company's strategy is to review acquisition prospects that would complement 
its existing product offerings, augment its market coverage, enhance its 
technological capabilities or offer growth opportunities.  The Company has no 
current agreements or negotiations underway with respect to any such 
acquisitions.  Future acquisitions by the Company could result in potentially 
dilutive issuance of equity securities and/or the incurrence of debt and the 
assumption of contingent liabilities, any of which could have a material 
adverse effect on the Company's business and operating results and/or the 
price of the Company's Class A Common Stock.  In this regard, as a result of 
the ownership interest of Axel Johnson in the Company, the Company will not 
be able to use pooling of interests accounting for any future acquisitions.  
Accordingly, such acquisitions could result in amortization of goodwill and 
other charges (including the immediate write-off of purchased research and 
development in process) typically associated with purchase accounting.  
Acquisitions entail numerous risks, including difficulties in the 
assimilation of acquired operations, technologies and products, diversion of 
management's attention to other business concerns, risks of entering markets 
in which the Company has limited or no prior experience and potential loss of 
key employees of acquired organizations.  The Company's management has 
limited prior experience in assimilating acquired organizations.  No 
assurance can be given as to the ability of the Company to successfully 
integrate any businesses, products, technologies or personnel of any company 
that might be acquired in the future, and the failure of the Company to do so 
could have a material adverse effect on the Company's business and operating 
results.

LIMITED PROTECTION OF INTELLECTUAL PROPERTY; PROPRIETARY INFORMATION.  The 
Company relies upon a combination of trade secrets, contractual restrictions, 
copyrights, trademark laws and patents to establish and protect proprietary 
rights in its products and technologies.  Although the Company has been 
issued only one U.S. patent to date, it believes that the success of its 
business depends primarily on its proprietary technology, information and 
processes and know-how, rather than patents.  Much of the Company's 
proprietary information and technology is not patented and may not be 
patentable.  There can be no assurance that the Company will be able to 
protect its technology or that competitors will not be able to develop 
similar technology independently.  The Company has entered into 
confidentiality and invention assignment agreements with all of its 
employees, and enters into non-disclosure agreements with its 

                                      14

<PAGE>

                             LARSCOM INCORPORATED

suppliers, distributors and appropriate customers so as to limit access to 
and disclosure of its proprietary information.  There can be no assurance 
that these statutory and contractual arrangements will deter misappropriation 
of the Company's technologies or discourage independent third-party 
development of similar technologies.  In the event such arrangements are 
insufficient, the Company's business and operating results could be 
materially adversely affected.

                                      15

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                               LARSCOM INCORPORATED

PART II:      OTHER INFORMATION

Item 1:       Legal Proceedings:

                 The Company is not currently involved in any material legal
                  proceedings.

Item 2:       Changes in Securities:

                  Not Applicable.

Item 3:       Defaults upon Senior Securities:

                  Not Applicable.

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

                  Not Applicable.

Item 5:       Other Information:

                  Not Applicable.

Item 6:       Exhibits and Reports on Form 8-K:

              A:   Exhibits:                                     Page
                                                                 Number

                   11.1  Statements Re. Computation of Net 
                          Income Per Share                        18
                   27    Financial Data Schedule                  19

              B:   Reports on Form 8-K:

                   There were no reports on Form 8-K filed during the 
                    quarter ended March 31, 1997.

                                      16

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                              LARSCOM INCORPORATED

                                   SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, as 
amended, the Registrant has duly caused this report to be signed on its 
behalf by the undersigned thereunto duly authorized.

                             LARSCOM INCORPORATED



Date     May 14, 1997    By   /s/ Bruce D. Horn                   
     ------------------     ----------------------------------------
                             Bruce D. Horn
                             Vice President, Finance and Chief Financial
                               Officer
                             (Principal Financial and Accounting Officer)


                                       17