<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 June 30, 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 July 31, 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..................................................15

ITEM 4:  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS:................15

ITEM 6:  EXHIBITS AND REPORTS ON FORM 8-K:...................................15
 
  A: EXHIBITS................................................................15
  
  B: FORM 8-K................................................................15
 
  SIGNATURES.................................................................16

<PAGE>

PART I:        FINANCIAL INFORMATION

ITEM I:        FINANCIAL STATEMENTS

                                LARSCOM INCORPORATED
                       CONDENSED CONSOLIDATED BALANCE SHEETS
                                   (In thousands)

                                        ASSETS

                                                        JUNE 30,    DECEMBER 31,
                                                     -------------  ------------
                                                         1997           1996
                                                     -------------  ------------
                                                             (UNAUDITED)
 Current assets:                                             
   Cash and cash equivalents                          $  11,303     $  46,403
   Short-term investments                                37,558             -
   Accounts receivable, net                              10,485         9,478
   Due from Axel Johnson Inc.                               337             -
   Inventories                                           11,404         8,654
   Deferred income taxes                                  2,402         2,026
   Prepaid expenses and other current assets              1,644           722
                                                      ---------     ---------
      Total current assets                               75,133        67,283
 Property and equipment, net                              5,388         5,530
 Other assets                                               191           230
                                                      ---------     ---------
      Total assets                                    $  80,712     $  73,043
                                                      ---------     ---------
                                                      ---------     ---------

                      LIABILITIES AND STOCKHOLDERS' EQUITY

 Current liabilities:
   Accounts payable                                    $  4,058      $  2,569
   Accrued expenses and other current liabilities         6,743         7,441
   Income tax payable                                       199             -
   Due to Axel Johnson Inc.                                   -         1,329
                                                      ---------     ---------
      Total current liabilities                          11,000        11,339
                                                      ---------     ---------

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

 Stockholders' equity:
   Class A Common Stock                                      81            70
   Class B Common Stock                                     100           107
   Additional paid-in capital                            80,521        76,392
   Accumulated deficit                                  (11,249)      (15,124)
                                                      ---------     ---------
      Total stockholders' equity                         69,453        61,445
                                                      ---------     ---------
      Total liabilities and stockholders' equity      $  80,712     $  73,043
                                                      ---------     ---------
                                                      ---------     ---------

                                       3
<PAGE>

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

<TABLE>
<CAPTION>

                                                        THREE MONTHS ENDED JUNE 30,    SIX MONTHS ENDED JUNE 30,
                                                        ---------------------------    -------------------------
                                                            1997           1996           1997          1996
                                                        -----------    ------------    ----------   ------------
                                                                              (UNAUDITED)
<S>                                                    <C>            <C>            <C>           <C>
Revenues                                                $  19,148      $  18,776      $  35,558     $  30,624
Cost of revenues                                            8,186          8,334         15,580        13,760
                                                        ---------      ---------      ---------     ---------
  Gross profit                                             10,962         10,442         19,978        16,864
                                                        ---------      ---------      ---------     ---------

Operating expenses:
  Research and development                                  2,400          1,875          4,616         3,631
  Selling, general and administrative                       5,011          4,849         10,191         8,909
                                                        ---------      ---------      ---------     ---------
    Total operating expenses                                7,411          6,724         14,807        12,540
                                                        ---------      ---------      ---------     ---------

Income from operations                                      3,551          3,718          5,171         4,324
Interest expense charged by Axel Johnson                      (18)             -            (37)            -
Interest income                                               469              -            920             -
                                                        ---------      ---------      ---------     ---------
Income before income taxes                                  4,002          3,718          6,054         4,324
Provision for income taxes                                  1,461          1,528          2,179         1,777
                                                        ---------      ---------      ---------     ---------
Net income                                               $  2,541       $  2,190       $  3,875      $  2,547
                                                        ---------      ---------      ---------     ---------
                                                        ---------      ---------      ---------     ---------

Net income per share (1)                                $    0.14      $    0.15      $    0.21     $    0.18

Shares used to compute net income per share                18,076         14,193         18,038        14,193


</TABLE>

(1)  Net income per share for the three and six months ended June 30, 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)

                                                       SIX MONTHS ENDED JUNE 30,
                                                       -------------------------
                                                           1997           1996
                                                       -----------     ---------
                                                              (UNAUDITED)
Cash flows from operating activities
  Net income                                             $  3,875      $  2,547
  Depreciation and amortization                             1,396         1,248
  Net increase in working capital                          (3,759)       (5,306)
                                                         --------      --------
Net cash provided (used) by operating activities            1,512        (1,511)
                                                         --------      --------

Cash flows from investing activities:
  Purchases of short-term investments                    (143,131)            -
  Maturities of short-term investments                     81,965             -
  Sales of short-term investments                          23,608             -
  Purchase of property and equipment                       (1,215)       (1,179)
                                                         --------      --------
Net cash used by investing activities                     (38,773)       (1,179)
                                                         --------      --------

Cash flows from financing activities:
  (Repayments to) advances from Axel Johnson Inc.          (1,666)        2,692
  Proceeds from issuance of Class A Common Stock            3,827             -
                                                         --------      --------
Net cash provided by financing activities                   2,161         2,692
                                                         --------      --------
(Decrease) increase in cash and cash equivalents          (35,100)            2
Cash and cash equivalents at beginning of period           46,403            30
                                                         --------      --------
Cash and cash equivalents at end of period               $ 11,303      $     32
                                                         --------      --------
                                                         --------      --------

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Interest paid                                            $     37      $      -
                                                         --------      --------
Income taxes paid                                        $  2,356      $  1,777
                                                         --------      --------

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


                                       5
<PAGE>

                            LARSCOM INCORPORATED
             NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                       
NOTE 1--BASIS OF PRESENTATION:

     The condensed  consolidated  financial  statements for the three and six 
months ended June 30, 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 six 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:

                                                      JUNE 30,    DECEMBER 31,
                                                    -----------  -------------
                                                       1997           1996
                                                    -----------  -------------
                                                         (In thousands)
 Inventories:
   Raw materials                                    $  2,002      $  1,508
   Work in process                                     3,245         1,823
   Finished goods                                      6,157         5,323
                                                    --------      --------
                                                    $ 11,404      $  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. 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,

                                       6
<PAGE>

                            LARSCOM INCORPORATED

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 August 1997 the Company was notified by the GSA 
that they were commencing the audit of certain GSA contracts.  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  six months ended  June 30, 1997 and  1996, the basic net income  
per share and diluted net income per share for these periods 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.

NOTE 7--SHORT-TERM INVESTMENTS:

      The Company accounts for its short-term investments in accordance with 
SFAS No. 115 "Accounting for Certain Investments in Debt and Equity 
Securities". Accordingly, the Company determines the appropriate 
classification of its investments in debt and equity securities at the time 
of purchase and reevaluates such determinations at each balance sheet date.  
All of the securities owned by the Company, which consist primarily of fixed 
and variable rate municipal debt securities, have been classified as 
available-for-sale. Due to the short-term nature of such securities, fair 
value approximates carrying amount.  Gains and losses on sales of 
available-for-sale securities have been immaterial.

                                       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 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 $19,148,000 and $35,558,000 for the three and six 
months ended June 30, 1997, respectively, grew by  2% and 16% over revenues 
of $18,776,000 and $30,624,000 during the comparable periods in 1996. During 
the three months ended June 30, 1997, broadband product sales increased to 
38% of total revenues as compared to 28% in the same period of 1996.  During 
the six months ended June 30, 1997, broadband product sales were 36% of total 
revenues, as compared to 24% of total revenues in the six months ended June 
30, 1996. The increase in broadband product sales is due primarily to higher 
unit sales to NSPs.  Average selling prices have decreased slightly in some 
product lines.

     GROSS PROFIT.  As a percentage of revenues, gross profit for the three 
months ended June 30, 1997 increased to  57% as compared to 56% in the same 
period in 1996.  Gross profit for the six months ended June 30, 1997 
increased to  56% as compared to 55% 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, as 
well as economies of scale associated with higher revenues.

     RESEARCH AND DEVELOPMENT.  Research and development expenses increased 
28% to $2,400,000 in the three months ended June 30, 1997 from $1,875,000 in 
the comparable period of 1996.  During the first six months of 1997 research 
and development expenses increased by 27% from $3,631,000 to $4,616,000.  The 
growth in research and development expenses in the 1997 periods as compared 
to 1996 was due primarily to increased headcount and therefore higher 
personnel related costs associated with the development of the Company's 
broadband product line. The Company expects that research and development 
expenses will continue to increase in absolute dollars in the future.

     SELLING, GENERAL AND ADMINISTRATIVE.  Selling, general and 
administrative expenses increased 3% to $5,011,000 during  the three months 
ended June 30, 1997 as compared to $4,849,000 in the comparable 1996 period.  
During the first six months of 1997 selling, general and administrative 
expenses increased by 14% to $10,191,000 from $8,909,000 during the 
comparable period in 1996.  The increase in absolute dollars was due to 
additional headcount and personnel costs associated with expansion of the 
Company's 

                                       8
<PAGE>

                            LARSCOM INCORPORATED

sales and marketing resources, as well as higher selling expenses, 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.

     Selling, general and administrative expenses include charges from Axel 
Johnson Inc. ("Axel Johnson") for legal, accounting, tax, treasury and 
administrative services of $311,000 and $263,000 during the six months ended 
June 30, 1997 and 1996, respectively.

     INTEREST EXPENSE CHARGED BY AXEL JOHNSON.  Interest expense for the six 
months ended June 30, 1997 includes a commitment fee 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 $469,000 and  $920,000 for the 
three and six months ended June 30, 1997, respectively, represents 
principally Federal income tax exempt interest from the Company's cash 
equivalents and short-term investments.

     PROVISION FOR INCOME TAXES.  The 1997 rate of 36% 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 and 
short-term investments.  The effective rate of 41% for the six months ended 
June 30, 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 36% for the six months ended June 30, 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

     The Company's operating activities generated $1,512,000 during the six 
months ended June 30, 1997 as compared to using $1,511,000 in the same period 
in 1996. The cash generated during the 1997 period was primarily due to net 
income and increases in accounts payable, which have been offset by increases 
in accounts receivable and inventory and decreases in accrued expenses and other
current liabilities.

     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 June 30, 
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.

                                       9
<PAGE>

                            LARSCOM INCORPORATED

     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 no more than $4,000,000 of which 
$1,215,000 was spent in the six months ended June 30, 1997.  As of June 30, 
1997, the Company's working capital was $64,133,000.

     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 six months ended June 30, 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.

                                       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 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 six months ended June 30, 1997, MCI and IBM/Advantis accounted for 
26% and 16% of revenue, respectively.  During the six months ended June 30, 
1996, the same two customers accounted for 22% and 12% 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 36% of revenues during  
the first six months of 1997 and 24% of revenues during the same period of 
1996. 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 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 was 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.

LIMITED 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 limited 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.  The Company has access, 
subject to certain conditions, to a $15,000,000 credit facility provided by 
Axel Johnson, but there 

                                       11
<PAGE>

                            LARSCOM INCORPORATED

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.

     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 

                                       12
<PAGE>

                            LARSCOM INCORPORATED

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.  Any 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.

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 

                                       13
<PAGE>

                            LARSCOM INCORPORATED

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 acquire businesses 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, 
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 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.

                                       14
<PAGE>

                            LARSCOM INCORPORATED

PART II:     OTHER INFORMATION

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

The annual meeting of stockholders was held on May 19, 1997.  In connection
with the meeting, proxies were solicited pursuant to the Securities Exchange
Act of 1934.  The following are the voting results on proposals considered and
voted upon at the meeting, all of which were described in the proxy statement:

     1.  To elect six (6) directors to serve until the next Annual Meeting of
     Stockholders or until their successors are elected and qualified.


                                              Class A Common Shares
                                     ---------------------------------------
                                        For          Withheld      Against
                                     ---------     ------------  -----------
      Deborah M. Soon                7,139,700         42,010             -
      Paul E. Graf                   7,139,700         42,010             -
      Donald G. Heitt                7,174,700          7,010             -
      Kevin N. Kalkhoven             7,174,600          7,110             -
      Harvey L. Poppel               7,174,600          7,110             -
      Joseph F. Smorada              7,139,600         42,110             -
     
                                              Class B Common Shares
                                     ---------------------------------------
                                        For          Withheld      Against
                                     ---------     ------------  -----------
      Deborah M. Soon               10,000,000              -             -
      Paul E. Graf                  10,000,000              -             -
      Donald G. Heitt               10,000,000              -             -
      Kevin N. Kalkhoven            10,000,000              -             -
      Harvey L. Poppel              10,000,000              -             -
      Joseph F. Smorada             10,000,000              -             -
     
     2.  To ratify the appointment of Price Waterhouse LLP as independent
     auditors of the Company for the fiscal year ending December 31, 1997.

                                        For          Withheld      Against
                                     ---------     ------------  -----------

 Class A Common Shares               7,174,462              -             -
 Class B Common Shares              10,000,000              -             -




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

             A:   Exhibits:

                  11.1  Statements Regarding Computation of Net Income Per Share

                  27    Financial Data Schedule

             B:   Reports on Form 8-K:

                  There were no reports on Form 8-K filed during the quarter 
                  ended June 30, 1997.

                                       15
<PAGE>

                            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   August 13, 1997                 BY   /s/ Bruce D. Horn
                                            -----------------------------------

                                            Bruce D. Horn
                                            Vice President, Finance and Chief 
                                            Financial Officer (Principal 
                                            Financial and Accounting Officer)

                                       16