<PAGE>   1
                                  UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549
                             ----------------------
                                    FORM 10-Q

(Mark One)

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

For the quarterly period ended June 30, 1998

                                       OR

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

For the transition period from          to
                               ---------  ----------

                         Commission file number 0-24156

                               FORE SYSTEMS, INC.
             ------------------------------------------------------
             (Exact Name of Registrant as Specified in Its Charter)

             Delaware                                             25-1628117
  -------------------------------                            -------------------
  (State or Other Jurisdiction of                              (I.R.S Employer
   Incorporation or Organization)                            Identification No.)

              1000 FORE Drive, Warrendale, Pennsylvania 15086-7502
              ----------------------------------------------------
           (Address of Principal Executive Offices)        (Zip Code)

       Registrant's Telephone Number, Including Area Code: (724) 742-4444

         Indicate by check mark whether the registrant: (1) has filed all
reports required to be filed by Section 13 or 15 (d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.

                                Yes  X    No
                                   -----     -----
         Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date.

           Class                                   Outstanding at July 31, 1998
----------------------------                       ----------------------------
Common Stock, $.01 par value                            101,610,360 Shares


<PAGE>   2




                                    FORM 10-Q

                               FORE SYSTEMS, INC.

                                TABLE OF CONTENTS

<TABLE>
<CAPTION>
                                                                                       Page
                                                                                      Number
                                                                                      ------
<S>                <C>                                                               <C>
PART I.      FINANCIAL INFORMATION

     Item 1.       Financial Statements

                   FORE Systems, Inc. Consolidated Balance
                   Sheet as of June 30, 1998 and
                   March 31, 1998                                                        3

                   FORE Systems, Inc. Consolidated Statement
                   of Income for the three months ended
                   June 30, 1998 and 1997                                                4

                   FORE Systems, Inc. Consolidated Statement
                   of Cash Flows for the three months ended
                   June 30, 1998 and 1997                                                5

                   Notes to Unaudited Consolidated Financial
                   Statements                                                            6-8

     Item 2.       Management's Discussion and Analysis of
                   Financial Condition and Results of Operations                         9-13

     Item 3.       Quantitative and Qualitative Disclosures about Market Risk            13   

PART II.           OTHER INFORMATION

     Item 1.       Legal Proceedings                                                     14

     Item 6.       Exhibits and Reports on Form 8-K                                      14

     Signatures                                                                          15

     Exhibit Index                                                                       16
</TABLE>



                                        2

<PAGE>   3


PART I.  FINANCIAL INFORMATION

Item 1.   Financial Statements.

                               FORE SYSTEMS, INC.
                                        
                           CONSOLIDATED BALANCE SHEET
                                        
                       (IN THOUSANDS, EXCEPT SHARE DATA)
                                        

<TABLE>
<CAPTION>
                                                                                (UNAUDITED)
                                                                                  JUNE 30,           MARCH 31,
                                                                                   1998                1998
                                                                                   ----                ----
<S>                                                                                <C>            <C>
                                                    ASSETS
Current assets:
      Cash and cash equivalents                                                    $ 121,492      $ 127,231
      Short-term investments                                                         201,741        186,999
      Accounts receivable, net of allowance for doubtful
        accounts of $6,562 at June 30, 1998 and
        $7,194 at March 31, 1998                                                     110,415        111,347
      Inventories                                                                     76,964         70,388
      Deferred income taxes                                                           35,619         36,620
      Prepaid expenses and other current assets                                       14,586         12,127
                                                                                   ---------      ---------
        Total current assets                                                         560,817        544,712
Fixed assets, net                                                                     75,514         71,495
Other non-current assets                                                               5,000          5,000
                                                                                   ---------      ---------

                     Total assets                                                  $ 641,331      $ 621,207
                                                                                   =========      =========


                                   LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:
      Accounts payable                                                             $  36,732      $  37,240
      Accrued payroll and related costs                                               13,924         18,560
      Income taxes payable                                                            18,310         13,789
      Deferred revenue                                                                27,858         28,719
      Other current liabilities                                                       10,782         15,881
                                                                                   ---------      ---------
        Total current liabilities                                                    107,606        114,189
                                                                                   ---------      ---------

Commitments and contingencies
Stockholders' equity:
      Common stock, par value $.01 per share; 300,000,000
        shares authorized; shares issued:
        101,556,894 at June 30, 1998 and 100,302,143
        at March 31, 1998                                                            436,173        423,782
      Retained earnings                                                              102,687         88,285
      Treasury stock, at cost:  145,130 shares                                        (3,252)        (3,252)
      Cumulative translation adjustment                                                 (238)          (101)
      Valuation allowance for short-term investments                                  (1,645)        (1,696)
                                                                                   ---------      ---------
        Total stockholders' equity                                                   533,725        507,018
                                                                                   ---------      ---------

                     Total liabilities and stockholders' equity                    $ 641,331      $ 621,207
                                                                                   =========      =========
</TABLE>


    The accompanying notes are an integral part of these financial statements


                                        3
<PAGE>   4
                                        
                                        
                               FORE SYSTEMS, INC.
                                        
                        CONSOLIDATED STATEMENT OF INCOME
                                        
                                   UNAUDITED
                                        
                (IN THOUSANDS, EXCEPT SHARE AND PER-SHARE DATA)
                                        

                                                      THREE MONTHS ENDED
                                                            JUNE 30,
                                                      -------------------
                                                      1998           1997
                                                      ----           ----

Revenue                                            $ 143,731      $ 95,359

Cost of sales                                         63,496        42,184
                                                   ---------      --------
Gross profit                                          80,235        53,175
                                                   =========      ========
Operating expenses:
         Research and development                     18,415        15,905
         Sales and marketing                          38,397        27,938
         General and administrative                    6,913         4,781
                                                   ---------      --------
            Total operating expenses                  63,725        48,624
                                                   =========      ========
Income from operations                                16,510         4,551

Interest income, net                                   3,823         3,029
Other income (expense)                                  (330)          (30)
                                                   ---------      --------
Income before provision for income taxes              20,003         7,550

Provision for income taxes                             5,601         2,567
                                                   ---------      --------
Net income                                         $  14,402      $  4,983
                                                   =========      ========
Net income per share - basic                       $    0.14      $   0.05
                                                   =========      ========
Net income per share - diluted                     $    0.14      $   0.05
                                                   =========      ========

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


                                        4
<PAGE>   5
                               FORE SYSTEMS, INC.

                      CONSOLIDATED STATEMENT OF CASH FLOWS

                                    UNAUDITED

                                 (IN THOUSANDS)

<TABLE>
<CAPTION>
                                                                         THREE MONTHS ENDED
                                                                              JUNE 30,
                                                                        ---------------------
                                                                        1998             1997
                                                                        ----             ----
<S>                                                                  <C>            <C>
Cash flows from operating activities:
      Net income                                                     $  14,402      $   4,983
      Adjustments to reconcile net income
         to net cash provided by (used in) operating activities:
             Depreciation and amortization                               8,249          5,514
             Deferred income tax benefit                                 1,001           (255)
             Cumulative translation adjustment                            (137)            40
             Change in operating assets and liabilities:
                 Accounts receivable                                       932            344
                 Inventories                                            (6,576)        (3,399)
                 Prepaid expenses and other current assets              (2,516)        (6,713)
                 Accounts payable                                         (508)        (3,468)
                 Accrued liabilities                                    (9,735)        (1,713)
                 Prepaid income taxes and income taxes payable           4,521          1,648
                 Deferred revenue                                         (861)           (36)
                                                                     ---------      ---------
Net cash provided by (used in) operating activities                      8,772         (3,055)
                                                                     ---------      ---------

Cash flows from investing activities:
      Purchases of short-term investments                              (49,701)       (48,645)
      Redemption and sale of short-term investments                     35,010         45,312
      Capitalization of software development costs                        (263)           (10)
      Purchases of fixed assets                                        (11,948)       (12,817)
                                                                     ---------      ---------
Net cash used in investing activities                                  (26,902)       (16,160)
                                                                     ---------      ---------

Cash flows from financing activities:
      Principal payments on notes payable and capital lease
         obligations                                                         -            (21)
      Proceeds from issuance of Common stock                            12,391          3,666
                                                                     ---------      ---------
Net cash provided by financing activities                               12,391          3,645
                                                                     ---------      ---------

Decrease in cash and cash equivalents                                   (5,739)       (15,570)

Cash and cash equivalents at beginning of period                       127,231        129,424
                                                                     ---------      ---------

Cash and cash equivalents at end of period                           $ 121,492      $ 113,854
                                                                     =========      =========
</TABLE>


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


                                        5
<PAGE>   6



              NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

                                  June 30, 1998

NOTE 1.  Interim Financial Statements

         The accompanying unaudited interim consolidated financial statements of
FORE Systems, Inc. (the "Company") have been prepared in accordance with
generally accepted accounting principles for interim financial information and
with the instructions to Form 10-Q and Article 10 of Regulation S-X.
Accordingly, they do not include all of the information and footnotes required
by generally accepted accounting principles for complete financial statements.
In the opinion of management, these statements include all adjustments,
consisting of normal and recurring adjustments, considered necessary for a fair
presentation of the results for such period. The results of operations for the
three month period ending June 30, 1998 are not necessarily indicative of
results which may be achieved for the entire fiscal year ending March 31, 1999.
The unaudited consolidated interim financial statements should be read in
conjunction with the financial statements and notes thereto contained in the
Company's Annual Report on Form 10-K for the fiscal year ended March 31, 1998 as
filed with the Securities and Exchange Commission.

NOTE 2.  Inventories (in thousands)

         Inventories are stated at the lower of cost or market, cost being
determined using the first-in, first-out method, and include raw material
components, processing costs and manufacturing overhead costs. Inventories are
summarized as follows:

                                June 30, 1998     March 31, 1998
                                -------------     --------------
Raw Materials                      $22,309          $15,120
Work in Process                     10,734           11,512
Finished Goods                      43,921           43,756
                                   -------          -------
Total Inventories                  $76,964          $70,388
                                   =======          =======

NOTE 3.  Lease Commitments

         In December 1995, the Company entered into an agreement to lease
headquarters and operating facilities constructed on land that was purchased by
the Company. The Company is now occupying the facilities. In October 1997, the
lessor finalized permanent financing arrangements for the facilities with a
group of lenders. The total amount financed was $41 million. The Company is
leasing the facilities under a ten-year operating lease and has options, subject
to the lenders' and lessor's consent, to renew the lease for two additional
five-year terms. Annual minimum rental payments under the lease are
approximately $3.3 million and commenced in calendar 1998. The Company has
guaranteed repayment of up to approximately $32 million of the lenders'
financing of the facilities, which includes pledged amount of approximately
$29.2 million, as of June 30, 1998, of securities it holds as collateral for
specified obligations of the lessor. In addition, under the terms of the lease,
the Company is required to comply with certain financial covenants including the
maintenance of a minimum tangible net worth. Other restrictive covenants limit
indebtedness and the payment of dividends.

         The Company may, at its option, purchase the facilities during or at
the expiration of the term of the lease at an amount equal to the remaining
balance of any debt of the lessor related to the construction of the facilities
plus any applicable prepayment penalties. If the Company does not exercise the
purchase option at the end of the lease, the Company will guarantee the residual
value of the facilities of approximately $24 million, an amount that was
determined at the lease inception date.


                                        6
<PAGE>   7



NOTE 4.  Legal Proceedings

         In July and August 1997, the Company was notified that it was a party
to seven nearly identical class action lawsuits, filed in the United States
District Court for the Western District of Pennsylvania, alleging certain
violations of federal securities laws by the Company and certain of its
officers, who were named as defendants in the suits, arising from alleged
misstatements or omissions by the Company. Plaintiffs seek compensatory damages
for injuries allegedly incurred by purchasers of the Company's stock during the
period from October 17, 1996 through April 1, 1997, inclusive. Pursuant to court
order, the lawsuits were consolidated and a consolidated amended complaint was
filed by the lead plaintiffs. The Company and the individual defendants
subsequently filed their answer to the consolidated amended complaint. The
Company believes the allegations in the consolidated amended complaint are
completely without merit and intends to defend these actions vigorously.
Management believes that the ultimate outcome of these claims will not have a
material adverse effect on the results of operations or financial position of
the Company.

         From time to time, the Company receives notifications alleging that it
is or may be infringing the intellectual property rights of third parties. At
the present time, the Company is in separate discussions with several such third
parties regarding the alleged infringement by the Company of certain patents
owned by such third parties. Management believes that the ultimate outcome of
these matters is not likely to have a material adverse effect on the results of
operations or financial position of the Company.

NOTE 5.  New Accounting Pronouncements

         In June 1998, the FASB issued Statement of Financial Accounting
Standards No. 133 "Accounting for Derivative and Similar Financial Instruments
and for Hedging Activities" ("SFAS 133"). This new standard requires recognition
of all derivatives as either assets or liabilities at fair value. Based upon the
hedging strategies currently used and the level of activity related to
derivative instruments, the Company does not anticipate the effect of adoption
to have a material impact on either financial position or results of operations.
The Company will implement SFAS 133 in fiscal year 2000, as required.

         In June 1997, the FASB issued Statement of Financial Accounting
Standards No. 130 "Reporting Comprehensive Income" ("SFAS 130") and Statement of
Financial Accounting Standards No. 131 "Disclosures about Segments of an
Enterprise and Related Information" ("SFAS 131"). During the quarter, the
company adopted SFAS 130. This statement establishes standards for reporting and
the display of comprehensive income and its components in a primary financial
statement. At June 30, 1998 and June 30, 1997, the components of comprehensive
income were as follows:

Three months ended June 30,                1998          1997

Net Income                              $ 14,402       $ 4,983
Change in currency translation
 adjustment                             $   (137)      $    40
Change in unrealized gain (loss)
 on available-for-sale investments      $     56       $  (149)
                                        --------       -------

Comprehensive income                    $ 14,321       $ 4,874
                                        ========       =======


                                       7
<PAGE>   8



NOTE 6.  Earnings Per Share (in thousands except per-share data)

         In February 1997, Statement of Financial Accounting Standards No. 128
"Earnings per share"("SFAS 128") was issued by the Financial Accounting
Standards Board ("FASB"). Under SFAS 128, "basic earnings per share" is
calculated based upon the weighted average number of common shares actually
outstanding, and "diluted earnings per share" is calculated based upon the
weighted average number of common shares outstanding and other potential common
shares if they are dilutive. Common share equivalents consisting of common
shares issuable on exercise of outstanding options are computed using the
treasury method.


Three months ended June 30,                          1998          1997

Net income available to common stockholders        $ 14,402      $  4,983
                                                   --------      --------

Shares used for basic per share computation
     weighted average shares outstanding            100,719        98,324

Effect of dilutive securities:

     Stock options                                    5,014         2,174
                                                   --------      --------

Shares used for diluted per share computation       105,733       100,498
                                                   ========      ========

Net income per share:

     Basic                                         $    .14      $    .05
                                                   ========      ========

     Diluted                                       $    .14      $    .05
                                                   ========      ========






                                    8


<PAGE>   9



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

RESULTS OF OPERATIONS

GENERAL

     Certain statements made herein, including, without limitation, statements
regarding increased market acceptance of ATM and LAN switching products,
statements regarding the Company's pricing strategies and resulting effects on
revenue and gross margins and statements regarding the Company's sales and
marketing strategies, may be deemed to be forward-looking statements that
involve risks and uncertainties. Such statements should be read in conjunction
with certain cautionary statements set forth herein and the list of risk factors
set forth in the Company's Annual Report on Form 10-K for the year ended March
31, 1998 (the "Form 10-K"). Such factors could cause actual results to differ
materially from those expressed in any forward-looking statements contained
herein.

QUARTER ENDED JUNE 30, 1998 COMPARED WITH QUARTER ENDED JUNE 30, 1997

     REVENUE. Revenue increased by 51% to $143.7 million in the quarter ended
June 30, 1998, from $95.4 million in the quarter ended June 30, 1997. The
distribution of revenue from sales to domestic and foreign customers was 70% and
30%, respectively, in the quarter ended June 30, 1998. This compares with 71%
and 29%, respectively, in the corresponding quarter in 1997. In the quarter
ended June 30, 1998, the distribution of revenue from sales to foreign customers
by geographic region was 21%, 4% and 5% for Europe (which includes Middle East
and Africa), Pacific Rim and other, respectively. Geographic mix for the
corresponding quarter in 1997 was 16%, 4% and 9%, respectively. The increase in
revenue dollars was attributable to the increased market acceptance of ATM and,
to a lesser extent, LAN switching products.

     The Company measures overall unit volume for its switching products based
on the number of ATM ports or network connections shipped. The total number of
ATM ports shipped in the quarter ended June 30, 1998 was 49,500 as compared with
25,000 in the corresponding quarter in 1997. The total installed base of ATM
ports as of June 30, 1998 was 360,000 as compared with 185,000 at June 30, 1997.
The total number of LAN switching ports shipped in the quarter ended June 30,
1998 was 138,500 as compared with 107,000 in the previous year's corresponding
quarter. The total number of adapter cards shipped in the quarter ended June 30,
1998 was 13,000 as compared with 7,100 in the previous year's corresponding
quarter. The total installed base of adapter cards as of June 30, 1998 was
124,000 as compared with 69,000 as of June 30, 1997. In the quarter ended June
30, 1998, revenue mix, as a percentage of revenue, among ATM switching products,
LAN switching products, adapter cards and other revenue (principally service
support and development contracts) was 61%, 24%, 3% and 12%, respectively.
Revenue mix for the corresponding quarter in 1997 was 54%, 30%, 4% and 12%,
respectively. Average selling price per ATM port during the quarter ended June
30, 1998 was $1,800 as compared to $2,100 in the corresponding quarter in 1997.
Average selling price per LAN switching port was $245 in the quarter ended June
30, 1998 as compared to $270 in the corresponding quarter in 1997. Average
selling price for adapter cards shipped during the quarter ended June 30, 1998
was $380, as compared to $525 in the previous year's quarter ended June 30,
1997. In January of 1998, the Company reduced the price of certain of its ATM
workgroup products by up to 40%.

     GROSS PROFIT. Gross profit increased to $80.2 million or 55.8% as a
percentage of revenue in the quarter ended June 30, 1998 as compared to gross
profit of $53.2 million or 55.8% as a percentage of revenue in the corresponding
quarter in 1997. The dollar increase in gross profit was largely attributable to
the increase in revenue. The Company intends to price its products
competitively. There can be no assurance that gross profit percentage can be
maintained at the current level.


                                       9
<PAGE>   10



     RESEARCH AND DEVELOPMENT. Research and development expense was $18.4
million or 12.8% of revenue in the quarter ended June 30, 1998 as compared to
$15.9 million or 16.7% of revenue in the corresponding quarter in 1997. The
increase in research and development expense in dollars was largely attributable
to increased payroll costs, purchases of research and development materials and
depreciation. The decrease in research and development expense as a percentage
of revenue was primarily attributable to increased revenue absorbing a greater
portion of the Company's expenses. The number of employees of the Company
engaged in research and development decreased to 406 at June 30, 1998 from 420
at June 30, 1997.

     SALES AND MARKETING. Sales and marketing expense was $38.4 million or 26.7%
of revenue for the quarter ended June 30, 1998 as compared to $27.9 million or
29.3% of revenue in the corresponding quarter in 1997. The increase in sales and
marketing expense in dollars was largely the result of hiring additional sales,
marketing and support personnel (including training and documentation) and
increased advertising costs. The decrease in sales and marketing expense as a
percentage of revenue was primarily attributable to increased revenue absorbing
a greater portion of the Company's expenses. The number of employees of the
Company engaged in sales and marketing activities increased to 851 at June 30,
1998 from 587 at June 30, 1997. The Company expects to continue to increase
sales and marketing expenses in dollars, but not as a percentage of revenue,
both domestically and internationally as a part of its continuing effort to
expand its markets, introduce new products, build marketing staff and programs
and expand its international presence.

     GENERAL AND ADMINISTRATIVE. General and administrative expense was $6.9
million or 4.8% of revenue in the quarter ended June 30, 1998 as compared to
$4.8 million or 5.0% of revenue in the corresponding quarter in 1997. The
increase in general and administrative expense in dollars was largely due to
increased salary costs, increased hiring of administrative staff, including
those engaged in systems administration, accounting and human resources and
increased costs for professional services. The decrease in general and
administrative expense as a percentage of revenue was primarily attributable to
increased revenue absorbing a greater portion of the Company's expenses. The
number of employees of the Company engaged in general and administrative
activities increased to 178 at June 30, 1998 from 146 at June 30, 1997. The
Company plans to make appropriate expenditures in the general and administrative
organization as necessary, but does not expect the overall expenditures to
increase materially as a percentage of revenue.

     INTEREST INCOME. Interest income, net of interest expense, was $3.8 million
in the quarter ended June 30, 1998 as compared to $3.0 million in the
corresponding quarter in 1997. The increase in interest income is principally
due to an increase in the Company's average cash balance.

     INCOME TAXES. The provision for income taxes was $5.6 million, or an
effective rate of 28%, in the quarter ended June 30, 1998 as compared to $2.6
million, or 34%, in the previous year's quarter ended June 30, 1997. The
decrease in the effective tax rate is primarily the result of certain tax
advantages associated with the operation of the Dublin, Ireland manufacturing
facility.

YEAR 2000

       The Company believes that all of its current products are Year 2000
compliant. However, certain products previously sold by the Company may not be
Year 2000 compliant, and the Company has undertaken a study to determine what
actions may be appropriate for the Company to take with respect to any such
products which continue to be used by customers. The Company believes that the
costs associated with any such actions would not have a material effect on its
financial position or results of operations.


                                       10
<PAGE>   11


     The Company believes that most of its internal information systems are Year
2000 compliant, in that they will be able to distinguish accurately between 20th
century and 21st century dates, and that the costs of converting or replacing
those that are not Year 2000 compliant will not have a material adverse effect
on the Company's financial position or results of operations. However, the
information systems of the Company's suppliers and customers may not be Year
2000 compliant, and it is possible that various business functions which require
the interaction of the Company's systems with those of suppliers or customers
will fail or malfunction in the Year 2000. In addition, it is possible that the
Company's revenue may be adversely affected if current and prospective customers
divert their spending resources away from networking equipment over the next two
years in order to correct or replace information systems which are not Year 2000
compliant.

FUTURE GROWTH SUBJECT TO RISKS

     The Company's quarterly and annual operating results are affected by a wide
variety of risks and uncertainties as discussed in the Company's 1998 Annual
Report on Form 10-K. This Quarterly Report on Form 10-Q should be read in
conjunction with the 1998 Form 10-K, particularly the section entitled "Certain
Risk Factors."

     The networking industry is highly competitive and is characterized by
rapidly changing technology, evolving industry standards and frequent new
product introductions which could render the Company's products noncompetitive
or obsolete. Because the Company's business strategy is based upon the belief
that ATM will be the technology of choice for the information technology
infrastructure, the Company's business, financial position and results of
operations would be materially adversely affected if ATM fails to gain broad
commercial acceptance or if other networking technologies gain competitive
advantages over ATM. Even if ATM achieves broad commercial acceptance, there can
be no assurance that the Company can continue to successfully develop and
introduce new products and enhancements given the fact that many of the
Company's competitors have significantly greater financial, technological and
personnel resources than does the Company. The introduction of a new line of
products based on multi-service WAN adaptation and concentration technology for
the service provider market, previously announced by the Company, has been
delayed, and there can be no assurance that this product will be introduced or,
if it is introduced, that it will be successful in the marketplace.

     Although the Company has historically experienced increasing sales on an
annual basis, the rate of revenue growth has slowed in the last two fiscal
years. The Company's rate of revenue growth may continue to decline, and there
can be no assurance that the Company will experience revenue growth in the
future at historic rates or at all.

     The Company has experienced fluctuating operating results on a quarterly
and annual basis and may continue to do so. These fluctuations are caused by
many factors, including a disproportionate share of sales occurring late in a
given quarter, the introduction of new products and technologies by competitors,
the pattern and seasonality of customer purchasing cycles, variations in the mix
of products sold and sales channels, price competition, manufacturing lead times
and changes in economic conditions. These factors make it difficult to predict
operating results for any given period, and have led to, and are likely to
continue to lead to, volatility in the market price of the Company's Common
stock.

     The Company competes in international markets and is, accordingly, subject
to numerous risks. Sales to foreign customers in fiscal 1998 decreased in
dollars and as a percentage of revenue in comparison with fiscal 1997, and there
can be no assurance that such sales will not continue to decline. In addition,
the Company's international business may be adversely affected by foreign
regulatory requirements, changes in demand resulting from fluctuations in
currency exchange rates and local purchasing practices, difficulties in
distribution, slower payment of invoices, increases in duty rates, foreign
political and economic conditions and constraints upon international trade.


                                       11
<PAGE>   12



     The Company has in the past and may in the future make acquisitions of
companies and technologies. Acquisitions are subject to numerous risks, and can
increase research and development and other expenses without necessarily leading
to the introduction of new products or enhancements. There can be no assurance
that the Company can successfully identify acquisition opportunities or that any
acquisitions that are completed will be successfully integrated with the
Company's operations.

     The Company's gross margins have been adversely affected and may continue
to be adversely affected by competitive pricing pressures and a change in the
mix of products sold toward lower-margin workgroup and desktop products for both
ATM and Ethernet. In addition, the Company's operating margins may be adversely
affected by the need to hire additional sales, marketing and other personnel.
The Company plans its operating expense levels based primarily on forecasted
revenue, and a shortfall in revenue would be likely to lead to operating results
being lower than expected. Any such failure to meet expectations could result in
a decrease in the market price of the Company's Common stock.

LIQUIDITY AND CAPITAL RESOURCES

     The Company has financed most of its working capital and capital
expenditure requirements to date primarily through cash proceeds from public
offerings and cash generated from operations.

     Net cash provided by operations was $8.8 million for the quarter ended June
30, 1998. Net cash provided by operations was the result of net income and
increases to prepaid income taxes and income taxes payable offset somewhat by
decreases to accrued liabilities and increased inventory. The increase in
inventories was due to increased revenue. Net cash used by operations was $3.1
million for the quarter ended June 30, 1997 which resulted from increased
inventories and a decrease in accounts payable, somewhat offset by net income.
The increase in inventories was due to increased revenue. The Company's
investing activities to date have been for the purchase of fixed assets to
support the Company's growth.

     At June 30, 1998, the Company had cash and cash equivalents of
approximately $121.5 million, short-term investments of $201.7 million and an
unused line of credit of $20 million.

     In December 1995, the Company entered into an agreement to lease
headquarters and operating facilities constructed on land that was purchased by
the Company. The Company is now occupying the facilities. In October 1997, the
lessor finalized permanent financing arrangements for the facilities with a
group of lenders. The total amount financed was $41 million. The Company is
leasing the facilities under a ten-year operating lease and has options, subject
to the lenders' and lessor's consent, to renew the lease for two additional
five-year terms. Annual minimum rental payments under the lease are
approximately $3.3 million and commenced in calendar year 1998. The Company has
guaranteed repayment of up to approximately $32 million of the lenders'
financing of the facilities, which includes pledged amounts of approximately
$29.2 million, as of June 30, 1998, of securities it holds as collateral for
specified obligations of the lessor. In addition, under the terms of the lease,
the Company is required to comply with certain financial covenants including the
maintenance of a minimum tangible net worth. Other restrictive covenants limit
indebtedness and the payment of dividends.

     The Company believes that its existing sources of liquidity and internally
generated cash will satisfy the Company's projected cash needs through at least
the next twelve months. The Company may require additional sources of liquidity
to fund future growth, including additional equity offerings or debt financing.

      In July and August 1997, the Company was notified that it was a party to
seven nearly identical class action lawsuits, filed in the United States
District Court for the Western District of Pennsylvania, alleging certain
violations of federal securities laws by the Company and certain of its
officers, who were named as defendants in the suits, arising from alleged
misstatements or omissions by the Company. Plaintiffs seek compensatory damages
for injuries allegedly incurred by purchasers of the Company's stock during


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the period from October 17, 1996 through April 1, 1997, inclusive. Pursuant to
court order, the lawsuits were consolidated and a consolidated amended complaint
was filed by the lead plaintiffs. The Company and the individual defendants
subsequently filed their answer to the consolidated amended complaint. The
Company believes the allegations in the consolidated amended complaint are
completely without merit and intends to defend these actions vigorously.
Management believes that the ultimate outcome of these claims will not have a
material adverse effect on the results of operations or financial position of
the Company.

     To date, inflation has not had a material impact on the Company's financial
results.

NEW ACCOUNTING PRONOUNCEMENTS

     In June 1998, the FASB issued Statement of Financial Accounting Standards
No. 133 "Accounting for Derivative and Similar Financial Instruments and for
Hedging Activities" ("SFAS 133"). This new standard requires recognition of all
derivatives as either assets or liabilities at fair value. Based upon the
hedging strategies currently used and the level of activity related to
derivative instruments, the Company does not anticipate the effect of adoption
to have a material impact on either financial position or results of operations.
The Company will implement SFAS 133 in fiscal year 2000, as required.

     In June 1997, the FASB issued Statement of Financial Accounting Standards
No. 130 "Reporting Comprehensive Income" ("SFAS 130") and Statement of Financial
Accounting Standards No. 131 "Disclosures about Segments of an Enterprise and
Related Information" ("SFAS 131"). During the quarter, the company adopted SFAS
130. This statement establishes standards for reporting and the display of
comprehensive income and its components in a primary financial statement.

ITEM 3.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

Not Applicable.


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PART II. OTHER INFORMATION

Item 1.  Legal Proceedings.

         In July and August 1997, the Company was notified that it was a party
to seven nearly identical class action lawsuits, filed in the United States
District Court for the Western District of Pennsylvania, alleging certain
violations of federal securities laws by the Company and certain of its
officers, who were named as defendants in the suits, arising from alleged
misstatements or omissions by the Company. Plaintiffs seek compensatory damages
for injuries allegedly incurred by purchasers of the Company's stock during the
period from October 17, 1996 through April 1, 1997, inclusive. Pursuant to court
order, the lawsuits were consolidated and a consolidated amended complaint was
filed by the lead plaintiffs. The Company and the individual defendants
subsequently filed their answer to the consolidated amended complaint. The
Company believes the allegations in the consolidated amended complaint are
completely without merit and intends to defend these actions vigorously.
Management believes that the ultimate outcome of these claims will not have a
material adverse effect on the results of operations or financial position of
the Company.


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

         a)       Exhibits.

                  The exhibits listed below are filed or incorporated by 
         reference as part of this quarterly report on Form 10-Q:

         3.1      Amended and Restated Certificate of Incorporation of FORE
         Systems, Inc. (as amended by Certificate of Amendment dated May 6,
         1996) (incorporated by reference to Exhibit 3.1 to the Company's Annual
         Report on Form 10-K for the fiscal year ended March 31, 1996).

         3.2      Second Amended and Restated Bylaws of FORE Systems, Inc.
         (as amended through March 5, 1997) (incorporated by reference to
         Exhibit 3.2 to the Company's Annual Report on Form 10-K for the fiscal
         year ended March 31, 1997).

         27.1.    Financial Data Schedule.

         b)       Reports on Form 8-K.

                  The Company did not file any Reports on Form 8-K during the 
         quarter ended June 30, 1998.





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                                   SIGNATURES

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



                                     FORE SYSTEMS, INC.
                                     (Registrant)



Date:  August 13, 1998               /s/ Bruce E. Haney
                                     -------------------------------------------
                                     Bruce E. Haney
                                     Senior Vice President and Chief
                                     Financial Officer
                                     (Authorized Officer and Principal Financial
                                     Officer)










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                                  EXHIBIT INDEX

Exhibit No.   Description


27.1          Financial Data Schedule
















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