<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 September 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: 0-20124
                                           
                                           
                           NETWORK COMPUTING DEVICES, INC.
                (Exact name of registrant as specified in its charter)
                                           
                                           
             California                          77-0177255
    (State or other jurisdiction of            (I.R.S. Employer
    incorporation or organization)            Identification No.)

              350 North Bernardo Avenue, Mountain View, California 94043
                (Address of principal executive offices and zip code)
                                           
                    Registrant's telephone number:  (650) 694-0650
                                           
                                           
Indicate by check mark whether the registrant (1) has filed all reports 
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 
1934 during the preceding 12 months (or for such shorter period that the 
registrant was required to file such reports) and (2) has been subject to 
such filing requirements for the past 90 days.

                                  Yes   X   No 
                                       ---      ---
                                           
                                           
   The number of shares outstanding of the Registrant's Common Stock was 
16,379,595 at October 31, 1997.

<PAGE>

                          NETWORK COMPUTING DEVICES, INC.

                                        INDEX
                                           



                     DESCRIPTION                                  PAGE NUMBER
---------------------------------------------------------         -----------

Cover Page                                                              1

Index                                                                   2

Part I:  Financial Information

    Item 1:   Financial Statements

            Condensed Consolidated Balance Sheets as of 
              September 30, 1997 and December 31, 1996                  3

            Condensed Consolidated Statements of Operations 
              for the Three- and Nine-Month Periods Ended 
              September 30, 1997 and 1996                               4

            Condensed Consolidated Statements of Cash Flows 
              for the Nine-Month Periods Ended September 30, 
              1997 and 1996                                             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
    
    Item 6:   Exhibits and Reports on Form 8-K                         16
    
Signature                                                              17




                                       2

<PAGE>

                        NETWORK COMPUTING DEVICES, INC.

                        PART I:  FINANCIAL INFORMATION
                         ITEM 1.  FINANCIAL STATEMENTS

                     CONDENSED CONSOLIDATED BALANCE SHEETS
                                (IN THOUSANDS)


<TABLE>
<CAPTION>

                                    ASSETS
                                                      September 30,   December 31,
                                                          1997            1996
                                                      -------------   ------------
                                                      (UNAUDITED)
<S>                                                   <C>             <C>
Current assets:
  Cash and cash equivalents                            $  24,787      $  23,832
  Short-term investments                                  12,624         11,839
  Accounts receivable, net                                18,012         21,549
  Inventories                                             14,724          9,776
  Refundable and deferred income tax assets                4,395          8,287
  Other current assets                                     2,835          3,652
                                                      -----------     ----------
Total current assets                                      77,377         78,935

Property and equipment, net                                4,604          4,895
Other assets                                               1,637          1,863
                                                      -----------     ----------
Total assets                                           $  83,618      $  85,693
                                                      -----------     ----------
                                                      -----------     ----------


                        LIABILITIES AND SHAREHOLDERS' EQUITY

Current liabilities:
  Accounts payable                                      $  9,412       $  4,383
  Accrued expenses                                         9,471          9,337
  Current portion of capital lease obligations               198            748
  Deferred revenue                                         4,262          3,486
                                                      -----------     ----------
Total current liabilities                                 23,343         17,954
Long-term portion of capital lease obligations               182            314
Shareholders' equity:
  Undesignated preferred stock                                 -              -
  Common stock                                            59,285         68,217
  Retained earnings (accumulated deficit)                    808           (792)
                                                      -----------     ----------
Total shareholders' equity                                60,093         67,425
                                                      -----------     ----------
Total liabilities and shareholders' equity             $  83,618      $  85,693
                                                      -----------     ----------
                                                      -----------     ----------

</TABLE>

                           See accompanying notes.

                                       3


<PAGE>

                         NETWORK COMPUTING DEVICES, INC.

                 CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
               (UNAUDITED - IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

<TABLE>
<CAPTION>

                                                     Three Months Ended September 30,   Nine Months Ended September 30,
                                                     --------------------------------   -------------------------------
                                                           1997             1996              1997             1996
                                                     ---------------   --------------   ---------------   -------------
<S>                                                  <C>               <C>              <C>               <C>
Net revenues:
    Hardware products and services                      $  26,532         $  22,642        $  76,347      $  69,742
    Software licenses and services                          8,114             5,309           23,725         17,976
                                                     ---------------   --------------   ---------------   -------------
Total net revenues                                         34,646            27,951          100,072         87,718
Cost of revenues:                                                                     
    Hardware products and services                         19,764            14,875           53,600         55,592
    Software licenses and services                          2,579             1,779            7,121          5,964
                                                     ---------------   --------------   ---------------   -------------
Total cost of revenues                                     22,343            16,654           60,721         61,556
                                                     ---------------   --------------   ---------------   -------------
                                                                                      
Gross margin                                               12,303            11,297           39,351         26,162
Operating expenses:                                                                   
  Research and development                                  3,703             3,207           10,674         11,346
  Marketing and selling                                     7,379             6,181           22,749         25,140
  General and administrative                                1,722             2,219            5,064          8,255
  Credit on litigation settlement                            (147)                -             (147)             -
                                                     ---------------   --------------   ---------------   -------------
Total operating expenses                                   12,657            11,607           38,340         44,741
                                                     ---------------   --------------   ---------------   -------------
                                                                                      
Operating income (loss)                                      (354)             (310)           1,011        (18,579)
Interest income, net                                          435               343            1,452          1,167
Other income                                                    -                 -              200              -
Gain on sale of product lines                                   -                 -                -          6,932
                                                     ---------------   --------------   ---------------   -------------
                                                                                      
Income (loss) before income taxes                              81                33            2,663        (10,480)
Provision for income taxes (income tax benefit)                30                13            1,063         (4,193)
                                                     ---------------   --------------   ---------------   -------------
                                                                        
Net income (loss)                                       $      51         $      20        $   1,600      $  (6,287)
                                                     ---------------   --------------   ---------------   -------------
                                                     ---------------   --------------   ---------------   -------------
                                                                                      
Net income (loss) per share:                                                          
     Primary                                            $    0.00         $    0.00        $    0.09      $   (0.38)
                                                     ---------------   --------------   ---------------   -------------
                                                     ---------------   --------------   ---------------   -------------
     Fully diluted                                      $    0.00         $    0.00        $    0.09      $   (0.38)
                                                     ---------------   --------------   ---------------   -------------
                                                     ---------------   --------------   ---------------   -------------
                                                                                      
Shares used in per share computations:                                                
     Primary                                               17,848            17,122           18,520         16,460
                                                     ---------------   --------------   ---------------   -------------
                                                     ---------------   --------------   ---------------   -------------
     Fully diluted                                         17,957            17,700           18,520         16,460
                                                     ---------------   --------------   ---------------   -------------
                                                     ---------------   --------------   ---------------   -------------

</TABLE>

                           See accompanying notes.

                                       4
<PAGE>

                       NETWORK COMPUTING DEVICES, INC.

               CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                         (UNAUDITED - IN THOUSANDS)

<TABLE>
<CAPTION>
                                                                    Nine Months Ended September 30,
                                                                    -------------------------------
                                                                          1997           1996
                                                                    --------------   --------------
<S>                                                                 <C>              <C>
Cash flows from operations:
 Net income (loss)                                                    $   1,600        $  (6,287)
 Reconciliation to cash provided (used) by operations:                                
   Depreciation and amortization                                          2,403            3,227
   Gain on sale of product lines                                              -           (6,932)
   Deferred income taxes                                                    862           (2,563)
   Other, net                                                                 -              526
   Changes in:                                                                        
     Accounts receivable, net                                             3,537            9,634
     Inventories                                                         (4,948)             445
     Refundable income taxes                                              3,030                -
     Other current assets and other                                         817           (1,945)
     Accounts payable                                                     5,029           (8,726)
     Accrued expenses                                                       134           (1,948)
     Deferred revenue                                                       776            1,179
                                                                    --------------   --------------
   Cash provided (used) by operations                                    13,240          (13,390)
   Cash flows from investing activities:                                              
     Short-term investments, net                                           (785)          10,229
     Proceeds from sale of product lines                                      -            8,625
     Changes in other assets                                                226              249
     Property and equipment purchases, net                               (2,112)          (2,105)
                                                                    --------------   --------------
   Cash provided (used) by investing activities                          (2,671)          16,998
   Cash flows from financing activities:                                              
     Principal payments on capital lease obligations                       (682)          (1,037)
     Repurchases of common stock                                        (10,719)             (89)
     Proceeds from issuance of common stock, net                          1,787            2,876
                                                                    --------------   --------------
   Cash provided (used) by financing activities                          (9,614)           1,750
   Increase in cash and equivalents                                         955            5,358
   Cash and equivalents:                                                              
     Beginning of period                                                 23,832           13,364
                                                                    --------------   --------------
     End of period                                                    $  24,787        $  18,722
                                                                    --------------   --------------
                                                                    --------------   --------------

</TABLE>

                           See accompanying notes.

                                       5
<PAGE>

                        NETWORK COMPUTING DEVICES, INC.
             NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

BASIS OF PRESENTATION

The unaudited condensed consolidated financial information of Network Computing
Devices, Inc. (the "Company") furnished herein reflects all adjustments,
consisting only of normal recurring adjustments, which in the opinion of
management are necessary to fairly state the Company's consolidated financial
position, results of operations and cash flows for the periods presented.  This
Quarterly Report on Form 10-Q should be read in conjunction with the
consolidated financial statements and notes thereto included in the Company's
1996 Annual Report on Form 10-K.  The consolidated results of operations for the
three- and nine-month periods ended September 30, 1997 are not necessarily
indicative of the results to be expected for any subsequent quarter or for the
entire year ending December 31, 1997.  Certain financial statement amounts from
1996 have been reclassified to conform to the current year's presentation.

PER SHARE INFORMATION  

Per share information is computed using the weighted-average number of common
and dilutive common equivalent shares outstanding.  For primary and fully
diluted earnings per share, common equivalent shares consist of the incremental
shares issuable upon the assumed exercise of dilutive stock options (using the
treasury stock method).  The effect of common equivalent shares is not included
in earnings per share calculations during periods in which such effect would be
antidilutive.  The Financial Accounting Standards Board recently issued
Statement of Financial Accounting Standards ("SFAS") No. 128, "Earnings Per
Share."  SFAS No. 128 requires the presentation of basic earnings per share
("EPS") and, for companies with complex capital structures, diluted EPS.  SFAS
No. 128 is effective for annual and interim periods ending after December 15,
1997.  The Company expects that for profitable periods, basic EPS will be higher
than primary earnings per share as presented in the accompanying consolidated
financial statements, and diluted EPS will not differ materially from fully
diluted earnings per share as presented in the accompanying financial
statements.  Computations for loss periods should not change significantly.

INVENTORIES

Inventories, stated at the lower of standard cost, which approximates actual
cost on a first-in, first-out basis, or market, consisted of (in thousands):


                                              September 30,   December 31,
                                                   1997           1996
                                                   ----           ----

Purchased components and sub-assemblies         $ 12,650        $ 8,396
Work in process                                      761            240
Finished goods                                     1,313          1,140
                                                --------        -------
                                                $ 14,724        $ 9,776
                                                --------        -------
                                                --------        -------

INTEREST AND TAX PAYMENTS

Interest payments, primarily related to interest on capital lease liabilities,
were $9,000 and $33,000 for the third quarters of 1997 and 1996, respectively,
and $45,000 and $98,000 for the first nine months of 1997 and 1996,
respectively.  Income tax payments were $71,300 and $185,000 for the third
quarter and first nine months of 1997, while income tax refunds of $27,800 and
$3.0 million were received during the third quarter and first nine months of
1997.  Income tax payments were $209,000 for the first nine months of 1996.

1997 STOCK REPURCHASE PROGRAM

In April 1997, the Company's Board of Directors adopted a program to repurchase
from time to time at management's discretion up to 1,000,000 shares of the
Company's common stock on the open market during the 12-month period ending
April 30, 1998 at prevailing market prices.  Repurchases were made under the
program using the Company's cash resources.  



                                       6
<PAGE>

                        NETWORK COMPUTING DEVICES, INC.
             NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


Shares repurchased are available for the issuance under the Company's stock 
plans and for other corporate purposes.  In the third quarter of 1997, a 
total of 708,500 shares were repurchased at prices ranging from $8.38 to 
$12.00 per share for a total purchase price of $7.3 million.  Through 
September 30, 1997, the repurchase program was completed with an aggregate of 
1,000,000 shares repurchased at prices ranging from $8.38 to $12.00 per share 
for a total purchase price of $10.7 million.

In November 1997, the Company's Board of Directors adopted an additional program
to repurchase from time to time at management's discretion up to 1,000,000
shares of the Company's common stock on the open market during the 12 month
period ending October 31, 1998 at prevailing market prices.

MAJOR CUSTOMERS AND RELATED ACCOUNTS RECEIVABLE

International Business Machines Corporation ("IBM") accounted for approximately
33% and 25% of the Company's revenues for the third quarter and first nine
months of 1997, respectively.  At September 30, 1997, related accounts
receivable due from IBM were approximately $5.2 million, or 29% of the total
accounts receivable balance.




                                       7
<PAGE>

                        NETWORK COMPUTING DEVICES, INC.


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

OVERVIEW

THIS DISCUSSION INCLUDES FORWARD-LOOKING STATEMENTS, INCLUDING BUT NOT 
LIMITED TO STATEMENTS WITH RESPECT TO THE COMPANY'S FUTURE FINANCIAL 
PERFORMANCE, OPERATING RESULTS, PLANS AND OBJECTIVES.  ACTUAL RESULTS MAY 
DIFFER MATERIALLY FROM THOSE CURRENTLY ANTICIPATED DEPENDING UPON A VARIETY 
OF FACTORS, INCLUDING THOSE DESCRIBED BELOW UNDER THE SUB-HEADING, "FUTURE 
PERFORMANCE AND RISK FACTORS."

THE FOLLOWING DISCUSSION SHOULD BE READ ONLY IN CONJUNCTION WITH THE 
UNAUDITED CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS AND NOTES 
THERETO INCLUDED IN PART I -- ITEM 1 OF THIS QUARTERLY REPORT ON FORM 10-Q, 
AND THE AUDITED CONSOLIDATED FINANCIAL STATEMENTS AND NOTES THERETO AND 
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF 
OPERATIONS FOR THE YEAR ENDED DECEMBER 31, 1996, CONTAINED IN THE COMPANY'S 
1996 ANNUAL REPORT ON FORM 10-K.

The Company provides network computer hardware and software that delivers 
high-performance, easy-to-manage, simultaneous access to any application on 
an enterprise network from any desktop.  The Company's product lines include 
the EXPLORA and HMX families of Universal Network Computers, WINCENTER 
PRO-TM-multi-user WINDOWS NT-Registered Trademark- application server 
software, and PC-XWARE-Registered Trademark- network computer software for 
PCs. 

During 1996, the Company underwent significant changes to its operations, 
including changes in senior management, product focus, and business unit 
organization.  During the first half of the year, the Company initiated and 
completed the disposition of two software product lines, MARINER and 
Z-MAIL-Registered Trademark-.  Also during the first half of 1996, the 
Company recorded operating losses of $18.3 million, and combined cash and 
short-term investments had declined from $36.2 million at December 31, 1995 
to $26.4 million at June 30, 1996.  By the end of the second quarter, the 
Company announced that it had appointed a new President and Chief Executive 
Officer, Robert G. Gilbertson, and a new Executive Vice President of 
Operations & Finance and Chief Financial Officer, Rudolph G. Morin.  Shortly 
thereafter, Doug Klein, a founder of the Company, was appointed to Senior 
Vice President & Chief Technology Officer and Lorraine Hariton, the Vice 
President of Business Development, was added to the senior management team.  
In September 1996, Cecil M. Dye was appointed Senior Vice President of Sales 
& Marketing.  This new senior management team initiated a "turnaround" 
program that included recombining its Systems and Software business units, 
spending and hiring controls, significant reorganization of the Research & 
Development and Sales & Marketing functions and asset management initiatives. 
 By the end of the second half, profitable, cash-flow positive operations had 
been achieved.  The Company's ability to continue this trend is subject to 
various risks and uncertainties, however, and there is no assurance that this 
trend toward profitability will continue into the future.  See below under 
"Future Performance and Risk Factors."

In June 1996, the Company announced an agreement with International Business 
Machines Corporation ("IBM") for the joint development of a network 
application terminal for resale by IBM.  In November 1997, the agreement (the 
"IBM Agreement") was amended to include a renewal through December 31, 2000.  
Under the IBM Agreement as amended, IBM agreed to fund a portion of the 
Company's development efforts through the first quarter of 1998. The IBM 
Agreement as amended further provides for IBM to purchase a substantial 
portion of its requirements for such products from the Company during 1997 
through December 31, 2000.  In March 1997, IBM commenced shipping production 
versions of such products.  However, the volume of sales to IBM under the IBM 
Agreement may be difficult to predict.  See below under "Future Performance 
and Risk Factors --Fluctuations in Operating Results." 

During 1995, the Company took various actions to reorganize the two basic 
components of its business into two separate business units: the Systems 
business, consisting of the Company's network computers and related software; 
and the Software business, consisting of its lines of PC connectivity 
software and, initially, its electronic messaging software and its MARINER 
Internet access software.  In addition, the Company took steps to consolidate 
the management and sales organizations of the geographically separated 
segments of its Software business and reoriented its software sales strategy 
toward the increased use of distributors, value added resellers ("VARs") and 
other resellers.

During the third quarter of 1995, the Company created and began implementing a
plan to restructure the business to improve its operating performance.  The plan
included substantial modifications to the Company's manufacturing processes,
phasing out lower margin products, a reduction in the amount of leased space,
and a reduction in the number of employees.  During 



                                       8
<PAGE>

                        NETWORK COMPUTING DEVICES, INC.


the third quarter of 1995, the Company recognized charges totaling $7.5 
million for the implementation of this plan.  Included in these restructuring 
charges were amounts related to the severance of personnel, phase-out of 
certain products, and costs associated with the termination of lease 
obligations.  In the fourth quarter of 1996, the Company substantially 
concluded such restructuring activities and determined that $1.1 million in 
related accruals was in excess of amounts required.  As a result, the Company 
recognized a $1.1 million credit for business restructuring during the fourth 
quarter of 1996.  The credit relates primarily to lease obligations that were 
exited or subleased at dates or rates more favorable than those anticipated 
at the time of the initial restructuring plan.

In 1994, the Company began the development of MARINER, an Internet access and 
navigation tool which it intended to market to large enterprises, as well as 
to original equipment manufacturers ("OEMs") and VARs.  In January 1995, the 
Company entered into a software development and licensing agreement with AT&T 
to develop a custom version of MARINER for AT&T (the "AT&T Agreement").  The 
AT&T Agreement provided for total minimum royalties of $15 million through 
1998, and contemplated the development of additional Internet access products 
for license to AT&T.  In September 1995, the AT&T Agreement was amended to 
terminate these provisions for additional product development and to provide 
instead that the Company would be paid fees totaling $9 million through 1996 
for development work completed at the time of the amendment and for a license 
to evaluate the MARINER product.  In 1995, the Company recognized license 
fees totaling $6.8 million under the AT&T Agreement and received $500,000 in 
fees for non-recurring engineering costs that offset research and development 
expenses.  In 1995, the Company also recognized revenues of $300,000 from 
other customers related to the MARINER product line.  In 1996 and the first 
nine months of 1997, the Company recognized license fees totaling $426,000 
and $1.2 million, respectively.  No additional related revenues will be 
recognized in the future.  In light of the Company's inability to develop a 
long-term relationship with AT&T, as well as other changes in the Internet 
market, including the development of intense price competition among vendors 
of Internet access products, the Company determined in late 1995 to sell the 
MARINER product line and focus its attention on its core business of 
providing desktop information access solutions for network computing 
environments.  In February 1996, the Company sold the MARINER product line to 
FTP Software, Inc. ("FTP") for $9.8 million.  The Company paid FTP a one-time 
license fee of $2.5 million for the right to incorporate MARINER technology 
into future versions of the Company's hardware and software products.  The 
net gain recognized on this transaction was $7.0 million.

In February 1994, the Company acquired all of the outstanding stock of Z-Code 
Software Corp. ("Z-Code"), a developer of electronic mail and messaging 
application products (collectively, "Z-MAIL") for open system environments.  
The Company's Z-MAIL electronic messaging product was a part of the Company's 
Software business unit.  In light of disappointing operating results, 
intensifying competition in this market, and other related factors, the 
Company determined during the second quarter of 1996 to sell or discontinue 
this product line.  In June 1996, the Company sold its Z-MAIL product line to 
NetManage, Inc. for a total sales price of $1.3 million.  The net loss 
recognized on this transaction was $27,000.

RESULTS OF OPERATIONS

As mentioned above under "Overview," the Company determined to recombine its 
two former business units (i.e., "Systems" and "Software") into a single 
operation in June 1996.  Although the Company is now managed as one operating 
entity, the Company is reporting hardware and software revenues 
independently.  Revenues, cost of revenues and gross margins relating to 
prior operating periods have been conformed to the current presentation, and 
the following discussions of net revenues and gross margins address the 
revised presentation.

TOTAL NET REVENUES

Total net revenues were $34.6 million and $28.0 million for the third 
quarters of 1997 and 1996, respectively, representing an increase of 24%, and 
$100.1 million and $87.7 million for the first nine months of 1997 and 1996, 
respectively, representing an increase of 14%.  Total international revenues 
were 34% and 32% of total net revenues for the third quarters of 1997 and 
1996, respectively, and 33% and 32% for the first nine months of 1997 and 
1996, respectively.  International revenues excluding revenues related to the 
IBM Agreement were 28% and 29% for the third quarter and first nine months of 
1997, down from 32% for the same periods of 1996.  There were no 
international IBM revenues recognized in the third quarter and first nine 
months of 1996. Revenues under the IBM Agreement accounted for approximately 
33% and 25% of the Company's revenues for the third quarter and first nine 
months of 1997, respectively.  No single customer accounted for greater than 
10% of the Company's revenues in the same periods of 1996.



                                       9
<PAGE>

                        NETWORK COMPUTING DEVICES, INC.


HARDWARE REVENUES

Hardware revenues consist primarily of revenues from the sale of network 
computers, related hardware, and to a lesser extent, fees for related service 
activities.  Hardware revenues were $26.5 million and $22.6 million for the 
third quarters of 1997 and 1996, respectively, and $76.3 million and $69.7 
million for the first nine months of 1997 and 1996, respectively.  The 
increases in revenues were due to increased unit volume shipments, including 
revenues from IBM related to the IBM Agreement, partially offset by lower 
average selling prices.

SOFTWARE REVENUES

Software revenues consist primarily of revenues from the licensing of 
software products and related support services.  Current software products 
that are generating revenue include WINCENTER, the Company's multi-user 
WINDOWS NT application server software, PC-XWARE, the Company's network 
computer software for PCs, and NCDWARE-Registered Trademark-, the Company's 
proprietary network computer software.  Revenues from software and related 
services were $8.1 million and $5.3 million for the third quarters of 1997 
and 1996, respectively, and $23.7 million and $18.0 million for the first 
nine months of 1997 and 1996, respectively.  The increase in the software 
revenues resulted primarily from higher sales of WINCENTER and the related 
support revenues. This increase was offset in part for the first nine months 
by declines in revenues related to PC-XWARE and the absence of revenues 
related to the former Z-MAIL product line, which was sold during the second 
quarter of 1996.  Revenues related to the former Z-MAIL product line of $1.1 
million had been recognized in the first nine months of 1996, while no such 
revenues were recognized during the first nine months of 1997.  In addition, 
revenues related to the AT&T Agreement of $166,000 were recognized in the 
third quarter of 1997 while no such revenues were recognized in the third 
quarter of 1996.  Revenues related to the AT&T Agreement of $1.2 million were 
recognized in the first nine months of 1997 compared to $426,000 in the first 
nine months of 1996.  No additional revenues related to the AT&T Agreement 
will be recognized in the future.

GROSS MARGIN ON HARDWARE REVENUES

The Company's gross margin percentages on hardware revenues were 26% and 34% 
for the third quarters of 1997 and 1996, respectively, and 30% and 20% for 
the first nine months of 1997 and 1996, respectively.  The decrease in margin 
for the third quarter was primarily related to sale of IBM network computers 
which have lower margins than other NCD product lines.  The dramatic increase 
in margin in the first nine months of 1997 compared to the same period in 
1996 is primarily due to a charge of approximately $3.0 million incurred in 
the second quarter of 1996 to reduce the value of certain inventories to 
market price.  Also benefiting margin percentages in 1997 were declines in 
material costs, reflecting declines in the cost of certain semiconductor and 
other components. In addition, the Company benefited from certain reduced 
component prices related to volume purchase discounts in association with the 
IBM Agreement during the third quarter and first nine months of 1997 while no 
such purchasing benefits were realized in the same periods of 1996.  The 
Company currently anticipates that the mix of hardware OEM revenues as a 
component of total hardware revenues will continue to rise.  In addition, the 
Company plans to increase the mix of revenues generated through indirect 
channels.  The anticipated changes in the mix of revenues by sales channel 
are likely to result in overall reduced gross margin percentages on hardware 
revenues in future periods.

GROSS MARGIN ON SOFTWARE REVENUES

The Company's gross margin percentages on software revenues were 68% and 66% 
for the third quarters of 1997 and 1996, respectively, and 70% and 67% for 
the first nine months of 1997 and 1996, respectively.  The increase in the 
gross margin percentage for the third quarter of 1997 was primarily due to 
increased support revenues related to the WINCENTER product line.  This was 
offset slightly by a higher mix of WINCENTER revenues in 1997, which carry a 
lower margin due to higher third-party royalty costs.  The gross margin 
percentage for the first nine months of 1997 increased from the same period 
of 1996 due to increased sales of high margin WINCENTER software support and 
from increased AT&T revenues recognized in 1997 of $1.2 compared to $426,000 
in 1996, partially offset by reduced margin from increased WINCENTER sales 
and the absence of sales of higher margin Z-MAIL products and the reduction 
of PC-XWARE sales.  Certain technology used in the Company's products is 
licensed from third parties on a royalty-bearing basis.  The costs associated 
with such royalties increased substantially during 1996, and will continue to 
be a significant component of total software cost of sales.

RESEARCH AND DEVELOPMENT EXPENSES

Research and development ("R&D") expenses were $3.7 million and $3.2 million for
the third quarters of 1997 and 1996, respectively, and $10.7 million and $11.3
million for the first nine months of 1997 and 1996, respectively.  Increases in
the 


                                       10
<PAGE>

                        NETWORK COMPUTING DEVICES, INC.


third quarter of 1997 are primarily due to increased investment in research 
and development in the area of network computing products.  This increase is 
partially offset for the first nine months of 1997 by the absence of R&D 
expenses related to the MARINER and Z-MAIL product lines while spending on 
such product line development was a significant component of R&D expenses 
during the same period of 1996. As a percentage of net revenues, R&D expenses 
were 11% for the third quarters of 1997 and 1996, and 11% and 13% for the 
first nine months of 1997 and 1996, respectively.  The Company plans to 
maintain its current level of investment in research and development in the 
area of network computing products through 1997.

MARKETING AND SELLING EXPENSES

Marketing and selling expenses were $7.4 million and $6.2 million for the 
third quarters of 1997 and 1996, respectively, and $22.7 million and $25.1 
million for the first nine months of 1997 and 1996, respectively.  The 
increase in the third quarter 1997 expenses primarily relates to increased 
headcount necessary for increased sales.  The decreases in the first nine 
months of 1997 reflects lower labor and other employee-related expenses due 
to decreased headcount from the sale of the Z-MAIL and MARINER product lines. 
 The Company also experienced increased efficiencies in these areas resulting 
from the reconsolidation of the Company's remaining business units, which 
commenced in June of 1996.  As a percentage of net revenues, marketing and 
selling expenses were 21% and 22% for the third quarters of 1997 and 1996, 
respectively, and 23% and 29% for the first nine months of 1997 and 1996, 
respectively.

GENERAL AND ADMINISTRATIVE EXPENSES

General and administrative ("G&A") expenses were $1.7 million and $2.2 
million for the third quarters of 1997 and 1996, respectively, and $5.1 
million and $8.3 million for the first nine months of 1997 and 1996, 
respectively.  The decreases were primarily related to cost containment 
measures implemented by new senior management, including reductions in legal 
costs and outside consulting fees and the reconsolidation of separate 
business units into a single operating entity. G&A expenses for the third 
quarter and first nine months of 1996 included increased expense related to 
both the severance costs associated with the elimination of certain positions 
within the Company and to increased personnel costs that resulted from the 
division of the Systems and Software businesses into separate business units. 
 As a percentage of net revenues, G&A expenses were 5% and 8% for the third 
quarters of 1997 and 1996, respectively, and 5% and 9% for the first nine 
months of 1997 and 1996, respectively.

CREDIT ON LITIGATION SETTLEMENT

A credit of $147,000 was recognized in the third quarter of 1997, reflecting 
the remainder of the $1.1 million dollar accrual that was made in the fourth 
quarter of 1996 to account for legal costs to settle all pending litigation 
associated with the shareholder lawsuit.  No further charges related to such 
settlement will be incurred in the future.

INTEREST INCOME

Interest income, net of interest expense, was $435,000 and $343,000 for the 
third quarters of 1997 and 1996, respectively, and $1.5 million and $1.2 for 
the first nine months of 1997 and 1996, respectively.  The increase was 
primarily due to higher average balances in interest-bearing accounts.

OTHER INCOME

Other income for the first nine months of 1997 includes the receipt of 
insurance proceeds for certain legal expenses incurred in association with 
securities litigation costs.

GAIN ON SALE OF PRODUCT LINES

The gain on the sale of product lines for the first nine months of 1996 
represents the net gain recognized on the sale of the Company's MARINER 
product line in February 1996, offset slightly by the net loss on the sale of 
Z-MAIL in June 1996.

INCOME TAXES AND INCOME TAX BENEFIT

The Company recognized an income tax provision of $30,000, $13,000 and $1.1 
million for the third quarters of 1997 and 1996 and the first nine months of 
1997, respectively, and an income tax benefit of $4.2 million for the first 
nine months of 1996.


                                       11
<PAGE>

                        NETWORK COMPUTING DEVICES, INC.


FINANCIAL CONDITION

Total assets as of September 30, 1997 decreased by $2.1 million, or 2%, from 
December 31, 1996.  The change in total assets reflected decreases in 
refundable and deferred income tax assets of $3.9 million and in accounts 
receivable of $3.5 million, partially offset by a $4.9 million increase in 
inventory and a $1.7 million increase in cash and short-term investments.  
The decrease in refundable and deferred income tax assets was primarily 
related to income tax refunds received, while the decrease in accounts 
receivable was primarily related to increased collections. The increase in 
inventory was primarily related to lower than budgeted sales volumes, while 
the increase in cash and short-term investments was related to increased 
collections, income tax refunds received and increased accounts payable, 
partially offset by repurchases of the Company's common stock. 

Total liabilities as of September 30, 1997 increased by $5.3 million, or 29%, 
from December 31, 1996.  This increase was primarily due to an increase of 
$5.0 million in accounts payable which was primarily related to increased 
inventory receipts.

CAPITAL REQUIREMENTS

Capital spending requirements for the remainder of 1997 are estimated at 
approximately $1.0 million, and at September 30, 1997, the Company had 
commitments for capital expenditures of approximately $500,000, primarily 
related to manufacturing tooling and information technology.

LIQUIDITY

In April 1997, the Company's Board of Directors adopted a program to 
repurchase from time to time at management's discretion up to 1,000,000 
shares of the Company's common stock on the open market during the 12-month 
period ending April 30, 1998 at prevailing market prices.  Repurchases were 
made under the program using the Company's cash resources.  Shares 
repurchased are available for the issuance under the Company's stock plans 
and for other corporate purposes.  In the third quarter of 1997, a total of 
708,500 shares were repurchased at prices ranging from $8.38 to $12.00 per 
share for a total purchase price of $7.3 million.  Through September 30, 
1997, the repurchase program was completed with an aggregate of 1,000,000 
shares repurchased at prices ranging from $8.38 to $12.00 per share for a 
total purchase price of $10.7 million.

In November 1997, the Company's Board of Directors adopted an additional 
program to repurchase from time to time at management's discretion up to 
1,000,000 shares of the Company's common stock on the open market during the 
12 month period ending October 31, 1998 at prevailing market prices.

As of September 30, 1997, the Company had combined cash and equivalents and 
short-term investments totaling $37.4 million, with no significant debt. The 
Company believes that its existing sources of liquidity, including cash 
generated from operations, will be sufficient to meet operating cash 
requirements and capital lease repayment obligations at least through the 
next twelve months. 

FUTURE PERFORMANCE AND RISK FACTORS

THE COMPANY'S FUTURE BUSINESS, OPERATING RESULTS AND FINANCIAL CONDITION ARE 
SUBJECT TO VARIOUS RISKS AND UNCERTAINTIES, INCLUDING THOSE DESCRIBED BELOW.

EVOLVING NETWORK COMPUTING MARKET

The Company derives a majority of its revenues from the sale of network 
computer products and related software.  During the past several years, the 
Company and other manufacturers of network computing systems and products 
have experienced intense competition from alternative desktop computing 
products, particularly personal computers, which has slowed the growth and 
development of the network computing market.  Until recently, the absence of 
X protocol support from Microsoft Corporation ("Microsoft"), combined with 
the proliferation of off-the-shelf Windows-based application software, 
constituted an obstacle to the expansion of the network computing model into 
Windows-based environments.  The introduction of the Company's WINCENTER 
multi-user WINDOWS NT application server software and new, lower-priced 
network computers have allowed the Company to offer network computing systems 
that provide users with access to Windows applications, although sales of 
these new products have been limited to date. The Company's future success 
will depend in substantial part upon increased acceptance of the network 
computing model and the successful marketing of the Company's new network 



                                       12
<PAGE>

                        NETWORK COMPUTING DEVICES, INC.


computing products.  There can be no assurance that the Company's new network 
computing products will compete successfully with alternative desktop 
solutions or that the network computing model will be widely adopted in the 
rapidly evolving desktop computer market.  The failure of new markets to 
develop for the Company's network computing products would have a material, 
adverse effect on the Company's business, operating results and financial 
condition.  See "Item 1.  Business - Industry  Background" and "Business - 
Markets and Applications" in the Company's Annual Report on Form 10-K for the 
year ended December 31, 1996.

COMPETITION

The desktop computer and information access markets are characterized by 
rapidly changing technology and evolving industry standards.  The Company 
experiences significant competition from other network computer 
manufacturers, suppliers of personal computers and workstations and software 
developers.  Competition within the network computing market has intensified 
over the past several years, resulting in price reductions and reduced profit 
margins.  The Company expects this intense competition to continue, and there 
can be no assurance that the Company will be able to continue to compete 
successfully against current and future competitors as the desktop computer 
market evolves and competition increases.  The Company's software products 
also face substantial competition from software vendors that offer similar 
products, including several large software companies.  See "Item 1.  Business 
- Competition" in the Company's Annual Report on Form 10-K for the year ended 
December 31, 1996.

FLUCTUATIONS IN OPERATING RESULTS

The Company's operating results have varied significantly, particularly on a 
quarterly basis, as a result of a number of factors, including general 
economic conditions affecting industry demand for computer products, the 
timing and market acceptance of new product introductions by the Company and 
its competitors, the timing of significant orders from and shipments to large 
customers, periodic changes in product pricing and discounting due to 
competitive factors, and the availability and pricing of key components, such 
as DRAMs, video monitors, integrated circuits and electronic sub-assemblies, 
some of which require substantial order lead times.  The Company's operating 
results may fluctuate in the future as a result of these and other factors, 
including the Company's success in developing and introducing new products, 
its product and customer mix, licensing costs, the level of competition that 
it experiences and its ability to develop and maintain strategic business 
alliances.

The Company has committed significant resources, including research and 
development, manufacturing and sales and marketing resources, to the 
implementation of the IBM Agreement (see "Overview").  The production cycle 
of related product requires the Company to rely on IBM to provide accurate 
product requirement forecasts, which have in the past and will in the future, 
be subject to changes by IBM.  Should the Company commence production of 
related product based on provided forecasts that are subsequently reduced, 
the Company bears the risk of increased levels of unsold inventories.  Should 
the expected business volumes associated with the IBM Agreement not occur, or 
occur in volumes below management's expectations, there would be a material, 
adverse effect on the Company's operating results. 

The Company currently anticipates that the mix of hardware revenues as a 
component of total revenues may rise as a result of the IBM Agreement and the 
Company's current efforts to develop other OEM relationships for its network 
computers.  In addition, the Company plans to increase its revenues generated 
through indirect sales.  This change in the mix of revenues by product type 
and by sales channel is likely to result in overall reduced gross margin 
percentages on hardware revenues and on total revenues.  In addition, the 
Company operates with a relatively small backlog.  Revenues and operating 
results therefore generally depend on the volume and timing of orders 
received, which are difficult to forecast and which may occur 
disproportionately during any given quarter or year.  The Company's expense 
levels are based in part on its forecast of future revenues.  If revenues are 
below expectations, the Company's operating results may be adversely 
affected.  The Company has experienced a disproportionate amount of shipments 
occurring in the last month of its fiscal quarters.  This trend increases the 
risk of material quarter-to-quarter fluctuations in the Company's revenues 
and operating results.  In the past, the Company has experienced reduced 
orders during the first and third quarters due to buying patterns common in 
the computer industry.  In addition, sales in Europe have been adversely 
affected in the third calendar quarter, when many European customers reduce 
their business activities.

NEW PRODUCT DEVELOPMENT AND TIMELY INTRODUCTION OF NEW AND ENHANCED PRODUCTS

The markets for the Company's products are characterized by rapidly changing
technologies, evolving industry standards, frequent new product introductions
and short product life cycles.  The Company's future results will depend to a
considerable 


                                       13
<PAGE>

                        NETWORK COMPUTING DEVICES, INC.


extent on its ability to continuously develop, introduce and deliver in 
quantity new hardware and software products that offer its customers enhanced 
performance at competitive prices.  The development and introduction of new 
products is a complex and uncertain process requiring substantial financial 
resources and high levels of innovation, accurate anticipation of 
technological and market trends and the successful and timely completion of 
product development.  Once a hardware product is developed, the Company must 
rapidly bring it into volume production, a process that requires accurate 
forecasting of customer requirements in order to achieve acceptable 
manufacturing costs.  The introduction of new or enhanced products also 
requires the Company to manage the transition from older, displaced products 
in order to minimize disruption to customer ordering patterns, avoid 
excessive levels of older product inventories and ensure that adequate 
supplies of new products can be delivered to meet customer demand.  As the 
Company is continuously engaged in this product development and transition 
process, its operating results may be subject to considerable fluctuation, 
particularly when measured on a quarterly basis.  The inability to finance 
important research and development projects, delays in the introduction of 
new and enhanced products, the failure of such products to gain market 
acceptance, or problems associated with new product transitions could 
adversely affect the Company's operating results.  See "Item 1.  Business 
-Industry Background" and "Business - Product Development" in the Company's 
Annual Report on Form 10-K for the year ended December 31, 1996.

RELIANCE ON INDEPENDENT DISTRIBUTORS AND RESELLERS

The Company increasingly relies substantially on independent distributors and 
resellers, particularly in European markets, for the marketing and 
distribution of its products, particularly its software products.  During 
1995, the Company consolidated its Software sales operations by creating a 
single organization devoted to the sale of the Company's PC connectivity and 
messaging software and re-oriented its software sales strategy toward the 
increased use of distributors, VARs and other resellers.  In early 1996, the 
Company experienced significant returns of its software products from its 
distributors.  There can be no assurance that the Company will not experience 
some level of returns in the future.  In addition, there can be no assurance 
that the Company's distributors and resellers will continue their current 
relationships with the Company or that they will not give higher priority to 
the sale of other products, which could include products of the Company's 
competitors.  A reduction in sales effort or discontinuance of sales of the 
Company's products by its distributors and resellers could lead to reduced 
sales and could adversely affect the Company's operating results.  In 
addition, there can be no assurance as to the continued viability or the 
financial stability of the Company's distributors and resellers, the 
Company's ability to retain its existing distributors and resellers or the 
Company's ability to add distributors and resellers in the future. See "Item 
1.  Business - Marketing and Sales" in the Company's Annual Report on Form 
10-K for the year ended December 31, 1996.

RELIANCE ON INDEPENDENT CONTRACTORS

The Company relies on independent contractors for virtually all of the 
sub-assembly of the Company's network computer products.  The Company's 
reliance on these independent contractors limits its control over delivery 
schedules, quality assurance and product costs.  In addition, a number of the 
Company's independent suppliers are located abroad.  The Company's reliance 
on these foreign suppliers subjects the Company to risks such as the 
imposition of unfavorable governmental controls or other trade restrictions, 
changes in tariffs and political instability.  The Company currently obtains 
all of the sub-assemblies used for its network computer products (consisting 
of all major components except monitors and cables) from a single supplier 
located in Thailand.  Any significant interruption in the supply of 
sub-assemblies from this contractor would have a material adverse effect on 
the Company's business and operating results.  Although the Company is 
currently planning to develop alternative locations in different countries 
from which to obtain sub-assemblies, there is no assurance that the Company 
will be successful in this pursuit. Disruptions in the provision of 
components by the Company's other suppliers, or other events that would 
require the Company to seek alternate sources of supply, could also lead to 
supply constraints or delays in delivery of the Company's products and 
adversely affect its operating results.  The operations of certain of the 
Company's foreign suppliers were briefly disrupted during 1992 due to 
political instability in Thailand. See "Item 1. Manufacturing and Supplies" 
in the Company's Annual Report on Form 10-K for the year ended December 31, 
1996.

INTERNATIONAL SALES

A majority of the Company's international sales are denominated in U.S. dollars,
and an increase in the value of the U.S. dollar relative to foreign currencies
could make the Company's products less competitive in those markets.  Over the
past two years, from time to time, a significant portion of international
revenues have been derived from sales to a customer in the United Kingdom that
have been denominated in pound sterling and sales denominated in foreign
currencies may increase in the future.  These sales are subject to exchange rate
fluctuations which could affect the Company's operating results negatively 



                                       14
<PAGE>

                        NETWORK COMPUTING DEVICES, INC.


or positively, depending on the value of the U.S. dollar against the other 
currency.  Where the Company believes foreign currency-denominated sales 
could pose significant exposure to exchange rate fluctuations, the Company 
acquires forward exchange contracts in an effort to reduce such exposure.  
International sales and operations may also be subject to risks such as the 
imposition of governmental controls, export license requirements, 
restrictions on the export of technology, political instability, trade 
restrictions, changes in tariffs and difficulties in staffing and managing 
international operations and managing accounts receivable.  In addition, the 
laws of certain countries do not protect the Company's products and 
intellectual property rights to the same extent as the laws of the United 
States.  There can be no assurance that these factors will not have an 
adverse effect on the Company's future international sales and, consequently, 
on the Company's operating results.

DEPENDENCE ON KEY PERSONNEL

The Company's success depends to a significant degree upon the continuing 
contributions of its senior management and other key employees, particularly 
Robert G. Gilbertson, its President and Chief Executive Officer, and Rudolph 
G. Morin, its Executive Vice President of Operations & Finance and Chief 
Financial Officer.  The loss of these individuals or other key management 
personnel could have a material adverse effect on the Company's business, 
operating results or financial condition.  The Company believes that its 
future success will depend in large part on its ability to attract and retain 
highly-skilled engineering, managerial, sales and marketing personnel.  
Competition for such personnel is intense, and there can be no assurance that 
the Company will be successful in attracting, integrating and retaining such 
personnel.  Failure to attract and retain key personnel could have a material 
adverse effect on the Company's business, operating results or financial 
condition.

VOLATILITY OF STOCK PRICE

The market price of the Company's common stock has fluctuated significantly 
over the past several years and is subject to material fluctuations in the 
future in response to announcements concerning the Company or its competitors 
or customers, quarterly variations in operating results, announcements of 
technological innovations, the introduction of new products or changes in 
product pricing policies by the Company or its competitors, general 
conditions in the computer industry, developments in the financial markets 
and other factors.  In particular, shortfalls in the Company's quarterly 
operating results from historical levels or from levels forecast by 
securities analysts could have an adverse effect on the trading price of the 
common stock.  The Company may not be able to quantify such a quarterly 
shortfall until the end of the quarter, which could result in an immediate 
and adverse effect on the common stock price. In addition, the stock market 
has, from time to time, experienced extreme price and volume fluctuations 
that have particularly affected the market prices for technology companies 
and which have been unrelated to the operating performance of the affected 
companies.  Broad market fluctuations of this type may adversely affect the 
future market price of the Company's common stock.



                                       15
<PAGE>

                           NETWORK COMPUTING DEVICES, INC.


                             PART II - OTHER INFORMATION
                                           


ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K

(a)  The following exhibits are filed herewith:

     Exhibit 11.1     Statement Regarding Computation of Shares Used in Income
                      (Loss) Per Share Computations.

     Exhibit 27       Financial Data Schedule.

(b)  The Company filed a report on Form 8-K on August 12, 1997 which reported,
     under Item 5, the distribution to its shareholders of rights to repurchase
     1/100 share of Series A Participating Preferred Stock, no par value, 
     under terms and conditions set forth in a Rights Agreement dated 
     August 12, 1997 between the Company and ChaseMellon Shareholder 
     Services, L.L.C.


                                       16
<PAGE>

                        NETWORK COMPUTING DEVICES, INC.


                                   SIGNATURE
                                           

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



                                   Network Computing Devices, Inc.
                                   (Registrant)

Date:  November 6, 1997

                                   By:  /s/ Rudolph G. Morin    
                                      ---------------------------------------
                                        Rudolph G. Morin
                                        Executive Vice President, Operations 
                                        & Finance and Chief Financial Officer
                                        (Duly Authorized and Principal 
                                        Financial and Accounting Officer)



                                       17