<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 April 1, 2001

                                       OR

   [ ]         Transition Report Pursuant to Section 13 or 15(d) of the
               Securities Exchange Act of 1934

                          Commission File No. 000-27221

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

                                VIXEL CORPORATION
             (Exact name of registrant as specified in its charter)


                  Delaware                                  84-1176506
        (State or other jurisdiction                     (I.R.S. Employer
      of incorporation or organization)                 Identification No.)


                         11911 North Creek Parkway South
                            Bothell, Washington 98011
                                 (425) 806-5509

             (Address, including zip code, of Registrant's principal
          executive offices and telephone number, including area code)

     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, $.0015
par value, as of May 1, 2001 was 24,069,261.


<PAGE>   2
                                VIXEL CORPORATION

               INDEX TO FORM 10-Q FOR QUARTER ENDED APRIL 1, 2001

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

    Item 1.  Financial Statements

        Condensed Balance Sheet as of April 1, 2001 (unaudited) and
        December 31, 2000 (unaudited) ........................................    3

        Condensed Statement of Operations for the three month periods ended
        April 1, 2001 (unaudited) and April 2, 2000 (unaudited)...............    4

        Condensed Statement of Cash Flows for the three month periods ended
        April 1, 2001 (unaudited) and April 2, 2000 (unaudited)...............    5

        Notes to Condensed Financial Statements...............................    6

    Item 2.  Management's Discussion and Analysis of Financial Condition
             and Results of Operations........................................    7

    Item 3.  Quantitative and Qualitative Disclosures About Market Risk.......   20

Part II.  OTHER INFORMATION

    Item 2.  Changes in Securities and Use of Proceeds........................   20

    Item 6.  Exhibits and Reports on Form 8-K.................................   20

Signature.....................................................................   21
</TABLE>


                                       2
<PAGE>   3
                          PART I. FINANCIAL INFORMATION

Item 1.  Financial Statements

                                VIXEL CORPORATION
                             CONDENSED BALANCE SHEET
                      (IN THOUSANDS, EXCEPT SHARE AMOUNTS)
                                  (UNAUDITED)
<TABLE>
<CAPTION>
                                                                 April 1,    December 31,
                                                                   2001         2000
                                                                 ---------   ------------
<S>                                                              <C>         <C>
Assets
     Current assets
         Cash and cash equivalents ...........................   $  24,041    $  17,066
         Short-term investments ..............................      16,284       25,636
         Accounts receivable, net of allowance for doubtful
             accounts of $703 and $850, respectively .........       2,842        7,344
         Inventories .........................................       2,557        1,415
         Prepaid expenses and other current assets ...........       1,799        2,129
                                                                 ---------    ---------
                Total current assets .........................      47,523       53,590

     Property and  equipment, net ............................       6,844        7,307
     Goodwill and other intangibles, net .....................       1,433        1,680
     Other assets ............................................         329          354
                                                                 ---------    ---------
                Total assets .................................   $  56,129    $  62,931
                                                                 =========    =========

Liabilities and stockholders' equity
     Current liabilities
         Current portion of long-term debt and capital leases    $   2,225    $   2,466
         Accounts payable ....................................       4,059        5,083
         Accrued liabilities .................................       8,079        6,927
                                                                 ---------    ---------
                Total current liabilities ....................      14,363       14,476

     Long-term debt and capital leases .......................       1,062        1,510
                                                                 ---------    ---------
                Total liabilities ............................      15,425       15,986
                                                                 ---------    ---------
     Commitments and contingencies
     Stockholders' equity

         Common stock, $.0015 par value;  60,000,000 shares
             authorized; 23,922,706 and 23,845,041 shares
             issued and outstanding, respectively ............          36           36
         Additional  paid-in capital .........................     156,407      156,387
         Stock-based compensation ............................      (1,631)      (2,160)
         Notes receivable from stockholders ..................      (5,122)      (5,122)
         Treasury stock, at cost; 66,666 shares ..............         (50)         (50)
         Accumulated deficit .................................    (108,936)    (102,146)
                                                                 ---------    ---------
                Total stockholders' equity ...................      40,704       46,945
                                                                 ---------    ---------
                Total liabilities and stockholders' equity ...   $  56,129    $  62,931
                                                                 =========    =========
</TABLE>
         The accompanying notes are an integral part of these condensed
                             financial statements.

                                       3
<PAGE>   4
                                VIXEL CORPORATION
                        CONDENSED STATEMENT OF OPERATIONS
                    (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
                                   (UNAUDITED)

<TABLE>
<CAPTION>
                                                         THREE MONTHS ENDED
                                                        --------------------
                                                        April 1,    April 2,
                                                          2001        2000
                                                        --------    --------
<S>                                                     <C>         <C>
Revenue
       SAN systems ..................................   $  3,540    $  6,969
       Components ...................................      2,514         808
                                                        --------    --------
           Total revenue ............................      6,054       7,777
Cost of revenue (1) .................................      3,839       5,581
                                                        --------    --------
Gross profit ........................................      2,215       2,196
                                                        --------    --------

Operating expenses
       Research and development (2) .................      3,993       3,444
       Selling, general and administrative (3) ......      4,817       4,105
       Amortization of goodwill and other intangibles        247         540
       Amortization of stock-based compensation .....        516       1,142
                                                        --------    --------
           Total operating expenses .................      9,573       9,231
                                                        --------    --------

Loss from operations ................................     (7,358)     (7,035)
Other income, net ...................................        568         768
                                                        --------    --------
Net loss ............................................   $ (6,790)   $ (6,267)
                                                        ========    ========

Basic and diluted net loss per share ................   $  (0.29)   $  (0.28)
                                                        ========    ========

Weighted-average shares outstanding .................     23,264      22,103
                                                        ========    ========
</TABLE>

(1)   Includes amortization of stock-based compensation of $11 and $26,
      respectively.

(2)   Excludes amortization of stock-based compensation of $11 and $49,
      respectively.

(3)   Excludes amortization of stock-based compensation of $505 and $1,093,
      respectively.


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


                                       4
<PAGE>   5
                                VIXEL CORPORATION
                        CONDENSED STATEMENT OF CASH FLOWS
                                 (IN THOUSANDS)
                                   (UNAUDITED)

<TABLE>
<CAPTION>
                                                                THREE MONTHS ENDED
                                                               --------------------
                                                               April 1,    April 2,
                                                                 2001        2000
                                                               --------    --------
<S>                                                            <C>         <C>
Cash flows from operating activities
     Net loss ..............................................   $ (6,790)   $ (6,267)
     Adjustments to reconcile net loss to net cash used in
        operating activities
         Depreciation ......................................      1,028         707
         Amortization of goodwill and other intangibles ....        247         540
         Stock-based compensation ..........................        527       1,168
         Changes in
             Accounts receivable, net ......................      4,502        (877)
             Inventories ...................................     (1,142)      1,464
             Prepaid expenses and other assets .............        355         459
             Accounts payable and accrued liabilities ......        128         (90)
                                                               --------    --------
                Net cash used in operating activities ......     (1,145)     (2,896)
                                                               --------    --------

Cash flows from investing activities
     Purchase of short-term investments ....................     (8,221)     (4,329)
     Sale of short-term investments ........................     17,573      43,446
     Purchase of property and equipment ....................       (530)       (642)
                                                               --------    --------

                Net cash provided by investing activities ..      8,822      38,475
                                                               --------    --------

Cash flows from financing activities
     Receipt of payment on stockholder note receivable .....       --            24
     Principal payments on long-term debt and capital leases       (725)       (712)
     Amortization of debt issuance costs ...................          1           4
     Proceeds from exercise of stock options ...............         22         156
                                                               --------    --------
                Net cash used in financing activities ......       (702)       (528)
                                                               --------    --------

Net increase in cash and cash equivalents ..................      6,975      35,051
Cash and cash equivalents, beginning of period .............     17,066      16,706
                                                               --------    --------
Cash and cash equivalents, end of period ...................   $ 24,041    $ 51,757
                                                               ========    ========

Cash paid for interest .....................................   $    102    $    147
Equipment purchased under capital leases ...................   $     36    $    698
</TABLE>

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

                                       5
<PAGE>   6
                                VIXEL CORPORATION

                     Notes to Condensed Financial Statements
                     (Information for the three months ended
                        April 1, 2001 and April 2, 2000)
                                   (Unaudited)

NOTE 1.  BASIS OF PRESENTATION

     The accompanying condensed financial statements as of April 1, 2001 and for
the three month periods ended April 1, 2001 and April 2, 2000 are unaudited;
however, in the opinion of management, the interim data includes all
adjustments, consisting only of normal recurring adjustments, necessary for a
fair statement of the results for the interim periods. Certain information and
note disclosures normally included in financial statements, prepared in
accordance with generally accepted accounting principles, have been condensed or
omitted pursuant to the rules and regulations of the Securities and Exchange
Commission. Results of operations for the three month period ended April 1, 2001
are not necessarily indicative of future financial results.

     Investors should read these interim statements in conjunction with
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and the financial statements and notes thereto for the fiscal year
ended December 31, 2000 (audited) included in our Annual Report on Form 10-K,
filed with the Securities and Exchange Commission on March 29, 2001.

     Certain items in the April 2, 2000 financial statements have been
reclassified to conform to the April 1, 2001 presentation. These
reclassifications have no impact on stockholders' equity, net loss or cash flows
as previously reported.

NOTE 2.  INVENTORIES

     Inventories consist of the following (in thousands):

<TABLE>
<CAPTION>
                                                April 1,   December 31,
                                                  2001        2000
                                                --------   ------------
<S>                                             <C>        <C>
         Raw materials                           $1,291      $ 1,177
         Finished goods                           1,998        1,266
         Less: write-down to expected
                realizable value                   (732)      (1,028)
                                                 ------      -------
                                                 $2,557      $ 1,415
</TABLE>

NOTE 3.  NET LOSS PER SHARE

     Basic net loss per share represents the net loss divided by the
weighted-average number of common shares outstanding during the period,
excluding shares of restricted stock subject to repurchase. Diluted net loss per
share represents net loss divided by the weighted-average number of common
shares outstanding including the potentially dilutive impact of common stock
options and warrants and shares of restricted stock subject to repurchase.
Common stock options and warrants are converted using the treasury stock method.
Basic and diluted net loss per share are equal for the periods presented because
the impact of common stock equivalents is anti-dilutive. Potentially dilutive
securities totaling 5,004,946 and 4,758,079 shares for the quarters ended April
1, 2001 and April 2, 2000, respectively, were excluded from diluted net loss per
share due to their anti-dilutive effect.

                                       6
<PAGE>   7
ITEM 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
         RESULTS OF OPERATIONS

     The following discussion should be read in conjunction with the condensed
financial statements in Item 1 of this Quarterly Report and with the
Management's Discussion and Analysis of Financial Condition and Results of
Operations contained in our Annual Report on Form 10-K filed with the Securities
and Exchange Commission on March 29, 2001.

     This document contains forward-looking statements that involve risk and
uncertainties. The statements contained in this report that are not purely
historical are forward-looking statements within the meaning of Section 21E of
the Securities Exchange Act of 1934, as amended. In some cases, you can identify
forward-looking statements by terminology such as "may," "will," "should,"
"expect," "plan," "anticipate," "believe," "estimate," "predict," "potential" or
"continue," the negative of such terms or other comparable terminology. These
statements are only predictions. Actual events or results may differ materially.

     Although we believe that the expectations reflected in the forward-looking
statements are reasonable, we cannot guarantee future results, levels of
activity, performance or achievements. Moreover, neither we nor any other person
assumes responsibility for the accuracy and completeness of the forward-looking
statements. We are under no duty to update any of the forward-looking statements
after the date hereof to conform such statements to actual results or to changes
in our expectations.

     References to dollar amounts are in thousands unless otherwise specified.

                                COMPANY OVERVIEW

     We are a provider of comprehensive solutions in storage area networks, or
SANs. SANs are networks that are specifically designed to interconnect computer
systems and data storage devices. Our portfolio of Fibre Channel products,
including our SAN management software, switches, hubs and transceivers, is fully
interoperable and designed to perform in concert to address a wide variety of
data and storage needs.

     We derive substantially all of our revenue from the sale of SAN
interconnect products, including switches, hubs and transceivers. We currently
include our SAN InSite software with our switches and managed hubs and do not
sell this software separately from our other products. We have, however,
developed a version of our SAN InSite software that we will license for a fee.
SAN systems revenue consists of revenue generated from our SAN switches, hubs
and transceiver products sold as a result of selling our switches and hubs.
Component revenue consists primarily of revenue generated from the sale of our
transceiver products to original equipment manufacturers, or OEMs, for use in
their products.

     We sell our products primarily to a limited number of customers. Sun
Microsystems, Avid Technology and Compaq Computer represented 49.0%, 19.5% and
10.2% of revenue, respectively for the three months ended April 1, 2001. Compaq
Computer, IBM, Bell Microproducts and Avid Technology represented 24.6%, 10.9%,
10.4% and 10.4% of revenue, respectively for the three months ended April 2,
2000. No other individual customer represented more than 10.0% of our total
revenue in those periods. During the three months ended April 1, 2001 and April
2, 2000, 9.7% and 20.4%, respectively, of our total revenue was derived from
sales to distribution channel customers. We plan to continue to expand our sales
channels to include systems integrators, VARs and additional distributors in the
United States and internationally.

     We generally recognize revenue at the time of product shipment, unless we
have future obligations for installation or when we ship product demonstration
units. Revenue from products shipped with future installation obligations is
recognized when we meet our future obligation. Revenue is not recognized on
demonstration units unless the customer ultimately purchases the unit, and the
related revenue is recognized at that time. Our agreements with our North
American distributors provide for price protection and for stock rotation based
on a percentage of shipments for the preceding quarter when an offsetting order


                                       7
<PAGE>   8
is requested. Revenue for these stock rotation rights is deferred until the
stock rotation period has passed. We provide an allowance for price protection
rights. We also maintain a reserve for product warranty costs based on a
combination of historical experience and specifically identified potential
warranty liabilities.

     Our gross profit as a percentage of total revenue is affected by the mix of
products sold, sales channels and customers to which our products are sold. Our
gross profit as a percentage of total revenue also is affected by fluctuations
in manufacturing volumes and component costs, manufacturing costs charged by our
contract manufacturer, new product introductions, changes in our product pricing
and estimated warranty costs. We expect that average unit selling prices for our
products will decline over time in response to competitive pricing pressures,
increased sales discounts, new product introductions by us or our competitors
and other factors. We seek to maintain gross profit as a percentage of total
revenue by selling a higher percentage of higher margin products and reducing
the cost of our products through manufacturing efficiencies, design improvements
and cost reductions for components.

                               RESULTS OF OPERATIONS

     The following table sets forth the percentage of total revenue represented
by selected items from the unaudited Condensed Statement of Operations. This
table should be read in conjunction with the unaudited Condensed Financial
Statements included elsewhere herein.

<TABLE>
<CAPTION>
                                                       Three Months Ended
                                                       ------------------
                                                       April 1,  April 2,
                                                         2001      2000
                                                       --------  --------
<S>                                                    <C>       <C>
Revenue
       SAN systems ..................................      58.5%     89.6%
       Components ...................................      41.5      10.4
                                                         ------    ------
           Total revenue ............................     100.0     100.0
Cost of revenue .....................................      63.4      71.8
                                                         ------    ------

Gross profit ........................................      36.6      28.2
                                                         ------    ------

Operating expenses

       Research and development .....................      66.0      44.3
       Selling, general and administrative ..........      79.6      52.8
       Amortization of goodwill and other intangibles       4.1       6.9
       Amortization of stock-based compensation .....       8.5      14.7
                                                         ------    ------
           Total operating expenses .................     158.1     118.7
                                                         ------    ------

Loss from operations ................................    (112.2)    (90.5)
Other income, net ...................................       9.4       9.9
                                                         ------    ------
Net loss ............................................    (102.8)%   (80.6)%
                                                         ======    ======
</TABLE>

THREE MONTHS ENDED APRIL 1, 2001 COMPARED WITH THREE MONTHS ENDED APRIL 2, 2000

     Revenue. Total revenue was $6,054 and $7,777 for the three months ended
April 1, 2001 and April 2, 2000, respectively. Our SAN systems revenue was
$3,540 and $6,969 for the three months ended April 1, 2001 and April 2, 2000,
respectively. The 49.2% decrease in SAN systems revenue in the first quarter
2001 compared with the first quarter 2000 was primarily the result of decreased
sales of our entry-level hub products.

     Component revenue was $2,514 and $808 for the three months ended April 1,
2001 and April 2, 2000, respectively. The increase in our component revenue is a
result of a one-time order of a transceiver product from one of our OEM
customers. This order was received during fourth quarter of 2000 and shipments

                                       8
<PAGE>   9
against the order took place during the fourth quarter of 2000 and the first
quarter of 2001. The remaining balance of the order is scheduled to ship during
the second quarter of 2001. We plan to discontinue the manufacturing and selling
of our gigabit interface converter transceivers, or GBIC, during the second
quarter of 2001. As a result, we anticipate that our component revenue will
significantly decrease in the third quarter of 2001 and thereafter.

     Gross profit. Cost of revenue includes the cost to acquire finished
products from a third party manufacturer of our products, expenses we incur
related to inventory management, product quality testing, customer order
fulfillment, and provisions for warranty expenses and inventory obsolescence.
Gross profit was $2,215 and $2,196 for the three months ended April 1, 2001 and
April 2, 2000, respectively, representing 36.6% and 28.2% of total revenue,
respectively. The 2001 increase in gross profit percentage compared with 2000
reflects the shift to higher-margin switch revenue and increased gross margins
on the 2001 component revenue.

    Research and development expenses. Research and development expenses consist
primarily of salaries and related expenses for personnel engaged in the design,
development and sustaining engineering of our products, consulting and outside
service fees, costs for prototype and test units and other expenses related to
the design, development, testing and enhancement of our products. Research and
development expenses were $3,993, or 66.0% of total revenue, in the three months
ended April 1, 2001 compared with $3,444, or 44.3% of total revenue, in the
three months ended April 2, 2000. The $549, or 15.9%, increase in expenses
during the three months ended April 1, 2001 was primarily attributable to
increased personnel, costs for prototype and test units and other expenses
related to the design, development, testing and enhancement of our products. We
believe that continued investment in research and development is an essential
element of our strategic objectives to design quality products while reducing
costs. We anticipate that research and development expenses will increase in the
future.

    Selling, general and administrative expenses. Selling, general and
administrative expenses consist primarily of salaries, commissions and related
expenses for personnel engaged in marketing, sales, finance and information
technology support functions, as well as professional fees, allowance for
doubtful accounts receivable, trade shows and other marketing activities.
Selling, general and administrative expenses were $4,817, or 79.6% of total
revenue, in the three months ended April 1, 2001 compared with $4,105, or 52.8%
of total revenue, in the three months ended April 2, 2000. The $712, or 17.3%,
increase in expenses during the three months ended April 1, 2001 was primarily
attributable to additional personnel devoted to selling and servicing our
products. We expect our quarterly selling, general and administrative expenses
to decrease from first quarter 2001 amounts during the remainder of 2001. This
reduction is anticipated as a result of reducing the number of personnel engaged
in marketing, finance and information technology support functions in April
2001, and reduced levels of discretionary spending now planned for the remainder
of 2001.

     Amortization of goodwill and other intangibles. Amortization of goodwill
and other intangibles for the three months ended April 1, 2001 and April 2, 2000
were $247 and $540, respectively, representing 4.1% and 6.9% of total revenue,
respectively. This decrease is the result of certain intangible assets
capitalized in conjunction with our purchase of Arcxel Technologies in February
1998, being fully amortized during fiscal 2000.

    Amortization of stock-based compensation. Total amortization of stock-based
compensation was $527 and $1,168 for the three months ended April 1, 2001 and
April 2, 2000, respectively. Of these amounts, $11 and $26, respectively, were
included in cost of revenue. At April 1, 2001, unamortized stock-based
compensation was approximately $1.6 million.

    Other income, net. Other income, net consists of interest income, interest
expense and other miscellaneous income or expense. Other income was $568 for the
three months ended April 1, 2001, which consisted primarily of interest income
and represented 9.4% of total revenue. Other income of $768 for the three months
ended April 2, 2000 represented 9.9% of total revenue and consisted primarily of
interest income.

                                       9
<PAGE>   10
                         LIQUIDITY AND CAPITAL RESOURCES

    Since inception, we have financed our operations primarily through the sale
of common stock and preferred stock with aggregate proceeds of approximately
$114.3 million. Additionally, we have financed our operations through capital
equipment lease lines, working capital credit facilities, notes payable and $6.9
million in net cash received from the sale of our laser diode fabrication
facility and gigabit Ethernet product line. Our principal sources of liquidity
at April 1, 2001 consisted of $24.0 million in cash and cash equivalents and
$16.3 million in short-term investments.

    Cash utilized by operating activities was $1.1 million for the three months
ended April 1, 2001, due primarily to net losses, offset by a reduction in
working capital required to fund our operations. Cash provided by investing
activities was $8.8 million, primarily related to maturities of short-term
investments, offset by purchases of short-term investments, and capital
expenditures of $530. Cash used in financing activities was $702, primarily due
to payments on our capital leases.

    We believe that our existing cash, cash equivalents and short-term
investment balances will be sufficient to meet our cash requirements at least
through the next twelve months. However, we may be required, or could elect, to
seek additional funding prior to that time. Our future capital requirements will
depend on many factors, including our future revenue, the timing and extent of
spending to support product development efforts and expansion of sales, general
and administrative activities, the timing of introductions of new products, and
market acceptance of our products. We cannot assure you that additional equity
or debt financing, if required, will be available on acceptable terms or at all.

                        RECENT ACCOUNTING PRONOUNCEMENTS

     Statement of Financial Accounting Standards ("SFAS") No. 133, "Accounting
for Derivative Instruments and Hedging Activities," as amended by SFAS No. 137,
"Accounting for Derivative Instruments and Hedging Activities - Deferral of the
Effective Date of FASB Statement No. 133," and SFAS No. 138, "Accounting for
Derivative Instruments and Certain Hedging Activities," is effective as of
January 1, 2001. These pronouncements establish accounting and reporting
standards for derivative instruments and hedging activities which, among other
things, require that an entity recognize all derivatives as either assets or
liabilities in the statement of financial position and measure those derivatives
at fair value. The adoption of SFAS No. 133 has not materially impacted our
financial position, results of operations or cash flows because the Company does
not have derivative financial instruments.

        In December 1999 the Securities and Exchange Commission issued Staff
Accounting Bulletin No. 101 ("SAB 101"), "Revenue Recognition." SAB 101 as
amended provides guidance with respect to the SEC's interpretation of existing
authoritative accounting guidance on the recognition of revenue in financial
statements. Our adoption of SAB 101, effective January 3, 2000, has not
materially impacted our financial position, results of operations or cash flows.

     The Financial Accounting Standards Board ("FASB") issued FASB
Interpretation No. 44 ("FIN 44"), "Accounting for Stock Based Compensation" in
March 2000. FIN 44 provides guidance and clarification to the application of
Accounting Principles Board Opinion No. 25 "Accounting for Stock Issued to
Employees." Our adoption of FIN 44, effective July 1, 2000, has not materially
impacted our financial position, results of operations or cash flows.

      FACTORS THAT MAY AFFECT RESULTS OF OPERATIONS AND FINANCIAL CONDITION

WE HAVE INCURRED SIGNIFICANT LOSSES SINCE OUR INCEPTION, WE EXPECT FUTURE
LOSSES, AND WE MAY NOT BECOME PROFITABLE.

     We have incurred significant losses since inception, most recently
a net loss of $6.8 million for the three months ended April 1, 2001,
and expect to incur losses in the future. As of April 1, 2001, we had an


                                       10
<PAGE>   11
accumulated deficit of $108.9 million. We cannot be certain that we ever will
realize sufficient revenue to achieve profitability. We expect to incur
significant product development, sales and marketing and administrative
expenses, and we will need to generate significant revenue to achieve and
maintain profitability. Even if we do achieve profitability, we may not be able
to sustain or increase profitability.

OUR OPERATING RESULTS ARE DIFFICULT TO FORECAST, MAY FLUCTUATE ON A QUARTERLY
BASIS AND MAY BE ADVERSELY AFFECTED BY MANY FACTORS, WHICH MAY RESULT IN
VOLATILITY IN OUR STOCK PRICE.

     Our revenue and results of operations have varied on a quarterly basis in
the past and may vary significantly in the future due to a number of factors,
many of which may cause our stock price to fluctuate. Some of the factors that
could affect our operating results include:

     o    the size, terms and fluctuations of customer orders, particularly
          orders from a limited number of original equipment manufacturers, or
          OEMs;

     o    changes in general economic conditions and specific economic
          conditions in the computer storage and networking industries, such as
          a change in spending levels for information technology products;

     o    the timing of customer orders, a large percentage of which are
          generated in the last month of the quarter;

     o    our ability to attain and maintain sufficient reliability levels for
          our SAN interconnect products;

     o    our ability to develop and market new products;

     o    the timing of the introduction or enhancement of products by us, our
          OEMs and our competitors;

     o    decreases in the prices at which we can sell our products;

     o    the mix of products sold and the mix of distribution channels through
          which our products are sold; and

     o    the ability of our contract manufacturer to produce and distribute our
          products in a timely fashion.

     As a result of these and other factors, we believe that period to period
comparisons of our operating results should not be relied upon as an indicator
of our future performance. It is likely that in some future period our operating
results will be below our guidance, your expectations or the expectations of
public market analysts.

OUR OEMS HAVE UNPREDICTABLE ORDER PATTERNS, WHICH MAY CAUSE OUR REVENUE TO VARY
SIGNIFICANTLY FROM PERIOD TO PERIOD.

     Our OEMs tend to order sporadically, and their purchases can vary
significantly from quarter to quarter. Our OEMs generally forecast expected
purchases in advance, but frequently do not order as expected and tend to place
purchase orders only shortly before the scheduled delivery date. We plan our
operating expenses based in part on revenue projections derived from our OEMs'
forecasts. Because most of our expenses are fixed in the short term or incurred
in advance of anticipated revenue, we may not be able to decrease our expenses
in a timely manner to offset any unexpected shortfall in revenue. These order
habits cause our backlog to fluctuate significantly. Moreover, our backlog is
not necessarily indicative of actual sales for any succeeding period, as orders
are subject to cancellation or delay by our OEMs with limited or no penalty.

THE LOSS OF ONE OR MORE KEY CUSTOMERS COULD SIGNIFICANTLY REDUCE OUR REVENUE.

     Our success will depend on our continued ability to develop and manage
relationships with significant OEMs and resellers, as well as on the sales
efforts and success of these customers. Sun Microsystems, Avid Technology and
Compaq Computer represented 49.0%, 19.5% and 10.2% of our total revenue,
respectively, for the three months ended April 1, 2001. Although we are
attempting to expand our base of OEMs and resellers, most of our future revenue
may come from a small number of customers.

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<PAGE>   12
     Our agreements with our customers do not provide any assurance of future
sales to those customers. For example:

     o    our OEM and reseller agreements are not exclusive and contain no
          renewal obligation;

     o    our OEMs and resellers can stop purchasing and marketing our products
          at any time; and

     o    our OEM and reseller agreements do not require minimum purchases.

     We cannot be certain that we will retain our current OEMs and resellers or
that we will be able to recruit additional or replacement customers. Many of our
OEMs and resellers carry or utilize competing product lines. If we were to lose
one or more OEMs or resellers to a competitor, our business, results of
operations and financial condition could be significantly harmed.

OUR SUCCESS IS DEPENDENT UPON ACCEPTANCE OF FIBRE CHANNEL TECHNOLOGY AND THE
GROWTH OF THE EMERGING SAN MARKET.

     Our SAN InSite management software, switches and hubs are used exclusively
in SANs. Accordingly, widespread adoption of SANs is critical to our future
success. The market for SANs and related software, switches and hubs is evolving
rapidly and it is difficult to predict its potential size or future growth rate.
Our success in generating revenue in this emerging SAN market will depend on,
among other things, our ability to:

     o    demonstrate the benefits of SANs and our SAN InSite management
          software, switch and hub products to OEMs, resellers and end-users;

     o    enhance our existing products and to introduce new products on a
          timely basis to meet changes in customer preferences and evolving
          industry standards;

     o    develop, maintain and build relationships with leading OEMs and
          resellers; and

     o    accurately predict the direction of industry standards and base our
          products on those industry standards.

Our failure to do any of these activities would adversely affect our ability to
successfully compete in the emerging SAN market.

COMPETING TECHNOLOGIES MAY EMERGE AND WE MAY FAIL TO ADOPT NEW TECHNOLOGIES ON A
TIMELY BASIS. FAILURE TO UTILIZE NEW TECHNOLOGIES MAY DECREASE THE DEMAND FOR
OUR PRODUCTS.

     Emerging technologies, such as Ethernet IP and SCSI over IP, have been
discussed as competing alternatives to SANs. If we are unable to identify new
technologies in a timely manner and efficiently utilize such new technologies in
our product development efforts, the demand for our current products may
decrease significantly and rapidly, which would harm our business.

WE EXPECT THAT A GROWING PERCENTAGE OF OUR FUTURE REVENUE WILL BE DERIVED FROM
OUR SWITCH AND MANAGED HUB PRODUCTS, OUR SAN MANAGEMENT SOFTWARE PRODUCTS, AND
ROYALTIES FROM TECHNOLOGY DEVELOPMENT AGREEMENTS WITH CUSTOMERS, AND OUR SUCCESS
WILL DEPEND ON WIDESPREAD ACCEPTANCE OF THESE PRODUCTS AND TECHNOLOGIES.

     Our future success depends upon our ability to address the rapidly changing
needs of our customers by developing and introducing high-quality,
cost-effective products as well as product enhancements and services on a timely
basis and by keeping pace with technological developments and emerging industry
standards. If we do not successfully develop, introduce and market new products,
especially our switch and managed hub products, our revenue may decline. We have
announced the launch of our 2-gigabit Fibre Channel switches and will soon
launch our SAN InSite management software upgrade. Our future revenue growth
will depend on the success of our upgrades and new product launches and product
launches by customers for which we are developing products under technology


                                       12
<PAGE>   13
development agreements and the success of our current switch and managed hub
products. In addition, as we introduce new or enhanced products, we will have to
manage successfully the transition from older products in order to minimize
disruption in our customers' ordering patterns, avoid excessive levels of older
product inventories and ensure that enough supplies of new products can be
delivered to meet our customers' demands. To the extent customers defer or
cancel orders in expectation of new product releases, any delay in development
or introduction of new products could cause our operating results to suffer.

BECAUSE A SIGNIFICANT PORTION OF OUR REVENUE IS DERIVED FROM SALES OF
ENTRY-LEVEL HUBS AND TRANSCEIVERS, WE ARE DEPENDENT ON CONTINUED WIDESPREAD
MARKET ACCEPTANCE OF THESE PRODUCTS.

     We currently derive a significant portion of our revenue from sales of our
entry level hubs and transceivers. We plan, however, to discontinue the
manufacturing and selling of our GBIC product during the second quarter of 2001.
Although we anticipate our revenue from sales of entry level hubs and
transceivers to further decline as we focus on the development of SAN system
products and as management of SAN products becomes more important in larger,
more complex SAN implementations, we expect that revenue from our entry level
hubs and, in the second quarter of 2001, our transceiver products will continue
to account for a substantial portion of our total revenue for the foreseeable
future. If the market does not continue to accept our entry-level hubs, our
total revenue will decline significantly.

COMPETITION IN OUR MARKETS MAY LEAD TO REDUCED PRICES AND SALES OF OUR PRODUCTS,
INCREASED LOSSES AND REDUCED MARKET SHARE.

     The markets for SAN interconnect products are highly competitive. Our
current competitors include a number of domestic and international companies,
many of which have substantially greater financial, technical, marketing and
distribution resources than we have. We expect that more companies, including
our customers, may enter the market for SAN interconnect products. We may not be
able to compete successfully against either current or future competitors.
Increased competition could result in significant price erosion, reduced
revenue, lower margins or loss of market share, any of which would have a
material adverse effect on our business, results of operations and financial
condition.

     For switch sales, we compete primarily with Brocade Communications, McDATA
Corporation and Qlogic Corporation. For hub sales, we compete primarily with
Emulex Corporation and Gadzoox Networks. Although we do not believe that any of
the above competitors offer comprehensive SAN interconnect management software
that directly competes with ours, other vendors, such as Brocade and Gadzoox,
provide single point-device managers for either switch or hub products, but not
across multiple interconnect devices, including switches, hubs and transceivers.
We will soon launch a version of our SAN InSite management software to manage
third-party devices within the SAN interconnect. Other software vendors, such as
Veritas Software, SANnavigator, Inc., and Prisa Networks, have introduced or
have under development products that may compete with our product when it is
released. Our competitors continue to introduce improved products with lower
prices, and we will have to do the same to remain competitive. Furthermore,
larger companies in other related industries or our customers may develop or
acquire technologies and apply their significant resources, including their
distribution channels and brand recognition, to capture significant SAN market
share. Therefore, we may not be able to compete successfully in the SAN market.

OUR FAILURE TO ENHANCE OUR EXISTING PRODUCTS AND INTRODUCE NEW PRODUCTS ON A
TIMELY BASIS COULD CAUSE OUR REVENUE TO FALL.

     Given the product life cycles in the markets for our products, any delay or
unanticipated difficulty associated with new product introductions or product
enhancements could significantly harm our business, results of operations and
financial condition. During 2001, we expect to introduce our new 2-gigabit Fibre
Channel switch, our "loop switch on a chip" ASIC, a Fibre Channel switch module
for Lucent Technology's OptiStar EdgeSwitch, and a version of our SAN InSite
management software that will manage third-party products in the SAN. We may not
be able to develop, manufacture and market these new products or other


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<PAGE>   14
product enhancements in a timely manner or in a manner that will achieve market
acceptance. We also may not be able to develop the underlying core technologies
necessary to create new products and enhancements, or to license these new
technologies from third parties. Product development delays may result from
numerous factors, including:

     o    changing OEM product specifications;

     o    difficulties in hiring and retaining necessary personnel;

     o    difficulties in reallocating engineering resources and overcoming
          resource limitations;

     o    difficulties with independent contractors or development partners;

     o    changing market or competitive product requirements; and

     o    unanticipated engineering complexities.

THE SALES CYCLE FOR OUR PRODUCTS IS LONG AND WE MAY INCUR SUBSTANTIAL
NON-RECOVERABLE EXPENSES AND DEVOTE SIGNIFICANT RESOURCES TO SALES THAT DO NOT
OCCUR WHEN ANTICIPATED OR AT ALL.

     OEMs and resellers typically conduct significant evaluation, testing,
implementation and acceptance procedures before they begin to market and sell
new solutions that include our products. This evaluation process is lengthy and
may range from six months to one year or more. This process is complex and may
require significant sales, marketing and management efforts on our part. This
process becomes more complex as we simultaneously qualify our products with
multiple customers. As a result, we may expend significant resources to develop
customer relationships before we recognize any revenue from these relationships
or we may never realize any revenue from these efforts.

FAILURE TO MANAGE OUR OEM AND RESELLER RELATIONSHIPS AND EXPAND OUR DISTRIBUTION
CHANNELS COULD SIGNIFICANTLY REDUCE OUR REVENUE.

     We rely on OEMs and resellers to distribute and sell our products. Our
success depends substantially on our ability to initiate, manage and expand our
relationships with OEMs, our ability to attract additional resellers and the
sales efforts of these OEMs and resellers. Our failure to manage and expand our
relationships with OEMs and resellers, or their failure to market our products
effectively, could substantially reduce our revenue and seriously harm our
business.

ANY FAILURE BY US TO SUCCESSFULLY EXECUTE OUR DISTRIBUTION STRATEGY WILL
NEGATIVELY IMPACT OUR REVENUE.

     Our distribution strategy focuses primarily on developing and expanding
indirect distribution channels through OEMs and resellers. Our failure to
execute this strategy successfully could limit our ability to grow or sustain
revenue. Furthermore, as we expand our sales to resellers, we may increase our
selling costs, as these parties generally require a higher level of customer
support than our OEMs. If we fail to develop and cultivate relationships with
significant resellers, or if these resellers are not successful in their sales
efforts, sales of our products may decrease and our operating results would
suffer. Many of our resellers also sell products that compete with our products.
We cannot assure you that our resellers will market our products effectively or
continue to devote the resources necessary to provide us with effective sales,
marketing and technical support. Our failure to successfully develop or manage
our reseller relationships or their failure to sell our products could reduce
our revenue.

THE LOSS OF K*TEC, THE FAILURE TO FORECAST ACCURATELY DEMAND FOR OUR PRODUCTS OR
TO MANAGE SUCCESSFULLY OUR RELATIONSHIP WITH K*TEC WOULD NEGATIVELY AFFECT OUR
BUSINESS.

     We rely on K*Tec Electronics, an outside contract-manufacturing firm, to
manufacture, store and ship our products. We share K*Tec's manufacturing
capacity with numerous companies whose manufacturing needs may conflict with
ours. If K*Tec is unable or unwilling to complete production runs for us in the
future, or experiences any significant delays in completing production runs or
shipping our products, the manufacturing and sale of our products would be
temporarily suspended. We have in the past experienced delivery problems based
on capacity constraints for production, test and material supply. If our product

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<PAGE>   15
volume requirements increase, we may find it necessary to augment our
manufacturing capacity by exploring new subcontract manufacturers. We may not be
successful in finding qualified manufacturers that meet our needs. An
interruption in supply of our products, or additional costs incurred to qualify
and shift production to an alternative manufacturing facility, would
significantly harm our business, results of operations and financial condition.

     In October 2000, Kent Electronics announced that it had sold K*Tec
Electronics to Thayer-Blum Funding II LLC. K*Tec Electronics has assured us that
the sale will not affect its ability to meet our manufacturing needs. However,
we cannot be certain that K*Tec will continue to operate in the same manner as
before the sale or be able to meet our manufacturing requirements without
additional cost, or at all.

     K*Tec is not obligated to supply products for us, except as may be provided
in a particular purchase order that K*Tec has accepted. We place purchase orders
with K*Tec based on periodic forecasts. While most of the materials used in our
products are standard products, some are proprietary and/or sole-source and
require extended lead times. Our business will be adversely affected if we are
unable to accurately forecast demand for our products and manufacturing capacity
or if materials are not available at K*Tec to meet the demand. Lead times for
materials and components vary significantly and depend on the specific supplier,
contract terms and demand for a component at a given time. We also may
experience shortages of components from time to time, which could delay the
manufacture of our products.

     We are in the process of launching our new 2-gigabit Fibre Channel
switches, and plan to regularly introduce new products and product enhancements,
which will require that we coordinate our efforts with K*Tec to rapidly achieve
volume production. If we do not effectively manage our relationship with K*Tec,
or if K*Tec experiences delays, disruptions, capacity constraints or quality
control problems in its manufacturing operations, our ability to ship products
to our customers could be delayed and our competitive position and reputation
could be harmed. Qualifying a new contract manufacturer and commencing volume
production is expensive and time consuming. If we are required to or choose to
change contract manufacturers, we may lose revenue and damage our customer
relationships.

WE MAY LOSE SALES IF OUR SOLE SOURCE SUPPLIERS FAIL TO MEET OUR NEEDS.

     We currently purchase several key components from single sources. We depend
on single sources for our card guides, our application specific integrated
circuits, or ASICs, and our microprocessors. ASICs are custom designed computer
chips that perform specific functions very efficiently. In addition, we license
software from a third party that is incorporated into our switches and hubs. If
we cannot supply products due to a lack of components, or are unable to redesign
products with other components in a timely manner, our business, results of
operations and financial condition would be materially adversely affected.

     We use rolling forecasts based on anticipated product orders to determine
our component requirements. Lead times for materials and components that we
order vary significantly and depend on factors such as specific supplier
requirements, contract terms and current market demand for particular
components. As a result, our component requirement forecasts may not be
accurate. If we overestimate our component requirements, we may have excess
inventory, which would increase our costs. If we underestimate our component
requirements, we may have inadequate inventory, which could interrupt our
manufacturing and delay delivery of our products to our customers. Any of these
occurrences would negatively impact our business and operating results.

UNDETECTED SOFTWARE OR HARDWARE DEFECTS COULD INCREASE OUR COSTS AND REDUCE OUR
REVENUE.

     SAN interconnect products and management software frequently contain
undetected software or hardware defects when first introduced or as new versions
are released. Our products are complex and problems may be found from time to

                                       15
<PAGE>   16
time in our existing, new or enhanced products. Our products incorporate
components manufactured by third parties. We have in the past experienced
difficulties with quality and reliability of components obtained from third
parties and we could experience similar problems in the future. In addition, our
products are integrated with products from other vendors. As a result, when
problems occur, it may be difficult to identify the source of the problem. These
problems may cause us to incur significant warranty and repair costs, divert the
attention of our engineering personnel from our product development efforts and
cause significant customer relations problems.

A COMPONENT IN OUR TRANSCEIVERS HAS EXPERIENCED AN ABNORMALLY HIGH FAILURE RATE,
WHICH HAS ADVERSELY AFFECTED AND COULD IN THE FUTURE AFFECT OUR SALES.

     We observed, and some customers confirmed, that in certain applications our
GBIC and GLM transceivers manufactured prior to March 1998 that incorporated a
third party CD laser experienced an abnormally high failure rate. We no longer
use the CD laser. As a result of this problem, we recorded a warranty reserve of
$3.6 million in the fourth quarter of fiscal 1998. Although we have settled
claims by customers that purchased the majority of these products, there is a
risk that additional claims could occur and that the total amount reserved may
be inadequate to cover all potential claims. Claims against us in excess of the
amount of our reserves could have a material adverse effect on our business and
financial condition. Partially as a result of this problem we have seen our
component revenue decrease from $24.2 million in fiscal 1998 to $13.7 million in
fiscal 1999 to $3.6 million in fiscal 2000. We plan to discontinue the
manufacturing and selling of our GBIC product during the second quarter of 2001
and anticipate that revenue from our other tansceivers will continue to decrease
as we have decided to focus our resources on our SAN systems products.

IF WE FAIL TO SUCCESSFULLY DEVELOP THE VIXEL BRAND, OUR REVENUE MAY NOT GROW AND
OUR STOCK PRICE MAY FALL.

     We believe that establishing and maintaining the Vixel brand is a critical
aspect of our efforts to maintain and develop strategic OEM and reseller
relationships, and that the importance of brand recognition will increase due to
the growing number of vendors of SAN interconnect products. If we fail to
promote our brand successfully, or if we incur excessive expenses in an attempt
to promote and maintain the Vixel brand, our business, results of operations and
financial condition may be materially adversely affected. In addition, if our
OEMs, resellers and end users of our SAN interconnect products do not perceive
our products to be of high quality, or if we introduce new products or
technologies that are not accepted by the market, the value of the Vixel brand
will decline and our business will suffer.

IF WE LOSE KEY PERSONNEL OR ARE UNABLE TO HIRE AND INTEGRATE QUALIFIED
PERSONNEL, WE MAY NOT BE SUCCESSFUL.

     Our success depends to a significant degree upon the continued joint
contributions of our senior management, including James M. McCluney, president
and chief executive officer, Kurtis L. Adams, Chief Financial Officer, Thomas
Hughes, Vice President, Product Development and Stuart B. Berman, Chief
Technology Officer. The loss of one or more of our senior management personnel
could harm our sales or delay our product development efforts.

     We believe our future success will depend in large part upon our ability to
attract and retain highly skilled managerial, technical, sales and marketing,
finance and operations personnel. The loss of services of any of our key
personnel could have a negative impact on our business. Many of our employees
have only recently joined us. If we are unable to integrate new employees in a
timely and cost-effective manner, our operating results may suffer. We also need
to increase the number of technical staff members with experience in high-speed
networking applications, ASIC design and software development as we further
develop our product line. Competition for these highly skilled employees in our
industry is intense. Our failure to attract and retain these key employees could
have a material adverse effect on our business, results of operations and
financial condition.

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<PAGE>   17
     The loss of the services of any of our key employees, the inability to
attract or retain qualified personnel in the future or delays in hiring required
personnel could hinder the development and introduction of and negatively impact
our ability to sell our products. In addition, employees may leave our company
and subsequently compete against us. Moreover, companies in our industry whose
employees accept positions with competitors frequently claim that their
competitors have engaged in unfair hiring practices. We may be subject to claims
of this type in the future as we seek to hire qualified personnel and some of
these claims may result in material litigation. We could incur substantial costs
in defending ourselves against these claims, regardless of their merits.

WE PLAN TO INCREASE OUR INTERNATIONAL SALES, WHICH WILL SUBJECT US TO ADDITIONAL
BUSINESS RISKS.

     Our revenue from international sales represented 19.2% of our total revenue
for the three months ended April 1, 2001. We plan to expand our international
sales, especially in Europe and Asia. Our international sales growth will be
limited if we are unable to establish relationships with international
distributors, establish foreign operations, effectively manage international
sales channels and develop relationships with service organizations. We cannot
be certain that we will be able to establish, generate and build market demand
for our products internationally. Our international operations will be subject
to a number of risks, including:

     o    increased complexity and costs of managing international operations;

     o    multiple protectionist, conflicting and changing governmental laws and
          regulations;

     o    longer sales cycles;

     o    difficulties in collecting accounts receivables;

     o    reduced or limited protections of intellectual property rights; and

     o    political and economic instability.

     These factors and others could harm future sales of our products to
international customers, which would negatively impact our business and
operating results. To date, none of our international revenue has been
denominated in foreign currencies. As a result, an increase in the value of the
U.S. dollar relative to foreign currencies could make our products more
expensive and thus less competitive in foreign markets. In the future, a portion
of our international revenue may be denominated in foreign currencies, including
the Euro, which would subject us to risks associated with foreign currency
fluctuations.

     Our SAN interconnect products are subject to U.S. Department of Commerce
export control restrictions. Neither our customers nor we may export those
products without obtaining an export license. These U.S. export laws also
prohibit the export of our SAN interconnect products to a number of countries
deemed by the United States to be hostile. These restrictions may make foreign
competitors facing less stringent controls on their products more competitive in
the global market than are our customers or we. The U.S. government may not
approve any pending or future export license requests. In addition, the list of
products and countries for which export approval is required, and the regulatory
policies with respect thereto, could be revised. The sale of our SAN
interconnect products could be harmed by our failure or the failure of our
customers to obtain the required government licenses or by the costs of
compliance.

OUR PRODUCTS MUST COMPLY WITH EVOLVING INDUSTRY STANDARDS AND GOVERNMENT
REGULATIONS, AND IF WE CANNOT DEVELOP PRODUCTS THAT ARE COMPATIBLE WITH THESE
EVOLVING STANDARDS, OUR BUSINESS WILL SUFFER.

     The market for SAN products is characterized by the need to support
industry standards as they emerge, evolve and achieve acceptance. To remain
competitive, we must continue to introduce new products and product enhancements
that meet these industry standards. All components of a SAN must utilize the
same standards in order to operate together. Our products comprise only a part
of an entire SAN and we depend on the companies that provide other components,
many of which are significantly larger than we are, to support industry
standards as they evolve. We also depend on our competitors to support these
same industry standards. The failure of these providers or our competitors to
support these industry standards could negatively impact market acceptance of
our products.

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<PAGE>   18
     In addition, in the United States, our products must comply with various
regulations and standards defined by the Federal Communications Commission and
Underwriters Laboratories. Internationally, products that we develop also will
be required to comply with standards established by authorities in various
countries. Failure to comply with existing or evolving industry standards or to
obtain timely domestic or foreign regulatory approvals or certificates could
materially harm our business.

OUR INTELLECTUAL PROPERTY PROTECTION MAY PROVE TO BE INADEQUATE WHICH COULD
NEGATIVELY AFFECT OUR ABILITY TO COMPETE.

     We believe that our continued success depends on protecting our proprietary
technology. We currently rely on a combination of patents, copyrights,
trademarks, trade secrets and contractual provisions to establish and protect
our intellectual property rights. In addition, we also enter into
confidentiality or license agreements with our employees, consultants and
corporate partners, and control access to and distribution of our software,
documentation and other proprietary information. Our failure to protect our
intellectual property rights could have a material adverse effect on our
business, results of operations and financial condition. Efforts to protect our
intellectual property could be time consuming and expensive and could have a
material adverse effect on results of operations and financial condition. We
cannot be certain that the steps we take to protect our intellectual property
will adequately protect our proprietary rights, that others will not
independently develop or otherwise acquire equivalent or superior technology or
that we can maintain any of our technology as trade secrets. In addition, the
laws of some of the countries in which our products are or may be sold may not
protect our products and intellectual property rights to the same extent as the
laws of the United States, or at all.

THIRD-PARTY CLAIMS OF INFRINGEMENT OF THEIR INTELLECTUAL PROPERTY RIGHTS COULD
ADVERSELY AFFECT OUR BUSINESS.

     In recent years, there has been significant litigation in the United States
involving patents and other intellectual property rights. We occasionally
receive communications from third parties alleging patent infringement, and
there always is the chance that third parties may assert infringement claims
against us. Future patent infringement disputes, with or without merit, could
result in costly litigation, cause product shipment delays or require us to
enter into royalty or licensing agreements. We cannot be certain that the
necessary licenses would be available or that they could be obtained on
commercially reasonable terms. If we fail to obtain these royalty or licensing
agreements in a timely manner and on reasonable terms, our business, results of
operations and financial condition would be materially adversely affected.

OUR STOCK PRICE HAS BEEN AND MAY CONTINUE TO BE VOLATILE.

     The trading price of our common stock has been and is likely to continue to
be volatile. The market price of our common stock may fluctuate significantly in
response to several factors, including but not limited to the following factors,
some of which are beyond our control:

     o    actual or anticipated fluctuations in our operating results;

     o    losses of our key OEMs or reduction in their purchases of our
          products;

     o    changes in financial estimates by securities analysts;

     o    changes in market valuations of other technology companies;

     o    announcements by us or our competitors of significant technical
          innovations, contracts, acquisitions, strategic partnerships, joint
          ventures or capital commitments;

     o    additions or departures of key personnel; and

     o    future sales of capital stock.

     In addition, the stock market has experienced extreme volatility that often
has been unrelated to the performance of particular companies. These market
fluctuations may cause our stock price to fall regardless of our performance.

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<PAGE>   19
WE MAY NOT BE ABLE TO MEET OUR FUTURE CAPITAL REQUIREMENTS, LIMITING OUR ABILITY
TO GROW.

        We believe that our existing cash, cash equivalents and short-term
investment balances will be sufficient to meet our capital requirements at least
through the next twelve months. However, we may need, or could elect, to seek
additional funding prior to that time. If we need to raise additional funds, we
may not be able to do so on favorable terms, or at all. Further, if we issue
equity securities, existing stockholders may experience additional dilution or
the new equity securities may have rights, preferences or privileges senior to
those of existing holders. If we cannot raise funds on acceptable terms, we may
not be able to develop or enhance our products, take advantage of future
opportunities or respond to competitive pressures or unanticipated funding
requirements.

WE MAY ENGAGE IN FUTURE ACQUISITIONS THAT MAY DILUTE OUR STOCKHOLDERS AND CAUSE
US TO INCUR DEBT OR ASSUME CONTINGENT LIABILITIES.

     We may review opportunities to buy other businesses or technologies that
would complement our current products, expand the breadth of our markets or
enhance our technical capabilities, or that may otherwise offer growth
opportunities. While we have no current agreements or negotiations underway, we
may buy businesses, products or technologies in the future. If we make any
future purchases, we could issue stock that would dilute existing stockholders'
percentage ownership, incur substantial debt or assume contingent liabilities.

     These purchases also involve numerous risks, including:

     o    problems assimilating the purchased operations, technologies or
          products;

     o    unanticipated costs associated with the acquisition;

     o    diversion of management's attention from our core business;

     o    adverse effects on existing business relationships with suppliers and
          customers;

     o    incorrect estimates made in the accounting for acquisitions;

     o    risks associated with entering markets in which we have no or limited
          prior experience; and

     o    potential loss of key employees of purchased organizations.

OUR CORPORATE OFFICES AND PRINCIPAL PRODUCT DEVELOPMENT FACILITY ARE LOCATED IN
A REGION THAT IS SUBJECT TO EARTHQUAKES AND OTHER NATURAL DISASTERS.

        Our corporate offices in Bothell, Washington and research facility in
Irvine, California are located near major earthquake faults. We are not
specifically insured for earthquakes, or other such natural disasters. Any
personal injury or damage to the facilities as a result of such occurrences
could have a material adverse effect on our business, results of operations and
financial condition.

OUR STOCKHOLDER RIGHTS PLAN, CERTIFICATE OF INCORPORATION AND DELAWARE LAW COULD
ADVERSELY AFFECT THE PERFORMANCE OF OUR STOCK.

        Our stockholder rights plan and provisions of our certificate of
incorporation and the Delaware General Corporation Law could make it more
difficult for a third party to acquire us, even if doing so would be beneficial
to our stockholders. The stockholder rights plan and these provisions of our
certificate of incorporation and Delaware law are intended to encourage
potential acquirers to negotiate with us and allow our board of directors the
opportunity to consider alternative proposals in the interest of maximizing
stockholder value. However, such provisions may also discourage acquisition
proposals or delay or prevent a change in control, which could harm our stock
price.

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ITEM 3. QUALITATIVE AND QUANTITATIVE DISCLOSURE ABOUT MARKET RISK.

     We maintain investment portfolio holdings of various issuers, types, and
maturities, the majority of which are commercial paper and government
securities. These securities are generally classified as available for sale and,
consequently, are recorded on the balance sheet at fair value.

     Our investment portfolio, with a fair value of $16.3 million as of April 1,
2001, is invested in commercial paper, government securities and corporate
indebtedness that could experience an adverse decline in fair value should an
increase in interest rates occur. In addition, declines in interest rates could
have an adverse impact on interest earnings for our investment portfolio. We do
not currently hedge against this interest rate exposure.

     All of our revenue is realized in U.S. dollars and is from customers
primarily headquartered in the United States. Therefore, we do not believe we
currently have any significant direct foreign currency exchange risk.

                           PART II - OTHER INFORMATION

ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS

     The Company's Registration Statement on Form S-1 (No. 333-81347) for its
initial public offering of its common stock became effective September 30, 1999.
The initial public offering resulted in net proceeds to the Company of $82.8
million. Expenses related to the offering totaled approximately $1.4 million.
Through April 1, 2001, the proceeds were applied to repay $12.3 million in
debt, $3.5 million in capital lease obligations, $3.7 million was used to
purchase property and equipment and $22.6 million was used for working capital
and general purposes.

ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K

(a)     Exhibits:

        EXHIBIT
        NUMBER                       DESCRIPTION

         3.1(1)   Amended and Restated Certificate of Incorporation of
                  Registrant (Exhibit 3.2)

         3.2(2)   Certificate of Designation of Series A Junior Participating
                  Preferred Stock (Exhibit 3.1)

         3.3(1)   Bylaws of the Registrant (Exhibit 3.4)

         4.1(1)   Form of Registrant's Common Stock Certificate

         10.1     Form of Stock Option Agreement under 1999 Stock Option Plan
                  between the Registrant and Certain of its Executive Officers.

         10.2     Nonstatutory Stock Option Agreement between Registrant and
                  James McCluney dated January 23, 2001

         10.3     Employment Offer Letter between Registrant and Kurtis Adams
                  dated August 20, 1998.

         10.4     Employment Offer Letter between Registrant and Thomas Hughes
                  dated March 21, 2000.

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

(1)  Incorporated by reference to designated exhibits to the Registrant's
     Registration Statement on Form S-1 (SEC File No. 333-81347), declared
     effective on September 30, 1999.

(2)  Incorporated by reference to designated exhibits to Registrant's current
     report on Form 8-K filed with the Securities and Exchange Commission on
     November 17, 2000.

(b)  Reports on Form 8-K:

     None.

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<PAGE>   21
        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.

Dated: May 15, 2001         VIXEL CORPORATION
                            (Registrant)


                            /s/  Kurtis L. Adams
                            ---------------------------------
                            Kurtis L. Adams
                            Chief Financial Officer, Vice President of Finance,
                            Secretary and Treasurer (Authorized Officer and
                            Principal Financial and Accounting Officer)


                                       21
<PAGE>   22
                                  EXHIBIT INDEX

     EXHIBIT
     NUMBER                       DESCRIPTION

     3.1 (1)   Amended and Restated Certificate of Incorporation of Registrant
               (Exhibit 3.2)

     3.2 (2)   Certificate of Designation of Series A Junior Participating
               Preferred Stock (Exhibit 3.1)

     3.3 (1)   Bylaws of the Registrant (Exhibit 3.4)

     4.1 (1)   Form of Registrant's Common Stock Certificate

    10.1       Form of Stock Option Agreement under 1999 Stock Option Plan
               between the Registrant and Certain of its Executive Officers.

    10.2       Nonstatutory Stock Option Agreement between Registrant and
               James McCluney dated January 23, 2001

    10.3       Employment Offer Letter between Registrant and Kurtis Adams
               dated August 20, 1998.

    10.4       Employment Offer Letter between Registrant and Thomas Hughes
               dated March 21, 2000.

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

(1)  Incorporated by reference to designated exhibits to the Registrant's
     Registration Statement on Form S-1 (SEC File No. 333-81347), declared
     effective on September 30, 1999.

(2)  Incorporated by reference to designated exhibits to Registrant's current
     report on Form 8-K filed with the Securities and Exchange Commission on
     November 17, 2000.

                                       22