<PAGE>
 
                                 UNITED STATES
                      SECURITIES AND EXCHANGE COMMISSION
                                        
                             WASHINGTON, D.C. 20549
                                        

                                   FORM 10-Q
                                        
                                        
      QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
                             EXCHANGE ACT OF 1934



                 FOR THE QUARTERLY PERIOD ENDED AUGUST 2, 1998



                         Commission file number 1-13316
                                        
                                        

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



                 CANADA                                   98-0077506
    (State or other jurisdiction of                    (I.R.S. Employer
    incorporation or organization)                    Identification No.)


 600 MARCH ROAD, KANATA, ONTARIO, CANADA                    K2K 2E6
 (Address of principal executive offices)                  (Zip Code)

Registrant's telephone number, including area code      (613)  591-3600


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 Common Shares of the registrant outstanding as at September 10,
1998 was 176,774,891.



                       (Exhibit index located on page 20)

                                (Page 1 of 23)
<PAGE>
 
                         NEWBRIDGE NETWORKS CORPORATION
                                        

                               TABLE OF CONTENTS
                                        
<TABLE>
<CAPTION>
                                                                       Page No.
                                                                       --------
<S>           <C>                                                      <C> 
PART I.   FINANCIAL INFORMATION
 
   Item 1.    Financial Statements
 
                Consolidated Statements of Earnings and Retained
                  Earnings -- Fiscal quarters ended August 2, 1998
                  and August 3, 1997.....................................     3
                                                                      
                Consolidated Balance Sheets --                          
                  August 2, 1998 and April 30, 1998......................     4
                                                                      
                Consolidated Statements of Cash Flows --                
                  Fiscal quarters ended August 2, 1998 and 
                  August 3, 1997.........................................     5
 
                Notes to the Consolidated Financial Statements...........  6-10
 
   Item 2.    Management's Discussion and Analysis of Financial
                Condition and Results of Operations...................... 11-17
 
   Item 3.    Quantitative and Qualitative Disclosure About Market Risk..    17
                                                                       
PART II.  OTHER INFORMATION                                        
                                                                       
   Item 1.    Legal Proceedings..........................................    18
                                                                       
   Item 5.    Other Information..........................................    18
                                                                       
   Item 6.    Exhibits and Reports on Form 8-K...........................    18
                                                                       
SIGNATURES...............................................................    19
</TABLE>                                                               

                                (Page 2 of 23)
<PAGE>
 
                       PART I.     FINANCIAL INFORMATION
                                        
ITEM 1.   FINANCIAL STATEMENTS


                         NEWBRIDGE NETWORKS CORPORATION

           CONSOLIDATED STATEMENTS OF EARNINGS AND RETAINED EARNINGS
                                        
         (Canadian dollars, amounts in thousands except per share data)
                                  (Unaudited)
<TABLE>
<CAPTION>
 
 
                                               Fiscal quarter ended
                                              ----------------------
                                              August 2,   August 3,
                                                 1998        1997
                                              ----------  ----------
<S>                                           <C>         <C>
 
Sales                                          $426,056    $434,738
 
Cost of sales                                   176,562     160,730
                                               --------    --------
 
Gross margin                                    249,494     274,008
 
Expenses
  Selling, general and administrative           129,039     123,857
  Research and development                       67,156      59,683
                                               --------    --------
 
Income from operations                           53,299      90,468
 
Interest income                                   6,611       3,022
Interest expense on long term obligations        (6,703)       (284)
Other expenses                                   (2,433)     (2,185)
                                               --------    --------
 
Earnings before income taxes
  and non-controlling interest                   50,774      91,021
 
Provision for income taxes                       14,978      27,034
 
Non-controlling interest                            276        (367)
                                               --------    --------
 
Net earnings                                     35,520      64,354
 
Retained earnings, beginning of the period      749,830     768,148
                                               --------    --------
 
Retained earnings, end of the period           $785,350    $832,502
                                               ========    ========
 
Earnings per share (Note 5)
  Basic                                           $0.20       $0.37 
  Fully diluted                                   $0.20       $0.36
 
Weighted average number of shares
  Basic                                         176,105     172,964
  Fully diluted                                 196,750     189,082
 
</TABLE>


        See accompanying Notes to the Consolidated Financial Statements.

                                (Page 3 of 23)
<PAGE>
 
                         NEWBRIDGE NETWORKS CORPORATION

                          CONSOLIDATED BALANCE SHEETS
                                        
                        (Canadian dollars in thousands)
<TABLE>
<CAPTION>
 
 
                                                              August 2,   April 30,
                                                                1998         1998
                                                             -----------  ----------
                                                             (unaudited)
<S>                                                          <C>          <C>
ASSETS
 
Cash and cash equivalents (Note 2)                           $  509,366   $  499,278
Accounts receivable, net of provision for returns and
  doubtful accounts of $13,951 (April 30, 1998 - $13,067)       431,183      428,527
Inventories (Note 3)                                            188,617      196,285
Prepaid expenses and other current assets                        87,283       77,600
                                                             ----------   ----------
 
                                                              1,216,449    1,201,690
 
Property, plant and equipment                                   494,366      450,735
Goodwill (Note 4)                                                72,238       72,719
Software development costs                                       30,209       28,299
Future tax benefits                                              41,152       50,443
Other assets                                                    186,489      162,939
                                                             ----------   ----------
 
                                                             $2,040,903   $1,966,825
                                                             ==========   ==========
 
LIABILITIES AND SHAREHOLDERS' EQUITY
 
Current liabilities
  Accounts payable                                           $  119,692   $  127,040
  Accrued liabilities                                           108,721      118,771
  Income taxes                                                       --        5,851
  Current portion of long term obligations                        4,273        4,136
                                                             ----------   ----------
 
                                                                232,686      255,798
 
Long term obligations                                           395,026      383,311
Future tax obligations                                           74,223       71,197
Non-controlling interest                                         25,798       22,899
                                                             ----------   ----------
 
                                                                727,733      733,205
                                                             ----------   ----------
 
Common shares - 176,558,292 outstanding
  (April 30, 1998 - 175,686,083 outstanding)                    476,559      456,510
Accumulated foreign currency translation adjustment              51,261       27,280
Retained earnings                                               785,350      749,830
                                                             ----------   ----------
 
                                                              1,313,170    1,233,620
                                                             ----------   ----------
 
                                                             $2,040,903   $1,966,825
                                                             ==========   ==========
 
</TABLE>



        See accompanying Notes to the Consolidated Financial Statements.

                                (Page 4 of 23)
<PAGE>
 
                         NEWBRIDGE NETWORKS CORPORATION

                     CONSOLIDATED STATEMENTS OF CASH FLOWS
                                        
                        (Canadian dollars in thousands)
                                  (Unaudited)
<TABLE>
<CAPTION>
 
 
                                                   Fiscal quarter ended
                                                  ----------------------
                                                  August 2,   August 3,
                                                     1998        1997
                                                  ----------  ----------
<S>                                               <C>         <C>
OPERATING ACTIVITIES
 
Net earnings                                       $ 35,520    $ 64,354
 
Items not affecting cash
  Amortization                                       38,662      27,556
  Future income taxes                                14,313       5,158
  Non-controlling interest                              298        (367)
  Other                                                 (39)      1,979
 
Cash effect of changes in:
  Accounts receivable                                14,042     (23,980)
  Inventories                                        12,737     (29,283)
  Prepaid expenses and other current assets             932      15,109
  Accounts payable and accrued liabilities          (26,616)    (22,330)
  Income taxes                                      (12,703)    (13,314)
                                                   --------    --------
 
                                                     77,146      24,882
                                                   --------    --------
 
INVESTING ACTIVITIES
 
Additions to property, plant and equipment          (70,741)    (53,643)
Capitalized software development costs               (5,242)     (3,085)
Additions to other assets                           (22,410)     (7,560)
                                                   --------    --------
 
                                                    (98,393)    (64,288)
                                                   --------    --------
 
FINANCING ACTIVITIES
 
Issue of common shares                               18,945      53,580
Increase in long term obligations                    16,765       4,060
Repayment of long term obligations                   (5,462)     (1,415)
                                                   --------    --------
 
                                                     30,248      56,225
                                                   --------    --------
 
Increase in cash and cash equivalents                 9,001      16,819
Effect of foreign currency translation on cash        1,087       3,238
                                                   --------    --------
                                                     10,088      20,057
 
Cash and cash equivalents, beginning of period      499,278     333,904
                                                   --------    --------
 
Cash and cash equivalents, end of period           $509,366    $353,961
                                                   ========    ========
 
</TABLE>



        See accompanying Notes to the Consolidated Financial Statements.

                                (Page 5 of 23)
<PAGE>
 
                         NEWBRIDGE NETWORKS CORPORATION

                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
                                        
     (Canadian dollars, tabular amounts in thousands except per share data)
                                  (Unaudited)


1.  BASIS OF PRESENTATION

The accompanying unaudited interim consolidated financial statements of
Newbridge Networks Corporation (the "Company") have been prepared in accordance
with accounting principles generally accepted in Canada for interim financial
information. These accounting principles are also generally accepted in the
United States ("U.S. GAAP") in all material respects except for the disclosure
of certain cash equivalents on the Consolidated Balance Sheets and investing
activities on the Consolidated Statements of Cash Flows, as disclosed in Note 2,
and the method of calculation of earnings per share, as disclosed in Note 5.

In the opinion of Management, the unaudited interim consolidated financial
statements reflect all normal and recurring adjustments considered necessary for
fair presentation.

The results of operations for the first fiscal quarter ended August 2, 1998 are
not necessarily indicative of the results to be expected for the fiscal year
ending May 2, 1999.

2.  CASH AND CASH EQUIVALENTS

Components of cash and cash equivalents are:
<TABLE>
<CAPTION>
 
                                                 August 2,  April 30,
                                                   1998       1998
                                                 ---------  ---------
<S>                                              <C>        <C>
 
     Cash                                         $428,868   $467,464
     Held to maturity marketable securities
       Maturing within one year:
        Corporate debt securities                   71,131     22,447
 
     Available for sale marketable securities
       Equity securities                             9,367      9,367
                                                  --------   --------
 
                                                  $509,366   $499,278
                                                  ========   ========
</TABLE>

Held to maturity marketable securities are investments with original maturities
of three months or more. Available for sale marketable securities are common
shares of publicly traded companies acquired upon the Company's disposition of
minority interests in privately held companies. Under U.S. GAAP, marketable
securities would be disclosed as a separate caption on the Consolidated Balance
Sheets.

                                (Page 6 of 23)
<PAGE>
 
                         NEWBRIDGE NETWORKS CORPORATION

                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
                                        
     (Canadian dollars, tabular amounts in thousands except per share data)
                                  (Unaudited)


Held to maturity marketable securities are carried at amortized cost. The
unrealized gains and losses are not included in the Consolidated Statements of
Earnings as these gains and losses are unlikely to be realized due to the
Company's intent to hold the underlying securities to maturity. Available for
sale securities are carried at the lower of cost and market.

If the Consolidated Statements of Cash Flows were prepared under U.S. GAAP,
purchases, maturities and sales of marketable securities would be disclosed as
an investing activity. Disclosure in the Consolidated Statements of Cash Flows
prepared under U.S. GAAP would be as follows.
<TABLE>
<CAPTION>
                                                                Fiscal quarter ended
                                                               ----------------------
                                                                August 2,    August 3,
                                                                  1998         1997
                                                                ---------    --------
<S>                                                            <C>          <C>
     Investing activities in short
      term marketable securities:
 
       Held to maturity securities
          Maturities                                            $     198    $128,751
          Purchases                                               (48,882)    (50,018)
                                                                ---------    --------
                                                                  (48,684)     78,733
 
     Investing activities, as reported                            (98,393)    (64,288)
                                                                ---------    --------
 
     Investing activities, U.S. GAAP                            $(147,077)   $ 14,445
                                                                =========    ========
 
     Net increase in cash and cash equivalents, as reported     $  10,088    $ 20,057
 
     Investing activities in short
       term marketable securities                                 (48,684)     78,733
                                                                ---------    --------
 
     Net increase in cash and cash equivalents, U.S. GAAP       $ (38,596)   $ 98,790
                                                                =========    ========
 
 
 
3.  INVENTORIES
 
                                                                August 2,    April 30,
                                                                  1998         1998
                                                                ---------    --------
 
      Finished goods                                            $ 133,693    $129,850
      Work in process                                              13,959      18,178
      Raw materials                                                40,965      48,257
                                                                ---------    --------
 
                                                                $ 188,617    $196,285
                                                                =========    ========
</TABLE>

                                (Page 7 of 23)
<PAGE>
 
                         NEWBRIDGE NETWORKS CORPORATION

                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
                                        
     (Canadian dollars, tabular amounts in thousands except per share data)
                                  (Unaudited)



4.  GOODWILL

<TABLE>
<CAPTION>
                                   August 2,  April 30,
                                     1998       1998
                                   --------   ---------
<S>                               <C>         <C>
      Goodwill                     $ 84,163    $ 83,817
      Accumulated amortization      (11,925)    (11,098)
                                   --------   ---------
 
                                   $ 72,238    $ 72,719
                                   ========   =========
</TABLE>

5.  EARNINGS PER SHARE

Basic earnings per share has been calculated as net earnings for the period
divided by the daily weighted average number of Common Shares outstanding during
the fiscal quarter. Fully diluted earnings per share has been calculated as net
earnings plus after tax imputed earnings on the cash which would have been
received on the exercise of options, divided by the daily weighted average
number of Common Shares and common share equivalents outstanding during the
period.

Under U.S. GAAP, basic earnings per share has been calculated as net earnings
for the period divided by the daily weighted average number of Common Shares
outstanding during the fiscal quarter, consistent with the calculation of basic
earnings per share under accounting principles generally accepted in Canada.
Diluted earnings per share is calculated using the treasury stock method.
Earnings per share in U.S. dollars is disclosed for the convenience of the
reader. The exchange rates used for translation are based on the average of the
daily noon buying rates for Canadian dollars in U.S. dollars as reported by the
Federal Reserve Bank of New York. The calculation of earnings per share under
U.S. GAAP is as follows.

<TABLE>
<CAPTION>
                                          Fiscal quarter ended
                                          --------------------
                                          August 2,  August 3,
                                            1998       1997
                                          ---------  ---------
<S>                                       <C>        <C>
 Earnings per share
 
     Basic                                    $0.20      $0.37
                                          =========  =========
 
     Diluted                                  $0.20      $0.36
                                          =========  =========
 
 Earnings per share -- in U.S. dollars
 
     Basic                                    $0.14      $0.27
                                          =========  =========
 
     Diluted                                  $0.14      $0.26
                                          =========  =========
 
  Weighted average number of shares
 
     Basic                                  176,105    172,964
                                          =========  =========
 
     Diluted                                178,419    179,821
                                          =========  =========
</TABLE>

                                (Page 8 of 23)
<PAGE>
 
                        NEWBRIDGE NETWORKS CORPORATION

                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
                                        
     (Canadian dollars, tabular amounts in thousands except per share data)
                                  (Unaudited)


6.  RESTRUCTURING COSTS

In November 1997, the Company decided to restructure its activities related to
its LAN business. The restructuring plan involved the formation of a strategic
alliance with a company strongly positioned in the LAN business, and the
reduction of the Company's direct participation, and related costs, in the LAN
business. In repositioning the way in which it addresses the LAN market, the
restructuring plan created impairment losses on assets associated with the
Company's LAN business and liabilities associated with restructuring activities.
Restructuring costs of $181,444,000 were recorded in the third quarter of the
fiscal year ended April 30, 1998. Restructuring activities were essentially
completed as planned through the first quarter of fiscal 1999.

7.  LITIGATION

In the fourth quarter of fiscal 1998 the Company reached an agreement in
principle to settle the class action lawsuit which was filed in United States
District Court in Washington, D.C. during the fiscal year ended April 30, 1995.
The lawsuit purported to be a class action on behalf of a class of persons who
purchased securities of the Company between March 29 and August 1, 1994 and
alleged that the Company made false and misleading statements in violation of
United States securities law and common law. Notice of the proposed settlement
has been sent to class members. The proposed settlement is subject to review and
approval by the Court. The Company recorded the expense in connection with the
settlement of $2,642,000 in the fourth quarter of fiscal 1998 representing the
direct costs incurred.

Lucent Technologies Inc. ("Lucent Technologies") filed a complaint during the
fiscal year ended April 30, 1998 in United States District Court in Delaware
against the Company and its United States subsidiary, Newbridge Networks Inc.
Lucent Technologies manufactures and sells telecommunications systems, software
and products, and is both a distributor of the Company's products and a
competitor of the Company. The complaint alleges that the Company's manufacture
and sale in the United States of Newbridge frame relay and ATM (asynchronous
transfer mode) switch products infringe certain United States patent rights
claimed by Lucent Technologies, and requests actual and trebled damages in an
unspecified amount. Based upon its present understanding of the laws in the
United States and the facts, the Company believes it has meritorious defenses to
these claims. The Company has filed an answer to the complaint, as well as a
counterclaim alleging unfair competition by Lucent Technologies, and intends to
defend this action vigorously. Because the outcome of the action is not certain
at this time, no provision for any liability that may result upon adjudication
has been made in these Consolidated Financial Statements.

                                (Page 9 of 23)
<PAGE>
 
                        NEWBRIDGE NETWORKS CORPORATION


                NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
                                        
    (Canadian dollars, tabular amounts in thousands except per share data)
                                  (Unaudited)



8.  SUBSEQUENT EVENT

On September 9, 1998 the Company announced that it has agreed to sell its
majority ownership position in Advanced Computer Communications ("ACC") to
Telefonaktiebolaget LM Ericsson for cash proceeds of approximately US$170
million. The Company expects to record a non-recurring gain in the second
quarter of fiscal 1999 associated with the transaction, which the Company
expects will be closed in October 1998.


9.  RECENT ACCOUNTING PRONOUNCEMENTS

In June 1998, the United States Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 133 ("SFAS 133"), Accounting for
Derivative Instruments and Hedging Activities. SFAS 133 requires that an entity
recognize all derivative instruments as either assets or liabilities on its
balance sheet and requires that the instruments be recorded at fair value. SFAS
133 is effective for fiscal periods beginning after June 15, 1999. The Company
is currently assessing the impact that SFAS 133 will have on its financial
statements.

                                (Page 10 of 23)
<PAGE>
 
ITEM 2.   MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
             CONDITION AND RESULTS OF OPERATIONS


Certain parts of the following discussion and analysis may be forward-looking
statements that involve a number of risks and uncertainties. As a consequence,
actual results might differ materially from results forecast or suggested in any
forward-looking statements. See "Market for Registrant's Common Equity and
Related Stockholder Matters -- Cautionary Statement Regarding Forward-Looking
Information" in the Company's Annual Report on Form 10-K, which is incorporated
by reference herein.


RESULTS OF OPERATIONS

Sales declined in the first quarter of fiscal 1999 ended August 2, 1998 by 2%
compared to sales in the first quarter of fiscal 1997 ended August 3, 1997. The
decline in sales combined with a 4% decline in gross margin as a percentage of
sales and a $12,655,000 increase in operating expenses, resulted in net earnings
of $35,520,000 for the first quarter of fiscal 1999, a decline of 45% below net
earnings for the first quarter of fiscal 1998.

Net earnings of $35,520,000 for the first quarter of fiscal 1999 represented an
increase of 11% over the fourth quarter of fiscal 1998. The increase in net
earnings was predominantly due to an increase in sales of 8% in the first
quarter of fiscal 1999 compared to the fourth quarter of fiscal 1998.

SALES

<TABLE>
<CAPTION>
                                        Fiscal Quarter Ended
                                   ----------------------------
                                    Aug 2,    Aug 3,      %
                                     1998      1997    Decrease
                                   --------  --------  --------
                                  (Canadian dollars in thousands)
<S>                                <C>       <C>       <C>
 Sales                             $426,056  $434,738       (2)%
                                   ========  ========  ========
</TABLE>

The decline in sales in the first quarter of fiscal 1999 compared to the first
quarter of fiscal 1998 was due to a decrease in sales of products based on
packet technologies for local area network applications (LAN Packet products),
largely offset by increases in sales of products based on packet technologies
for wide area network applications (WAN Packet products). Revenues of LAN Packet
products declined approximately 70% from the first quarter of fiscal 1998 to the
first quarter of fiscal 1999. The decline was the result of sharp decreases in
revenue derived from products associated with the former Ungermann - Bass
Networks Inc. ("UB") organization, which the Company acquired in January 1997.
The Company restructured its activities in the LAN business, including the
former UB, in the third quarter of fiscal 1998. LAN Packet products represented
approximately 5% of the Company's revenue in the first quarter of fiscal 1999
compared to approximately 15% in the first quarter of fiscal 1998.

Sales of WAN Packet products grew approximately 30% in the first quarter of
fiscal 1999 compared to the first quarter of fiscal 1998. Sales of WAN Packet
products represented over 50% total sales in the first quarter of fiscal 1999,
compared to approximately 40% of total sales in the first quarter of fiscal
1998. Product line enhancements and new product lines introduced in fiscal 1997
and 1998 resulted in increased sales, predominantly through increased acceptance
and demand by carriers throughout the world for the Company's asynchronous
transfer mode (ATM) products.

                                (Page 11 of 23)
<PAGE>
 
Sales of circuit switched networking products declined 5% relative to sales in
the first quarter of fiscal 1998. The Company expects the proportion of sales
derived from products based on packet technologies for wide area network
applications to continue to increase relative to sales derived from circuit
switched networking products in fiscal 1999 when compared to fiscal 1998. As a
result, sales growth may be impeded due to longer sales cycles often associated
with the adoption of new technologies.

The Company's sales in the first quarter to carriers for applications that
provide a range of value-added services, such as Virtual Private Networks
(VPNs), wide area network support and Internet access, and for resale to end
users represented 71% of total sales versus 64% in the first quarter of fiscal
1998. The proportion of revenue derived from carriers increased relative to the
first quarter of fiscal 1998 due to the decline in revenues of former UB
Networks products, which serve enterprise customers. Deliveries to original
equipment manufacturers (OEMs) for carrier customers and deliveries under
certain large contracts with carriers contributed significantly to sales in the
first quarter of fiscal 1999 and the first quarter of fiscal 1998. Sales to
Siemens A.G. and subsidiaries, generally under OEM arrangements for resale to
end users, were 14% of total sales for the first quarter of fiscal 1999 and 19%
of total sales for the first quarter of fiscal 1998.

The sales decrease in the first quarter of fiscal 1999 relative to the first
quarter of fiscal 1998 reflects declines in the European Region, associated with
the sharp decline in sales of former UB Networks products, and in the Asia
Pacific Region, due to the recent downturn in economic activity, net of
increased revenues in the Americas region reflecting the increasing demand for
WAN Packet products.

A significant portion of the Company's sales are derived from products shipped
against orders received in each fiscal quarter and from products shipped against
firm purchase orders released in that fiscal quarter. As is prevalent in
emerging segments of the networking industry, a disproportionate amount of the
Company's shipments occur in the third month of each fiscal quarter. In
addition, customers have the ability to revise or cancel orders and change
delivery schedules without significant penalty. As a result, the Company
operates without significant backlog and schedules some production and budgets
expenses based on forecasts of sales, which are difficult to predict. Unforeseen
delays in product deliveries or closing large sales, introductions of new
products by the Company or its competitors, seasonal patterns of customer
capital expenditures or other conditions affecting the networking industry in
particular or the economy generally during any fiscal quarter could cause
quarterly revenue and, to a greater degree, net earnings, to vary greatly.
Quarterly operating results are consequently difficult to predict, even towards
the end of a given fiscal quarter.

Because substantial portions of the Company's sales, cost of sales and other
expenses are denominated in U.S. dollars and Pounds Sterling, the Company's
results of operations are subject to change based on fluctuations in the rates
of exchange of those currencies for the Canadian dollar. During the first
quarter of fiscal 1999, the decrease in the value of the Canadian dollar against
the Pound Sterling and the U.S. dollar, relative to exchange rates in the first
quarter of fiscal 1998, resulted in no material variance in reported sales,
gross margin or income from operations.

                                (Page 12 of 23)
<PAGE>
 
COST OF SALES AND GROSS MARGIN

<TABLE>
<CAPTION>
                                   Fiscal Quarter Ended
                                   --------------------
                                     Aug 2,    Aug 3,
                                     1998       1997
                                   --------   --------
                              (Canadian dollars in thousands)
<S>                                <C>        <C>
 Gross margin                      $249,494   $274,008
                                   ========   ========
 
 As % of sales                       59%        63%
</TABLE>

Cost of sales consists of manufacturing costs, warranty expense and costs
associated with the provision of services. The decline in the gross margin as a
percentage of sales in the first quarter of fiscal 1999 relative to the first
quarter of fiscal 1998 was the result of the decline in revenues from circuit
switched networking products, which carry gross margins above the average gross
margins earned on the Company's other products, as well as the result of
increased competition on product pricing, particularly in the market for
products based on packet technologies.


SELLING, GENERAL AND ADMINISTRATIVE EXPENSES

<TABLE>
<CAPTION>
                                                    Fiscal Quarter Ended
                                                -----------------------------
                                                 Aug 2,    Aug 3,       %
                                                  1998      1997    Increase
                                                --------  --------  ---------
                                               (Canadian dollars in thousands)
<S>                                             <C>       <C>       <C>
Selling, general and administrative expenses    $129,039  $123,857      4%
                                                ========  ========
 
 As a % of sales                                  30%       28%
</TABLE>

Selling, general and administrative expenses increased in the first quarter of
fiscal 1999 relative to the first quarter of fiscal 1998 predominantly as a
result of increased remuneration costs associated with annual salary increases
and additional staff. Incremental hiring was directed at programs to
strengthening the sales and support infrastructure throughout the world.

The increase in selling, general and administrative expenses as a percentage of
sales in the first quarter of fiscal 1999 over the first quarter of fiscal 1998
is the result of the increase in spending and the sales decrease over the same
period. Selling, general and administrative expenses as a percentage of sales
declined by 1% from the fourth quarter of fiscal 1998. Management anticipates
that selling, general and administrative expenses as a percentage of sales will
decline in fiscal 1999 relative to fiscal 1998.

                                (Page 13 of 23)
<PAGE>
 
RESEARCH AND DEVELOPMENT

<TABLE>
<CAPTION>
 
                                                    Fiscal Quarter Ended
                                                ----------------------------
                                                 Aug 3,    Aug 2,      %
                                                  1998      1997    Increase
                                                -------   -------   --------
 
                                              (Canadian dollars in thousands)
<S>                                             <C>       <C>       <C>
 
 Gross research and development expenditures    $83,746   $70,817      18%
                                                                     
 Investment tax credits                          (9,112)   (8,400)      8%
                                                                     
 Customer, government and other funding          (5,614)   (1,502)    274%
                                                                     
 Net deferral (amortization) of                                      
  software development costs                     (1,864)   (1,232)     51%
                                                -------   -------    
                                                                     
 Net research and development expenses          $67,156   $59,683      13%
                                                =======   =======
 
 Gross expenditures as a % of sales               20%       16%
 
 Recoveries as a % of gross expenditures          20%       16%
                                                  
 Net expenses as a % of sales                     16%       14%
</TABLE>

Research and development expenditures consist primarily of software and hardware
engineering personnel expenses, costs associated with equipment and facilities,
and subcontracted research and development costs. The increased costs in the
first quarter of fiscal 1999 relative to the first quarter of fiscal 1998
reflect spending to expand the breadth of network solutions for new value-added
service capabilities and access technologies, particularly with respect to ATM
platforms and network and service management software in carrier and carrier
access applications. The majority of the increase was the result of increased
engineering personnel and annual salary increases.

Recoveries increased as a percentage of gross expenditures in the first quarter
of fiscal 1999 compared to the first quarter of fiscal 1998 due to an increase
in customer, government and other funding as a proportion of gross research and
development expenditures. Based on Management's estimates of the proportion of
fiscal 1999 gross research and development expenditures to be incurred in Canada
and therefore eligible for investment tax credits, and current levels of
committed funding, Management expects the level of recoveries as a percentage of
gross research and development expenditures in fiscal 1999 to approximate the
fiscal 1998 level.

The markets for the Company's products are characterized by continuing
technological change. The Company plans to increase net research and development
spending in absolute dollars in fiscal 1999 relative to fiscal 1998 to address
the requirements of carriers as they invest in new infrastructures to meet the
challenges of growing demand for new communications services and increased
competition.

                                (Page 14 of 23)
<PAGE>
 
INTEREST AND OTHER EXPENSES

<TABLE>
<CAPTION>
                                                  Fiscal Quarter Ended
                                              -----------------------------
                                               Aug 2,    Aug 3,       %
                                                1998      1997    Increase
                                              --------  --------  ---------
                                             (Canadian dollars in thousands)
<S>                                           <C>       <C>       <C>
 Interest income                              $ 6,611   $ 3,022       118%
 
 Interest expense on long term obligations     (6,703)     (284)     2260%
 
 Other expenses                                (2,433)   (2,185)       11%
</TABLE>

Interest income and interest expense on long term obligations for the first
quarter of fiscal 1999 both increased compared to the first quarter of fiscal
1998 primarily as a result of interest income earned and interest expense
incurred on the proceeds of the issuance of US$225,000,000 of Senior Notes due
2003 at the end of the fourth quarter of fiscal 1998. Other expenses represented
less than 1% of sales in the first quarters of fiscal 1999 and fiscal 1998.


INCOME TAXES

<TABLE> 
<CAPTION> 
                                         Fiscal Quarter Ended
                                         --------------------
                                           Aug 2,    Aug 3,
                                            1998      1997
                                           ------    ------
 <S>                                      <C>       <C>
 Income tax rate                            30%       30%
</TABLE> 

The composite rates of income tax for fiscal the first quarter of fiscal 1999
and the first quarter of fiscal 1998 were reduced from the statutory rate
primarily as a result of the application of certain deductions related to
manufacturing and processing activities and to research and development
expenditures in Canada. Future changes in the composite rates of income tax will
be primarily due to the relative profitability of operations and the national
tax policies in each of the various countries in which the Company operates.
Management believes that the composite rate of income tax will remain lower than
the statutory rate because of the availability of deductions related to
manufacturing and processing activities and research and development
expenditures in Canada as well as other tax planning measures undertaken by the
Company.


NON-CONTROLLING INTEREST

The non-controlling interests' share of subsidiary net earnings of $276,000 in
the first quarter of fiscal 1999 relates primarily to net earnings of Coasin
S.A., a Chilean systems integrator of networking products. The non-controlling
interests' share of subsidiary net losses of $367,000 in the first quarter of
fiscal 1998 relate primarily to Transistemas S.A., an Argentine systems
integrator of networking products. The Company has a 51% equity interest in each
of Coasin S.A. and Transistemas S.A.


NET EARNINGS

Sales decreased in the first quarter of fiscal 1999 ended August 2, 1998 by 2%
compared to sales in the first quarter of fiscal 1998 ended August 3, 1997. The
sales decline of 2% for the first quarter of fiscal 1999 relative to the first
quarter of fiscal 1998 combined with a decline in the gross margin as a
percentage of sales of 4% and a 7% increase in operating expenses, resulted in
net earnings of $35,520,000 for the first quarter of fiscal 1999, a decrease of
45% below net earnings for the first quarter of fiscal 1998.

                                (Page 15 of 23)
<PAGE>
 
FINANCIAL CONDITION

During the first quarter of fiscal 1999 ended August 2, 1998 working capital
increased from $945,892,000 to $983,763,000. As at August 2, 1998 the Company
had $509,636,000 of cash and cash equivalents, which represented an increase of
$10,088,000 during the first quarter of fiscal 1999. Cash flow from operations
of $77,146,000 during the quarter, due mainly to net earnings of $35,520,000 and
improvements in certain working capital ratios, was largely offset by additions
to property, plant and equipment of $70,741,000.

Two principal components of the Company's working capital are accounts
receivable and inventory. Management believes that the payment terms and
conditions extended to the Company's customers, arrangements with the Company's
suppliers, and the levels of inventory the Company carries relative to its
levels of sales are consistent with practices generally prevailing in the
networking industry.

In April 1998 the Company issued US$225,000,000 of Senior Notes due 2003 bearing
a coupon rate of 6.51%. The Senior Notes require semi-annual payments of
interest only, with the principal due at maturity. The Company's obligation
under the Senior Notes can be satisfied at any time prior to maturity subject to
a make whole provision. The Senior Notes are unsecured.

In January 1998 the Company borrowed $50,000,000 under a long term loan
agreement. The loan agreement includes a term loan portion and a demand loan
portion, both due January 2003. The term loan bears interest at the fixed rate
of 5.46% and the demand loan bears interest at a floating rate equal to the one
month's bankers' acceptance rate. The term loan requires semi-annual payments of
interest only, with the principal due at maturity. The Company's obligation
under the term loan can be satisfied at any time prior to maturity subject to a
make whole provision. The demand loan requires monthly payments of interest
only, with the principal due at maturity.

Existing short term bank credit facilities consist of operating lines of credit
with certain banks in the aggregate amount of $176,079,000, primarily with banks
in Canada, the United Kingdom, the United States, Chile and Brazil. At August 2,
1998, $11,148,000 was being utilized under these credit facilities, of which
$10,771,000 was attributable to Coasin S.A. and Acacia S.A. The Company has a
51% equity interest in each of Coasin S.A, and Acacia S.A.

On September 9, 1998 the Company announced that it has agreed to sell its
majority ownership position in Advanced Computer Communications ("ACC") to
Telefonaktiebolaget LM Ericsson for cash proceeds of approximately US$170
million. The Company expects to record a non-recurring gain in the second
quarter of fiscal 1999 associated with the transaction, which the Company
expects will be closed in October 1998.

Management anticipates that the level of capital expenditures for fiscal 1999
will approximate the level of capital expenditures incurred in fiscal 1998. The
Company may also increase its current investments in associated companies. The
Company intends to fund capital expenditures and investments with existing cash
and cash expected to be generated from operations during fiscal 1999,
supplemented as appropriate by divestitures or the issuance of shares or debt.
In addition, the Company may use a portion of its cash resources to extend or
enhance its business and diversify its marketing and distribution channels
through acquisitions of or investments in businesses, products or technologies
or through the formation of strategic partnerships with other companies.

Management believes that the Company's liquidity in the form of existing cash
resources, its credit facilities, as well as cash generated from operations and
financing activities, will prove 

                                (Page 16 of 23)
<PAGE>
 
adequate to meet its operating and capital expenditure requirements through the
end of fiscal 1999 and into the foreseeable future.

YEAR 2000

Over a year ago, the Company commenced a program to address potential problems
associated with what is commonly known as the "Year 2000" issue". The Company's
program entails a comprehensive review of its supporting information systems,
products, and the Company's suppliers, to prepare for the Year 2000 date change.
Management believes that the costs of carrying out the program will not have a
significant impact on the results of operations. However, there can be no
assurance that these costs will not be greater than anticipated, nor that
preventative actions undertaken will be completed before problems associated
with the Year 2000 date change occur.

To date the Company has reviewed all of its major product offerings currently
available and the majority are Year 2000 compliant, certain other product
offerings are being reviewed for compliance. Some discontinued product offerings
will either not be evaluated for compliance or are already known to be non-
compliant. The Company has made available a Year 2000 Date Compliance Product
List to all customers, potential customers and the public in general which
identifies the compliance status of all of the Company's products including
discontinued products (http://www.newbridge.com/year2000). The Company has also
completed the identification phase of determining which software and
microprocessor dependent systems are being used by each of the functional areas
of the Company that could be affected by the Year 2000 date change. The Company
is taking preventative action in those cases where systems have been found not
to be Year 2000 compliant either by replacing those systems or upgrading to
compliant versions offered by suppliers. The process of obtaining information on
Year 2000 from certain suppliers of these systems has not been completed.

The Company is still assessing the potential  impact  the Year 2000 will have on
its suppliers and customers and is currently not able to determine the effect on
its operations and financial condition if key suppliers or customers do not
adequately prepare for the Year 2000 date change on a timely basis. Failure of
suppliers on which the Company relies or customers to address this issue in a
timely manner could result in a material financial risk to the Company.


ITEM 3.   QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

No material changes have occurred to the quantitative and qualitative
disclosures about market risk as disclosed in the Company's Annual Report on
Form 10-K for the year ended April 30, 1998.

                                (Page 17 of 23)
<PAGE>
 
                          PART II.   OTHER INFORMATION
                                        
ITEM 1.   LEGAL PROCEEDINGS

In the fourth quarter of fiscal 1998 the Company reached an agreement in
principle to settle the class action lawsuit which was filed in United States
District Court in Washington, D.C. during the fiscal year ended April 30, 1995.
The lawsuit purported to be a class action on behalf of a class of persons who
purchased securities of the Company between March 29 and August 1, 1994 and
alleged that the Company made false and misleading statements in violation of
United States securities law and common law. Notice of the proposed settlement
has been sent to class members. The proposed settlement is subject to review and
approval by the Court. The Company recorded the expense in connection with the
settlement of $2,642,000 in the fourth quarter of fiscal 1998 representing the
direct costs incurred.

Lucent Technologies Inc. ("Lucent Technologies") filed a complaint during the
fiscal year ended April 30, 1998 in United States District Court in Delaware
against the Company and its United States subsidiary, Newbridge Networks Inc.
Lucent Technologies manufactures and sells telecommunications systems, software
and products, and is both a distributor of the Company's products and a
competitor of the Company. The complaint alleges that the Company's manufacture
and sale in the United States of Newbridge frame relay and ATM (asynchronous
transfer mode) switch products infringe certain United States patent rights
claimed by Lucent Technologies, and requests actual and trebled damages in an
unspecified amount. Based upon its present understanding of the laws in the
United States and the facts, the Company believes it has meritorious defenses to
these claims. The Company has filed an answer to the complaint, as well as a
counterclaim alleging unfair competition by Lucent Technologies, and intends to
defend this action vigorously.


ITEM 5.   OTHER INFORMATION

The "Cautionary Statement Regarding Forward-Looking Information" contained in
"Market for Registrant's Common Equity and Related Stockholder Matters" in the
Company's Annual Report on Form 10-K for the fiscal year ended April 30, 1998 is
incorporated herein by reference and made a part hereof.


ITEM 6.   EXHIBITS AND REPORTS ON FORM 8-K

   a)  Exhibits

          Exhibit 11.1  Computation of earnings per share under accounting
                        principles generally accepted in Canada.

          Exhibit 11.2  Computation of earnings per share under accounting
                        principles generally accepted in the United States.


          Exhibit 27    Financial data schedule

 

                                (Page 18 of 23)
<PAGE>
 
                                   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.



                         NEWBRIDGE NETWORKS CORPORATION
                                   (Registrant)



Date: September 10, 1998   By:  /s/Terence H. Matthews
                                ----------------------
                                TERENCE H. MATTHEWS,
                                Chairman of the Board of
                                Directors and Chief
                                Executive Officer



Date: September 10, 1998   By:  /s/Kenneth B. Wigglesworth
                                --------------------------
                                KENNETH B. WIGGLESWORTH,
                                Vice President,
                                Chief Financial Officer

                                (Page 19 of 23)
<PAGE>
 
                         EXHIBIT INDEX



<TABLE>
<CAPTION>
                                                             Page No.
                                                            --------
<S>          <C>                                                 <C>
     11.1    Computation of earnings per share under accounting
             principles generally accepted in Canada             21
 
     11.2    Computation of earnings per share under accounting
             principles generally accepted in the United States  22
 
     27      Financial data schedule                             23
 
</TABLE>

                                (Page 20 of 23)