UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C.  20549

FORM 10-Q

(Mark One)           

x        Quarterly Report Pursuant to Section 13 or 15(D) of the Securities Exchange Act of 1934
                For the quarterly period ended June 27, 2003

OR

¨         Transition Report Pursuant to Section 13 or 15(D) of the Securities Exchange Act of 1934
                For the transition period from                                to                                .

Commission File Number 0-15323

NETWORK EQUIPMENT TECHNOLOGIES, INC.
(Exact name of registrant as specified in its charter)

6900 Paseo Padre Parkway
Fremont, CA  94555-3660
(510) 713-7300

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

                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.  xYes  ¨No

                Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act):  xYes  ¨No

                The number of shares outstanding of the registrant's Common Stock, par value $.01, on July 25, 2003 was22,969,501.

NETWORK EQUIPMENT TECHNOLOGIES, INC.

INDEX

	Page Number
PART I.  FINANCIAL INFORMATION
Item 1.  Financial Statements ...........................................................................................
Condensed Consolidated Balance Sheets at June 27, 2003 and March 28, 2003 ...............................................................................................................	3
Condensed Consolidated Statements of Operations and Comprehensive Income (Loss) - Quarters ended June 27, 2003 and June 28, 2002..................................	4
Condensed Consolidated Statements of Cash Flows - Quarters ended June 27, 2003 and June 28, 2002 ..............................................................................	5
Notes to Condensed Consolidated Financial Statements.......................................	6
Item 2.  Management's Discussion and Analysis of Results of Operations and Financial Condition.......................................................................................................	9
Item 3.  Quantitative and Qualitative Disclosures about Market Risk ......................	21
Item 4.  Disclosure Controls and Procedures ................................................................	21
PART II.  OTHER INFORMATION ...................................................................................
Item 1.  Legal Proceedings ...............................................................................................	22
Item 6.  Exhibits and Reports on Form 8-K ....................................................................	22
SIGNATURES ........................................................................................................................	22

PART I - FINANCIAL INFORMATION

ITEM 1.  FINANCIAL STATEMENTS

NETWORK EQUIPMENT TECHNOLOGIES, INC.
Condensed Consolidated Balance Sheets
(Unaudited -in thousands, except par value)

			June 27,										March 28,
			2003										2003
ASSETS
Current assets:
Cash and cash equivalents				$	10,289									$		20,593
Restricted cash					1,358											1,361
Short-term investments					87,120											72,614
Accounts receivable, net of allowance for doubtful accounts of         $752 at June 27, 2003 and $846 at March 28, 2003					14,447											14,574
Inventories					11,056											14,569
Prepaid expenses and other assets					4,978											4,110
Total current assets					129,248											127,821
Property and equipment, net					34,173											34,486
Software production costs, net					-											5
Other assets					2,402											2,506
Total assets				$	165,823				$							164,818
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable				$	4,372										$		5,427
Accrued liabilities					17,101												18,081
Total current liabilities					21,473											23,508
Long-term liabilities:
7 1/4% redeemable convertible subordinated debentures					24,706											24,706
Other long-term liabilities					1,854											1,770
Total long-term liabilities					26,560											26,476
Stockholders' equity:
Preferred stock ($0.01 par value; 5,000 shares authorized;         none outstanding)					-											-
Common stock ($0.01 par value; 50,000 shares authorized;         22,936 and 22,663 shares outstanding at June 27, 2003 and March         28, 2003, respectively)					229											226
Additional paid-in capital					185,216											184,122
Treasury stock					(3,408	)										(3,408				)
Accumulated other comprehensive income (loss)					71											(198				)
Accumulated deficit					(64,318	)										(65,908				)
Total stockholders' equity					117,790											114,834
Total liabilities and stockholders' equity				$	165,823									$		164,818

See accompanying notes to condensed consolidated financial statements

NETWORK EQUIPMENT TECHNOLOGIES, INC.
Condensed Consolidated Statements of Operations and Comprehensive Income (Loss)
(Unaudited- in thousands, except per share amounts)

		Quarters Ended
		June 27, 2003					June 28, 2002
Revenue:
Product revenue		$	29,297				$		22,001
Service and other revenue			4,804						5,227
Total revenue			34,101						27,228
Cost of sales:
Cost of product revenue			12,354						11,026
Cost of service and other revenue			3,958						4,932
Total cost of sales			16,312						15,958
Gross margin			17,789						11,270
Operating expenses:
Sales and marketing			7,854						8,516
Research and development			6,840						6,483
General and administrative			2,748						2,865
Restructuring costs			266						170
Total operating expenses			17,708						18,034
Income (loss) from operations			81						(6,764			)
Interest income			417							747
Interest expense			(510	)						(509	)
Gain on sale of Federal Service Business			1,500							5,000
Other income			87							2,199
Income before income tax			1,575						673
Income tax benefit			(15	)					(25			)
Income before cumulative change in accounting     principle, relating to goodwill			1,590						698
Cumulative effect of change in accounting principle, relating     to goodwill			-						(9,592			)
Net income (loss)		$	1,590				$		(8,894			)
Income (loss) per share:
Basic and diluted income per share before cumulative effect of       change in accounting principle, relating to goodwill		$	0.07				$		0.03
Basic and diluted income (loss) cumulative effect of change in       accounting principle, relating to goodwill			-						(0.43			)
Basic and diluted income (loss) per share		$	0.07				$		(0.40			)
Shares used in per share calculation:
Basic			22,811						22,296
Diluted			23,929						22,296
Consolidated Statements of Comprehensive Income (Loss)
Net income (loss)		$	1,590			$			(8,894			)
Other comprehensive income, net of tax:
Cumulative translation adjustments			254						42
Net unrealized gains on securities			15						352
Comprehensive income (loss)		$	1,859			$			(8,500			)

See accompanying notes to condensed consolidated financial statements

NETWORK EQUIPMENT TECHNOLOGIES, INC.
Condensed Consolidated Statements of Cash Flows
(Unaudited- in thousands)

				Quarters Ended
				June 27, 2003				June 28, 2002
Cash and cash equivalents at beginning of period				$	20,593			$	15,879
Cash flows from operating activities:
Net income (loss)					1,590				(8,894	)
Adjustments required to reconcile net income (loss) to net       cash provided by (used in) operating activities:
Depreciation and amortization					2,109				2,414
Gain on sale of Federal Services Business					(1,500	)			(5,000	)
Loss on disposition of property and equipment					34				7
Gain on insurance settlement					-				(2,187	)
Proceeds from insurance settlement					-				3,258
Cumulative effect of change in accounting principle, relating            to goodwill					-				9,592
Changes in assets and liabilities:
Accounts receivable					127				1,974
Inventories					3,513				(2,185	)
Prepaid expenses and other assets					(891	)			569
Accounts payable					(1,082	)			(1,286	)
Accrued liabilities					(970	)			(1,798	)
Net cash provided by (used in) operating activities					2,930				(3,536	)
Cash flows from investing activities:
Purchase of short-term investments					(91,745	)			(13,605	)
Proceeds from maturities of short-term investments					77,254				18,454
Purchases of property and equipment					(1,798	)			(1,849	)
Proceeds from sale of Federal Services Business					1,500				5,000
Decrease in restricted cash					3				1,700
Other, net					87				2
Net cash provided by (used in) investing activities					(14,699	)			9,702
Cash flows from financing activities:
Issuance of common stock					1,097				410
Net cash provided by financing activities					1,097				410
Effect of exchange rate on cash					368				11
Net (decrease) increase in cash and cash equivalents					(10,304	)			6,587
Cash and cash equivalents at end of period				$	10,289			$	22,466
Other cash flow information:
Cash paid (refunded) during the year for:
Interest				$	941			$	952
Income taxes				$	28			$	(28	)
Non-cash investing and financing activities:
Unrealized gain on available-for-sale securities				$	15			$	352

See accompanying notes to the condensed consolidated financial statements

NETWORK EQUIPMENT TECHNOLOGIES, INC.
Notes to Condensed Consolidated Financial Statements

Note 1.  Description of the Company

Network Equipment Technologies, Inc., doing business as net.com (net.com or the Company), is a global provider of networking technology platforms that are used for mission-critical communications solutions.  The Company's multiservice wide area networking (WAN) products, comprising the Promina product line, use circuit-switched technology to provide an effective platform for developing reliable and secure networks.  In response to the growth of next-generation networks using packet-switching technologies and the Internet protocol (IP), the Company developed its service creation platforms for broadband, IP telephony, and multiservice networks. These platforms allow network service providers to rapidly create and deliver new service offerings that the Company believes can help them to accelerate the return on their network investment, reduce capital and operating expenditures, and achieve greater profits. Network Equipment Technologies, Inc. was founded in 1983 and has been doing business as net.com since 2000.

Note 2.  Summary of Significant Accounting Policies

Basis of Presentation.   The condensed consolidated financial statements include the accounts of net.com and its wholly owned subsidiaries.  All significant intercompany balances and transactions have been eliminated.

In the opinion of management, the accompanying unaudited condensed consolidated financial statements contain all adjustments (consisting only of normal recurring adjustments) considered necessary to present fairly the financial position as of June 27, 2003, the results of operations for the quarters ended June 27, 2003 and June 28, 2002, and the cash flows for the quarters ended June 27, 2003 and June 28, 2002.  These financial statements should be read in conjunction with the March 28, 2003 audited consolidated financial statements and notes thereto.  The results of operations for the quarter ended June 27, 2003 are not necessarily indicative of the results to be expected for the fiscal year ending March 26, 2004.

Stock Based Compensation.   net.com accounts for its stock-based awards to employees using the intrinsic value method  in accordance with Accounting Principles Board (APB) Opinion No. 25, Accounting for Stock Issued to Employees, and its related interpretations. Stock-based compensation related to non-employees is based on the fair value of the related stock or options in accordance with Statement of Financial Accounting Standards (SFAS) No. 123, Accounting for Stock Based Compensation. Expense associated with stock-based compensation is amortized on an accelerated basis under Financial Accounting Standards Board Interpretation (FIN) No. 28 over the vesting period of each individual award. In accordance with SFAS No. 148, Accounting for Stock-Based Compensation--Transition and Disclosures--an amendment to FASB Statement No. 123, the Company is required to disclose the effects on reported net income (loss) and basic and diluted net income (loss) per share as if the fair value based method had been applied to all awards. For the three months ended June 27, 2003 and June 28, 2002, had compensation cost been determined based on the fair value method pursuant to SFAS 123, the Company's net income (loss) would have been as follows  (in thousands, except per share amounts):

Recently Issued Accounting Standards.   In May 2003, the Financial Accounting Standards Board (FASB) issued SFAS No. 150, Accounting for Certain Financial Instruments with Characteristics of both Liabilities and Equity.  SFAS 150 requires that certain financial instruments, which under previous guidance were accounted for as equity, must now be accounted for as liabilities. The financial instruments affected include mandatory redeemable stock, certain financial instruments that require or may require the issuer to buy back some of its shares in exchange for cash or other assets and certain obligations that can be settled with shares of stock. SFAS 150 is effective for interim periods beginning after June 15, 2003. The Company does not expect the adoption of SFAS 150 to have a material effect on its results of operations or financial condition.

In April 2003, the FASB issued SFAS No. 149, Amendment of Statement 133 on Derivative Instruments and Hedging Activities.  SFAS 149 amends and clarifies the accounting for derivative instruments, including certain derivative instruments embedded in other contracts, and for hedging activities under SFAS No. 133, Accounting for Derivative Instruments and Hedging Activities.   SFAS 149 is generally effective for contracts entered into or modified after June 30, 2003 and for hedging relationships designated after June 30, 2003.  The Company is currently evaluating the effect that the adoption of SFAS 149 will have on its results of operations and financial condition.

In December 2002, FASB issued SFAS No. 148, Accounting for Stock-Based Compensation-Transition and Disclosure, which amends SFAS 123, Accounting for Stock-Based Compensation.  SFAS 148 provides alternative methods of transition for a voluntary change to the fair value based method of accounting for stock-based employee compensation.  In addition, SFAS 148 amends the disclosure requirements of SFAS 123 to require more prominent and more frequent disclosures in financial statements about the effects of stock-based compensation.  SFAS 148 is effective for fiscal years ending after December 15, 2002.  The Company adopted the disclosure provisions of SFAS 148 at March 28, 2003. 

In November 2002, the FASB issued FIN 45, Guarantor's Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others, which elaborates on the disclosures to be made by a guarantor in its interim and annual financial statements about its obligations under certain guarantees that it has issued.  The Company adopted the provisions of FIN 45 for guarantees issued or modified after December 31, 2002, and the adoption of FIN 45 did not have a material impact on the Company's results of operations or financial position.

Note 3.  Inventories

Inventories are stated at lower of cost (first-in, first-out) or market and include material, labor and manufacturing overhead costs.  Inventories at June 27, 2003 and March 28, 2003 consisted of the following (in thousands):

		June 27, 2003		March 28, 2003
Purchased components		$       3,760		$      5,084
Work-in-process		6,064		6,153
Finish goods		1,232		3,332
Total