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 December 26, 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.  x Yes  ¨ No

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

                The number of shares outstanding of the registrant's Common Stock, par value $.01, as of February 3, 2004 was 23,982,479.

NETWORK EQUIPMENT TECHNOLOGIES, INC.

INDEX

			Page Number
PART I.  FINANCIAL INFORMATION
	Item 1.  Financial Statements .............................................................................................................		3
		Condensed Consolidated Balance Sheets at December 26, 2003 and March 28, 2003 ...........................................................................................................................	3
		Condensed Consolidated Statements of Operations and Comprehensive Income (Loss) - Quarter and Nine Months ended December 26, 2003 and December 27, 2002 .....................................................................................................................	4
		Condensed Consolidated Statements of Cash Flows - Nine Months ended December 26, 2003 and December 27, 2002 ................................................................	6
		Notes to Condensed Consolidated Financial Statements ...................................................	7
	Item 2.  Management's Discussion and Analysis of Results of Operations and Financial Condition .....................................................................................................................		10
	Item 3.  Quantitative and Qualitative Disclosures about Market Risk ........................................		24
	Item 4.  Disclosure Controls and Procedures .................................................................................		24
PART II.  OTHER INFORMATION
	Item 6.  Exhibits and Reports on Form 8-K ......................................................................................		25
SIGNATURES ................................................................................................................................................			25

PART I - FINANCIAL INFORMATION

ITEM 1.  FINANCIAL STATEMENTS

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

			December 26,										March 28,
			2003										2003
ASSETS
Current assets:
Cash and cash equivalents				$	10,876									$		20,593
Restricted cash					1,363											1,361
Short-term investments					83,091											72,614
Accounts receivable, net of allowance for doubtful         accounts and sale returns of $613 at December 26,         2003 and $846 at March 28, 2003					25,703											14,574
Inventories					12,282											14,569
Prepaid expenses and other assets					3,493											4,110
Total current assets					136,808											127,821
Property and equipment, net					32,226											34,486
Software production costs, net					-											5
Other assets					3,584											2,506
Total assets				$	172,618				$							164,818
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable				$	6,575										$		5,427
Accrued liabilities					17,252												18,081
Total current liabilities					23,827											23,508
Long-term liabilities:
7 1/4% redeemable convertible subordinated debentures					24,706											24,706
Other long-term liabilities					1,890											1,770
Total long-term liabilities					26,596											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;         23,513 and 22,663 shares outstanding at December 26,         2003 and March 28, 2003, respectively)					235											226
Additional paid-in capital					188,473											184,122
Treasury stock					(3,408	)										(3,408		)
Accumulated other comprehensive loss					(95	)										(198		)
Accumulated deficit					(63,010	)										(65,908		)
Total stockholders' equity					122,195											114,834
Total liabilities and stockholders' equity				$	172,618									$		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)

	Quarter Ended											Nine Months Ended
	December 26, 2003					December 27, 2002					December 26, 2003					December 27, 2002
Revenue:
Product	$	28,438			$		27,991			$		85,511		$			73,087
Service and other		5,433					5,014					14,401					15,212
Total revenue		33,871					33,005					99,912					88,299
Costs of sales:
Cost of product revenue		11,033					14,195					34,400					39,295
Cost of service and other revenue		4,394					4,582					11,959					14,315
Total cost of sales		15,427					18,777					46,359					53,610
Gross margin		18,444					14,228					53,553					34,689
Operating expenses:
Sales and marketing		8,202					7,880					23,320					24,279
Research and development		6,939					6,366					20,728					19,533
General and administrative		2,349					2,707					7,539					8,479
Restructure costs		-					689					266					1,861
Total operating expenses		17,490					17,642					51,853					54,152
Income (loss) from operations		954					(3,414	)				1,700					(19,463	)
Interest income		383					566					1,127					1,929
Interest expense		(500	)				(491	)				(1,534	)				(1,504	)
Gain on sale of Federal Services Business		-					-					1,500					5,000
Other income		69					167					88					2,348
Income (loss) before taxes		906					(3,172	)				2,881					(11,690	)
Income tax provision (benefit)		(3	)				32					(18	)				(2,297	)
Income (loss) before accounting change		909					(3,204	)				2,899					(9,393	)
Cumulative effect of change in accounting   principle relating to goodwill		-					-					-					(9,592	)
Net income (loss)	$	909			$		(3,204	)		$		2,899		$			(18,985	)
Per share data:
Income (loss) before accounting change:
Basic		$0.04					$(0.14	)				$0.13					$(0.42	)
Diluted		$0.04					$(0.14	)				$0.12					$(0.42	)
Cumulative effect of change in accounting principle   relating to goodwill – basic and diluted		$      -					$       -					$      -					$(0.43	)
Net income (loss):
Basic		$0.04					$(0.14	)				$0.13					$(0.85	)
Diluted		$0.04					$(0.14	)				$0.12					$(0.85	)
Common and common equivalent shares:
Basic		23,395					22,476					23,091					22,383
Diluted		24,884					22,476					24,385					22,383

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

		Quarter Ended										Nine Months Ended
	December 26, 2003					December 27, 2002					December 26, 2003					December 27, 2002
Consolidated Statements of Comprehensive     Income (Loss)
Net income (loss)		$  909					$ (3,204	)				$  2,899					$ (18,985	)
Other comprehensive income, net of tax:
Cumulative translation adjustments		267					(7	)				340					47
Net unrealized gain (loss) on securities		(95	)				14					(240	)				588
Comprehensive income (loss)		$ 1,081					$ (3,197	)				$  2,999					$ (18,350	)

See accompanying notes to condensed consolidated financial statements

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

				Nine Months Ended
				December 26, 2003				December 27, 2002
Cash and cash equivalents at beginning of period				$	20,593			$	15,879
Cash flows from operating activities:
Net income (loss)					2,899				(18,985	)
Adjustments required to reconcile net income (loss) to net       cash provided by (used in) operating activities:
Depreciation and amortization					6,571				7,027
Gain on sale of Federal Services Business					(1,500	)			(5,000	)
Loss on disposition of property and equipment					95				7
Gain on insurance settlement					-				(2,380	)
Proceeds from insurance settlement					-				3,451
Cumulative effect of change in accounting principle relating            to goodwill					-				9,592
Changes in assets and liabilities:
Accounts receivable					(11,129	)			455
Inventories					2,183				(1,532	)
Prepaid expenses and other assets					618				1,709
Accounts payable					1,103				(844	)
Accrued liabilities					(825	)			(1,905	)
Net cash provided by (used in) operating activities					15				(8,405	)
Cash flows from investing activities:
Purchases of short-term investments					(181,011	)			(45,032	)
Proceeds from maturities of short-term investments					170,294				49,340
Purchases of property and equipment					(4,247	)			(4,659	)
Proceeds from sale of Federal Services Business					1,500				5,000
Change in restricted cash					(1,453	)			1,891
Other, net					360				30
Net cash provided by (used in) investing activities					(14,557	)			6,570
Cash flows from financing activities:
Issuance of common stock					4,362				958
Net cash provided by financing activities					4,362				958
Effect of exchange rate changes on cash					463				(9	)
Net decrease in cash and cash equivalents					(9,717	)			(886	)
Cash and cash equivalents at end of period				$	10,876			$	14,993
Other cash flow information:
Cash paid (refunded) during the year for:
Interest				$	1,927			$	1,930
Income taxes				$	28			$	(1,067	)
Non-cash investing and financing activities:
Unrealized gain (loss) on available-for-sale securities				$	(240	)		$	588

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 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 SCREAM and SHOUTIP 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 December 26, 2003, the results of operations for the quarters and nine months ended December 26, 2003 and December 27, 2002, and the cash flows for the nine months ended December 26, 2003 and December 27, 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 and nine months ended December 26, 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, Accounting for Stock Appreciation Rights and Other Variable Stock Option or Award Plans, 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 quarter and nine months ended December 26, 2003 and December 27, 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):

	Quarter Ended					Nine Months Ended
	December 26, 2003		December   27, 2002			December  26, 2003		December  27, 2002
Net income (loss) -- as reported	$   909		$  (3,204	)		$  2,899			$  (18,985	)
Less: Stock-based compensation expense determined by the fair value method, net of tax	(971	)	(891	)		(3,128	)		(3,350	)
Net loss -- pro forma	$  (62	)	$  (4,095	)		$  (229	)		$  (22,335	)
Basic income (loss) per share -- as reported	$   0.04		$    (0.14	)		$   0.13			$     (0.85	)
Diluted income (loss) per share -- as reported	$   0.04		$    (0.14	)		$   0.12			$     (0.85	)
Basic and diluted loss per share -- pro forma	$  (0.00	)	$    (0.18	)		$  (0.01	)		$     (1.00	)

Recently Issued Accounting Standards.   In December 2003, the Securities and Exchange Commission (SEC) issued Staff Accounting Bulletin (SAB) No. 104, Revenue Recognition.  SAB 104 revises or rescinds portions of the interpretive guidance included in Topic 13 of the codification of staff accounting bulletins in order to make this interpretive guidance consistent with current authoritative accounting and auditing guidance and SEC rules and regulations.   The adoption of SAB 104 did not have a material effect on the Company's results of operations or financial condition.

Note 3.  Inventories

Inventories are stated at the lower of cost (first-in, first-out) or market and include material, labor and manufacturing overhead costs.  Inventories at December 26, 2003 and March 28, 2003 consisted of the following (in thousands):

		December 26, 2003		March 28, 2003
Purchased components		$       2,697		$      5,084
Work-in-process		7,625		6,153
Finished goods		1,960		3,332
Total		$    12,282		$    14,569

Note 4.  Income (Loss) Per Share

The following table sets forth the computation of the numerator and denominator used in the computation of basic and diluted net income (loss) per share (in thousands):

	Quarter Ended				Nine Months Ended
	December 26, 2003	December  27, 2002			December 26, 2003		December 27, 2002
Numerator:
Income (loss) before accounting change	$   909		$  (3,204	)	$   2,899			$   (9,393	)
Cumulative effect of change in accounting principle, relating to goodwill	-		-		-			(9,592	)
Net income (loss)	$   909		$  (3,204	)	$   2,899			$  (18,985	)
Denominator:
Basic weighted average shares of common stock outstanding	23,395		22,476		23,091			22,383
Diluted effect of options issued to employees	1,489		-		1,294			-
Diluted weighted average shares of common stock outstanding	24,884		22,476		24,385			22,383

Basic income (loss) per share has been computed based upon the weighted average number of common shares outstanding for the periods presented.  For diluted income per share, shares used in the per share computation include weighted average common and potentially dilutive shares outstanding.  Potentially dilutive shares consist of shares issuable upon the assumed exercise of dilutive stock options.  These shares totaled 1,489,000 and 121,000 for the quarters ended December 26, 2003 and December 27, 2002, respectively, and 1,294,000 and 203,000 for the nine months ended December 26, 2003 and December 27, 2002.  The dilutive shares for the quarter and nine months ended December 26, 2003 were included in the diluted per share computation. Because the Company reported a net loss for the quarter and nine months ended December 27, 2002, the calculation of diluted net loss per share does not include common stock equivalents as they are anti-dilutive and would result in a reduction of net loss per share.  Additionally, there were 784,000 shares of common stock issuable upon conversion of debentures.  These shares, and the related effect of the accrued interest on the debentures, were not included in the calculation of diluted income (loss) per share for the quarter and nine months ended December 26, 2003 and December 27, 2002, as their inclusion would have been anti-dilutive.

Note 5.  Restructure Costs

In the first quarter of fiscal 2004, net.com recorded a restructuring charge of $266,000.  This charge included $254,000 for lease write-off and $12,000 for office closure costs.  The remaining liability for restructuring charges is $790,000 at December 26, 2003, as shown in the table below.  Components of accrued restructuring charges, which are included in accrued liabilities in the accompanying balance sheets, and changes in accrued amounts related to this restructuring program during the first nine months of fiscal 2004 and as of March 28, 2003 were as follows (in thousands):

		Employee Separation   Costs		Lease Write-off		Office Closure   Costs		Other Restructuring   Costs		Total
Balance at    March 28, 2003		$   160		$  614		$    36		$    94		$  904
Provision		-		254		12		-		266
Payments		(25	)	(343	)	(12	)	-		(380	)
Balance at    December 26, 2003		$   135		$  525		$    36		$    94		$  790

net.com believes that all costs associated with these restructuring charges will be paid no later than the end of fiscal 2007.

Note 6.  Sale of N.E.T. Federal, Inc.'s Professional Services Business

On December 1, 2000, net.com sold the assets of its federal services business to CACI International Inc. (CACI) for cash consideration of $40.0 million.  The assets sold were comprised mainly of federal government service contracts, accounts receivable, spares inventory and fixed assets. The cash received from CACI to date is $38.5 million.  The remaining $1.5 million is payable during the first quarter of fiscal 2005.  During the quarter ended June 27, 2003, net.com received payment and recorded a gain of $1.5 million related to the sale. The total net gain on the sale to date is $26.4 million.  In addition, under an ongoing agreement with CACI, net.com will continue to receive royalties on maintenance revenue.

Note 7.  Goodwill and other intangible assets

In July 2001, the FASB issued SFAS No. 142, Goodwill and Other Intangible Assets, which establishes financial accounting and reporting for acquired goodwill and other intangible assets and supercedes APB Opinion No.17, Intangible Assets.  The Company adopted SFAS 142 on March 30, 2002.  SFAS 142 requires that goodwill and intangible assets that have indefinite useful lives not be amortized but, instead, tested at least annually for impairment.  Accordingly, net.com ceased amortization of all goodwill on March 30, 2002.  Intangible assets that have finite useful lives, consisting primarily of patents, continue to be amortized over their estimated useful lives.  Any impairment loss was measured as of the date of adoption and recognized as a cumulative effect of a change in accounting principle.

The standard also requires that goodwill be tested for impairment annually.  In the year of adoption, the standard required a transitional goodwill impairment evaluation, which was a two-step process.  The first step of the goodwill impairment test, used to identify potential impairment, compares the fair value of a reporting unit with its carrying amount, including goodwill.  If the fair value of a reporting unit exceeds its carrying amount, goodwill of the reporting unit is considered not impaired, thus the second step of the impairment test is unnecessary.  If the carrying amount of a reporting unit exceeds its fair value, the second step of the goodwill impairment test shall be performed to measure the amount of impairment loss.  During the quarter ended June 28, 2002, net.com completed this first step, which indicated that the goodwill could be impaired.

The second step of the goodwill impairment test used to measure the amount of impairment loss compares the implied fair value of goodwill with the carrying amount of the goodwill.  If the carrying amount of the goodwill exceeds the implied fair value of the goodwill, an impairment loss shall be recognized in an amount equal to that excess.  As of June 28, 2002, net.com completed this second step and measured and recognized a transitional impairment loss of $9.6 million (which represented the write off of the entire goodwill balance) as a cumulative effect of change in accounting principle in its statement of operations.

Note 8.  Warranty accruals

Components of the warranty accrual, which are included in accrued liabilities in the accompanying condensed consolidated balance sheets, during the first nine months of fiscal 2004 were as follows (in thousands):

	Warranty Accrual
Balance at March 28, 2003	$   204
Charges to cost of goods sold	196
Charges to warranty accrual	(197	)
Other adjustments (1)	(77	)
Balance at December 26, 2003	$   126

                (1) Adjustment resulted from a change in warranty cost estimates primarily from lower
                hourly costs of labor to repair products and reduced frequency of warranty claims.

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

This discussion and analysis should be read in conjunction with Part II of our Form 10-K for the fiscal year ended March 28, 2003. Statements contained in this Form 10-Q, which are not historical facts are forward-looking statements, including statements that relate to products, customers, operations and contingent payments.  A forward-looking statement may contain words such as "plans," "hopes," "believes," "estimates," "will continue to be," "will be," "continue to," "expect to," "anticipate that," "to be," or "can impact."  Forward-looking statements are based upon management expectations and involve risks and uncertainties that may cause actual results to differ materially from those anticipated in the forward-looking statements.  Many factors may cause actual results to vary including, but not limited to, the factors discussed in this Form 10-Q.  net.com expressly disclaims any obligation or undertaking to revise or publicly release any updates or revisions to any forward-looking statement contained in this Form 10-Q.  Investors should carefully review the risk factors described in this Form 10-Q along with other documents net.com files from time to time with the Securities and Exchange Commission (SEC).

Significant Accounting Policy Judgments and Estimates

The preparation of financial statements in accordance with accounting principles generally accepted in the United States requires that we make estimates and judgments, which affect the reported amounts of assets, liabilities, revenue and expenses, and related disclosures of contingent assets and liabilities. On an on-going basis, we evaluate our estimates, including those related to sales returns, bad debts, inventories, investments, intangible assets, income taxes, warranty obligations, restructuring charges, contingencies, such as litigation, and contract terms that have multiple elements and other complexities typical in the telecommunications equipment industry. We base our estimates on historical experience and other assumptions that we believe are reasonable under the circumstances. Actual results may differ from these estimates under different assumptions or conditions.

We believe the following critical accounting policies affect the more significant judgments and estimates used in the preparation of our financial statements.

Revenue Recognition:  We enter into agreements to sell products and services and other arrangements (multiple element arrangements) that include combinations of products and services. We recognize product revenue generally upon shipment, when all four of the following criteria are met:

    1)  we have a contract with our customer,
    2)  when delivery has occurred and risk of loss passes to the customer,
    3)  when our price is fixed or determinable, and
    4)  when collection of the receivable is reasonably assured.

For transactions where we have not yet obtained customer acceptance, revenue is generally deferred until the terms of acceptance are satisfied. Revenue for installation or other services is recognized upon completion of the service. Maintenance contracts are typically recognized ratably over the period of the contracts. When arrangements include multiple elements, such as products and services, we allocate revenue among the elements using objective evidence of fair value of each element, to the extent such objective evidence is available, and then recognize revenue for each element when the criteria for revenue recognition have been met. This allocation requires judgment as to whether vendor-specific objective evidence of fair value exists for the various elements. If fair value cannot be determined for some elements of the arrangement, such as support services, a portion of product revenue is deferred and recognized when the other elements of the arrangement have been delivered and accepted. Many of the conditions discussed above are inherently subjective and are frequently dependent on individual facts and circumstances.  Therefore, we cannot always accurately determine in advance when some components of revenue will be recognizable.  Deferral of substantial revenue due to any of these conditions could adversely affect our revenue in a given period.

Allowance for Sales Returns:   A reserve for sales returns is established based on historical trends in product returns. If the actual future returns differ from historical levels, our revenue could be adversely affected.

Allowance for Doubtful Accounts:  The allowance for doubtful accounts receivable is based on our assessment of the collectibility of specific customer accounts and the aging of accounts receivable. If there is a deterioration of a major customer's credit worthiness or actual defaults are higher than our historical experience, we may have to increase our allowance for doubtful accounts receivable, and our operating expenses could be adversely affected.

Inventory Provisions:    Inventory purchases and commitments are based upon future demand forecasts. If there is a significant decrease in demand for our products or there is a higher risk of inventory obsolescence because of rapidly changin