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UNITED STATES

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)

For the fiscal year ended January 31, 2004

COMPUTER NETWORK TECHNOLOGY CORPORATION

(763) 268-6000

Securities registered pursuant to Section 12(b) of the Act: None

Securities registered pursuant to Section 12(g) of the Act: Common Stock $.01 par value

      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            

      Indicate by check mark if disclosure of delinquent filers pursuant to item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of Registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.     o

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

      State the aggregate market value of the voting and non-voting common equity held by non-affiliates computed by reference to the price at which the common equity was last sold, or the average bid and asked price of such common equity, as of the last business day of the registrant’s most recently completed second fiscal quarter: $185,125,532.

      As of April 1, 2004 Registrant had 27,711,729 shares of Common Stock outstanding.

DOCUMENTS INCORPORATED BY REFERENCE

      Portions of Computer Network Technology Corporation’s definitive Proxy Statement for the Annual Meeting of Shareholders to be held on June 23, 2004 are incorporated by reference into Part III of this Form 10-K.

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PART I

Overview

      We are a leading provider of today’s most cost-effective and reliable storage networking solutions. For over 20 years, businesses around the world have depended on us to improve business efficiency, increase data availability and manage their business-critical information. We apply our technology, products and expertise in open storage networking architecture and business continuity to help companies build end-to-end storage solutions, including hardware and software products, analysis, planning and design, multi-vendor integration, implementation and ongoing remote management. We focus primarily on helping our customers design, develop, deploy and manage storage and data networks, including storage area networks, or SANs, a high speed network within a business’ existing computer system that allows the business to manage its data storage needs with greater efficiency and less disruption to its overall network. We design, manufacture, market and support a wide range of solutions that provide fast and reliable connections among networks of computer and related devices, allowing customers to manage and expand large, complex storage networks efficiently, without geographic limitations, including applications such as remote data replication, or the real-time backup of data to remotely located disks, and remote tape vaulting, or the backup of data to remotely archived tapes.

      On May 5, 2003, we completed the acquisition of Inrange Technologies Corporation (“Inrange”) for $190 million in cash plus transaction costs. Inrange designs, manufactures, markets and supports switching and networking products for storage and data networks. Inrange’s flagship product, the FC/9000®, is the most scalable storage networking director-class switch available for SANs. With an ability for customers to upgrade and scale to 256 ports without disrupting existing systems, the FC/9000®provides a platform from which enterprises can build storage networks that can be used in systems where reliability and continuous availability are critical. The acquisition of Inrange makes us one of the world’s largest providers of complete storage networking products, solutions and services, with combined 2003 pro forma annual revenues of approximately $400 million. We have global leadership positions in our combined markets. The acquisition significantly broadens and strengthens our portfolio of storage networking products and solutions, increases our global size and scope, expands our customer base, and provided us with significant opportunities for both revenue growth and cost reduction synergies. We expect our integration of the two companies will result in over $20 million in annual cost savings.

      Our revenues were $360.9 million, $211.5 million and $187.0 million for the years ended January 31, 2004, 2003 and 2002, respectively. Our revenues for the year ended January 31, 2004 include the acquisition of Inrange from May 5, 2003.

      Our storage networking solutions enable businesses to cost-effectively design, implement, monitor and manage their storage requirements, connect geographically dispersed storage networks, provide continuous availability to greater amounts of data and protect increasing amounts of data more efficiently. We market our storage networking products and services directly to customers through our sales force and worldwide distributors. We also have strategic marketing and supply relationships with leading storage, telecommunications and fibre switching companies, including Brocade, EMC, Hewlett-Packard, Hitachi Data Systems, IBM, StorageTek, and Dell Computer Corporation.

      We are a leading provider of the following storage networking solutions:

	•	Fibre Channel and FICON Switching. With our acquisition of Inrange in May 2003, we became a leader in Fibre Channel and FICON switching. Data is transported across SANs using two communications protocols: Fibre Channel and FICON. Fibre Channel is a technology that dramatically improves the speed of data input and output, or I/ O, between existing storage devices and the ability to connect additional devices to storage networks. FICON, which is based on Fibre Channel, is an IBM-proprietary protocol for transporting data from server to storage in a mainframe environment. Our Fibre Channel and FICON switching solutions provide businesses with a robust

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		backbone or core for high-speed SAN’s in local (LAN), metropolitan (MAN) or remote environments (WAN).
	•	Storage networking over WANs. Our solutions for storage networking over wide area networks, or WANs, enable businesses to manage and protect data across remote locations, in real time if necessary, through applications such as remote data replication and remote tape vaulting. WANs are networks dispersed over long distances that communicate by traditional copper or fiber optic third-party telecommunication lines.
	•	Fibre Channel and FICON-based storage networking over WANs. We believe our Fibre Channel and FICON-based storage networking over WAN products offer significant growth prospects. These products uniquely address constraints in distance, connectivity and data transmission speeds inherent in the Fibre Channel and FICON standards. We believe Fibre Channel or FICON technology, combined with our products and services, will enable businesses to efficiently consolidate, cluster and share data from multiple storage devices on storage networks.
	•	Storage networks over IP-based networks. Our products allow storage networking applications, such as remote data replication, to be deployed over private networks that are based on Internet protocol, or IP, the standard method for data transmission over the Internet. Our products were the first to extend the Fibre Channel, SCSI and ESCON standards to IP-based networks. SCSI and ESCON are older, widely used standards for communicating between computers. These products uniquely enable businesses that use virtual private IP-based networks, or VPNs, to build storage networking over WAN applications. In October 2002, we announced the first remote tape backup/recovery solution for open systems environments to operate over thousands of miles utilizing IP networks.
	•	Storage Network software. Our management software uses open, standard interfaces that can manage multiple product lines and protocols, across SAN, LAN, MAN and WAN environments. Our software solutions facilitate the management of a businesses entire network infrastructure in a single view, by proactively collecting network performance data, identifying problem areas and correlating those problems back to the affected application, increasing data availability and reducing the time required to diagnose and resolve problems.

      In addition to our internally developed proprietary products, we have expanded our range of solutions by offering third party products manufactured by others, coupled with our proprietary consulting, integration, monitoring, and management services that allow our customers to rapidly design, implement and manage complex storage environments. As a result, we are able to capture more of our customers’ spending dollars on storage solutions. We also offer telecommunications bandwidth thereby enabling us to design and offer end-to-end storage networking solutions for our customers.

      Our storage networking solutions operate across most business computing environments, including open systems and mainframes. Open systems are server-based systems that are easy to scale, or expand, and use hardware and software standards not proprietary to any vendor. Mainframes are computer systems with high processing power that have historically been used by large businesses for storing and processing large amounts of data. Compared to available alternatives, we believe our storage networking products offer greater ability to connect various applications and heterogeneous environments using different interfaces, protocols and standards, and to connect and link devices in storage networks transparently, meaning with little or no alteration of other vendors’ hardware or software products.

      Our Fibre Channel and FICON director solutions can be used as the backbone or core of businesses high-speed SAN, LAN, MAN or WAN environments. With the ability to support multiple protocols, interfaces, operating systems, management platforms and topologies, our solutions offer the port capacity, bandwidth, and extensibility required for data intensive, anytime, anywhere applications. Our solutions support the following applications: data and resource sharing to provide availability to crucial data remotely, when and where businesses need it, helping to drive business efficiency; shared storage enabling better storage utilization, since more servers are able to access more storage; clustering to enable

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      We believe our solutions that enable storage networking applications over IP-based networks will benefit existing customers and attract new customers, including mid-sized businesses. These solutions extend the “bandwidth on demand” advantages of IP-based networks to storage applications and allow customers to access telecommunications capacity only as needed through a virtual private network, or VPN, connection, as opposed to leasing expensive dedicated lines. By deploying storage networks over IP-based networks, companies can leverage their existing bandwidth, and can rely on their existing IP network knowledge. We believe that these cost savings, along with the generally expected decreasing costs of telecommunications capacity, will create high-growth opportunities for us in remote data replication, remote tape vaulting and other storage networking applications we enable.

      Our storage networking products consist primarily of our FC/9000® family of Fibre Channel and FICON director class switches, and our UltraNet® family of products that connect storage devices. We also market proprietary consulting, integration, monitoring, and management services that allow our customers to rapidly design, implement and manage complex storage environments, and provide support services for our proprietary products, and products manufactured by others. Our solution offerings, including our proprietary products, third party products, and our proprietary service offerings, help our customers design, deploy and manage enterprise storage solutions by supplying products and expertise for implementing storage applications. Our solution offerings include consulting and integration services for disaster recovery, business continuance, storage infrastructure and network performance. We also offer integration services for data replication, enterprise backup and restore, SAN implementation and network performance monitoring.

Our Market Opportunities

      We believe several forces will continue to drive the demand for our storage networking products and services:

	•	Customers are continuing to implement Fibre Channel and FICON technology to dramatically improve the speed and performance of data input and output, or I/ O, between existing storage devices and the ability to connect additional devices to storage networks. Historically, because of constraints in technology and scalability, customers have built their networks using numerous 32 and 64 port Fibre Channel switches, thereby increasing complexity, and reducing the manageability of their networks. We believe customers will consolidate numerous smaller switches into larger director class switches to improve the manageability of their networks. We believe this trend will provide an enhanced market opportunity for our large, director class 256 port Fibre Channel and FICON switches.
	•	There are significant opportunities for selling additional products and providing additional services to our existing customer base. For example, we have a large install base of customers using our ESCON director products. We believe these customers would have a significant need to upgrade to either Fibre Channel or FICON storage networks, providing us with an attractive market opportunity.
	•	The volume of enterprise data is expected to increase significantly due to the proliferation of Web-based content, digital media, e-mail, supply chain management, customer relations management and other data- driven business applications. As a result, the demand for storage capacity continues to grow.
	•	Actual and expected declines in telecommunications costs and the introduction of cost-effective technologies such as Fibre Channel switching and fiber optic transmission capabilities will make remote data replication and remote tape backup applications more financially attractive for our customers. These costs trends coupled with the introduction of new technologies contributes to a

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		trend of consolidating and connecting storage across many servers and many locations, which drives demand for our products and services.
	•	Storage networking applications over IP-based networks will further expand the type and amount of data our customers will backup and replicate to remote locations. This will also make these applications more affordable for customers with fewer storage requirements.
	•	The increased complexities of storage applications, such as interoperability, storage effectiveness, and business efficiency issues, results in customers requiring storage integration and implementation expertise. We believe our services permit customers to effectively solve these issues, driving demand for our products and services and increasing our revenues.
	•	Customers require that their business critical applications have effective disaster recovery solutions. The events of September 11, 2001 demonstrate the need for and functionality of our products and services. Our customers had 40 systems located in lower Manhattan that were significantly impacted. Because our products were routing data to remote facilities on behalf of customers located in and around the World Trade Center, we believe all products worked as designed, resulting in no material loss of data by any customer.

      International Data Corporation, or IDC, estimates that the worldwide revenue for SAN-attached disk storage systems will grow from $6.68 billion in 2003 to $9.98 billion in 2007, a compound annual growth rate of 10%. Another indication of demand for our storage networking solutions is the growth of the Fibre Channel industry. IDC estimates the revenue for Fibre Channel hubs, switches and directors will grow from $938 million in 2003 to $2.2 billion in 2007, which reflects a compound annual growth rate of 23%. Gartner storage services estimates the demand for storage consulting, implementation and management services will grow from $7.4 billion in 2003 to $10.0 billion in 2007, a compound annual growth rate of 8%. We believe these industry trends, in addition to the specific foregoing factors, will continue to drive demand for our products, and provide us with future growth opportunities.

Selected Recent Development

      On April 6, 2003, we entered into an agreement whereby our wholly owned subsidiary would acquire all of the shares of Inrange that were owned by SPX Corporation. The shares acquired constituted approximately 91% of the issued and outstanding shares of Inrange for a purchase price of $2.31 per share and $173 million in the aggregate. On May 5, 2003 we completed the acquisition of Inrange and pursuant to the agreement the subsidiary merged into Inrange, and the remaining capital stock owned by the other Inrange shareholders was converted into the right to receive $2.31 per share in cash, resulting in a total payment of approximately $190 million for both the stock purchase and merger. In connection with the acquisition, we incurred charges for in-process research and development of $19.7 million, integration expenses of $5.4 million primarily related to severance and wages for terminated CNT employees, and $1.6 million for the write-down of inventory related to the integration of the CNT and Inrange product offerings. The integration of Inrange into our company is now complete, and we expect our integration of the two companies will result in over $20 million in annual cost savings.

      Our acquisition of Inrange makes us one of the world’s largest providers of complete storage networking products, solutions and services, with combined 2003 pro forma annual revenues of approximately $400 million. We have global leadership positions in our combined markets. The acquisition significantly broadens and strengthens our portfolio of storage networking products and solutions, increases our global size and scope, expands our customer base, and provided us with significant opportunities for both revenue growth and cost reduction synergies.

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Storage Networking Overview

      The volume of enterprise data is increasing due to the proliferation of Web-based content, digital media, e-mail, supply chain management, customer relations management and other data-driven business applications.

      The growth of the size and amount of data stored has presented organizations with significant data management challenges and increased storage related costs. As the volume of data stored, and the number of users that require access to the data continue to increase, storage systems and servers are burdened by an increased number of input/output, or I/ O, transactions they must perform. Hence users are moving to Fibre Channel and FICON protocols that dramatically improve the speed of data I/ O between existing storage devices, and the ability to connect additional devices to storage networks. However, traditional storage architecture has inherent speed, distance, capacity and performance constraints. For example, depending on the standards and protocols used, the following constraints may exist:

	•	bandwidth, or the data transmission rate, is generally fixed at 15, 40 or 80 megabytes per second;
	•	distance between devices is limited to 12 to 150 meters;
	•	connectivity is limited to 15 storage devices;
	•	lack of data management capability in SCSI devices places the burden for management tasks on servers, thereby degrading network performance;
	•	if the server to which the data storage device is connected fails, the data cannot be accessed; and
	•	local area network, or LAN, performance can be significantly degraded while the LAN is being used for storage backup applications.

      Storage networking is necessary for the effective use of large data-intensive applications such as enterprise resource planning, customer relationship management, and digital media. Our current and potential customers have a growing need to access and protect the business critical data created by these types of applications. As a result, we expect increased demand for the purchase and installation of storage networks, which will drive demand for our products and demand for our consulting, integration, and managed services for end-to-end storage solutions. As a result of the installation of these solutions, we expect there will also be increased demand for support services.

      Complexity and interoperability issues associated with storage networks, coupled with budgetary constraints, cause customers to struggle with the effective implementation of storage networking environments. We believe this will cause many potential customers to look outside their organization for help. Thorough knowledge across a wide variety of proprietary technologies and standards, combining storage expertise and networking knowledge, is not easily found in the marketplace. We anticipate companies such as ours, with comprehensive expertise and skill sets in disaster recovery, business continuity, storage resource management, database, tuning, troubleshooting, switches, Fibre Channel and FICON protocols, networking and storage arrays, will be able to fill in the void for these customers with consulting and integration services. We believe customers may also look to contract out the management of these storage networks as a result of outsourcing the design and implementation of these solutions.

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      Our storage networking solutions, consist of products and services that address the limitations of traditional storage architecture in the following ways:

	•	Network infrastructure — Our Fibre Channel and FICON directors are at the heart of applications spanning local, metropolitan, and wide area environments, with the ability to support multiple protocols, interfaces, operating systems and management topologies, our large 256 port capacity delivers a larger, centralized core that eliminates disruptions, management complexity and reduced performance resulting from large storage networks based on multiple smaller port directors.
	•	Storage networks over unlimited distance — Our products and services enable organizations to create secure storage networks without any distance limitations. This allows the creation of storage networking over WAN environments in such critical applications as remote data replication, enterprise backup and recovery and remote tape vaulting.
	•	Any-to-any connectivity — Our products are protocol independent — they can connect devices that use Fibre Channel, SCSI, ESCON, and bus and tag protocols. These devices can be connected and extended over telecommunications links including T1/ E1, T3/ E3 and ATM (OC3, OC12), packet over sonet, or WAN protocols like IP, Fibre Channel and fiber optics. We believe our products connect with substantially all storage vendors.
	•	Infrastructure options — Our products enable the use of IP, ATM, Fibre Channel and fiber optics for expanded use of storage network infrastructure. This supports the growing amounts of storage created by applications like e-mail and increases due to user demands to access applications in a continuous mode.
	•	IP-based networking solutions — We enable remote data replication over IP-based networks using software provided by EMC, IBM, Hitachi and Hewlett-Packard. Our solutions allow our customers to capitalize on inexpensive “bandwidth on demand” capabilities of IP-based networks and use existing IP capacity, especially at low traffic times of the day, and rely on existing IP network knowledge. We anticipate expanding storage networking application support with products from other vendors.
	•	Storage Network Software — Our software solutions facilitate the management of a businesses entire network infrastructure in a single view, by pro-actively collecting network performance data, identifying problem areas and correlating those problems back to the affected application, increasing data availability and reducing the time required to diagnose and resolve problems.
	•	Consulting and integration services — Our consulting and integration services help customers evaluate, analyze, design, install and manage storage networks. We believe these value-added services assist customers in designing, implementing, and managing storage networks more effectively than they could on their own. Our integration services help customers deal with the complexity of implementing a storage network that is scalable and compatible with customer resources. These services bolster sales of our high margin FC/9000® and UltraNet® products and allow us to capture more of our customers’ spending. We offer bundled telecommunications access with our products and services to provide customers a complete end-to-end operating solution.
	•	Managed services — We offer outsourced storage management services that complement our current storage networking products on a 24x7x365 basis. These services consisting of solutions, implementation, pro-active management and maintenance satisfy a businesses complete storage networking requirements, all for a single monthly fee. Our network management service helps our customers monitor their UltraNet® and FC/9000® products, third party manufactured products, and third-party telecommunication lines and allows them to quickly respond to and resolve storage network issues.
	•	Data migration — Our data migration services help our customers migrate large amounts of data from one data center or storage facility to another during consolidation or expansion of data centers.

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		This is a turnkey service including personnel, equipment, software and support. We anticipate adding other outsourced services to monitor and manage complete end-to-end storage solutions for our customers and help drive demand for our storage networking products.

      Our Fibre Channel and FICON storage networking solutions are at the core of applications spanning local, metropolitan, and wide area environments, and offer the port capacity, bandwidth, and extensibility required for data intensive anytime, anywhere applications, including support for backup and recovery of data to enable cost-effective business continuity; data and resource sharing to provide availability to crucial data remotely; shared storage enabling better storage utilization; data mining and data imaging requiring the transfer of large amounts of data; storage consolidation providing better resource utilization and E-commerce applications with critical demands for continual uptime.

      Our UltraNet® storage networking solutions are used for immediate, or real-time, backup and recovery, and support a technology known as remote data replication. Data replication avoids the serious threat to businesses posed by the loss of data between data system backups by simultaneously creating up-to-the-minute images of business-critical data on multiple backup storage disks. Tape backup over long distances, or tape pipelining, using our UltraNet® Edge Storage Router dramatically improves the performance of remote tape backup, making it a viable solution for business continuity and disaster recovery. Our remote data replication technology permits the backups to be transmitted to a separate geographic location, thereby reducing the risk of natural and site-wide disasters. This technique also permits rapid recovery of data when needed.

      We also enhance continuous business operations. Traditional LAN-based storage management requires manual handling and transportation of storage to an off-site location. While this ensures a physically-separated copy of valuable corporate data, it requires additional time and expense for handling and transportation. By bridging the storage network over the WAN, backups can be instantly made to remote locations on disk media, including by data replication, or on tape, known as electronic tape vaulting. This allows for more secure archiving and timely retrieval of the correct business critical data.

      We intend to build upon our position as a leading provider of storage networking solutions. Key elements of this strategy are as follows:

      We intend to extend our storage networking technology leadership by continuing to broaden our product and service offerings and by expanding our storage networking solutions into new markets. Our acquisition of Inrange in 2003 provided us with important new growth markets for Fibre Channel and FICON switching. The FC/9000® Fibre Channel and FICON switching products we acquired with Inrange have more port capacity or bandwidth than any other Fibre Channel director product currently available, providing users with the ability to expand the core of their Fibre Channel and FICON storage networks to 256 ports without disruption or a reduction in performance.

      In June 2003 we announced the first Fibre Channel and FICON director products with integrated metropolitan area and wide area network capabilities, uniquely positioning these products to support long distance applications, using high-speed interfaces at virtually unlimited distances. Typical customer applications include business continuity, data center migration and consolidation, remote disk mirroring, remote tape backup/recovery, data archiving and consolidation of storage and servers.

      We have continued to offer new products and enhancements for storage networking over WANs, including IP over Fibre Channel, IP over ATM WANs and IP tape pipelining. Currently, our IP-based network solutions enable remote data replication, in conjunction with software products from EMC, IBM, Hitachi and Hewlett-Packard and remote tape vaulting over IP-based networks. Our network management services enable us to use our expertise to assist customers in keeping the data stored in their storage networks performing efficiently and continuously.

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      We intend to build market share by continuing to focus on areas that make storage networks more useful and accessible, such as WAN applications, any-to-any connectivity, IP-based network and network performance solutions. To achieve leadership, we intend to capitalize on the remote data replication, enterprise backup and recovery, remote tape vaulting and network management capabilities of our products.

      We have developed FICON extension offerings with IBM’s Enterprise Storage Server Extended Remote Copy (XRC) support. We already have over 60 IBM XRC installations at some of the largest data centers in the world, and we have been supporting FICON for several years. We expect that customers will look to us to support their wide-area infrastructure in these environments, given our significant experience with the XRC and FICON protocols.

      In January 2004, our new UltraNet® Edge 3000 storage router received the silver award for product of the year for networking equipment from Storage magazine and SearchStorage.com. The UltraNet® Edge is the first storage router to seamlessly integrate both open systems and mainframe environments over any distance. When we developed the UltraNet® Edge 3000, we were committed to providing our customers with the performance, flexibility and cost savings required by today’s businesses. Winning the award provides validation that we have achieved those goals.

      We recently announced the availability of our inVSN family of storage network software solutions that facilitate the management of an enterprise’s entire SAN, MAN and WAN infrastructure. Our inVSN software is uniquely designed to visualize and correlate network information across multiple topologies. No other solution gives users this type of insight to issues across their entire enterprise infrastructure. By being able to view and entire storage application, businesses can troubleshoot network issues ahead of time so that they can proactively take action and avoid outages. This proactive approach means less time and money spent on managing storage network problems.

      Our consulting and integration services help customers evaluate, analyze, design, install and manage storage networks. We believe these value-added services assist customers in designing, implementing, and managing storage networks more effectively than they could on their own. Our integration services eliminate the complexity of implementing a storage network that is scalable and compatible with customer resources. These services bolster sales of our high margin FC/9000® and UltraNet® products and allow us to capture more of our customers’ spending. We offer bundled telecommunications access with our products and services to provide customers a complete end-to-end operating solution.

      We anticipate adding other outsourced services to monitor and manage complete end-to-end storage solutions for our customers to help drive demand for our storage networking products. We offer outsourced storage management services that complement our current storage networking products on a 24x7x365 basis. These services consisting of solutions, implementation, proactive management and maintenance satisfy businesses complete storage networking requirements, all for a single monthly fee. Our network management service helps our customers monitor their UltraNet® and FC/9000® products, third party manufactured products, and third-party telecommunication lines and allows them to quickly respond to and resolve storage network issues.

      Our data migration services help customers migrate large amounts of data between data centers or storage facilities to facilitate consolidation or expansion of data centers. This is a turnkey service, including personnel, equipment, software and support. We anticipate adding other outsourced services to monitor and manage complete end-to-end storage solutions for our customers and help drive demand for our storage networking products.

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      In January 2004, we signed a $15 million contract with a division of the IBM company to provide on demand storage service offerings, consisting of our storage networking products, implementation services, network monitoring and maintenance.

      We have established relationships with leaders in the storage networking market, including storage vendors, telecommunications providers, storage management software providers and Fibre Channel switch manufacturers. The parties with whom we have strategic relationships include companies such as Brocade, EMC, Hewlett-Packard, Hitachi Data Systems, IBM, StorageTek, and Dell Computer Corporation. We intend to strengthen our existing relationships and develop new relationships that enable us to offer complementary products and services. We believe our current and future strategic relationships will facilitate the integration of our products, thereby increasing our market share and reducing the length of our sales cycle.

      In October 2003, we expanded our strategic relationship with Brocade to enable seamless extension of Brocade SANs over distance using our storage networking solutions. We will continue to offer the Brocade family of SilkWorm® fabric switches to our global customers and will designate these products as preferred storage networking solutions, complementing our current FC/9000® Fibre Channel and FICON director-class switch offerings. In addition, Brocade will recommend our UltraNet® Edge products as a preferred SAN extension solution to its OEM and reseller channels worldwide. More than 300 customers have already deployed Brocade SANs with our extension products. Together, our two companies will provide customers a proven core-to-edge storage solution that includes the industry’s leading SAN infrastructure solutions and the industry’s most installed SAN extension devices. This will allow customers to seamlessly extend Brocade SANs with Fibre Channel over IP, ATM or SONET networks for improved information access, data availability and business continuity across the enterprise.

      In addition, our global support organization can provide support for all Brocade products through our 24x7x365 call center and worldwide logistics network. Brocade’s customers and worldwide partners can also fully leverage our professional and global support services, including proactive remote monitoring and management services. Brocade has also agreed to qualify the interoperability between our FC/9000® Fibre Channel and FICON Director products and Brocade’s SilkWorm® fabric switches. As a result, our customers will be able to build storage networks consisting of CNT and Brocade products, thereby extending the value of our FC/9000® environments.

Our Storage Networking Products

      Our storage networking products include the FC/9000® family of Fibre Channel and FICON director products we acquired with the acquisition of Inrange in May 2003, and the UltraNet® family of storage director products.

      FC/9000® Fibre Channel and FICON Directors are at the heart of applications spanning local, metropolitan, and wide area environments. The FC/9000® delivers the speed, reliability, and high availability required for a 24x7x365 world. With the ability to support multiple protocols, interfaces, operating systems, management platforms and topologies, the FC/9000’s® 256 port capacity delivers a large, centralized core eliminating the disruptions, management complexity, and reduced performance of a network based on multiple smaller directors.

      UltraNet® Storage Director is a high performance switching product that enables storage networks to establish a direct connection between storage elements and servers and share data among diverse servers and storage systems, and networks that are local and geographically dispersed. The switch provides connectivity among SCSI, ESCON, bus and tag, Fibre Channel, FICON and WANs.

      UltraNet® Edge Storage Router complements the UltraNet® Storage Director by meeting the needs of a broader market. It provides a new price and performance entry point, which do not require high port-density and mixed platform support offered by the UltraNet® Storage Director. The UltraNet® Edge

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      Third party manufactured storage networking products supplied by us that are designed and manufactured by others, include the following:

	•	storage systems;
	•	Fibre Channel switches;
	•	telecommunications capacity;
	•	fiber optical multiplexers;
	•	software; and
	•	servers.

Our Storage Networking Services

      Our storage networking services help our clients design, deploy, monitor and manage end-to-end storage solutions. We believe these solutions allow our customers to better manage risk and reduce the cost of storage solutions in the enterprise.

Consulting Services

      Our consulting services analyze a company’s storage needs, determine a storage networking solution to meet those needs, and assist in the development of a business case to justify the storage networking solution. With our consulting, we assist our customers in making their existing networks more flexible and easier to manage. Our consulting expertise is focused on business continuation, disaster recovery, storage infrastructure and network performance to assist information technology managers and corporate executives responsible for planning and funding resources in making sound data management and storage decisions.

Integration Services

      Our integration services help companies implement storage networking solutions. These services include project planning, analyzing, designing and documenting a detailed network, installing storage components, integrating storage components, and testing the functionality of the implemented storage solution. Our storage networking products are at the core of our storage architecture implementations, and our long-standing relationships with well-known and successful storage equipment and software manufacturers place us at the forefront of storage management solutions. Our integration services focus on data replication, enterprise backup and restore, SAN implementation and network management.

Managed Services and Telecommunications

      We offer outsourced storage management services that complement our current storage networking products on a 24x7x365 basis. These services consisting of solutions, implementation, proactive management and maintenance satisfy a businesses complete storage networking requirements, all for a single monthly fee. Our network management service helps our customers monitor their UltraNet® and FC/9000® products, third party manufactured products, and third-party telecommunication lines, and allows them to quickly respond to and resolve storage network issues.

      Our managed services include a network management service. We monitor our customers’ FC/9000® products, UltraNet® products, third party manufactured products and telecommunications networks 24x7x365. We believe this service allows our customers to optimize network performance, decreases the chance of downtime and reduces recovery time after failures. Our data migration services help our customers migrate large amounts of data from one data center or storage facility to another during

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Support Services

      We offer standard maintenance contracts for our proprietary storage networking products. The contracts generally have a one-year term and provide for advance payment. Our products generally include a one-year limited warranty. Customers purchasing our UltraNet® Director products generally purchase maintenance contracts to supplement their one-year limited warranty. Customers are offered a variety of contracts to choose from to suit their particular needs. For instance, current options allow a customer to choose support 7 days a week, 24 hours per day, or 5 days per week, 11 hours a day. Other options offer the customer the choice to select air shipment for replacement parts, with the part being installed by the customer’s staff, or on site support with spare parts and service being provided by a local parts distributor.

Strategic Storage Networking Relationships

      Offering customers effective storage networking solutions requires implementing diverse components, including disk and tape storage devices, storage management software, network management products and Fibre Channel products. Our storage networking relationships include those with key storage vendors, storage management software providers and manufacturers of optical networking products. We market our storage networking products directly and through worldwide distributors. We have strategic marketing and supplier relationships with leading storage, telecommunications and fibre switching companies, including Brocade, EMC, Hewlett-Packard, Hitachi Data Systems, IBM, StorageTek, Dell Computer Corporation and Veritas. These relationships allow us to provide complete end-to-end storage solutions for our customers.

Sales and Marketing

      We market our Fibre Channel and FICON director switching products to end user customers through our direct sales forces and through our relationships with storage system vendors.

      We market our other storage networking products and services in the United States through a direct sales force. We have established representative offices in Canada, the United Kingdom, France, Germany, Belgium, Italy, Switzerland, Australia, Japan, and the Netherlands. We also market these products and services in the United States and throughout the world through systems integrators and independent distributors. We use an exclusive independent consultant to market telecommunications services.

      We maintain our own marketing staff and direct sales force. As of January 31, 2004, we had approximately 319 persons in our marketing and sales organization.

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Customers

      Our customers include:

      IBM and its affiliates accounted for 22% of our revenue for fiscal 2003, and 10% of our revenue for fiscal 2002. IBM re-sells the FC/9000 product we acquired with our acquisition of Inrange in May 2003. This relationship accounted for the fiscal 2003 increase in IBM revenue as a percentage of our total revenue. No single customer accounted for more than 10% of our revenue in fiscal 2001.

Research and Development

      The markets in which we operate are characterized by rapidly changing technology, new standards and changing customer requirements. Our long-term success in these markets depends upon our continuing ability to develop advanced network hardware and software technologies.

      To meet the future demands of our customers, we expect to:

	•	increase the compatibility of our products with the products made by others;
	•	emphasize the flexible and modular architecture of our products to permit the introduction of new and improved products within existing systems;
	•	continue to focus on providing sophisticated diagnostic support tools to help deliver high network availability and, in the event of failure, rapid return to service; and
	•	develop new products based on customer feedback and market trends.

      Research and development expenses were 12% of total revenue for the year ended January 31, 2004, and 13% of total revenue for each of the years ended January 31, 2003 and 2002. We intend to continue to apply a significant portion of our resources to product enhancements and new product development for the foreseeable future. We cannot assure you that our research and development activities will be successful.

Manufacturing and Suppliers

      We purchase our printed circuit boards and product chassis from third party manufacturers. Our in-house manufacturing activities include the addition of parts and components to printed circuit boards. Other in-house manufacturing activities include quality assurance testing of completed boards and subassemblies, and final system assembly, integration and quality assurance testing. We became ISO 9002 certified in 1993. In fiscal 2002, we achieved certification under the ISO 2000 standard.

      We manufacture our products based on forecasted orders. Forecasting orders is difficult as most shipments occur at the end of each quarter. Our customers generally place orders for immediate delivery, not in advance of need. Customers may generally cancel or reschedule orders without penalties. At January 31, 2004 we had a backlog for products and professional services of $38.4 million. We believe

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      We manufacture our FC/9000® and UltraNet® products from subassemblies, parts and components, such as integrated circuits, printed circuit boards, power supplies and metal parts, manufactured by others. Some items manufactured by suppliers are made to our specific design criteria.

      At January 31, 2004, we held $1.1 million of net inventory for parts that our vendors no longer manufacture. Products in which those parts are included accounted for $63.7 million in revenue during the year ended January 31, 2004. We expect that this inventory will be used in the ordinary course of our business over the next five years. Relevant parts will have to be redesigned after the inventory is used.

      We believe that we currently have adequate supply channels. Components and subassemblies used in our products and systems are generally available from a number of different suppliers. However, certain components in our other products are purchased from a limited number of sources. We do not anticipate any difficulty in obtaining an adequate supply of such products and required components. An interruption in our existing supplier relationships or delays by some suppliers, however, could result in production delays and harm our results of operations.

Competition

      Computer storage is a very large, multi-billion dollar, multi-faceted, industry that has spawned the need for a diverse set of products, services and management solutions to address the needs of the large enterprise.

      This market has a diverse set of needs, often dictated by the total cost of ownership, that include high availability, archive, large scale, high volume growth, flexibility, heterogeneous and interoperability requirements for a spectrum of solutions for the enterprise. Data movement and replication (mirroring) are two key applications that every customer must use a spectrum of products and services to get the job done. Customers have varying degrees of needs based upon: the peculiar requirements for various vendor and technology platforms; capacity; performance; access; back up and recovery time for the application user, for auditors and regulators; and risk and cost management for the entire enterprise. These needs have a further communications and distance dimension in their requirement to be local (same building) to each other, on a campus, across the city, across the country or even internationally interconnected. These needs often need to be satisfied across a diverse set of communications capabilities, including low and high speed lines from T1 to OC48+, to diverse protocols from point to point, ATM and IP, to free space optics and wireless, as well as the availability of dark fiber or wave length services.

      Finally, customers often use existing technologies (including multi-generations of products) and methods that must be compared and integrated for total enterprise storage management. These data movement solutions would include: manual truck and archive storage, server based software for data movement and replication, SAN, LAN, MAN and WAN fabric switching products and technologies, wave division multiplexing, or WDM, products and technologies, and services across an array of providers both in house and outsourced to the customer.

      We believe we have positioned ourselves to be a leading competitor of storage networking products and services, particularly in providing customers and service providers a wide range of integrated storage networking solutions, from us and others, that address high performance, guaranteed data reliability, large scale storage handling that addresses the above requirements for the global 2000 customers. Our key assets include, not only our patents, engineering technologies and products, but our 7x24 services, our professional consulting and our 20 years of diverse implementations experience in networking our clients most mission critical information.

      Our products are sold in markets where other market participants have significantly greater revenues and internationally known brand names. Many of those market participants do not currently sell products identical to ours today, but address customer needs from one vantage point or another, usually evolving as

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      While the Fibre Channel and FICON switching markets have yet to develop fully, we believe that the market for our FC/9000® Fibre Channel and FICON director switching products will be highly competitive, continually evolving and subject to rapid technology change. Our competitors in Fibre Channel and FICON switching include Brocade Communications Systems, McData Corporation, Cisco Systems, Inc., and Qlogic Corporation, as well as storage system vendors who may resell the Fibre Channel and FICON switching products manufactured by our competitors.

      Our competitors for our other storage networking products, primarily our UltraNet® family of products, include storage system vendors and others including Akara, which is owned by Ciena, and Nishan Systems, which is owned by McData. In addition, Cisco has acquired technology (Andiamo and NuSpeed) with functionality similar to our product offerings. Also, EMC has a WAN capability for storage networking that competes with our products. IBM and others continue to push the distance, performance and price performance capabilities of channels using FICON and GDPS technologies. In addition, some of the fiber channel switch and director companies, including McData, are stating that they will be providing similar long distance IP based connectivity features with an integrated card. Software vendors, Veritas, Legato and Tivoli/ IBM offer data movement and replication capabilities today at lower speeds and/or shorter distances.

      Our storage solution services have numerous competitors, including consulting and integration services offered by other storage solutions providers, telephone companies, and various other types of service providers. In addition, nearly every major storage vendor, including EMC, IBM, HP, Sun, and Hitachi, provide various capabilities in full service offerings for the design, implementation and operation of storage infrastructures.

      The markets in which we operate are characterized by rapidly changing technology and evolving industry standards, resulting in rapid product obsolescence and frequent product and feature introductions and improvements. We compete with several companies that have greater engineering and development resources, marketing resources, financial resources, manufacturing capability, customer support resources and name recognition. As a result, our competitors may have greater credibility with existing and potential customers. They also may be able to adopt more aggressive pricing policies and devote greater resources to the development, promotion and sale of their products than we can to ours, which would allow them to respond more quickly than we could to new or emerging technologies and changes in customer requirements. These competitive pressures may materially harm our business.

      The competitive environments of markets in which our storage networking solutions are sold are continuing to develop rapidly. We are not in a position to prepare long-range plans in response to unknown competitive pressures. As these markets grow, we anticipate other companies will enter with competing products. In addition, our customers and business relationships may develop and introduce competing products. We anticipate the markets will be highly competitive.

      The principal competitive factors affecting our products include total cost of ownership, customer service, flexibility, price, performance, reliability, ease of use, bundling of features and capabilities and functionality. In many situations, the potential customer has an installed base of a competitor’s products, which can be difficult to dislodge. IBM, Cisco, EMC, Nortel, Microsoft and others can significantly influence customers and control technology in our markets. However, we believe our direct sales force, storage networking expert consultants and support services personnel offer us a substantial advantage over new competitors, because these newer competitors do not have the knowledge of storage networking design and support and any-to-any connectivity necessary to sell competing products and services.

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Intellectual Property Rights

      We rely on a combination of trade secret, copyright, patent and trademark laws, nondisclosure agreements and technical measures to establish and protect our intellectual property rights. That protection may not preclude competitors from developing products with features similar to our products.

      We currently own 29 patents and have 19 patent applications filed or in the process of being filed in the United States with respect to our continuing operations. Our pending patent applications, however, may not be issued. We have not applied for patent protection in any foreign countries. Not all of our unique products and technology are patented. Our issued patents may not adequately protect our technology from infringement or prevent others from claiming that our technology infringes that of third parties. Failure to protect our intellectual property could materially harm our business. We believe that patent and copyright protection are less significant to our competitive position because of the rapid pace of technological change in the markets in which our products are sold and because of the effectiveness and quality of our support services, the knowledge, experience and ability of our employees and the frequency of our enhancements.

      We rely upon a patent license agreement to manufacture our UltraNet® products that use ESCON. This license expires on December 31, 2004. Historically, the license has been renewable every three years. We renewed the license on commercially reasonable terms at the end of the first license period, and we anticipate that we will be able to do so again under commercially reasonable terms.

      We have from time to time received, and may in the future receive, communications from third parties asserting that our products infringe on their patents. We believe that we possess or license all required proprietary rights to the technology included in our products and that our products, trademarks and other intellectual property rights do not infringe upon the proprietary rights of others. However, there can be no assurance that others will not claim a proprietary interest in all or a part of the technology we use or assert claims of infringement. Any such claim, regardless of its merits, could involve us in costly litigation and materially harm our business.

      The existence of a large number of patents in the markets in which our products are sold, the rapid rate of issuance of new patents and short product development cycles means it is not economically practical to determine in advance whether a product infringes patent rights of others. We believe that, based upon industry practice, any necessary license or rights under such patents may be obtained on terms that would not materially harm our consolidated financial position or results of operations. However, there can be no assurance in this regard.

Employees

      As of January 31, 2004, we had 1,215 full-time employees. We consider our ability to attract and retain qualified employees and to motivate such employees to be essential to our future success. Competition for highly skilled personnel is particularly intense in the computer and data communications industry, and we cannot assure that we will continue to attract and retain qualified employees.

Website Access to Reports

      The company’s website is located at www.cnt.com. The “Financial” link at this website provides, free of charge, access to the Company’s annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and all related amendments as soon as reasonably practicable after such material is electronically filed with, or furnished to, the SEC.

Special Note Regarding Forward-Looking Statements

      This Form 10-K contains “forward-looking statements” within the meaning of the securities laws. These forward-looking statements are subject to a number of risks and uncertainties, many of which are beyond our control. All statements other than statements of historical facts included or incorporated by reference in this Form 10-K, including the statements under “Business” and elsewhere in this Form 10-K

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      Our principal administrative, manufacturing, engineering and development functions are located in leased facilities in the Minneapolis, Minnesota suburb of Plymouth, and in the Philadelphia Pennsylvania suburb of Lumberton New Jersey. In addition, we lease office space in England, France, Germany, Belgium, Italy, Switzerland, Japan, and the Netherlands. We also lease space for sales offices for our direct sales staff and systems consultants in a number of locations throughout the United States and Canada. We believe our facilities are adequate to meet our current needs.

      Inrange Technologies Corporation, which is now a wholly owned subsidiary of the Company, has been named as a defendant in the case SBC Technology Resources, Inc. v. Inrange Technologies Corp., Eclipsys Corp. and Resource Bancshares Mortgage Group, Inc., No. 303-CV-418-N, pending in the United States District Court for the Northern District of Texas, Dallas Division. The action was commenced on February 27, 2003. The complaint claims that Inrange is infringing one SBC patent by manufacturing and selling storage area networking equipment, including Fibre Channel directors and switches, for use in storage networks that allegedly embody certain inventions claimed in a patent owned by SBC. The complaint asks for judgment that SBC’s patent is infringed by the defendants in the case, an accounting for actual damages, attorneys fees, costs of suit and other relief. Additionally, Eclipsys has demanded that Inrange indemnify and defend Eclipsys pursuant to documentation under which it acquired the product from Inrange. Hitachi Data Systems Corporation has informed Inrange that it has also received a demand from Eclipsys that Hitachi indemnify and defend Eclipsys for this action. Hitachi has put Inrange on notice that it will tender any claim by Eclipsys for indemnification and defense of this action to Inrange. Inrange has answered, denying SBC’s allegations. The case is in its preliminary stages and management is evaluating the litigation. At this point, it is too early to form a definitive opinion concerning the ultimate outcome of this matter.

      A shareholder class action was filed against Inrange and certain of its officers on November 30, 2001, in the United States District Court for the Southern District of New York, seeking recovery of damages caused by Inrange’s alleged violation of securities laws, including section 11 of the Securities Act of 1933 and section 10(b) of the Exchange Act of 1934. The complaint, which was also filed against the various underwriters that participated in Inrange’s initial public offering (IPO), is identical to hundreds of shareholder class actions pending in this court in connection with other recent IPOs and is generally referred to as In re Initial Public Offering Securities Litigation. The complaint alleges, in essence, (a) that the underwriters combined and conspired to increase their respective compensation in connection with the IPO by (i) receiving excessive, undisclosed commissions in exchange for lucrative allocations of IPO shares, and (ii) trading in Inrange’s stock after creating artificially high prices for the stock post-IPO

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      From time-to-time we are a party to various other legal actions and receive threats of litigation. At this time, management does not believe any such litigation or threats will have a material impact on our consolidated financial position or results of operations.

      None.

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      Our executive officers are as follows: