8-K

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

FORM 8-K

CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

Date of Report (Date of earliest event reported):  January 18, 2006

Network Equipment Technologies, Inc.
(Exact name of registrant as specified in its charter)

Delaware
(State or other jurisdiction of incorporation) 0-15323
(Commission
File Number) 94-2904044
(IRS Employer
Identification No.)

6900 Paseo Padre Parkway, Fremont, California 94555
(510) 713-7300
(Address, including zip code, and telephone number, including area code, of
Registrant's principal executive offices)

Not applicable
(Former name or former address if changed since last report)

Item 2.02.  Results of Operations and Financial Condition.

On January 18, 2006, Network Equipment Technologies, Inc. issued a press release announcing its financial results for the fiscal quarter ended December 30, 2005. 

The information in this Item 2.02 is being furnished and shall not be deemed "filed" for the purposes of Section 18 of the Securities Exchange Act of 1934.

Item 9.01.

Financial Statements and Exhibits.

(c) Exhibits

99

Press release dated January 18, 2006

SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

Date:  January 18, 2006 Network Equipment Technologies, Inc. By: /s/ JOHN F. MCGRATH, JR. Name: John F. McGrath, Jr. Title: Vice President and Chief Financial Officer

EXHIBIT INDEX

Exhibit Number	Description
99	Press release dated January 18, 2006.

EX-99

EXHIBIT 99

Network Equipment Technologies Announces
Final Results for Q3 Fiscal 2006

Fremont, CA, January 18, 2006 – Telecommunications equipment maker Network Equipment Technologies, Inc. (NYSE: NWK), today reported its final results for the third quarter of fiscal 2006.

For the third quarter of fiscal 2006, total revenue was $16.4 million, down from $21.6 million in the prior quarter and $29.7 million in the same period of the prior year. Product revenue was $13.7 million, down from $18.1 million in the prior quarter and $25.4 million in the same period of the prior year.

Net loss for the quarter was $6.2 million, or $0.25 per share, compared to a net loss of $5.7 million or $0.23 per share in the prior quarter and a net loss of $2.9 million, or $0.12 per share for the same period of the prior year.

Cash balances at the end of the quarter were $89.7 million, compared to $94.6 million in the prior quarter, and $104.7 million, including $697,000 of long-term restricted cash included in other assets, for the same period of the prior year.

President and CEO C. Nicholas Keating remarked, “In the third quarter, our revenues were down significantly as our government business was hurt by further project and budget delays. We are aggressively pursuing our new product initiatives and distribution partnerships, but these efforts will take some time to provide revenue. During this time, we have continued to reduce operating expenses and we remain focused on cash management, as evidenced by our continued strong cash position at quarter end.”

Keating continued, “I am very pleased with the product strategy that we are working on for our two primary markets:  government and enterprise. The new network exchange product we are jointly developing with Bay Microsystems will be aimed initially at government applications, including high-speed SAN to WAN communications and secure grid computing, but its high performance can serve new applications and markets in the future. We are also working on a much smaller IP-based product designed for tactical military and disaster preparedness applications, which will inter-operate with existing Promina networks. And our new voice exchange platforms, based on our Shout platform, will allow enterprises to invest in new VoIP applications today, with equipment perfectly suited to the coming convergence of mobile corporate communications, including Voice-over-WiFi and dual-mode cellular and wired connections. ”

Highlights:

·

Entered partnership with Bay Microsystems to deliver a secure high-speed multiservice platform to switch and aggregate data at full line rates of 10 gigabits per second.

·

Launched a new “voice exchange” strategy, under which our Shout product will form the basis of a new “Universal Voice Exchange” platform, the VX Series, to further the conversion of TDM to IP traffic and the convergence of voice traffic from desktop applications to mobile corporate communications.

·

Received initial orders related to USMC Transition Switch Module (TSM) and US Army Joint Network Nodes (JNN) for ultimate use in the WIN-T initiative.

·

Named Talbot Harty as Vice President of Marketing and Chief Technology Officer, Terry Fore as Vice President of Operations, and David Wagenseller as Vice President of Finance.

About Network Equipment Technologies, Inc.

Network Equipment Technologies is a leading provider of networking equipment that enables its customers to adapt to a broadband future. An architect of the networking industry, N.E.T. has been supplying service providers, governments and enterprises around the world with networking technology for more than 20 years.

Visit www.net.com for more information.

Forward Looking Statements

This press release contains forward-looking statements relating to products, revenue, expenses, cash balances, existing and potential strategic relationships, product development initiatives, and possible future operating results within the meaning of the safe harbor provisions of Section 21E of the Securities Exchange Act of 1934. Investors are cautioned that such statements are based on current expectations, forecasts and assumptions that involve risks and uncertainty that may cause actual results to differ materially from those expressed or implied in the forward-looking statements. Factors that could affect such results include the volume and timing of orders and revenue, our ability to commercialize new products and product enhancements, the performance of strategic partners regarding product and marketing activities, and changes in the mix of products we sell and the potential reductions in marg in as a result, as well as the factors identified in Network Equipment Technologies’ Annual Report on Form 10-K for the year ended March 25, 2005, and  its most recent Quarterly Report on Form 10-Q. Network Equipment Technologies disclaims any intention or obligation to update or revise any forward looking statements, whether as a result of new information, future events or otherwise.

# # #

Promina and SHOUT are trademarks of Network Equipment Technologies, Inc.

NETWORK EQUIPMENT TECHNOLOGIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands except per share data)

(unaudited)

	Quarter Ended							Nine Months Ended
		Dec 30, 2005				Dec 24, 2004			Dec 30, 2005			Dec 24, 2004
Revenue:
Product	$	13,687		$		25,363		$	46,539		$	77,217
Service and other		2,665				4,314			9,821			13,153
Total revenue		16,352				29,677			56,360			90,370
Costs of sales:
Cost of product revenue		6,647				10,381			20,888			29,571
Cost of service and other revenue		2,484				4,081			8,824			12,411
Total cost of sales		9,131				14,462			29,712			41,982
Gross margin		7,221				15,215			26,648			48,388
Operating expenses:
Sales and marketing		5,061				6,629			18,227			21,180
Research and development		5,563				6,134			17,334			20,075
General and administrative		3,053				2,514			8,040			7,623
Restructuring costs (benefit)	(	90	)			2,846			1,825			4,117
Total operating expenses		13,587				18,123			45,426			52,995
Loss from operations	(	6,366	)	(		2,908	)	(	18,778	)	(	4,607	)
Other income (expense), net	(	69	)			37		(	11	)		1,380
Interest income (expense), net		217			(	7	)		567		(	210	)
Loss before taxes	(	6,218	)	(		2,878	)	(	18,222	)	(	3,437	)
Income tax expense (benefit)		30				5		(	1,151	)	(	1,115	)
Net loss	$ (	6,248	)	$(		2,883	)	$ (	17,071	)	$(	2,322	)
Per share data:
Net loss:
Basic	$ (	0.25	)	$(		0.12	)	$ (	0.69	)	$(	0.10	)
Diluted	$ (	0.25	)	$(		0.12	)	$ (	0.69	)	$(	0.10	)
Common and common equivalent shares:
Basic		24,630				24,597			24,674			24,332
Diluted		24,630				24,597			24,674			24,332

NETWORK EQUIPMENT TECHNOLOGIES, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands)
(unaudited)

		Dec 30,		Mar 25,
		2005		2005
Assets
Cash and investments	$	89,744	$	108,011
Accounts receivable, net		13,014		15,725
Inventories		12,554		13,274
Prepaid expenses and other assets		3,571		2,525
Total current assets		118,883		139,535
Property and equipment, net		21,887		26,318
Software production costs, net		1,750		-
Other assets		1,941		2,623
Total assets	$	144,461	$	168,476
Liabilities and Stockholders' Equity
Accounts payable	$	5,558	$	8,602
Other current liabilities		11,170		13,688
Total current liabilities		16,728		22,290
Long term liabilities		856		869
7 1/4% convertible subordinated debentures		24,706		24,706
Stockholders' equity		102,171		120,611
Total liabilities and stockholders’ equity	$	144,461	$	168,476