STOCKREPORTS		 Network General Corporation Nasdaq Symbol NETG
In S&P SmallCap 600
19-JUL-97 Industry:
Computer (Software & Services)		 Summary: Network General is a leading supplier of software-based monitoring and analysis tools that help troubleshoot and maintain enterprise networks.

Recent Price 13.44
52 Wk Range 29.75 - 13.44		 Yield Nil
12-Mo. P/E 24.4

Quantitative Evaluation:
Outlook (1 Lowest - 5 Highest)
5+
Fair Value
29.30
Risk
MEDIUM
Earn/Div Rank
B+
Technical Evaluation:
BEARISH since 02/97
Rel. Strength Rank (1 Lowest - 99 Highest)
6
Insider Activity
NA

Overview 03-JUL-97

Network General is the market share leader in providing fault tolerant and performance management solutions for enterprise networks. NETG's Service Level Manager (SLM) software can detect and solve problems in up to 100 elements in a network, including routers, switches, PCs and servers. The company is well positioned to benefit from the increasing implementation of network computing and decentralized client-server architectures in place of centralized mainframe structures. The recent introduction of a wide-area network (WAN) analyzer tool for notebook computers extends the reach of the company's monitoring capability beyond the local-area network (LAN). The company pre-announced disappointing June quarter results, citing order weakness in Europe and longer sales cycles. Our revised outlook is for revenues and earnings (before charges) to advance about 17% in FY 98 (Mar.).

Valuation 03-JUL-97

We downgraded NETG shares to hold from accumulate following a disappointing pre-announcement of results for the June quarter. NETG management expects revenues to be up about 12% year to year in the June quarter, significantly below the company's 25% long-term growth rate. Despite NETG's strong position in the network monitoring and analysis market, we are concerned about competing products that have recently entered the market from larger players such as Cisco, 3Com and Ascend. We are lowering our FY 98 (Mar.) EPS estimate to $1.00 (from $1.25) to reflect limited earnings visibility for the remainder of 1997. FY 97 earnings included $0.43 a share of acquisition-related charges.

Key Stock Statistics

S&P EPS Est. 1998 1.00
P/E on S&P Est. 1998 13.4
S&P EPS Est. 1999 1.35
Dividend Rate/Share Nil
Shs. outstg. (M) 42.7
Avg. daily vol. (M) 0.976
Tang. Bk. Value/Share 4.15
Beta 0.88
Shareholders 400
Market cap. (B) $0.574
Inst. holdings 80%
Value of $10,000 invested 5 years ago:$ 15,808

Fiscal Year Ending Mar. 31

Revenue (Million $)
1997 1996 1995 1994 1993 1992
Q1 51.68 39.74 30.05 23.72 15.50 13.00
Q2 55.55 43.73 32.38 26.40 20.10 14.50
Q3 65.44 51.59 37.53 30.83 24.10 17.40
Q4 68.01 53.79 39.80 33.95 23.60 19.00
Year 240.7 188.8 139.8 114.9 83.30 64.00

Earning Per Share ($)
1997 1996 1995 1994 1993 1992
Q1 0.19 0.16 0.11 0.04 0.03 0.06
Q2 0.22 0.01 0.12 0.08 0.08 0.03
Q3 0.28 0.21 0.16 0.10 0.09 0.09
Q4 -0.15 0.22 0.18 0.05 0.08 0.10
Year 0.55 0.60 0.57 0.27 0.28 0.28

Dividend Data: No cash dividends have been paid, and NETG does not expect to pay dividends in the foreseeable future. A two-for-one stock split was effected in 1990.

Business Summary 03-JUL-97

Consider this scenario. A company's network slows to a crawl, functions fail and applications work sporadically. Despite repeated calls to its various vendors' support lines, the company cannot determine whether the problem stems from the network, the system, the database or one of the applications. Network General (NETG) designs, manufactures, markets and supports software-based analysis and monitoring tools for managing enterprise-wide computer networks. The company's "Total Network Visibility" technology enables NETG's customers to see into their networks and to locate and solve the problems that affect performance, often even before they occur.

With the standard network now containing multiple vendors and protocols spanning multiple geographies, the potential for performance problems has never been greater. To detect these problems, NETG offers a network analysis product line consisting of portable tools and centralized systems that use artificial intelligence-based software to facilitate real-time identification, diagnosis and resolution of network problems.

NETG's portable tools are designed to monitor and analyze individual local area network (LAN) and internetwork segments. The flagship tool product is the Expert Sniffer Network Analyzer, which uses artificial intelligence technology, called expert analysis, that learns network configurations automatically. The company's system product is the Distributed Sniffer System (DSS), designed for monitoring and troubleshooting distributed enterprise and client/server networks. Clients have the ability to detect faults and solve performance problems at any level of the network, from the network's cabling to the applications that it runs.

In September 1996, NETG unveiled Total Network Visibility (TNV), an open, distributed application for the management of client/server environments and the Service Level Manager (SLM), the first in a family of applications that will leverage the TNV architecture. SLM is designed to provide insight into overall network health and availability by consolidating information from a variety of data sources. In February 1997, NETG released the WAN Sniffer Analyzer NB for PC-based notebooks, which pinpoints WAN (wide area network) problems and focuses troubleshooting efforts.

Going forward, NETG plans to expand the scope of its network monitoring solutions in UNIX server performance monitoring, Cisco router systems, Oracle client/server database applications, and the Internet through visibility to HTTP (Hypertext Transmission Protocol) traffic over the World Wide Web.

Capitalization

Long Term Debt: None (3/97).
Options: To buy 7,162,508 shs. at $2.19 to $20.00 ea. (3/96, adj.).

Per Share Data ($)
1997 1996 1995 1994 1993 1992 1991 1990 1989 1988
Tangible Bk. Val. 4.15 4.13 3.79 3.16 2.98 1.71 1.44 1.17 0.61 0.15
Cash Flow 0.80 0.80 0.73 0.41 0.35 0.36 0.32 0.25 0.14 0.06
Earnings 0.55 0.60 0.57 0.27 0.28 0.28 0.25 0.22 0.13 0.06
Dividends Nil Nil Nil Nil Nil Nil Nil Nil Nil Nil
Payout Ratio Nil Nil Nil Nil Nil Nil Nil Nil Nil Nil
Cal. Yrs. 1996 1995 1994 1993 1992 1991 1990 1989 1988 1987
Prices - High 30 1/4 23 1/4 13 1/8 10 1/8 12 3/4 8 5/8 7 3/8 5 3/8 NA NA
- Low 15 11 3/8 7 4 4 3 1/8 2 2 NA NA
P/E Ratio - High 55 39 23 38 46 31 29 25 NA NA
- Low 27 19 12 15 15 11 8 9 NA NA

Income Statement Analysis (Million $)
1997 1996 1995 1994 1993 1992 1991 1990 1989 1988
Revs. 241 189 140 115 83.3 64.0 44.6 29.4 12.9 4.9
Oper. Inc. 69.6 51.8 38.6 25.8 14.7 16.0 10.9 9.2 4.3 1.5
Depr. 11.5 9.2 6.8 6.2 2.8 2.4 1.8 1.0 0.3 0.1
Int. Exp. 11.5 Nil Nil Nil Nil Nil Nil Nil Nil Nil
Pretax Inc. 44.7 42.5 37.1 17.3 15.2 13.8 10.7 9.6 4.3 1.5
Eff. Tax Rate 44% 36% 32% 35% 33% 35% 32% 38% 40% 43%
Net Inc. 25.1 27.4 25.4 11.3 10.3 9.0 7.3 5.9 2.6 0.8

Balance Sheet & Other Fin. Data (Million $)
1997 1996 1995 1994 1993 1992 1991 1990 1989 1988
Cash 132 116 92.9 55.6 30.2 35.4 29.6 26.7 13.0 2.9
Curr. Assets 204 166 130 91.9 60.3 58.2 41.3 33.7 16.2 4.3
Total Assets 263 223 196 161 130 58.0 45.0 37.0 17.0 5.0
Curr. Liab. 80.0 40.0 28.4 26.4 18.5 10.6 4.2 3.5 1.8 1.6
LT Debt Nil Nil Nil Nil Nil Nil Nil 0.1 0.1 0.1
Common Eqty. 179 180 166 132 110 53.0 41.0 33.0 15.0 3.0
Total Cap. 179 180 166 132 110 54.0 41.0 33.0 15.0 3.0
Cap. Exp. 14.7 13.9 8.8 7.5 6.3 4.5 2.8 3.1 0.8 0.2
Cash Flow 36.6 36.6 32.2 17.5 13.1 11.4 9.1 6.9 2.8 0.9

Curr. Ratio 2.5 4.1 4.6 3.5 3.3 5.5 9.9 9.7 8.9 2.7
% LT Debt of Cap. Nil Nil Nil Nil Nil Nil Nil 0.2 0.5 2.6
% Net Inc.of Revs. 10.5 14.5 18.2 9.8 12.3 14.0 16.3 20.1 19.9 16.9
% Ret. on Assets 10.4 13.1 14.2 7.3 9.9 16.1 17.7 16.1 15.1 18.4
% Ret. on Equity 14.0 15.9 17.1 8.8 11.9 18.9 19.6 17.9 28.6 29.4

Data as orig. reptd.; bef. results of disc. opers. and/or spec. items. Per share data adj. for stk. divs. as of ex-div. date. E-Estimated. NA-Not Available. NM-Not Meaningful. NR-Not Ranked.

Office--4200 Bohannon Dr., Menlo Park, CA 94025. Tel--(415) 473-2000. Website--www.ngc.com Chrmn--H. J. Saal. Pres & CEO--L. G. Denend. EVP & COO--D. Carver. SVP, CFO & Secy--J. T. Richardson. Dirs--C. J. Abbe, D. C. Chance, L. G. Denend, H. Frank, G. M. Gallo, L. R. Hootnick, J. L. Hyland, H. J. Saal. Transfer Agent & Registrar--Chase Tust Co. of California. Incorporated--in Delaware in 1987. Empl-- 780. S&P Analyst: Aydin Tuncer


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