Farallon Reports Fiscal First Quarter 1997 Results; 71% Growth in Internet/Intranet Product Revenue.

ALAMEDA, Calif.--(BUSINESS WIRE)--Jan. 23, 1997--Farallon Communications, Inc. (NASDAQ: FRLN), a leading provider of plug-and-play Internet connectivity solutions and real-time Internet/Intranet collaboration software, today announced results for the fiscal first quarter ended December 31, 1996, including 71% percent year-over-year growth in Internet/Intranet product revenue.

Farallon's total revenue was $13.5 million for the fiscal first quarter of 1997 as compared to $14.1 million in the comparable period of the prior fiscal year. Internet/Intranet revenue increased to $4.8 million from $2.8 million in the comparable period of the prior fiscal year, primarily reflecting increased sales of Netopia Internet connectivity solutions, as well as greater demand for Farallon's Timbuktu Pro real-time Internet collaboration software. Netopia products growth is a result of three factors: 1) increased international shipments; 2) greater numbers of regional U.S. Internet Service Providers ("ISPs") selling Netopia; 3) new `SO-Smart' Netopia routers that enable small business customers to lower their ISDN Internet access costs. Fiscal 1997 first quarter net income and earnings per share were $118,000 and $0.01, respectively.

"We are particularly excited about the introduction and early sales of our new Netopia `SO-Smart' routers, which offer SOHO (small office/home office) customers the benefits of high-speed ISDN access while dramatically reducing access fees and setup time," said Alan Lefkof, Farallon's President and CEO. "These new models are extremely popular among ISPs, who are setting up SOHO pricing plans based on the simplicity of Netopia's new `SmartIP' feature."

"We were not, however, immune to Apple's well-publicized difficulties during the calendar fourth quarter," observed James Clark, Chief Financial Officer. "On the LAN side of our business in particular, we felt the impact of the PowerBook backlogs, Performa shortfalls, and Mac/OS confusion in the marketplace." LAN revenues of $8.7 million in the first quarter of fiscal 1997 declined 23% compared with the same period last year.

First Quarter Announcements

Significant announcements from the Company during the first quarter included: -0-

-- Microsoft selects Farallon's Timbuktu Applet for its Internet Explorer Starter Kit (10/15/96)

-- Farallon ships next generation Netopia ISDN Modem to double performance and reduce installation time (10/21/96)

-- Farallon announces new Netopia "SO-Smart" Routers engineered for the Small Office (12/2/96)

-- Farallon introduces the first public beta of Netopia Virtual Office, breakthrough Internet/Intranet Collaboration software (12/9/96)

-- Farallon signs several new strategic partnerships with ISPs -0-

About Farallon

Founded in 1986, Farallon Communications, Inc. develops complete, easy-to-use Internet connectivity and networking solutions and real-time Internet/Intranet collaboration software. The Company's products are designed to increase the productivity and efficiency of Internet, Intranet and LAN users and to target remote offices, home offices, mobile users, small businesses, and schools that may not have access to sophisticated technical support. Further information can be obtained via phone [phone], fax [phone], Internet "[e-mail] ," or Web "www.farallon.com ." Farallon products are available through distributors and resellers worldwide, as well as through licensing relationships with other computer vendors. Farallon has its headquarters in Alameda, Calif., and its European office in Paris.

This release contains forward-looking statements which involve risks and uncertainties. The Company's actual results could differ materially from the results discussed herein. Factors that could cause or contribute to such differences include, but are not limited to, those discussed from time to time in the Company's public reports filed with the Securities and Exchange Commission, including those discussed in the Company's Annual Report on Form 10-K as filed with the Securities and Exchange Commission on December 24, 1996 and Registration Statement on Form S-1 as declared effective by the Securities and Exchange Commission on June 12, 1996 (Reg. No. 333-3868). -0-

Note to Editors: The Farallon logo design, Farallon and Timbuktu are registered trademarks, and Netopia is a trademark of Farallon Communications, Inc. All other trademarks are the property of their respective holders. -0-

                   FARALLON COMMUNICATIONS, INC.
                 Consolidated Statement of Earnings
             (in thousands, except for per share amounts)


                                          Three Months Ended
                                              December 31,
                                            1995       1996
Revenues:
 Internet/Intranet products             $  2,809   $  4,805
 LAN products                             11,302      8,658
  Total revenue                           14,111     13,463
Cost of revenues:
 Internet/Intranet products                  458      1,554
 LAN products                              6,827      5,310
  Total cost of revenues                   7,285      6,864
Gross profit                               6,826      6,599

Operating expenses:
 Research and development                  2,016      2,167
 Selling, marketing and service            3,787      3,801
 General and administrative                  789        837
  Total operating expenses                 6,592      6,805
  Operating income (loss)                    234       (206)

Other income, net                            227        388
  Income before taxes                        461        182
Income tax provision                         162         64
  Net income                             $   299   $    118

Net income per share                     $  0.03   $   0.01

Shares in per share calculation            9,857     12,447


                   FARALLON COMMUNICATIONS, INC.
              Condensed Consolidated Balance Sheet
                         (in thousands)


                                      September 30,   December 31,
                                          1996           1996
Assets                                  (audited)
Current assets:
 Cash and short-term investments     $    37,145    $   37,625
 Accounts receivable, net                 11,172         9,347
 Inventories                               6,295         6,770
 Deferred tax asset                        1,829         1,829
Prepaid expenses and other current assets  1,457         1,364
Total current assets                      57,898        56,935
Furniture, fixtures and equipment, net     2,935         2,811
Other assets                                 785           819
Total assets                         $    61,618    $   60,565

Liabilities and stockholders' equity
Current liabilities:
 Accounts payable                    $     4,979    $    3,694
 Accrued compensation                      2,023         1,943
 Deferred revenue                            787           755
 Other current liabilities                   640           895
  Total current liabilities                8,429         7,287
 Long-term liabilities                        46             3
  Total liabilities                        8,475         7,290

Stockholders' equity                      53,143        53,275
Total liabilities and stockholders'
 equity                              $    61,618    $   60,565
-0-

CONTACT: Farallon Communications, Inc.

Jim Clark, 510/814-5120 (Investor Contact)

Investor Relations:

Hotline: [phone]

[e-mail]

http://www.farallon.com

or

Thomas & Associates

Theresa Hanlon, 415/596-2700 (Press Contact)