Farallon Reports Record Fourth Quarter and Year-End Revenues; 208 Percent Growth in Fourth Quarter Internet/Intranet Product Revenue.

ALAMEDA, Calif.--(BUSINESS WIRE)--Nov. 7, 1996--Farallon Communications, Inc. (NASDAQ: FRLN), a leading provider of plug-and-play Internet connectivity solutions and real-time Internet/Intranet collaboration software, today announced record revenues for the fiscal fourth quarter and fiscal year ended September 30, 1996, including 208 percent year-over-year growth in fiscal fourth quarter Internet/Intranet product revenue.

Farallon's total revenue increased to $16.5 million in the fiscal fourth quarter ended September 30, 1996, compared to $15.2 million for the same quarter in fiscal 1995. Fiscal fourth quarter net income was $461,000 compared to $640,000 in the comparable period of fiscal 1995. Fiscal fourth quarter earnings per share were $0.04, compared to $0.06 in the comparable period of the previous fiscal year. Weighted average shares outstanding of 12.2 million grew 23 percent year over year as a result of the Company's June 1996 initial public offering.

For the fiscal year ended September 30, 1996, revenues grew to $61.6 million versus $57.2 million in fiscal 1995. Net income for the fiscal year ended September 30, 1996 increased 48 percent to $3.7 million, compared with $2.5 million for the comparable period last year. The fiscal 1996 net income benefited from a $2.3 million non-recurring income tax benefit.

"Our fourth quarter and year-end results demonstrate the success of our high-growth Internet/Intranet strategy, reflecting both customer and industry acceptance of our products," said Alan Lefkof, Farallon's president and CEO.

Internet/Intranet revenue increased to $5.7 million for the fourth quarter of fiscal 1996, compared to $1.8 million for the same quarter in fiscal 1995. As a result, Internet/Intranet revenues nearly tripled as a percentage of total fourth quarter revenue to 34 percent, up from 12 percent in the same period of the prior year.

This growth reflects increased market penetration of Timbuktu Pro real-time collaboration software, growing acceptance of Netopia Internet connectivity solutions, and the Company's recently announced patent license with Microsoft. LAN products revenue was $10.9 million for the fiscal fourth quarter ended September 30, 1996, declining to 66 percent of total revenue for the quarter.

During the fiscal fourth quarter, Farallon and Microsoft announced a strategic relationship, which the Company believes validates the technical uniqueness and increases the market awareness of Farallon's software technology. Microsoft licensed Farallon's patent covering cross-platform screen-sharing technology, allowing collaboration across multiple operating systems including Windows 3.x, Windows 95, Windows NT, and MacOS.

Microsoft paid Farallon a one-time license fee for the non-exclusive license. In addition, Microsoft is distributing Farallon's Timbuktu technology in its Internet Explorer Starter Kit. Further, the two Companies plan a separate technology-sharing agreement to develop cross-platform interoperable Internet collaboration products.

Other significant announcements from the Company since the end of the third quarter included:

-- Farallon Announces Timbuktu Pro for Windows NT

-- Farallon Ships International Versions of Netopia Internet Router

-- Farallon Upgrades Netopia Internet Routers with Cost-Saving Features for ISPs, Workgroups and Telecommuters

-- Farallon Redefines Macintosh Remote Access and Internet Collaboration with Timbuktu Pro 3.0

-- Farallon Ships Next Generation Netopia ISDN Modem

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, as well as those discussed in "Risk Factors" included in the Company's 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 Statements of Operations
                 (in thousands, except per share amounts)


                        Three Months Ended        Fiscal Year Ended
                          September 30,             September 30,
                           (unaudited)               (audited)

                        1996        1995         1996        1995
Revenues:
 Internet/Intranet
  products            $ 5,662     $ 1,840    $  16,718     $ 6,569
 LAN products          10,870      13,403       44,886      50,620
     Total revenues    16,532      15,243       61,604      57,189
Cost of revenues:
 Internet/Intranet
  products              1,493         199        3,811         674
  LAN products          7,510       7,893       28,439      28,842
     Total cost of
      revenues          9,003       8,092       32,250      29,516
     Gross profit       7,529       7,151       29,354      27,673
Operating expenses:
 Research and
  development           2,238       2,265        8,919       8,429
 Selling, marketing and
  service               4,156       3,526       15,778      13,691
 General and
  administrative          764         715        3,429       2,888
     Total operating
      expenses          7,158       6,506       28,126      25,008
     Operating income     371         645        1,228       2,665
Other income, net         377         245        1,040         815
     Income before income
      taxes               748         890        2,268       3,480
Income tax provision      287         250       (1,433)(a)     974
  Net income          $   461     $   640    $   3,701    $  2,506

Net Income Per Share  $  0.04     $  0.06    $    0.33    $   0.25

Shares Used in Per
 Share Calculation     12,226       9,954       11,071       9,891


    (a) In the second quarter of fiscal 1996, the Company reversed a
full valuation allowance that it had previously provided against its
deferred tax assets, resulting in a non-recurring income tax benefit
of approximately $2.3 million.

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


                                    September 30,      September 30,
                                      1996               1995
Assets
 Current assets:
  Cash and short-term investments   $  37,145          $  17,643
  Accounts receivable, net             11,172              7,724
  Inventories                           6,295              4,758
  Deferred tax asset                    1,829                 --
  Prepaid expenses and other current
   assets                               1,457              1,005
     Total current assets              57,898             31,130
 Furniture, fixtures and equipment,
  net                                   2,935              2,457
 Other assets                             785                285
     Total assets                   $  61,618          $  33,872

Liabilities
 Current liabilities:
  Accounts payable                  $   4,979          $   6,841
  Accrued compensation                  2,023              1,482
  Deferred revenue                        787                168
  Other current liabilities               640                884
     Total current liabilities          8,429              9,375
 Long-term liabilities                     46                218
     Total liabilities                  8,475              9,593

Stockholders' equity                   53,143             24,279
     Total liabilities and
      stockholders' equity          $  61,618          $  33,872

CONTACT: Farallon Communications

Amal Abed, 510/814-5307 (Media Relations)

[e-mail]

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

[e-mail]

Investor Relations Hotline: [phone]

http://www.farallon.com