1
 
                                                                    EXHIBIT 11.1
 
                               BAY NETWORKS, INC.
 
                       COMPUTATION OF PER SHARE EARNINGS
                    (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
 


                                                      FOR THE YEARS ENDED JUNE 30,
                                                   ----------------------------------
                                                     1996         1995         1994
                                                   --------     --------     --------
                                                                    
Net income.....................................    $206,325     $128,986     $124,378
                                                   ========     ========     ========
Weighted average common shares outstanding.....     185,056      177,347      169,143
Common stock equivalents resulting from stock
  options......................................      13,722       10,312       10,945
                                                   --------     --------     --------
Total common and common equivalent shares for
  calculation of primary net income per
  share........................................     198,778      187,659      180,088
Additional dilutive effect due to stock
  options......................................         419        1,558          329
                                                   --------     --------     --------
Total common and common equivalent shares for
  calculation of fully diluted net income per
  share........................................     199,197      189,217      180,417
                                                   ========     ========     ========
Net income per primary common and common
  equivalent share.............................    $   1.04     $   0.69     $   0.69
                                                   ========     ========     ========
Net income per fully diluted common and common
  equivalent share.............................    $   1.04     $   0.68     $   0.69
                                                   ========     ========     ========

 
     All share and per share data for prior periods have been retroactively
restated to reflect the acquisition with Xylogics, Inc., in a pooling of
interests transaction effective December 15, 1995.