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

                                    FORM 10-K
(Mark One)

/X/      Annual Report pursuant to Section 13 or 15(d) of the Securities
         Exchange Act of 1934 for the fiscal year ended March 31, 2004 or

/ /      Transition Report pursuant to Section 13 or 15(d) of the Securities
         Exchange Act of 1934 for the transition period from
                                to                        .
         ----------------------    -----------------------

Commission file number:    0-27266

                           WESTELL TECHNOLOGIES, INC.
             (Exact name of registrant as specified in its charter)

                  DELAWARE                             36-3154957
     (State or other jurisdiction of                  (I.R.S. Employer
     incorporation or organization)                 Identification No.)

    750 N. COMMONS DRIVE
         AURORA, ILLINOIS                                 60504
(Address of principal executive offices)               (Zip Code)

Registrant's telephone number, including area code:   (630) 898-2500

Securities registered pursuant to Section 12(b) of the Act: NONE
Securities registered pursuant to Section 12(g) of the Act:

                      CLASS A COMMON STOCK, $.01 PAR VALUE
                      ------------------------------------
                                (Title of Class)

Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.     Yes   /X/     No / /

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K (ss.229.405 of this chapter) is not contained herein, and will
not be contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-K
or any amendment to this Form 10-K. / /

Indicate by check mark whether the registrant is an accelerated filer as defined
be rule 12b-2 of the Act.    Yes   /X/     No / /

The registrant estimates that the aggregate market value of the registrant's
Class A Common Stock held by non-affiliates (within the meaning of the term
under the applicable regulations of the Securities and Exchange Commission) on
September 30, 2003 (based upon an estimate that 70% of the shares are so owned
by non-affiliates and upon the average of the high and low prices for the Class
A Common Stock on the NASDAQ National Market on that date) was approximately
$265 million. Determination of stock ownership by non-affiliates was made solely
for the purpose of responding to this requirement and registrant is not bound by
this determination for any other purpose.

As of June 1, 2004, 53,611,329, shares of the registrant's Class A Common Stock
were outstanding and 14,741,872 shares of registrant's Class B Common Stock
(which automatically converts into Class A Common Stock upon a transfer of such
stock except transfers to certain permitted transferees) were outstanding.

The following documents are incorporated into this Form 10-K (and any
    amendments thereto) by reference: Portions of the Proxy Statement for
    2004 Annual Meeting of Stockholders (Part III).







                           WESTELL TECHNOLOGIES, INC.
                    2004 ANNUAL REPORT ON FORM 10-K CONTENTS


     Item                                                                   Page
- ---------------                                                             ----

PART I
     1.   Business..........................................................   1
          Risk Factors......................................................  14
     2.   Properties........................................................  22
     3.   Legal Proceedings.................................................  22
     4.   Submission of Matters to a Vote of Security Holders...............  23
PART II
     5.   Market for the Registrant's Common Equity and Related
          Stockholder Matters...............................................  23
     6.   Selected Financial Data...........................................  25
     7.   Management's Discussion and Analysis of Financial Condition
               and Results of Operations....................................  26
     7A.  Quantitative and Qualitative Disclosure About Market Risk.........  36
     8.   Financial Statements and Supplementary Data.......................  37
     9.   Changes in and Disagreements with Accountants on
               Accounting and Financial Disclosure..........................  37
     9A.  Controls and Procedures...........................................  37
PART III
     10.  Directors and Executive Officers of the Registrant................  37
     11.  Executive Compensation............................................  38
     12.  Security Ownership of Certain Beneficial Owners and Management....  38
     13.  Certain Relationships and Related Transactions....................  38
     14.  Principal Accountants Fees and Services...........................  38
PART IV
     15.  Exhibits, Financial Statement Schedules, and Reports on Form 8-K..  41
          Signatures........................................................  42













           CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING INFORMATION

                  Certain statements contained in this Annual Report of Form
10-K including, without limitation, statements containing the words "believe,"
"goal," "on track, " "anticipate," "committed" "expectation," "expect,"
"estimate", "await," "continue," "intend," "may," "will," "should," and similar
expressions are forward looking statements that involve risks and uncertainties.
The Company can give no assurance that the expectations reflected in the
forward-looking statements will prove to be correct. These risks include, but
are not limited to, product demand and market acceptance risks, need for
financing, the economic downturn in the U.S. economy and telecom market, the
impact of competitive products or technologies, competitive pricing pressures,
product development, excess and obsolete inventory, new product development,
commercialization and technological delays or difficulties (including delays or
difficulties in developing, producing, testing and selling new products and
technologies), the effect of Westell's accounting policies, the need for
additional capital, the effect of economic conditions and trade, legal social
and economic risks (such as import, licensing and trade restrictions) and other
risks more fully described in this Form 10-K for the fiscal year ended March 31,
2004 under the section "Risk Factors". These statements are not guaranties of
future performance. Westell undertakes no obligation to release publicly the
result of any revisions to these forward looking statements that may be made to
reflect events or circumstances after the date hereof or to reflect the
occurrence of unanticipated events. At any time when the Company makes
forward-looking statements, it desires to take advantage of the "safe harbor"
which is afforded such statements under the Private Securities Litigation Reform
Act of 1995.


                                     PART I

ITEM 1.  BUSINESS

         Westell Technologies, Inc., (the "Company") was incorporated in
Delaware in 1980 and its headquarters are located at 750 North Commons Drive,
Aurora, Illinois. The Company is comprised of two segments: equipment sales and
teleconference services. In the equipment segment, the Company designs,
manufactures, markets and services a broad range of digital and legacy analog
products used by telephone companies and other telecommunications service
providers to deliver broadband services primarily over existing copper telephone
wires that connect end users to a telephone company's central office. The
central office is a telephone company building where subscriber lines are joined
to switching equipment that can connect subscribers to each other. The copper
wires that connect users to these central offices are part of the telephone
companies' networks and are commonly referred to as the local loop or the local
access network.

         The equipment manufacturing segment consists of two product lines:
Customer Networking Equipment (CNE) products and Network Service Access (NSA)
products. The CNE product line includes broadband and digital subscriber line
(DSL) technology products that allow the transport of high-speed data over the
local loop and enable telecommunications companies to provide broadband services
over existing copper infrastructure. The Company's NSA product line consists of
manageable and non-manageable T1 transmission equipment, associated mountings
and special service plugs for the legacy copper telephone network. Westell
realizes the majority of its revenues from the North American market.

         The Company's service segment is comprised of a 91.5% owned subsidiary,
Conference Plus, Inc. Conference Plus provides audio, video, and web
conferencing services. Businesses and individuals use these services to hold
voice, video or web conferences with many people at the same time. Conference
Plus sells its services directly to large customers, including Fortune 1000
companies, and serves other customers indirectly through its private reseller
program.

                                      -1-




     Revenues and total assets from Westell's two reportable segments for the
fiscal years ended March 31 are as follows (for more information also see
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and the consolidated financial statements and note thereto included
in this Annual Report on Form 10-K):



(dollars in thousands)                                      Fiscal year ended March 31,
                                        --------------------------------------------------------------------
Revenue:                                   2002           %        2003           %        2004           %
                                        ------------ -------    ------------ -------    ------------ -------
                                                                                      
Telecom equipment ...................      $191,302     80%        $168,216     80%        $190,440     81%
Telecom services.....................        48,521     20%          41,805     20%          45,299     19%
                                        ------------            ------------            ------------
Total revenue                              $239,823                $210,021                $235,739
                                        ============            ============            ============

Assets:
Telecom equipment....................      $105,969     84%         $86,702     79%        $109,493     84%
Telecom services.....................        20,184     16%          22,772     21%          20,288     16%
                                        ------------            ------------            ------------
Total assets                               $126,153                $109,474                $129,781
                                        ============            ============            ============



     Financial information for each of the Company's business and operations by
geographic area and segments is located in Note 9 of the consolidated financial
statements included in this Annual Report and is incorporated herein by
reference.

     The Company reached profitability and positive cash flow from operations
for the first time as a public company in fiscal 2003. In fiscal 2004, the
Company improved its profitability primarily due to gains achieved from volume
efficiencies, productivity improvements and favorable component pricing in the
CNE product line of the equipment segment of the business. The economic downturn
in the telecommunications industry and the transition to higher speed digital
transmission services continued to negatively impact NSA product line of the
equipment segment as unit sales decreased in fiscal 2004. Revenue from the
Company's services segment improved in fiscal 2004 as conference call minutes
increased over fiscal 2003 levels.

The Company's stock is divided into two classes. Class A common stock is
entitled to one vote per share while class B common stock is entitled to four
votes per share. The Company's largest stockholder is a voting trust that owned
48.7% of the voting control of the Company as of June 1, 2004. The trust was
formed for the benefit of Robert C. Penny III and Melvin J. Simon and their
respective families. Certain Penny family members also own or are beneficiaries
of trusts that own shares outside of the voting trust. As trustees of the Voting
Trust and other trusts, Messrs. Penny and Simon control 52.4% of the voting
stock and therefore effectively control the Company.

                                      -2-





THE COMPANY'S PRODUCTS

     The equipment segment of the Company's business consists of two product
lines, offering a broad range of products that facilitate the broadband
transmission of high-speed digital and analog data between a telephone company's
central office and end-user customers. These two product lines are:

o    Customer Networking Equipment (CNE): Westell's family of broadband
     products enable the transport of high-speed data over existing local
     telephone lines and allow telecommunications companies to provide broadband
     services using their current copper infrastructure. The Company's broadband
     products also enable residential, small business and Small Office Home
     Office (SOHO) users to network multiple computers, telephones and other
     devices to access the Internet. Digital Subscriber Lines (DSL) products
     make up the majority of the revenue in this product group.
o    Network Service Access (NSA): Westell's NSA product family consists of
     manageable and non-manageable T1 transmission equipment for telephone
     services, and an array of mounting products used for connecting telephone
     wires and cables, and special service plugs. The T1 transmission equipment
     termed Network Interface Units (NIU) and the associated NIU mounting
     products make up the majority of revenue from this product group.

     The following table sets forth the revenues from Westell's two product
groups for the fiscal years indicated (for more information also see
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" included in this Annual Report on Form 10-K):

                                               Fiscal Year Ended March 31,
                                               ------------------------------
                                                2002       2003        2004
                                                ----       ----        ----
Equipment Segment                                   (Dollars in thousands)
- -----------------
CNE products..............................  $ 105,011  $ 111,146    $ 135,704
NSA products..............................     86,291     57,070       54,736

CNE products % of total revenues..........      43.8%      52.9%        57.6%
NSA products % of total revenues..........      35.9%      27.2%        23.2%

     The prices for the products within each market group vary based upon
volume, customer specifications and other criteria and are subject to change due
to competition among telecommunications manufacturers. Increasing competition,
in terms of the number of entrants and their size, and increasing size of the
Company's customers because of past mergers, continues to exert downward
pressure on prices for the Company's products. The Company has also elected to
eliminate some products and exit some markets based on an analysis of current
and future prospects.


     Digital subscriber line (DSL) technology uses complex modulation methods to
enable high-speed services over copper phone lines. Current DSL equipment allows
the simultaneous transmission of data at speeds up to 8 megabits per second when
receiving information on the Internet, or 140 times faster than standard 56k
modem dial up service, and up to 1 megabits per second when sending information
on the Internet, or 17 times faster than standard 56k modem dial up service,
while also providing standard analog telephone service over a single pair of
copper wires. Current DSL equipment operates at distances of up to 18,000 feet
from the telephone company's central office. A new DSL standard termed ADSL2+ is
being established by the industry that is expected to increase downstream speed
to 24 megabits per second while simultaneously extending the reach of the
equipment to potentially to 18,000 to 22,000 feet in certain circumstances.
Westell is developing an entire new line of ADSL2+ capable products.

     With DSL technology, a user can talk on the telephone and simultaneously
transmit high-speed data over the same copper phone line. DSL products enable
telephone companies to provide interactive multimedia services over copper wire
while simultaneously carrying traditional telephone services, thus mitigating
the need for the consumers to install second lines to provide these services.
DSL technology is also known as Asymmetric Digital Subscriber Line (ADSL and
ADSL2+) when it refers to products that provide the ability to send and receive
information at varying speeds.


                                      -3-


     The DSL connection or link is comprised of a DSL Access Multiplexer (DSLAM)
and equipment at the users location referred to as customer premise equipment
(CPE). The DSLAM is a piece of equipment that typically resides in telephone
companies' central offices. It aggregates, or multiplexes, multiple DSL access
lines into a telephone company's high-speed line back to its core or central
network. As network service providers begin deploying DSL based services, the
need for DSL line concentration at the central offices increases. The CPE is
typically a small device enabling DSL services that sit on a desktop next to a
personal computer.

The following table sets forth a list of the Company's principal CNE products
and their applications:



Product                   Description                                         Applications
- -------                   -----------                                         ------------

                                                                        
WireSpeed(TM)ADSL Modem.  Customer premise equipment (CPE) that is            Enables a residential or small
.......................    connected to a telephone line that has been         business customer of ADSL services to
.......................    configured to provide Asymmetrical Digital          connect a home PC to the ADSL service
.......................    Subscriber Line (ADSL) service from the telephone   for high speed Internet access.
.......................    company.  This device is typically located in the
.......................    home or office of the customer.  Customer users
.......................    can achieve speeds of up to 8 megabits per second
.......................    when receiving information on the Internet and up
.......................    to 1 megabit per second when sending information
.......................    on the Internet. The target market for this
                          product is residential users.

WireSpeedTM  ADSL NAT     Westell's WireSpeed ADSL NAT Router is a            Offers residential and small office
Router................    plug-and-play device that offers Network Address    home office (SOHO) sophisticated
.......................    Translation (NAT) routing and a built-in            routing, security protection and easy
.......................    firewall.  NAT is a method of connecting multiple   installation all in one box.
.......................    computers to the Internet (or any other IP
.......................    network) using one IP address.  NAT routing also
.......................    provides security for devices on the local area
.......................    network (LAN). The target market for this product
.......................    is residential and small office home office
.......................    (SOHO).

Westell xDSL Gateway..    Westell's xDSL Gateway product line offers          Enables residential, SOHO, and small
.......................    support for either ADSL or other types of DSL       businesses to easily network their
.......................    service with a variety of wireline and wireless     broadband services to multiple PCs and
.......................    networking technologies. The target market for      other computing devices.
.......................    this product is residential, small office home
                          office (SOHO), and small business.





                                      -4-



     NSA Products. Westell's NSA products provide telephone companies with
products to transport, maintain and improve the reliability of services over
copper and fiber lines in the local access network. The following table sets
forth a list of the Company's principal NSA products and their applications:



                                                                      
Product                      Description                                    Applications
- -------                      -----------                                    ------------
Network Interface Unit       The NIU is a T1 circuit termination device     Provides a "demarcation point" or
(NIU).................       that allows circuit loopback and access to     hand-off between the telephone company
.......................       historical circuit performance.                equipment and customer's equipment on T1
.......................                                                      circuits.  The NIU also functions as a
                                                                            maintenance tool that allows the telephone
                                                                            company to remotely drop the customer and
                                                                            test the line back toward the network. This
                                                                            functionality provides valued
                                                                            troubleshooting capability that helps the
                                                                            telephone company reduce maintenance costs
                                                                            and customer down-time.

NIU-PM (Network Interface    Network Interface Unit with Performance        In addition to the NIU capability, the
Unit with Performance        Monitoring that stores circuit performance     NIU PM units provide enhanced
Monitoring)...........       and maintenance information for a single T1    maintenance and remote performance
                             circuit.                                       monitoring of T1 circuits.  These units
                                                                            also provide enhanced data storage for
                                                                            better historical analysis of circuit
                                                                            performance.  Additionally, it creates
                                                                            an opportunity for preventive
                                                                            maintenance activities by the telephone
                                                                            company to improve their customer
                                                                            satisfaction.

NIU Mountings.........       NIU Mountings are electronic enclosures with   Deployed by telephone company at their
                             connectorized backplanes that house NIUs and   customer's premise locations to
                             NIU PM units                                   terminate their T1 circuits.

DS3 products..........       DS3 Network Interface Units with and without   Facilitates the maintenance, monitoring,
                             Performance Monitoring capability along with   extension, and demarcation of DS3
                             the Mountings to house these plug-in cards.    facilities.  Can be deployed in central
                                                                            offices to hand-off DS3s to alternate
                                                                            carriers and customer premise locations.

T1 Repeaters..........       T1 Office and Line Repeaters                   Facilitates the extension of T1 service
.......................                                                      to subscribers that are more than 3000
.......................                                                      feet* from the central office and those
.......................                                                      that are served beyond a fiber
                                                                            multiplexer. (*Distance will vary based on
                                                                            gauge of copper wire)




                                                          -5-



RESEARCH AND DEVELOPMENT CAPABILITIES AND ENGINEERING BASE

         The Company believes that its future success depends, in part, on its
ability to maintain its technological leadership through enhancements of its
existing products and development of new products that meet customer needs. The
Company is focusing on expanding its product offerings in the equipment segment
from basic high speed broadband to more sophisticated applications such as
networking, wireless and managed services. Westell works closely with its
current and potential customers as part of the product development process.

         In fiscal 2002, the Company received $2.0 million from customers to
fund engineering projects, which was offset against research and development
expenses. The Company did not receive any funding from customers for engineering
projects in fiscal 2003 or 2004. In fiscal 2002, 2003 and 2004 the Company spent
approximately $22.4 million, $16.5 million and $17.4 million on research and
development activities, net of customer funding.

         Westell's Product Development Processes are registered to TL9000, which
is the Telecommunication Industry's sector-specific version of the ISO9001:2000
International Quality System Standard. These processes are also registered to
ISO9001:2000. The Company's research and development personnel are organized
into product development teams. Each product development team is generally
responsible for sustaining technical support of existing products, decreasing
manufacturing costs, conceiving new products in cooperation with other groups
within the Company and adapting standard products or technology to meet new
customer needs. In particular, each product development team is charged with
implementing the Company's engineering strategy of reducing product costs for
each succeeding generation of the Company's products in an effort to be a highly
valued, superior quality provider, without compromising functionality or
serviceability.

         The Company believes that the key to this strategy is choosing an
initial architecture for each product that enables engineering innovations to
result in performance enhancements and future cost reductions. Westell's
products are designed in conjunction with input from procurement and
manufacturing personnel to reduce costs. The Company believes it has a quality
record that is grounded in a solid interface and transference of knowledge
between design and manufacturing teams. Successful execution of this strategy
also requires that the Company continue to attract and recruit highly qualified
engineers.

         The Company's products are subject to industry wide standardization
organizations which include, the DSL Forum, the American National Standards
Institute ("ANSI") in the United States and the European Telecommunications
Standards Institute ("ETSI") which are responsible for specifying transmission
standards for telecommunications technologies. The industry transmission
standard for ADSL adopted by ANSI and ETSI is based upon Discrete Multitone
Technology (DMT). DMT is technology that allows digital information to be sent
at high-speeds over copper phone lines and prevents the digital information from
interfering with other services provided on the same copper phone line. Westell
incorporates DMT technology into its DSL products. The Company has not developed
a DMT transceiver technology for its product offerings and is dependent on
transceiver technologies sourced from third parties. The Company has established
multiple strategic relationships with transceiver technology vendors for DSL
chipsets to be used in ADSL systems by the Company. Absent the proper
relationships with key silicon chipset vendors, the Company's products may not
comply with standards set forth by ANSI and ETSI. Should customers require
standards based products containing transceiver technology not available to the
Company under reasonable terms and conditions, the Company's business and
results of operations would be materially and adversely affected.



                                      -6-


         The following table lists the principal products currently under
development along with their description and expected application:



Product                   Description                                         Applications
- -------                   -----------                                         ------------

                                                                        
LiteLine TM ADSL Modem    Customer premise equipment that is connected to a   Enables residential and small office
.......................    telephone line that has been configured to          home office (SOHO) customers of ADSL
.......................    provide Asymmetrical Digital Subscriber Line        service to connect a PC to the ADSL
.......................    (ADSL and ADSL2+ once available) service from the   service for basic high speed Internet
.......................    telephone company. The LiteLine is a                access with routing and security
.......................    plug-and-play device that offers Network Address    protection all in one box.
.......................    Translation (NAT) routing and a built-in
.......................    firewall.  NAT is a method of connecting multiple
.......................    computers to the Internet (or any other IP
.......................    network) using one IP address.  NAT routing also
.......................    provides security for devices on the local area
                          network (LAN).

ProLine TM   ADSL         Similar in all ways to the LiteLine, the ProLine    In addition to providing the same
Modem/NAT Router......    provides the added benefit of allowing remote       applications as the LiteLine, the
.......................    diagnostics, maintenance, software upgrades and     ProLine offers service providers the
.......................    other remote services.                              ability to provide customers a higher
.......................                                                        level of service and performance than
                                                                              the LiteLine product.

UltraLineTM   Home DSL    A full-featured, high-performance multi-port DSL    Offers users the ability to utilize
Router................    router designed with sophisticated software         multiple broadband applications and
.......................    intelligence and remote management capabilities     manage service quality and security
.......................    for  broadband networking  multi-user environment.  preferences.
.......................

VersaLink  TM  Gateway    A fully featured, versatile gateway device that     Enables residential, SOHO, and small
.......................    offers wired, 802.11g WiFi wireless and optional    businesses to network their broadband
.......................    VersaLink(TM)fiber access for home or small         services to multiple PCs and other
.......................    businesses.                                         computing devices with wired and
                                                                              wireless access.

TriLink(TM)DSL and        Integrated Access Devices (IADs) that provide       Provides customers the ability to
TriLink(TM)Ethernet VoIP  Voice over Internet Protocol (VoIP)                 connect standard telephones to the
products                  communications.  TriLink DSL contains an            Internet to complete telephone calls
.......................    integrated DSL modem while the TriLink Ethernet     using standard VoIP protocols over a
.......................    connects to the Internet using an existing DSL      broadband DSL connection.
.......................    modem. Both products provide for the simultaneous
.......................    transmission of VoIP and data traffic.              .
.......................

EnVoy Service             A standards based, Westell hosted service           Allows Service Providers to offer
Management                ("managed service")designed to provide remote       firewall security, automated
System TM                 management and diagnostic capabilities used by      installation and maintenance, software
.......................    Service Providers, to deliver premium broadband     upgrades and entertainment
.......................    services to their subscribers.                      applications to products that are
.......................                                                        compliant with industry standards for
.......................                                                        remote management.




         The Company currently anticipates that it will generate revenue from
the products listed in the above table in fiscal year 2005 and fiscal year 2006.
However, there can be no assurance that the Company will be able to introduce
such products as planned.

                                      -7-


CUSTOMERS

         The Company's principal customers historically have been large Regional
Bell Operating Companies (RBOCs) within the United States. In addition, Westell
sells products to several other entities, including public telephone
administrations located outside the U.S., independent domestic local exchange
carriers, competitive local exchange carriers, inter-exchange carriers, the U.S.
federal government, Internet service providers, and business enterprises.
Revenues from international customers represented approximately $15.5 million,
$11.3 million and $6.3 million of the Company's revenues in fiscal 2002, 2003
and 2004, respectively, accounting for 6.5%, 5.4% and 2.7% of the Company's
revenues in such periods.

         The Company depends, and will continue to depend, on the Regional Bell
Operating Companies (RBOCs) and other independent local exchange carriers for
substantially all of its revenues. Sales to the RBOCs accounted for 66.4%, 75.1%
and 76.8% of the Company's revenues in fiscal 2002, 2003 and 2004, respectively.
Sales to the Company's largest three customers, Verizon, BellSouth and SBC
accounted for 43%, 18% and 13% of the Company's revenues in fiscal 2004,
respectively. Consequently, the Company's future success will depend upon the
timeliness and size of future purchase orders from the RBOCs, the product
requirements of the RBOCs, the financial and operating success of the RBOCs, and
the success of the RBOCs' services that use the Company's products. Any attempt
by an RBOC or other telephone company access providers to seek out additional or
alternative suppliers or to undertake the internal production of products could
have a material adverse effect on the Company's business and results of
operations. In addition, the Company's sales to its largest customers have in
the past fluctuated, and in the future could fluctuate significantly from
quarter to quarter and year to year. The loss of such customers or the
occurrence of such sales fluctuations would materially adversely affect the
Company's business and results of operations.

         The Company's contracts with its major customers are primarily pricing
and product specification agreements that do not require a specific level of
quantities to be purchased. Each customer provides the Company with purchase
orders for units on an as-needed basis.

         The RBOCs and the Company's other customers are significantly larger
than, and are able to exert a high degree of influence over, the Company. As a
result, our larger customers may be able to reschedule or cancel orders without
significant penalty. Prior to selling its products to telephone companies, the
Company must undergo lengthy approval and purchase processes which are discussed
in the section captioned "Marketing, Sales and Distribution".

MARKETING, SALES AND DISTRIBUTION

         The Company sells its products in the U.S. through its domestic field
sales organization and selected distributors. The Company has had an established
sales force and channel to domestic service providers since its founding in
1980.

         The Company markets its products domestically within the United States,
as well as in Canada and Europe. In North America, the Company's traditional NSA
products are sold directly to the service providers or in some cases to
distributors who service these carriers. The Company's CNE products are sold
directly to telephone carriers and to Internet Service Providers who provide DSL
services. The Company believes that the DSL sales channels are very dynamic and
continually looks to adapt and configure its sales force and processes to meet
these changes.

         The RBOCs and the Company's other customers are significantly larger
than, and are able to exert a high degree of influence over, the Company. Prior
to selling its products to telephone companies, the Company must undergo lengthy
approval and purchase processes. Evaluation can take as little as a few months
for products that vary slightly from existing products in the local access
network and often longer for products based on new technologies. Accordingly,
the Company is continually submitting successive generations of its current
products as well as new products to its customers for approval.

         Although the telephone company approval processes may vary to some
extent depending on the customer and the product being evaluated, they generally
are conducted as follows:


                                      -8-


         Laboratory Evaluation.  The product's function and performance are
         tested against all relevant industry standards.

         Technical Trial. A number of telephone lines are equipped with the
         product for simulated operation in a field trial. The field trial is
         used to evaluate performance, assess ease of installation and establish
         troubleshooting procedures.

         Marketing Trial. Emerging products are tested for market acceptance of
         new applications and services. Marketing trials usually involve a
         greater number of systems than technical trials because systems are
         deployed at several locations in the telephone company's network. This
         stage gives telephone companies an opportunity to establish procedures,
         train employees to install and maintain the new product and to obtain
         more feedback on the product from a wider range of operations
         personnel.

         Commercial Deployment. Commercial deployment usually involves
         substantially greater numbers of systems and locations than the
         marketing trial stage. In the first phase of commercial deployment, a
         telephone company initially installs the equipment in select locations
         for select applications. This phase is followed by general deployment
         involving greater numbers of systems and locations. Commercial
         deployment does not usually mean that one supplier's product is
         purchased for all of the telephone companies' needs throughout the
         system as telephone companies often rely upon multiple suppliers to
         ensure that their needs can be met. Subsequent orders, if any, are
         generally placed under single or multi-year supply agreements that are
         generally not subject to minimum volume commitments.

         The relationships that the Company establishes in this extensive
process are critical in almost every case. The Company has a history of working
closely with the service providers in this fashion and the Company has won
numerous quality awards from a variety of customers over the past twenty years.

TECHNICAL SUPPORT

         Westell maintains 24-hour, 7-day-a-week telephone support and provides
on-site support. The Company also provides technical consulting, research
assistance and training to some of its customers with respect to the
installation, operation and maintenance of its products.

         The Company has general purchase agreements with most of its major
customers. These agreements may require the Company to accept returns of
products or indemnify such customers against certain liabilities arising out of
the use of the Company's products. Although, to date, the Company has not
experienced any significant product returns or indemnification claims under
these contracts, any such claims or returns could have a material adverse effect
on the Company's business and results of operations.

         The Company's products are required to meet rigorous standards imposed
by its customers. Most of the Company's products carry a limited warranty
ranging from one to seven years, which generally covers defects in materials or
workmanship and failure to meet published specifications, but excludes damages
caused by improper use and all other warranties. In the event there are material
deficiencies or defects in the design or manufacture of the Company's products,
the affected products could be subject to recall. For the past five fiscal
years, the Company's warranty expenses have been insignificant.

MANUFACTURING

         The Company performs the majority of its manufacturing at its facility
in Aurora, Illinois. The Company is positioned to activate a subcontractor to
produce CNE products if demand were to significantly increase. The Company
subcontracts the production of a portion of its NSA products. Reliance on
third-party subcontractors involves several risks, including the potential
absence of adequate capacity and reduced control over product quality, delivery
schedules, manufacturing yields and costs.

         The Company has purchase contracts with suppliers of material
components. Most purchased items are standard commercial components available
from multiple suppliers. There are also single-sourced components needed to
produce products. There is one single-sourced item in broadband consisting of
the license to run an operating platform. There are a number of other suppliers


                                      -9-


in the market that could supply the Company with this same technology, however,
it would take the Company at least nine months to reengineer the product and
subsequently get product approval from customers. This delay would materially
adversely affect the Company's business. Broadband product sales accounted for
58% of revenue in fiscal 2004. All purchase contracts are short term in nature
with the exception of one long-term commitment to purchase memory chips. Under
this long-term agreement, the Company must purchase $13.5 million of products
through December 2005 or pay a cancellation fee of $800,000. The $800,000
cancellation fee is reduced as the Company meets purchase milestones. It was
determined in fiscal 2002 that this purchase commitment would more than likely
not be met and the Company therefore accrued for the cancellation fee. As of
March 31, 2004 the Company had fulfilled $7.5 million of the $13.5 million
obligation and the cancellation fee was reduced to $500,000. The remaining
cancellation fee of $500,000 is accrued. Suppliers may terminate unfulfilled
contracts without penalty that are outside of contractual time periods.

         A substantial portion of the Company's shipments in any fiscal period
can relate to orders for products received in that period. Westell's domestic
Manufacturing Processes are also registered to TL9000, as well as to
ISO9001:2000. Further, a significant percentage of orders, such as Network
Interface Units, or NIUs, may require delivery within 48 hours. To meet this
demand, the Company maintains raw materials inventory and finished goods
inventory at its manufacturing facilities. In addition, the Company maintains
some finished goods inventory at the customers' sites pursuant to agreements
that the customers will eventually purchase such inventory. Because of the rapid
technological changes to our products, the Company faces a reoccurring risk that
the inventory it holds may become obsolete.

COMPETITION

         The markets for the Company's products are intensely competitive and
the Company expects competition to increase in the future, especially in the
rapidly changing markets for broadband products. Westell's primary competitors
vary by market segment. The Company's principal competitors with respect to its
NSA products are HyperEdge Corporation, ADC Telecommunications and Pulsecom. The
Company's principal competitors with respect to its CNE broadband products are
primarily Siemens Information and Communication Network Inc. (Efficient),
Netopia Inc., 2Wire Inc., Cisco Systems Inc. (Linksys), D-Link Systems Inc.,
ActionTec Electronics Inc. and ZyXEL Communications Co. The Company believes
that it is currently one of the leading sellers of DSL products in North
America. However, many of the Company's competitors are significantly larger and
have more financial resources than the Company. To compete against these
competitors, the Company focuses on quality, time to market and the ability to
react quickly to market changes resulting from U.S. based operations including
manufacturing and product development. The Company expects that new competitive
pressure from Asian based manufactures will continue downward pressure on
pricing.

         Additional competition is seen from products that increase the
efficiency of digital transmission over copper wire such as fiber, wireless,
cable modems and other products delivering broadband digital transmission.
Telephone companies face competition from cable operators, new local access
providers and wireless service providers that are capable of providing high
speed digital transmission to end users. At the end of 2003, 16.0 million
customers used cable modems in the U.S. in contrast to 8.5 million DSL
subscribers. By 2008, the Yankee Group, a service that provides industry trend
data, is forecasting there to be 35.8 million cable modem users in the U.S.
versus 21.0 million DSL users in the U.S. resulting in a 37% market share for
DSL modems. In addition, the deployment of products and technologies for copper
wire may also reduce the demand for other products currently manufactured by the
Company. The deployment of HDSL2 and HDSL4 systems in the U.S. reduces telephone
companies' need for T-1 repeaters, which results in a decrease in demand for
Westell's more traditional T-1 products such as its Network Interface Units. The
Company believes that the domestic market for some of its older, low speed NSA
transmission products is decreasing, and will likely continue to decrease, as
high capacity digital transmission becomes less expensive and more widely
deployed. See the risk factor captioned "Our products face competition from
other existing products, products under development and changing technology, and
if we do not remain competitive, our business will suffer and we may not remain
profitable".

TELECONFERENCE SERVICES

         Conference Plus, Inc., founded in 1988, is a full service conferencing
company that manages and hosts specific software and applications relating to
conferencing and meeting services. Conference Plus is an 91.5% owned subsidiary
of Westell and manages its teleconferencing and meeting services through its


                                      -10-


main operations center in Schaumburg, Illinois and a facility in Dublin,
Ireland. Conference Plus services generated $48.5 million, $41.8 million and
$45.3 million in revenues in fiscal 2002, 2003 and 2004, respectively.

         In June 2002, the Company retained Robert W. Baird & Company to act as
an advisor on a possible divestiture of the Company's services subsidiary,
Conference Plus, Inc. At this time, the Company is not actively pursuing any
divestiture but may do so in the future if the divestiture fits into the
Company's strategic plans and adequate consideration can be obtained.

         Conference Plus allows multiple individuals, organizations and/or
businesses to conduct conference calls using a combination of voice, video or
data such as graphs or spreadsheets. Conference Plus offers conference call
services that can include a blend of audio, graphics, spreadsheets or other
documents that can be carried over and archived on the Internet to enhance the
traditional voice conference call. By enabling the sharing of this blend of
information, Conference Plus can help organizations increase productivity and
save money by reducing travel time, bringing down travel costs, and making it
easier for people in remote locations to work together. Teleconference and
meeting service technologies also allow organizations and individuals to collect
and disseminate information faster, more accurately and without the associated
costs of face-to-face meetings.

         Conference Plus is distinguished by three strategies:

         o        Diverse Distribution Channels
         o        State-of-the-Art Network and Integrated Systems
         o        International Reach

         DIVERSE DISTRIBUTION CHANNELS

                  Conference Plus has historically acted as a provider of
conferencing and meeting services on a wholesale basis, managing and hosting
applications for major carriers and telecommunications resellers. A majority of
Conference Plus' revenues come from indirect commercial teleconferencing
services to customers who market or use Conference Plus services under their own
brand name. Such companies choose to outsource and private label audio, web and
video teleconferencing services to maintain continuity, save costs and focus on
their core competencies. By selling into indirect or resale customers,
Conference Plus effectively increases the size of their sales organization
without incurring the expense necessary with a direct sales force.

         Conference Plus also sells its services directly to Fortune 1000
companies through its National Accounts Sales force. This area continues to be a
strong part of the of Conference Plus's business and the Company expects to
continue to invest resources in this area in order to maintain a diverse mix of
revenue distribution. The deployment of this strategy is designed to improve the
recognition of the Conference Plus brand, which has strategic long term benefits
to the Company.

         STATE OF THE ART NETWORK AND INTEGRATED SYSTEMS

         A critical part of Conference Plus' approach is its state of the art
network and integrated systems. Conference Plus has a state of the art network
infrastructure that enables it to take advantage of the relationships it has
with major telecommunications providers to provide quality service. Conference
Plus has a unique architecture that allows customers have access to all of the
Conference Plus bridge and network capacity during any of their conference calls
or meetings.

         Conference Plus has built an integrated reservations, scheduling and
billing system called Conferencing and Reservation Billing System ("CRBS") that
is a significant differentiator in the conferencing market. The CRBS system
allows Conference Plus to leverage its operations on a global basis. This
reliable and scalable system is seamlessly integrated in the operational
environment from the point of reservation through the billing process. This
integration allows Conference Plus to enjoy scale advantages and to be able to
provide resale service to its customers.

         INTERNATIONAL REACH



                                      -11-


         As customers globalize their telecommunications services, Conference
Plus has expanded its operational presence internationally to meet these needs.
In addition to its main operational centers in Schaumburg, Illinois and Dublin,
Ireland, Conference Plus has teleconferencing bridges located in Lombard,
Illinois and London, England. Conference Plus is able to serve the
teleconferencing needs of customers headquartered anywhere in the world through
these facilities. The Conference Plus facility in Dublin, Ireland was
established in 1998 to help meet the growing demand for global conferencing
service. The international market for teleconferencing is expected to grow
substantially as a result of deregulation and improved networks with associated
reductions in end user costs.

         Conference Plus' indirect or private label customers and many of its
other customers are significantly larger than, and are thus able to exert a high
degree of influence over, Conference Plus. Conference Plus depends on two
customers to provide a significant percent of its revenues. A loss of one of
these customers would have a material adverse effect on Conference Plus's
business. Prior to selling its services, the Company must undergo lengthy
approval and purchase processes. Evaluation can take a few months for services
that vary slightly from existing services used by the prospective customer to a
year or more for services based on technologies such as video or data
teleconferencing or which represent a new strategic direction for the customer,
as in the case with private labeling teleconference services for a Regional Bell
Operating Company.

         Competition in the teleconferencing business is intense and the Company
expects that competition will increase due to low barriers of entry and recent
entrants into the audio teleconferencing service market. Many of Conference
Plus' competitors, including AT&T, MCI Communications and Sprint Communications,
have much greater name recognition, more extensive customer service and
marketing capabilities and substantially greater financial, technological and
personnel resources than the Company. There can be no assurance that the Company
will be able to successfully compete in this market in the future or that
competitive pressures will not result in price reductions that would materially
adversely affect its business and results of operations.

GOVERNMENT REGULATION

         The telecommunications industry, including most of the Company's
customers, is subject to regulation from federal and state agencies, including
the FCC and various state public utility and service commissions. While such
regulation does not affect the Company directly, the effects of such regulations
on the Company's customers may, in turn, adversely impact the Company's business
and results of operations. For example, FCC regulatory policies affecting the
availability of telephone and communications services and other terms on which
service providers conduct their business may impede the Company's penetration of
certain markets. The Telecommunications Act of 1996 lifted certain restrictions
on the carriers' ability to provide interactive multimedia services including
video on demand. Under the Telecommunications Act of 1996, new regulations have
been established whereby carriers may provide various types of services beyond
traditional voice offerings.

         In addition, the Telecommunications Act of 1996 permits the carriers to
engage in manufacturing activities after the FCC authorizes a carrier to provide
long distance services within its service territory. A carrier must first meet
specific statutory and regulatory tests demonstrating that its monopoly market
for local exchange services is open to competition before it will be permitted
to enter the long distance market. When these tests are met, a carrier will be
permitted to engage in manufacturing activities, and the carriers, which are the
Company's largest customers, may become the Company's competitors as well. See
"Risk Factors".

PROPRIETARY RIGHTS AND INTELLECTUAL PROPERTY

         The Company's success and future revenue growth will depend, in part,
on its ability to protect trade secrets, obtain or license patents and operate
without infringing on the rights of others. The Company relies on a combination
of technical leadership, copyrights, patents, trademarks, trade secrets and
other intellectual property laws, nondisclosure agreements and other protective
measures to protect our unpatented proprietary know-how. The Company regards
some of its technology as proprietary and the Company has been granted 28
patents and has an additional 22 U.S. patents pending relating to its NSA and
CNE products. The expiration of any of the patents held by the Company would not
have a material impact on the Company. The Company expects to seek additional
patents from time to time related to its research and development activities.

         Many of the Company's products incorporate technology developed and
owned by third parties. Consequently, the Company must rely upon third parties
to develop and to introduce technologies which enhance the Company's current


                                      -12-


products and enable the Company, in turn, to develop its own products on a
timely and cost-effective basis to meet changing customer needs and
technological trends in the telecommunications industry. Without third party
transceiver technologies, such as DMT technology, the Company would not be able
to produce any of its DSL systems. Consequently, if the Company's third party
transceiver suppliers fail to deliver transceivers that meet the Company's
requirements or fail to deliver transceivers that meet industry standards and
other alternative sources of DSL transceiver technology are not available to the
Company at commercially acceptable terms, then the Company's business and
results of operations would be materially and adversely affected. The Company's
reliance on certain third party technology is also discussed above in "Research
and Development Capabilities and Engineering Base".

         Rapid technological evolution has resulted in the need to implement
strategic alliances with technology suppliers in order to accelerate the time to
market for new products. Without such relationships, due to the lengthy carrier
product approval and purchase cycles, the technology may be obsolete by the time
the Company completes the product approval and purchase cycles.

EMPLOYEES

         As of March 31, 2004, the Company had 880 full-time employees.
Westell's domestic equipment manufacturing business had a total of 581 full-time
employees, consisting of 143 in sales, marketing, distribution and service, 87
in research and development, 319 in manufacturing and 32 in administration.
Conference Plus had a total of 269 full-time employees. Westell Limited had a
total of 30 full-time employees. None of the Company's employees are represented
by a collective bargaining agreement nor has the Company ever experienced any
work stoppage. The Company believes its relationship with its employees is good.

ACCESS TO SEC REPORTS AND CORPORATE GOVERNANCE MATERIALS

         The Company makes available free of charge through its website,
www.westell.com:

     o    an automatic link to the SEC's website for the Company's annual report
          on Form 10-K, quarterly reports on Form 10-Q, current reports on Form
          8-K and all amendments to those reports as soon as reasonably
          practical after such material is electronically filed with the
          Securities and Exchange Commission; and

     o    the Company's Audit Committee Charter and its Code of Business
          Conduct.

 The Company's website and the information contained therein or incorporated
therein are not intended to be incorporated into this Annual Report on Form
10-K.



                                      -13-




                                  RISK FACTORS

You should carefully consider the risks described below in addition to the other
information contained and incorporated by reference in this Form 10-K. If any of
the following risks occurs, our business, operating results or financial
condition would likely suffer, and the market price for our securities could
decline.


WE HAVE INCURRED LOSSES IN THE PAST AND MAY INCUR LOSSES IN THE FUTURE.

        In the past, due to our significant ongoing investment in DSL and other
new technology, we have incurred losses through fiscal 2002. Through fiscal
2002, we have incurred operating losses, net losses and negative cash flow on
both an annual and quarterly basis. The Company had an accumulated deficit of
$287 million as of March 31, 2004.

         We believe that our future revenue growth and profitability will depend
on:

     o    creating sustainable product and service sales opportunities;
     o    lowering our CNE and NSA product costs through design and
          manufacturing enhancements and volume efficiencies;
     o    developing new and enhanced products and services; and

         In addition, we expect to continue to evaluate new product
opportunities. As a result, we will continue to invest heavily in research and
development and sales and marketing, which could adversely affect our short-term
operating results. We can offer no assurances that we will remain profitable in
the future.

OUR STOCK PRICE IS VOLATILE AND COULD DROP UNEXPECTEDLY.

         Like many technology stocks, our stock has demonstrated and likely will
continue to demonstrate extreme volatility as valuations, trading volume and
prices move significantly. This volatility may result in a material decline in
the market price of our securities, and may have little relationship to our
financial results or prospects.

         Our class A common stock price has experienced substantial volatility
in the past and is likely to remain volatile in the future due to factors such
as:

     o    Our actual and anticipated quarterly and annual operating results;
     o    Variations between our actual results and analyst and investor
          expectations;
     o    Announcements by us or others on developments affecting our business;
     o    Lack of success on winning new customers or the loss of an existing
          customer;
     o    Investor and analyst perceptions of our company and comparable public
          companies;
     o    Future sales of debt or equity securities;
     o    The activities of short sellers and risk arbitrageurs regardless of
          our performance; and
     o    Conditions and trends in the data communications and Internet-related
          industries.

         Many of the factors listed above are not within our control. In the
past, companies that have experienced volatility in the market price of their
stock have been the subject of securities class litigation.

WE HAVE AND COULD FACE SECURITIES CLASS LITIGATION, WHICH COULD SIGNIFICANTLY
HARM OUR BUSINESS.

         In fiscal 2000, Westell Technologies, Inc. and certain of its officers
and directors were named in consolidated class actions. Although these class
actions have settled, we could face securities litigation in the future which
could result in the payment of substantial damages or settlement costs in excess
of our insurance coverage. Any adverse outcome could harm our business. Even if
we were to be meritorious in any such litigation, we could incur substantial
legal costs and management's attention and resources could be diverted from our
business which could cause our business to suffer.


                                      -14-



DUE TO THE RAPID TECHNOLOGICAL CHANGES IN OUR INDUSTRY, OUR PRODUCTS MAY BECOME
OBSOLETE BEFORE WE CAN REALIZE SIGNIFICANT REVENUES FOR OUR PRODUCTS, WHICH
COULD CAUSE US TO INCUR CHARGES FOR EXCESS AND OBSOLETE INVENTORY AND MATERIALLY
HARM OUR BUSINESS.

         The telecommunications industry is subject to rapid technological
change and volatile customer demands, which results in a short product
commercial life before a product becomes obsolete. As a result, we have in the
past and may in the future devote disproportionate resources to a product that
has an unexpected short commercial life and/or have to write off excess and
obsolete inventory, each of which would harm our operating results and financial
condition and harm our business. From time to time, we may need to write off
inventory as excess or obsolete. In the past, we have experienced such
write-offs. For example, the Company recognized an inventory adjustment to net
realizable value and charges for excess and obsolete inventory of $13.9 million
during fiscal year 2002. If we incur substantial inventory expenses that we are
not able to recover because of changing market conditions, it could have a
material adverse effect on our business, financial condition and results of
operations.

PRICING PRESSURES ON OUR PRODUCTS MAY AFFECT OUR ABILITY TO BE PROFITABLE IN THE
FUTURE.

        We have and may in the future offer products and services based upon
forward pricing, which is the pricing of products below production costs to take
into account the expectation of large future volumes and corresponding reduction
of manufacturing costs. Forward pricing would cause us to incur lower margins on
product or service sales unless we can reduce the associated costs. We believe
that costs may decrease if:

     o    more cost-effective technologies become available,
     o    product design efficiencies and component integration are obtained,
          and
     o    we achieve economies of scale related to increased volume.

        There is no guaranty that we will be able to secure significant
additional business and reduce per unit costs that we have factored into our
forward priced products. As a result, we could incur low or negative margins in
connection with sales of forward priced products even if our unit volume
increases. Low margins from our sales of products and services could result in
fluctuations in our quarterly operating results and would materially and
adversely affect our profitability and ability to implement our business goals.

OUR PRODUCTS FACE COMPETITION FROM OTHER EXISTING PRODUCTS, PRODUCTS UNDER
DEVELOPMENT AND CHANGING TECHNOLOGY, AND IF WE DO NOT REMAIN COMPETITIVE, OUR
BUSINESS WILL SUFFER AND WE WILL NOT REMAIN PROFITABLE.

         The markets for our products are characterized by:

     o    intense competition within the DSL market and from other industries
          such as cable and wireless industries;
     o    rapid technological advances;
     o    evolving industry standards;
     o    changes in end-user requirements;
     o    frequent new product introductions and enhancements; and
     o    evolving customer requirements and service offerings.

         New products introductions or changes in services offered by telephone
companies or over the Internet could render our existing products and products
under development obsolete and unmarketable. Further, we believe that the
domestic market for many of our traditional T-1 products is decreasing, and will
likely continue to decrease, as high capacity digital transmission becomes less
expensive and more widely deployed. For example, our Network Interface Unit
product revenue decreased 16.7% in fiscal 2003 and an additional 15.8% in fiscal
2004. Our future success will largely depend upon our ability to continue to
enhance and upgrade our existing products, such as T-1 and DSL, and to
successfully develop and market new products.

         In addition, our current product offerings primarily enable telephone
companies to deliver communications over copper telephone wires in the local
access network. Telephone companies also face competition in the delivery of
digital communications from cable operators, new telephone companies, and
wireless service providers. If end users obtain their high-speed data
transmission services from these alternative providers, then the overall demand
for our DSL products will be impaired.


                                      -15-


         To remain competitive, we must develop new products to meet the demands
of these emerging transmission media and new local access network providers. Our
business would be severely harmed if our products become obsolete or fail to
gain widespread commercial acceptance due to competing products and
technologies.

EVOLVING INDUSTRY STANDARDS MAY ADVERSELY AFFECT OUR ABILITY TO SELL OUR
PRODUCTS AND CONSEQUENTLY HARM OUR BUSINESS.

         Industry wide standardization organizations such as the American
National Standards Institute and the European Telecommunications Standards
Institute are responsible for setting transceiver technology standards for DSL
and other products. We are dependent on transceiver technologies from third
parties to manufacture our products. If transceiver technologies needed for
standards-based products are not available to us in a timely manner and under
reasonable terms, then our revenues would significantly decrease and our
business and operating results would suffer significantly.

         In addition, the introduction of competing standards or implementation
specifications could result in confusion in the market and delay decisions
regarding deployment of our products. Delay in the announcement of standards
would materially and adversely impact our product sales and would severely harm
our business.


WE ARE DEPENDENT ON THIRD PARTY TECHNOLOGY, THE LOSS OF WHICH WOULD HARM OUR
BUSINESS.

         We rely on third parties to gain access to technologies that are used
in our current products and in products under development. For example, our
ability to produce DSL products is dependent upon third party transceiver
technologies. Our licenses for DSL transceiver technology are nonexclusive and
the transceiver technologies have been licensed to numerous other manufacturers.
If our DSL transceiver licensors fail to deliver commercially ready or standards
compliant transceiver solutions to us and other alternative sources of DSL
transceiver technologies are not available to us at commercially acceptable
terms, then our business and operating results would be significantly harmed.

         Any impairment in our relationships with the licensors of technologies
used in our products would force us to find other developers on a timely basis
or develop our own technology. For example, it would take us at least nine
months to reengineer the product and subsequently get product approval from
customers if the Company lost its existing licenses to the DSL technology and
operating platform used in its DSL products. There is no guarantee that we will
be able to obtain the third-party technology necessary to continue to develop
and introduce new and enhanced products, that we will obtain third-party
technology on commercially reasonable terms or that we will be able to replace
third-party technology in the event such technology becomes unavailable,
obsolete or incompatible with future versions of our products. We would have
severe difficulty competing if we cannot obtain or replace much of the
third-party technology used in our products. Any absence or delay would
materially adversely affect our business and operating results.

WE ARE DEPENDENT ON SOLE OR LIMITED SOURCE SUPPLIERS, THE LOSS OF WHICH WOULD
HARM OUR BUSINESS.

         Integrated circuits and other electronic components used in our
products are currently available from only one source or a limited number of
suppliers. Our inability to obtain sufficient key components or to develop
alternative sources for key components as required, could result in delays or
reductions in product deliveries, and consequently severely harm our customer
relationships and our business. Furthermore, additional sole-source components
may be incorporated into our future products, thereby increasing our supplier
risks. If any of our sole-source suppliers delay or halt production of any of
their components, or fail to supply their components on commercially reasonable
terms, then our business and operating results would be harmed. For example, it
would take the Company at least nine months to reengineer the product and
subsequently get product approval from customers if the Company lost its
existing licenses to the DSL technology and operating platform used in its DSL
products.

         We may experience delays in the receipt of key components which could
result in delays in related product deliveries. There is no guarantee that we
will be able to continue to obtain sufficient quantities of key components as
required, or that such components, if obtained, will be available to us on
commercially reasonable terms.


                                      -16-


WE HAVE FEW LONG TERM CONTRACTS OR ARRANGEMENT WITH SUPPLIERS WHICH COULD
ADVERSELY AFFECT OUR ABILITY TO PURCHASE COMPONENTS AND TECHNOLOGIES USED IN OUR
PRODUCTS.

         We have few long-term contracts or arrangements with our suppliers. We
may not be able to obtain components at competitive prices, in sufficient
quantities or under other commercially reasonable terms. If we enter into a
high-volume or long-term supply arrangement and subsequently decide that we
cannot use the products or services provided for in the supply arrangement, then
our business would also be harmed. We enter into short term contracts with our
suppliers in the form of purchase orders. Purchase orders are often
non-cancelable within contractual time periods. These purchase orders are issued
to venders based on forecasted demand. If the forecasted demand is materially
incorrect, we may find that we cannot use the products ordered, then our
business would also be harmed.

WE WILL NOT BE ABLE TO SUCCESSFULLY COMPETE, DEVELOP AND SELL NEW PRODUCTS IF WE
FAIL TO RETAIN KEY PERSONNEL AND HIRE ADDITIONAL KEY PERSONNEL.

         Because of our need to continually evolve our business with new product
developments and strategies, our success is dependent on our ability to attract
and retain qualified technical, marketing, sales and management personnel. To
remain competitive, we must maintain top management talent, employees who are
involved in product development and testing and employees who have developed
strong customer relationships. Because of the high demand to these types of
employees, it may be difficult to retain existing key employees and attract new
key employees. In addition we do not have non-compete contracts with most of our
employees. Our inability to attract and retain additional key employees could
harm our ability to successfully sell existing products and develop new products
and implement our business goals.

OUR QUARTERLY OPERATING RESULTS ARE LIKELY TO FLUCTUATE SIGNIFICANTLY AND SHOULD
NOT BE RELIED UPON AS INDICATIONS OF FUTURE PERFORMANCE.

         We may experience significant fluctuations in quarterly operating
results. Due to the risks identified below and elsewhere in "Risk Factors,"
sales to our largest customers have fluctuated and could fluctuate significantly
between quarters. Sales to our customers typically involve large purchase
commitments, and customers purchasing our products may generally reschedule
without penalty. As a result, our quarterly operating results have fluctuated
significantly in the past. Other factors that have had and may continue to
influence our quarterly operating results include:

     o    the impact of changes in the DSL customer mix or product mix sold;
     o    timing of product introductions or enhancements by us or our
          competitors;
     o    changes in operating expenses which can occur because of product
          development costs, timing of customer reimbursements for research and
          development, pricing pressures; availability and pricing of key
          components;
     o    write-offs for obsolete inventory; and
     o    the other risks that are contained in this "Risk Factors" section.

         Due to our fluctuations in quarterly results, we believe that
period-to-period comparisons of our quarterly operating results are not
necessarily meaningful. Our quarterly fluctuations make it more difficult to
forecast our manufacturing and purchasing needs and revenues. It is possible
that in some future quarters our operating results will be below the
expectations of securities analysts and investors, which may adversely affect
our stock price. As long as we continue to depend on DSL products and new
products, there is substantial risk of widely varying quarterly results,
including the so-called "missed quarter" relative to investor expectations.

WE MAY EXPERIENCE DELAYS IN THE DEPLOYMENT OF NEW PRODUCTS.

         Our past sales have resulted from our ability to anticipate changes in
technology, industry standards and telephone company service offerings, and to
develop and introduce new and enhanced products and services. Our continued
ability to adapt to such changes will be a significant factor in maintaining or
improving our competitive position and our prospects for growth. Factors
resulting in delays in product development include:


                                      -17-


     o    rapid technological changes in the telecommunications industry;
     o    our customers' lengthy product approval and purchase processes; and
     o    our reliance on third-party technology for the development of new
          products.

         There can be no assurance that we will successfully introduce new
products on a timely basis or achieve sales of new products in the future. In
addition, there can be no assurance that we will have the financial and
manufacturing resources necessary to continue to successfully develop new
products or to otherwise successfully respond to changing technology standards
and telephone company service offerings. If we fail to deploy new products on a
timely basis, then our product sales will decrease, our quarterly operating
results could fluctuate, and our competitive position and financial condition
would be materially and adversely affected.

THE TELECOMMUNICATIONS INDUSTRY IS A HIGHLY COMPETITIVE MARKET AND THIS
COMPETITION MAY RESULT IN OPERATING LOSSES, A DECREASE IN OUR MARKET SHARE AND
FLUCTUATIONS IN OUR REVENUE.

         We expect continuing competition as the DSL market continues to evolve.
Because we are significantly smaller than many of our competitors, we may lack
the financial resources needed to increase our market share. Many of our
competitors are much larger than us and can offer a wider array of different
products and services required for a telephone company's business than we do.

         We expect continued aggressive tactics from many of our competitors
such as:

     o    Forward pricing of products;
     o    Early announcements of competing products;
     o    Bids that bundle DSL products with other product and service
          offerings; and
     o    Intellectual property disputes.

OUR LACK OF BACKLOG MAY AFFECT OUR ABILITY TO ADJUST TO AN UNEXPECTED SHORTFALL
IN ORDERS.

         Because of customer ordering demands we generally ship products within
a short period after receipt of an order, we typically do not have a material
backlog (or known quantity) of unfilled orders, and our revenues in any quarter
are substantially dependent on orders booked in that quarter. Our expense levels
are based on anticipated future revenues and are relatively fixed in the
short-term. Therefore, we may be unable to adjust spending in a timely manner to
compensate for any unexpected shortfall of orders. Accordingly, any significant
shortfall of demand in relation to our expectations or any material delay of
customer orders would have an immediate adverse impact on our business and
operating results.

INDUSTRY CONSOLIDATION COULD MAKE COMPETING MORE DIFFICULT.

         Consolidation of companies offering high-speed telecommunications
products is occurring through acquisitions, joint ventures and licensing
arrangements involving our competitors, our customers and our customers'
competitors. We cannot provide any assurances that we will be able to compete
successfully in an increasingly consolidated telecommunications industry. Any
heightened competitive pressures that we may face may have a material adverse
effect on our business, prospects, financial condition and result of operations.

WE DEPEND ON A LIMITED NUMBER OF CUSTOMERS WHO ARE ABLE TO EXERT A HIGH DEGREE
OF INFLUENCE OVER US AND LOSS OF A MAJOR CUSTOMER COULD ADVERSELY IMPACT OUR
BUSINESS.

         We have and will continue to depend on the large Regional Bell
Operating Companies as well as other telephone carriers including smaller local
telephone carriers and new alternative telephone carriers, for substantially all
of our revenues. Sales to the Regional Bell Operating Companies accounted for
approximately 66.4%, 75.1% and 76.8% of our revenues in fiscal 2002, 2003 and
2004, respectively. Consequently, our future success will depend upon:


                                      -18-


     o    the timeliness and size of future purchase orders from the Regional
          Bell Operating Companies;
     o    the product requirements of the Regional Bell Operating Companies;
     o    the financial and operating success of the Regional Bell Operating
          Companies; and
     o    the success of the Regional Bell Operating Companies' services that
          use our products.

         The Regional Bell Operating Companies and our other customers are
significantly larger than we are and are able to exert a high degree of
influence over us. These customers may generally reschedule orders without
penalty to the customer. Even if demand for our products is high, the Regional
Bell Operating Companies have sufficient bargaining power to demand low prices
and other terms and conditions that may materially adversely affect our business
and operating results.

         Any attempt by a Regional Bell Operating Company or our other customers
to seek out additional or alternative suppliers or to undertake the internal
production of products would have a material adverse effect on our business and
operating results. The loss of any or our customers could result in an immediate
decrease in product sales and materially and adversely affect our business.

         Conference Plus's customer base is very concentrated as its top ten
customers represent a large portion of total revenue. Customers of Conference
Plus have expanded their requirements for our services, but there can be no
assurance that such expansion will increase in the future. Additionally,
Conference Plus's customers continually undergo review and evaluation of their
conferencing and meeting services to evaluate the merits of bringing those
services in-house rather than outsourcing those services. There can be no
assurance in the future that Conference Plus's customers will not bring some
portion or all of their conferencing and meeting services in-house. Conference
Plus must continually provide higher quality, lower cost services to provide
maintain and grow its customer base. Any loss of a major account, would have a
material adverse effect on Conference Plus. In addition, any merger or
acquisition of a major customer could have a material adverse effect on
Conference Plus.

OUR CUSTOMERS HAVE LENGTHY PURCHASE CYCLES THAT AFFECT OUR ABILITY TO SELL OUR
PRODUCTS.

         Prior to selling products to telephone companies, we must undergo
lengthy approval and purchase processes. Evaluation can take as little as a few
months for products that vary slightly from existing products or up to a year or
more for products based on new technologies such as DSL products. Accordingly,
we are continually submitting successive generations of our current products as
well as new products to our customers for approval. The length of the approval
process can vary and is affected by a number of factors, including:

     o    the complexity of the product involved;
     o    priorities of telephone companies;
     o    telephone companies' budgets; and
     o    regulatory issues affecting telephone companies.

         The requirement that telephone companies obtain FCC or state regulatory
approval for most new telephone company services prior to their implementation
has in the past delayed the approval process. Such delays in the future could
have a material adverse affect on our business and operating results. While we
have been successful in the past in obtaining product approvals from our
customers, there is no guaranty that such approvals or that ensuing sales of
such products will continue to occur.

OUR INTERNATIONAL OPERATIONS EXPOSE US TO THE RISKS OF CONDUCTING BUSINESS
OUTSIDE THE UNITED STATES.

         International revenues represented 6.5%, 5.4% and 2.7% of our revenues
in fiscal 2002, 2003 and 2004, respectively. Because Conference Plus has
expanded its conference call business in Europe by opening offices in Dublin,
Ireland, and because of our intention to expand our broadband products in Europe
we believe that our exposure to international risks may increase in the future.
These risks include:

     o    foreign currency fluctuations;
     o    tariffs, taxes and trade barriers;
     o    difficulty in accounts receivable collection;
     o    political unrest; and


                                      -19-


     o    burdens of complying with a variety of foreign laws and
          telecommunications standards.

         The occurrence of any of these risks would impact our ability to
increase our revenue and remain profitable, or could require us to modify
significantly our current business practices.

OUR SERVICES ARE AFFECTED BY UNCERTAIN GOVERNMENT REGULATION AND CHANGES IN
CURRENT OR FUTURE LAWS OR REGULATIONS COULD RESTRICT THE WAY WE OPERATE OUR
BUSINESS.

         Many of our customers are subject to regulation from federal and state
agencies, including the FCC and various state public utility and service
commissions. While these regulations do not affect us directly, the effects of
regulations on our customers may adversely impact our business and operating
results. For example, FCC regulatory policies affecting the availability of
telephone company services and other terms on which telephone companies conduct
their business may impede our penetration of local access markets.

          In addition, our business and operating results may also be adversely
affected by the imposition of tariffs, duties and other import restrictions on
components that we obtain from non-domestic suppliers or by the imposition of
export restrictions on products that we sell internationally. Internationally,
governments of the United Kingdom, Canada, Australia and numerous other
countries actively promote and create competition in the telecommunications
industry. Changes in current or future laws or regulations, in the U.S. or
elsewhere, could materially and adversely affect our business and operating
results.

POTENTIAL PRODUCT RECALLS AND WARRANTY EXPENSES COULD ADVERSELY AFFECT OUR
ABILITY TO REMAIN PROFITABLE.

         Our products are required to meet rigorous standards imposed by our
customers. Most of our products carry a limited warranty ranging from one to
seven years. In addition, our supply contracts with our major customers
typically require us to accept returns of products or indemnify such customers
against certain liabilities arising out of the use of our products. Complex
products such as those offered by us may contain undetected errors or failures
when first introduced or as new versions are released. Despite our testing of
products and our comprehensive quality control program, there is no guaranty
that our products will not suffer from defects or other deficiencies. Although
historically we have not experienced material problems with product defects,
recalls, returns or indemnification claims, if such claims exceed our reserves
for such claims, our business could be harmed. Such recalls, returns or claims
and the associated negative publicity could result in the loss of or delay in
market acceptance of our products, affect our product sales, our customer
relationships, and our ability to generate a profit.

INVESTORS COULD BE ADVERSELY AFFECTED BY FUTURE ISSUANCES AND SALES OF OUR
SECURITIES.

        Sales of substantial amounts of our common stock in the public market
could adversely affect the market price of our securities. Westell has
53,611,329 shares of common stock outstanding as of June 1, 2004, and has the
following obligations to issue additional class A common stock as of June 01,
2004:

     o    options to purchase 9,331,284 shares of class A common stock,
          4,396,223 of which are currently exercisable; and
     o    warrants to purchase 915,000 shares of class A common stock for $1.95
          per share

        These obligations could result in substantial future dilution with
respect to our common stock.

WE RELY ON OUR INTELLECTUAL PROPERTY THAT WE MAY BE UNABLE TO PROTECT, OR WE MAY
BE FOUND TO INFRINGE THE RIGHTS OF OTHERS.

         Our success will depend, in part, on our ability to protect trade
secrets, obtain or license patents and operate without infringing on the rights
of others. We rely on a combination of technical leadership, trade secrets,
copyright and trademark law and nondisclosure agreements to protect our
non-patented proprietary expertise. These measures, however, may not provide
meaningful protection for our trade secrets or other proprietary information.
Moreover, our business and operating results may be materially adversely
affected by competitors who independently develop substantially equivalent
technology.



                                      -20-


         In addition, the laws of some foreign countries do not protect our
proprietary rights to the same extent as U.S. law. The telecommunications
industry is also characterized by the existence of an increasing number of
patents and frequent litigation based on allegations of patent and other
intellectual property infringement. From time to time we receive communications
from third parties alleging infringement of exclusive patent, copyright and
other intellectual property rights to technologies that are important to us.

         There is no guarantee:

     o    that third parties will not assert infringement claims against us in
          the future, and that such assertions will not result in costly
          litigation; or
     o    that we would prevail in any such litigation or be able to license any
          valid and infringed patents from third parties on commercially
          reasonable terms.

         Further, such litigation, regardless of its outcome, could result in
substantial costs to and diversion of our efforts. Any infringement claim or
other litigation against or by us could have a material adverse effect on our
business and operating results.

BUSINESS INTERRUPTION COULD PREVENT OUR ABILITY TO DELIVER PRODUCT AND SERVICES
TO OUR CUSTOMERS AND COULD ADVERSELY AFFECT OUR BUSINESS.

         Our operations could be impacted by business interruptions such as
fire, flood, power loss and other events beyond our control. We have a detailed
disaster recovery plan and business interruption insurance but these may not be
sufficient to fully cover losses that may occur.

WE MAY ENGAGE IN FUTURE ACQUISITIONS OR FUND RAISING ACTIVITY THAT COULD DILUTE
OUR CURRENT STOCKHOLDERS.

         We expect to continue to review potential acquisitions and we may
acquire businesses, products or technologies in the future. In addition, the
Company may decide to raise additional capital to fund its operations. In order
to accomplish these activities, acquisitions and fund raising, we could:

     o    issue equity securities that could dilute our current stockholders'
          percentage ownership;
     o    incur substantial debt; or
     o    assume contingent liabilities.

         These events could harm our business and/or the price of our common
stock. Acquisitions also entail numerous integration risks that could adversely
affect our business.

CONFERENCE PLUS'S LARGE COMPETITORS COULD ADVERSELY AFFECT CONFERENCE PLUS'S
ABILITY TO MAINTAIN OR INCREASE ITS MARKET SHARE.

         Conference Plus participates in the highly competitive industry of
voice, video, and multimedia conferencing and meeting services. Competitors
include stand-alone conferencing companies and major telecommunications
providers. Conference Plus's ability to sustain growth and performance is
dependent on its:

     o    maintenance of high quality standards and low cost position;
     o    international expansion;
     o    marketing and sales effectiveness; and
     o    evolving technological capability.

         Any increase in competition could reduce our gross margin, require
increased spending on sales and marketing, and otherwise materially adversely
affect our business and operating results.

OUR PRINCIPAL STOCKHOLDERS CAN EXERCISE SIGNIFICANT INFLUENCE THAT COULD
DISCOURAGE TRANSACTIONS INVOLVING A CHANGE OF CONTROL AND MAY AFFECT YOUR
ABILITY TO RECEIVE A PREMIUM FOR CLASS A COMMON STOCK THAT YOU PURCHASE.

       As of June 1, 2004, as trustees of a voting trust containing common stock
held for the benefit of the Penny family and the Simon family, Robert C. Penny
III and Melvin J. Simon have the exclusive power to vote over 48.7% of the votes


                                      -21-


entitled to be cast by the holders of our common stock. In addition, members of
the Penny family who are beneficiaries under this voting trust are parties to a
stock transfer restriction agreement which prohibits the beneficiaries from
transferring any class B common stock or their beneficial interests in the
voting trust without first offering such class B common stock to the other Penny
family members. Certain Penny family members also own or are beneficiaries of
trusts that own shares outside of the voting trust. As trustees of the Voting
Trust and other trusts, Messrs. Penny and Simon control 52.4% of the voting
stock. Consequently, we are effectively under the control of Messrs. Penny and
Simon, as trustees, who can effectively control the election of all of the
directors and determine the outcome of most corporate transactions or other
matters submitted to the stockholders for approval. Such control may have the
effect of discouraging transactions involving an actual or potential change of
control, including transactions in which the holders of class A common stock
might otherwise receive a premium for their shares over the then-current market
price.


ITEM 2.  PROPERTIES

         The Company leases approximately 185,000 square feet of office,
development and manufacturing space in Aurora, Illinois, a suburb of Chicago,
and leases a facility of 4,250 square feet of office space in Basingstoke,
England for Westell Limited. As of March 31, 2004, the Company also leased
facilities of 41,860 and 14,131 square feet in Schaumburg, Illinois and Lombard,
Illinois, respectively, for Conference Plus' domestic operations. The Lombard
facility was substantially closed in fiscal 2003. The Company also leases 2,000
square feet in Dublin Ireland for Conference Plus' international operations. The
Aurora facility lease expires in 2017 and the lease in Basingstoke, England
expires in 2005. The leases for the properties in Schaumburg and Lombard,
Illinois expire in 2011 and 2008, respectively, and the lease for the facility
in Dublin, Ireland expires in 2024.

         The Company's Aurora, Illinois manufacturing facility is currently
operating below maximum capacity. The Company utilizes third-party
subcontractors to help fulfill fluctuations in customer demands that could be at
times beyond the manufacturing capacity of the Aurora facility. The Company has
a plan to expand the manufacturing capacity of its Aurora facility when and if
that is necessary.

ITEM 3.  LEGAL PROCEEDINGS

         In May 2002, the Company filed a patent infringement lawsuit against
HyperEdge Corporation in the U.S. District Court for the Northern District of
Illinois (Civil Action No. 02-C-3496). The complaint charges HyperEdge with
infringing Westell's U.S. Patent Number 5,444,776, under theories of direct
infringement and inducement of infringement by others. Westell seeks injunctive
relief, treble damages for willful infringement, and attorney fees. HyperEdge
has asserted affirmative defenses and counterclaims that include, but are not
limited to, non-infringement, invalidity, and unfair competition. Westell has
moved to dismiss certain of HyperEdge's counterclaims. Westell's 5,444,776
patent relates to an innovative bridge circuit technology often used in network
interface units. While the case is currently in discovery, the parties have
completely briefed a motion by HyperEdge for summary judgment of
non-infringement and invalidity, and are awaiting a decision from the Court. In
the opinion of the Company, although the outcome of this legal proceeding cannot
be predicted with certainty, the liability of the Company in connection with
this legal proceeding is not expected to have a material effect on the Company's
financial position and operating results.

         The Company is involved in various other legal proceedings incidental
to the Company's business. Management believes that the outcome of such
proceedings will not have a material adverse effect on our consolidated
operations or financial condition.

ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
         None.



                                      -22-


                                     PART II

ITEM 5.  MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.

         The Company's Class A Common Stock is quoted on the NASDAQ National
Market under the symbol "WSTL." The following table sets forth for the periods
indicated the high and low sale prices for the Class A Common Stock as reported
on the NASDAQ National Market.
                                                             High          Low
                                                           ---------    --------
Fiscal Year 2003
    First Quarter ended June 30, 2002..................      $1.90        $1.01
    Second Quarter ended September 30, 2002............       1.80         1.02
    Third Quarter ended December 31, 2002..............       1.85         1.10
    Fourth Quarter ended March 31, 2003................       4.50         1.15

Fiscal Year 2004
    First Quarter ended June 30, 2003..................     $10.10        $3.71
    Second Quarter ended September 30, 2003............      12.00         6.25
    Third Quarter ended December 31, 2003..............       9.40         5.50
    Fourth Quarter ended March 31, 2004................       8.75         6.32

Fiscal Year 2005
    First Quarter through June 1, 2004.................      $8.32        $4.76

         As of June 1, 2004, there were approximately 747 holders of record of
the outstanding shares of Class A Common Stock and 7 holders of Class B Common
Stock.


         The following table summarizes information as of March 31, 2004,
relating to equity compensation plans of the Company pursuant to which common
stock is authorized for issuance (for more information also see Note 8 to the
Consolidated Financial Statements of the Company which is incorporated herein by
reference):



                                                      Equity Compensation Plan Information


                              Number of securities to   Weighted average exercise   Number of securities remaining
                              be issued upon exercise      price of outstanding      available for future issuance
                              of outstanding options,     options, warrants and          (excluding securities
Plan category                   warrants and rights               rights            reflected in the first column)
- ---------------------------- -------------------------- --------------------------- --------------------------------
                                                                                                   
Equity compensation plans
approved by security                         7,759,762                       $6.00                          818,875
holders

Equity compensation plans
not approved by security                     1,776,923                        2.61                               --
holders*
                             -------------------------- --------------------------- --------------------------------

Total                                        9,536,685                       $5.37                          818,875

                             ========================== =========================== ================================

*Reflects non-qualified stock options of Class A Common Stock granted to E. Van
Cullens and one other employee in fiscal 2002. 1.1 million of these options vest
over a four-year period with 25% vesting per year. The remainder are performance
based and vest at the earlier of achievement of certain performance goals or
eight years. The strike price on 0.9 million, 0.4 million and 0.4 million and
0.1 million of the options is $1.95, $2.00, $5.00 and $1.32 per share,
respectively.



                                      -23-



Dividends

         The Company has never declared or paid any cash dividends on its common
stock and does not anticipate paying any cash dividends in the foreseeable
future. The Company currently intends to retain any future earnings to finance
the growth and development of its business. In addition, the Company's credit
facility restricts the Company's ability to pay dividends.



                                      -24-




ITEM 6.  SELECTED CONSOLIDATED FINANCIAL DATA.

         The following selected consolidated financial data as of March 31,
2000, 2001, 2002, 2003 and 2004 and for each of the five fiscal years in the
period ended fiscal year 2004 have been derived from the Company's consolidated
financial statements, which have been audited by Arthur Andersen LLP for fiscal
year 2000 and by Ernst & Young LLP for fiscal years 2001 through 2004. The data
set forth below is qualified by reference to, and should be read in conjunction
with, "Management's Discussion and Analysis of Financial Condition and Results
of Operations," the Consolidated Financial Statements and the related Notes
thereto and other financial information appearing elsewhere in this Annual
Report on Form 10-K.



                                                                         Fiscal Year Ended March 31,*
                                                    -------------------------------------------------------------------
                                                           2000        2001        2002         2003       2004
                                                          ------      ------      ------       -----      -----
                                                                                          
Statement of Operations Data:                                    (in thousands, except per share data)
Revenues.............................................  $120,993    $361,477    $239,823      $210,021    $235,739
Cost of goods sold...................................    89,969     331,319     205,793       146,261     155,998
                                                       --------    --------    --------      --------    --------
     Gross margin....................................    31,024      30,158      34,030        63,760      79,741
                                                       --------    --------    --------      --------    --------
Operating expenses:
  Sales and marketing................................    15,338      30,323      19,883        16,017      20,242
  Research and development...........................    10,789      33,308      22,444        16,483      17,385
  General and administrative.........................    14,003      24,254      24,028        17,513      17,506
  Goodwill and intangible amortization ..............     1,326      31,832      25,560         1,766       1,455
  Goodwill impairment ...............................      --           --       97,500            --        --
  Restructuring charge ..............................       550       1,700       6,258         1,678         698
                                                       --------    --------    --------      --------    --------
     Total operating expenses........................    42,006     121,417     195,673        53,457      57,286
                                                       --------    --------    --------      --------    --------
Operating profit (loss)..............................   (10,982)    (91,259)   (161,643)       10,303      22,455
Other income, net....................................     1,412         585         172           262         615
Interest expense.....................................   (1,856)      (2,197)     (5,564)       (2,648)       (743)
                                                       --------    --------    --------      --------    --------
Income (loss) before income taxes and minority interest (11,426)    (92,871)   (167,035)        7,917      22,327
Income tax expense (benefit).........................    (3,600)      --            --            372     (12,923)
Minority Interest....................................       356         585         394           271         373
                                                       --------    --------    --------      --------    --------
Income (loss) before cumulative effect of change in
  accounting principle...............................    (8,182)    (93,456)   (167,429)        7,274      34,877
Cumulative effect of change in accounting principle..       --         (400)         --           --           --
                                                       --------    --------    --------      --------    --------
Net income (loss)....................................  $ (8,182)  $ (93,856) $ (167,429)      $ 7,274   $  34,877
                                                       ========== =========== ===========    ========   ==========
Net loss per basic share:
Income (loss) before cumulative effect of change in
  accounting principle...............................   $ (0.22)    $ (1.53)    $ (2.60)       $ 0.11      $ 0.52
Cumulative effect of change in accounting principle..        --       (0.01)       --          --          --
                                                       --------    --------    --------      --------    --------
 Net income (loss) per basic share...................   $ (0.22)    $ (1.54)    $ (2.60)       $ 0.11      $ 0.52
                                                       ========    ========   =========      ========    ========
Average number of basic common shares
   outstanding.......................................    37,658      61,072      64,317        64,925      66,858
Net income (loss) per diluted share:
Income (loss) before cumulative effect of change in
  accounting principle...............................   $ (0.22)    $ (1.53)    $ (2.60)       $ 0.11      $ 0.49
Cumulative effect of change in accounting principle..       --        (0.01)       --           --        --
                                                       --------    --------    --------      --------    --------
 Net income (loss) per diluted share.................   $ (0.22)    $ (1.54)   $ (2.60)        $ 0.11      $ 0.49
                                                       ========    ========   =========      ========    ========
Average number of diluted common shares
   outstanding.......................................    37,658      61,072      64,317        65,126      70,667



                                                                              As of March 31,
                                            ----------------------------------------------------------------------------------
                                                           2000        2001        2002         2003         2004
                                                           ----        ----        ----        -----        -----
                                                                                           
Balance Sheet Data:
Working capital......................................  $ 64,335    $ 38,778    $ 16,811       $ 7,116     $27,626
Total assets.........................................   342,570     315,139     126,153       109,474     129,781
Current debt.........................................     1,633         103      11,186        17,057       3,416
Total debt...........................................     2,750      28,554      50,655        34,817       3,742
Total stockholders' equity...........................   279,663     197,825      36,273        43,493      91,765

 * Fiscal years 2001, 2002, 2003 and 2004 results reflect the acquisition of
Teltrend Inc. which occurred in March 2000.





                                      -25-





ITEM 7.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.

OVERVIEW

         The following discussion should be read together with the Consolidated
Financial Statements and the related Notes thereto and other financial
information appearing elsewhere in this Form 10-K. All references herein to the
term "fiscal year" shall mean a year ended March 31 of the year specified.

         The Company commenced operations in 1980 as a provider of
telecommunications network transmission products that enable advanced
telecommunications services over copper telephone wires. Until fiscal 1994, the
Company derived substantially all of its revenues from its Network Service
Access (NSA) product lines, particularly the sale of Network Interface Unit
(NIU) products and related products. NIU products accounted for approximately
21%, 20% and 15% of revenues in fiscal years 2002, 2003 and 2004, respectively.
The Company introduced its first DSL products in fiscal 1993 and these products
accounted for approximately 38%, 48% and 57% of revenues in fiscal 2002, 2003
and 2004, respectively. NIU products and DSL products are the two major products
within the Company's telecom equipment business. Telecom equipment constituted
approximately 80%, 80% and 81% of revenues in fiscal 2002, 2003 and 2004,
respectively. The Company has also provided audio teleconferencing services
since fiscal 1989, which constituted approximately 20%, 20% and 19% of revenues
in fiscal 2002, 2003 and 2004, respectively.

         The Company has two reportable segments. These segments are strategic
business units that are managed separately because each business requires
different technologies and market strategies. They consist of:

1)   A telecommunications equipment manufacturer of local loop access products,
     which include Broadband Consumer Network Equipment (CNE) products and
     Network Service Access (NSA) products. NSA products are primarily Network
     Interface Unit (NIU) products and CNE products are primarily DSL products;
     and
2)   A multi-point telecommunications service bureau operated through the
     Company's subsidiary Conference Plus, Inc. Conference Plus, Inc.
     specializes in audio teleconferencing, multi-point video conferencing,
     broadcast fax and multimedia teleconference services.

Below is a table that compares annual revenue from the Company's two reportable
segments and the two main equipment product groups.



                                      Fiscal        % of          Fiscal         % of          Fiscal         % of
                                        2002     revenue            2003      revenue            2004      revenue
                                -------------   ---------    ------------    ---------    ------------    ---------
                                                                                             
CNE equipment..................    $ 105,011         44%       $ 111,146          53%       $ 135,704          58%
NSA equipment..................       86,291         36%          57,070          27%          54,736          23%

                                -------------   ---------    ------------    ---------    ------------    ---------
   Total equipment segment.....      191,302         80%         168,216          80%         190,440          81%

   Services segment............       48,521         20%          41,805          20%          45,299          19%

                                -------------                ------------                 ------------
      Total revenue............    $ 239,823                   $ 210,021                    $ 235,739
                                =============                ============                 ============



         The Company reached profitability and positive cash flow from
operations for the first time as a public company in fiscal 2003. In fiscal
2004, the Company improved its profitability primarily due to gains achieved
from volume efficiencies, productivity improvements and favorable component
pricing in the CNE product line of the equipment segment of the business. The
Company continues to experience pricing pressures in both product segments. The
transition to higher speed digital transmission services continued to negatively
impact the NSA product line of the equipment segment.

         The Company expects revenue and earnings per share in the quarters
ending June 30, 2004 and September 30, 2004 to be lower than the revenue and
earnings per share recorded in the quarter ended March 31, 2004. The Company
believes this expected reduction in revenue and earnings per share is the result



                                      -26-



of entering into a long-term pricing agreement, increased coordination with the
customer to lower the customer's inventory levels, and seasonally in the
equipment segment of the business. The Company anticipates that revenues should
begin to increase again in the third fiscal quarter.

         The Company's customer base is comprised primarily of the Regional Bell
Operating Companies (RBOCs), independent domestic local exchange carriers and
public telephone administrations located outside the U.S. Due to the stringent
quality specifications of its customers and the regulated environment in which
its customers operate, the Company must undergo lengthy approval and procurement
processes prior to selling its products. Accordingly, the Company must make
significant upfront investments in product and market development prior to
actual commencement of sales of new products. In addition, to remain
competitive, the Company must continue to invest in new product development and
invest in targeted sales and marketing efforts to cover new product lines.

         The Company expects to continue to evaluate new product opportunities
and engage in extensive research and development activities. The Company is
focusing on expanding its product offerings in the equipment segment from basic
high speed broadband to more sophisticated applications such as networking,
wireless and managed services. This will require the Company to continue to
invest in research and development and sales and marketing, which could
adversely affect short-term results of operations. In view of the Company's
reliance on the DSL market for revenues and the unpredictability of orders and
pricing pressures, the Company believes that period-to-period comparisons of its
financial results are not necessarily meaningful and should not be relied upon
as an indication of future performance. Revenues from NSA products such as NIUs
have declined in recent years as telephone companies continue to move to
networks that deliver higher speed digital transmission services. Failure to
increase revenues from new products, whether due to lack of market acceptance,
competition, technological change or otherwise, would have a material adverse
effect on the Company's business and results of operations.

CRITICAL ACCOUNTING POLICIES

         The Company uses estimates and judgements in applying its accounting
policies which have a significant impact on the results reported in the
consolidated financial statements. The following are the Company's most critical
accounting policies.

         Accounts receivable
         The Company sells products primarily to various telecommunications
providers and distributors. Sales to these customers have varying degrees of
collection risk associated with them. Judgment is required in assessing the
realization of these receivables based on aging, historical experience and
customer's financial condition.

         Inventory reserves
         The Company reviews ending inventory for excess quantities and
obsolescence based on its best estimates of future demand, product lifecycle
status and product development plans. The Company also evaluates ending
inventory for lower of cost or market. Prices related to future inventory demand
are compared to current and committed inventory values.

         Inventory purchase commitments
         In the normal course of business, the Company enters into commitments
for the purchase of inventory. The commitments are at market rates and normally
do not extend beyond one year. Should there be a dramatic decline in revenues,
as there was in fiscal 2002, the Company may incur excess inventory and
subsequent losses as a result of these commitments. The Company has established
reserves for anticipated losses on such commitments.

         Valuation Allowance for Deferred Tax Assets
The company has significant deferred tax assets that resulted primarily from
historically generated net operating losses. A valuation allowance has been
provided for a portion of these deferred tax assets that management believes it
is more likely than not that these assets will not be utilized. The Company
accesses the realizability of deferred tax assets through an analysis of
projected future taxable income. Estimates of future taxable income is comprised
of a tax planning strategy and a three year estimate of future income that will
be generated by operations less tax differences including expected stock option
deductions.

                                      -27-


         Goodwill and Intangibles
         Under new accounting rules, which became effective in fiscal 2003,
goodwill and other indefinite-lived intangibles are no longer amortized but
subject to annual impairment tests. The Company determined that it operated in
two reporting units for the purpose of completing the impairment test of
goodwill. These reporting units are telecom equipment and telecom services. The
Company utilizes the comparison of its market capitalization and third party
appraisal of its telecom services reporting unit to book value as an indicator
of potential impairment. The Company performed its annual impairment test in the
fourth quarter of fiscal 2004. These tests showed no impairment of goodwill. On
an ongoing basis, the Company reviews intangible assets and other long-lived
assets other than goodwill for impairment whenever events and circumstances
indicate that carrying amounts may not be recoverable. If such events or changes
in circumstances occur, the Company will recognize an impairment loss if the
undiscounted future cash flows expected to be generated by the asset are less
than the carrying value of the related asset. The impairment loss would adjust
the asset to its fair value.

         Software Development
         The Company accounts for software development costs under FAS86,
Accounting for the Costs of Computer Software to Be Sold, Leased, other
Otherwise Marketed. The Company reviews software development to determine when
technological feasibility is reached. At such time, development costs will be
capitalized as intangible assets. These intangible assets will be amortized over
the product life once the product is available for customer use. At of March 31,
2004, the Company did not have any capitalized costs.

RESULTS OF OPERATIONS

         The following table sets forth the percentage of revenues represented
by certain items in the Company's statements of operations for the periods
indicated:




                                                                      Fiscal Year Ended March 31,
                                                                      ---------------------------

                                                                     2002         2003       2004
                                                                     ----         ----       ----

                                                                                    
Equipment.......................................................     79.8%         80.1%     80.8%
Services........................................................     20.2          19.9      19.2
                                                                   -------       ------  ---------
  Total revenues................................................    100.0         100.0     100.0

Cost of equipment...............................................     73.4          56.7      54.9
Cost of services................................................     12.4          12.9      11.3
                                                                     ----        ------     ------
  Total cost of goods sold......................................     85.8          69.6      66.2
                                                                     ----         -----     ------

    Gross margin................................................     14.2          30.4      33.8
                                                                     ----         -----    ------

Operating expenses:
  Sales and marketing...........................................      8.3           7.6       8.6
  Research and development......................................      9.4           7.8       7.4
  General and administrative....................................     10.0           8.3       7.4
  Goodwill and intangible amortization..........................     10.6           0.8       0.3
  Goodwill and intangible impairment............................     40.7           0.0       0.0
  Restructuring charge..........................................      2.6           0.8       0.6
                                                                      ---       -------      ------

     Total operating expenses...................................     81.6          25.3      24.3
                                                                     ----         -----     -----

Operating income (loss) ........................................    (67.4)          4.9       9.5
Other income, net...............................................      0.1           0.1       0.3
Interest expense................................................     (2.3)         (1.3)     (0.3)
                                                                      ----       -------   -------

Income (loss) before income taxes and minority interest.........    (69.6)          3.8       9.5
Income tax expense (benefit)....................................      0.0           0.1      (5.5)
Minority interest...............................................      0.2           0.1       0.2

Net income (loss)...............................................    (69.8)%         3.5%     14.8%
                                                                    =======      =======  ========




                                      -28-


FISCAL YEARS ENDED MARCH 31, 2002, 2003 AND 2004

         Revenues. Revenues were $239.8 million, $210.0 million and $235.7
million in fiscal 2002, 2003 and 2004, respectively. Revenues decreased 12.4% in
fiscal 2003 from the preceding year. The fiscal 2003 decrease of $29.8 million
was primarily due to a 12% decrease in revenue in the equipment segment of the
business. In the equipment segment, NSA product revenue decreased $29.2 million
due to reduced demand resulting from the economic downturn in the
telecommunications industry. The decrease in NSA revenue was offset by a $6.1
million increase in CNE revenue due primarily to an 87% increase in unit volume
offset in part by a 44% decrease in average selling price. Service revenue
decreased $6.7 million or 13.8% in fiscal 2003 compared to fiscal 2002 due to a
reduction in call minutes resulting from the economic downturn and the loss of
one major customer that resulted in a $6.3 million revenue reduction. This was
offset in part by customers choosing to hold meetings using teleconference
services instead of traveling because of war and health concerns around
travelling to locations with outbreaks of communicable diseases and terrorist
threats. In fiscal year 2004, revenue increased 12.2%. Revenue in the equipment
segment increased 13.2% or $22.2 million. In the equipment segment, the
Company's CNE product revenue increased 22.1% or $24.6 million due primarily to
45% higher unit sales offset in part by a 28% decline in the average per unit
price. Revenue from NSA products, which are also in the equipment segment,
decreased 4.1% or $2.3 million of which $3.2 million was due to lower unit sales
and lower selling prices offset in part by an $875,000 contractual settlement
from a customer. Services revenue increased 8.4% or $3.5 million due to an
increase in call minuets.

         Gross Margin. Gross margin was $34.0 million, $63.8 million and $79.7
million and gross margin as a percentage of revenues was 14.2%, 30.4% and 33.8%
in fiscal 2002, 2003 and 2004, respectively. Gross margin in the equipment
segment was $15.1 million, $49.1 million and $61.0 million and gross margin as a
percentage of revenues was 7.9%, 29.2% and 32.0% in fiscal 2002, 2003 and 2004,
respectively. The fiscal 2002 gross margin in the equipment segment was
negatively effected by adjustments to record inventory at net realizable value
and charges for excess and obsolete inventory of $13.9 million. The improved
gross margin in fiscal 2003 was primarily due to reduced per unit material,
labor, and handling costs, particularly in the CNE product group in the
equipment segment that resulted from economies of scales as unit volume
increased 87% and engineering design changes. The fiscal 2003 gross margin in
the equipment segment was positively effected by $2.2 million as the Company was
able to sell modem inventory which had been reserved as excess and obsolete
based on the estimated technological life of the modems at March 31, 2002. The
fiscal 2004 equipment gross margin was positively impacted by an $875,000
contractual settlement that had no corresponding cost of sales as well as
reduced per unit material, labor, and handling costs, particularly in the CNE
product group that resulted from a 45% increase in unit volume. Gross margin in
the services segment was $18.9 million, $14.7 million and $18.7 million and
gross margin as a percentage of revenues was 38.9%, 35.1% and 41.3% in fiscal
2002, 2003 and 2004, respectively. Services margin in fiscal year 2002 contained
a $1.2 million benefit for a contract resolution of a disputed expense with a
supplier. This benefit attributed in part to the reduction in services margin in
fiscal year 2003, which was also negatively impacted by a $6.7 million reduction
in revenue. Services margin improved in fiscal year 2004 due to increased
revenue of $3.5 million and lower long distance rates, offset in part by a
$775,000 charge for the early termination of a purchase contract, which was
recorded in the December quarter. The Company believes continued pricing
pressures and continued reduction of NSA sales affecting its equipment segment
could continue to adversely impact margins in the future. It is the Company's
strategy to offset the effects of these anticipated price reductions with
continued cost reductions and introducing new products that have higher sales
prices and margins.

         Sales and Marketing. Sales and marketing expenses were $19.9 million,
$16.0 million and $20.2 million in fiscal 2002, 2003 and 2004, respectively,
constituting 8.3%, 7.6% and 8.6% of revenues, respectively. In fiscal 2003,
sales and marketing expenses decreased by $3.9 million or 19.4% from the
previous year. Sales and marketing expenses in the equipment segment decreased
$3.5 million which resulted primarily from decreased technical support related
expenses of $1.5 million, a reduction in employee related expenses of $1.2
million and a reduction in warranty reserves by $874,000 resulting from actual
warranty costs being less than estimated at the end of fiscal 2002. Sales and
marketing expenses increased by $4.2 million in fiscal 2004. The equipment
segment sales and marketing expenses increased $2.4 million due to increases in
employee related expenses. The services segment sales and marketing expenses
increased $1.8 million due to an increase in the number of sales and marketing
employees. This increased expense is expected to continue in fiscal 2005. The


                                      -29-


Company believes that sales and marketing expense in the future will continue to
be a significant percent of revenue and will be required to expand its product
lines, bring new products to market and service customers. The Company is
planning to increase sales and marketing expense in the equipment segment of the
business to sell its CNE equipment in Europe.

         Research and Development. Research and development expenses were $22.4
million, $16.5 million and $17.4 million in fiscal 2002, 2003 and 2004,
respectively, constituting 9.4%, 7.8% and 7.4% of revenues, respectively.
Research and development expenses are incurred primarily in the equipment
segment of the business. In fiscal 2003, research and development decreased by
$5.9 million or 26.3% from the prior year. This decrease was due primarily to
the fiscal 2002 reorganizations, which reduced employee related expenses and
outside consulting expenses, and other cost-cutting measures that were taken as
a result of the economic downturn in the telecommunications industry. Research
and development expenses increased by $900,000 in fiscal 2004. The increase is
due primarily to increases in employee related expenses and increases in outside
consulting offset in part by lower depreciation expense. The Company received
$2.0 million from customers to fund engineering projects in fiscal 2002. There
were no customer funded engineering projects in fiscal 2003 or fiscal 2004. The
Company believes that research and development expenses will increase in fiscal
year 2005 as the Company continues to expand its product offering to include
networking, wireless, managed services and other broadband applications.

         General and Administrative. General and administrative expenses were
$24.0 million, $17.5 million and $17.5 million in fiscal 2002, 2003 and 2004,
respectively, constituting 10.0%, 8.3% and 7.4% of revenues, respectively. In
fiscal 2003, general and administrative expenses decreased by $6.5 million or
27.1% from the prior year primarily in the equipment segment of the business.
The decrease in general and administrative expenses was primarily due to the
fiscal 2002 reorganizations, which reduced employee related expenses and outside
consulting expenses. In fiscal 2004, general and administrative expenses were
flat overall. There was a decrease of $800,000 in the services segment of the
business and an increase of $800,000 in the equipment segment of the business.
The increase in the equipment segment resulted from increased employee related
expenses. The decrease in the service segment resulted from lower sales and use
tax expenses and bad debt expense.

         Goodwill and intangible amortization. Intangible assets include
goodwill, synergistic goodwill and product technology related to the March 17,
2000 acquisition of Teltrend Inc. for 20.2 million shares of class A common
shares valued at $213.6 million. Goodwill and intangible amortization expense
decreased from fiscal 2002 to fiscal 2003 due to adoption of the Statements of
Financial Accounting Standards (SFAS) 142 issued by the Financial Accounting
Standards Board (FASB). Under the new rules, goodwill and other indefinite lived
intangibles are no longer amortized but are subject to annual impairment tests.
The Company performed the first impairment test as of April 1, 2002 and its
annual impairment review during the fourth quarter of fiscal 2003 and fiscal
2004 with no write down required.

         Goodwill and intangible impairment. After the fiscal 2002
reorganizations, and given the current and expected market conditions in the NIU
and low-speed digital data products portion of the business acquired from
Teltrend, it became apparent that the goodwill acquired with the Teltrend
acquisition was impaired. In accordance with its policies, the Company completed
an evaluation of the fair value of the Teltrend long-lived assets (including
goodwill) during the quarters ended December 31, 2001 and March 31, 2002. The
Company reported non-cash charges of $90.5 million and $7.0 million,
respectively, to reduce the carrying value of recorded goodwill and intangibles
related to the Teltrend acquisition to their estimated fair value.

                                      -30-


         Restructuring charge. The Company recognized a restructuring charge of
$6.3 million in fiscal 2002. These charges included personnel, facility and
certain development contract costs. The purpose of the fiscal 2002 restructuring
plan was to decrease costs primarily by a workforce reduction of approximately
200 employees and to realign the Company's cost structure with the Company's
anticipated business outlook. During fiscal 2003, a portion of a leased facility
previously vacated was sublet resulting in a reversal of $0.9 million of
facility lease costs accrued in fiscal 2002. As of March 31, 2004, all of the
fiscal 2002 restructuring costs had been paid.

          The Company recognized a net restructuring expense of $1.7 million in
fiscal 2003 consisting of a charge of $2.6 million offset by the $.09 million
described above. This charge included personnel and facility costs related
primarily to the closing of a Conference Plus, Inc. facility and personnel and
facility charges at Westell Limited. Approximately 25 employees were impacted by
these reorganizations. As of March 31, 2004, the Company paid approximately $1.3
million of these accrued restructuring costs leaving a balance of $1.3 million
which will be paid out over the next four years.

         The Company recognized a restructuring expense of $698,000 in fiscal
2004. This restructuring resulted from discontinuing a product at Westell
Limited. The result was a workforce reduction of approximately 14 employees. All
of these costs will be paid in fiscal 2005.

         A table which summarizes the restructuring charges and their
utilization can be found in Note 10 to the Consolidated Financial Statements of
the Company and is incorporated herein by reference.

         Other income, net. Other income, net was $172,000, $262,000 and
$615,000 for fiscal years 2002, 2003, and 2004, respectively. Other income, net
was primarily comprised of interest income earned on temporary cash investments
and unrealized gains or losses on intercompany balances denominated in foreign
currency.

         Interest Expense. Interest expense was $5.6 million, $2.6 million and
$743,000 for fiscal 2002, 2003 and 2004, respectively. The decrease in interest
expense during each year is a result of lower obligations outstanding during the
period under promissory notes, capital leases and vendor debt.

         Income Taxes. No income tax was recorded in fiscal year 2002. An income
tax charge of $372,000 was recorded in fiscal 2003 due to the results on an
Internal Revenue Service audit on Teltrend Inc. for pre-acquisition periods. As
of March 31, 2004 the Company has approximately $5.2 million in income tax
credit carry forwards and a tax benefit of $67.0 million related to a net
operating loss carryforward that is available to offset future taxable income.
The tax credit carryforwards begin to expire in 2008 and the net operating loss
carryforward begins to expire in 2012. The Company recorded valuation allowances
of $21.4 million in fiscal 2002 which represents the amount that the deferred
tax benefit exceeded the value of the tax planning strategy available to the
Company. In fiscal 2003, the Company's deferred tax assets decreased primarily
due to the reduction of inventory reserves. As such, the Company reduced its
valuation allowances by $11.5 million as less valuation allowances were required
to record the net deferred tax assets at an amount realizable by the company's
tax planning strategy. The benefit for income taxes of $12.9 million for fiscal
year 2004 resulted from a current tax provision of $5.7 million and a reduction
of deferred tax assets of $4.4 million offset by a reduction in the valuation
allowance against the deferred tax assets in the amount of $23.0 million. The
Company reduced the valuation allowance in the fourth quarter of fiscal 2004 to
reflect the $4.4 million reduction in the deferred tax asset and to reflect
management's belief, based in part on the Company's return to profitable
operations in fiscal 2003 and 2004, that it is more likely than not an
additional $18.6 million of these deferred tax assets will be realized through
the generation of future taxable income. Estimates of future taxable income are
comprised of a tax planning strategy and a three year estimate of future income
that will be generated by operations less tax differences including expected
stock option deductions.


         Minority Interest. Minority interest expense was $394,000, $271,000 and
$373,000 in fiscal years 2002, 2003 and 2004 respectively. Minority interest
expense results from the elimination of profits at 91.5% owned subsidiary,
Conference Plus Inc.


                                      -31-




QUARTERLY RESULTS OF OPERATIONS

         The following tables present the Company's results of operations for
each of the last eight fiscal quarters and the percentage relationship of
certain items to revenues for the respective periods. The Company believes that
the information regarding each of these quarters is prepared on the same basis
as the audited Consolidated Financial Statements of the Company appearing
elsewhere in this Form 10-K. In the opinion of management, all necessary
adjustments (consisting only of normal recurring adjustments) have been included
to present fairly the unaudited quarterly results when read in conjunction with
the audited Consolidated Financial Statements of the Company and the Notes
thereto appearing elsewhere in this Form 10-K. These quarterly results of
operations are not necessarily indicative of the results for any future period.



                                                                 Quarter Ended
                     ------------------------------------------------------------------------------------------------
                                               Fiscal 2003                                              Fiscal 2004
                     ------------------------------------------------------------------------------------------------

                              June 30, Sept. 30,   Dec. 31,   Mar. 31,   June 30,  Sept. 30,   Dec. 31,  Mar. 31,
                                  2002     2002        2002       2003       2003      2003        2003      2004
                                  ----     ----        ----       ----       ----      ----        ----      ----
                                                                   (in thousands)
                                                                                 
Equipment .................    $39,030 $46,235      $39,121  $43,830      $43,707    $46,921   $49,203   $50,609
Services...................     10,775   9,936       10,082   11,012       11,580     11,455    10,775    11,489
                               ------- -------      -------  -------      -------    -------   -------   -------
   Total revenues..........     49,805  56,171       49,203   54,842     55,287       58,376    59,978    62,098

Cost of equipment..........     28,956  32,717       28,181   29,295       28,262     32,568    33,167    35,416
Cost of services...........      6,838   6,984        6,577    6,713        6,754      6,783     7,693     5,355
                               ------- -------      -------  -------      -------    -------   -------   -------
   Total cost of goods sold     35,794   39,701       34,758   36,008       35,016    39,351     40,860       40,771
                               ------- -------      -------  -------      -------    -------   -------   -------
     Gross margin..........     14,011  16,470       14,445     18,834     20,271     19,025    19,118    21,327
                               ------- -------      -------  -------      -------    -------   -------   -------

Operating expenses:
  Sales and marketing......      4,333   4,615        3,535    3,534        5,427      4,783     4,647    5,385
  Research and
    development............      3,446   4,178        4,097    4,762        4,436      4,321     3,874    4,754
  General and
    administrative.........      4,651   4,126        3,486    5,250        5,134      4,335     4,545    3,492
  Goodwill and intangible
    amortization...........        389     389          389      599          363        364       364      364
   Restructuring charge....       --     1,742          180      (244)       --           --      --        698
    Total operating
      expenses.............     12,819  15,050       11,687   13,901       15,360     13,803    13,430   14,693
                               ------- -------      -------  -------      -------    -------   -------   -------
Operating income ..........      1,192   1,420        2,758    4,933        4,911      5,222     5,688    6,634
                               ------- -------      -------  -------      -------    -------   -------   -------

Other income (expense), net        182       (3)         83      --          156          35       212      212
Interest expense...........      (783)   (685)       (517)     (663)      ( 359)      (197)      (127)     (60)
                               ------- -------      -------  -------      -------    -------   -------   -------

Income before taxes and
   minority interest.......        591     732        2,324    4,270        4,708      5,060     5,773    6,786

Income tax expense (benefit)      --      --          --         372         --        --        --      (12,923)
Minority interest..........        132      (64)         66      137          111        121        23      118

Net income.................     $  459     $796      $ 2,258  $ 3,761     $ 4,597      $4,939   $ 5,750  $19,591
                                ======    ======    =======  =========   ========     ======   =======  =========

Net income per common share:
   Basic...................      $0.01     $0.02      $0.03      $0.06      $0.07      $0.07     $0.09      $0.29
   Diluted.................      $0.01     $0.02      $0.03      $0.06      $0.07      $0.07     $0.08     $0.27



                                      -32-





                                                                 Quarter Ended
                     ------------------------------------------------------------------------------------------------
                                               Fiscal 2003                                              Fiscal 2004
                     ------------------------------------------------------------------------------------------------
                              June 30, Sept. 30,   Dec. 31,   Mar. 31,   June 30,  Sept. 30,  Dec. 31,   Mar. 31,
                               2002      2002       2002      2003        2003       2003      2003       2004
                               ----      ----       ----      ----        ----       ----      ----       ----

                                                                                  
Equipment....................    78.4%      82.3%      79.5%      79.9%      79.1%    80.4%      82.0%    81.5%
Service....................      21.6       17.7       20.5       20.1       20.9     19.6       18.0     18.5
                                -----      -----      -----      -----      -----    -----      -----    -----
  Total revenues...........     100.0      100.0      100.0      100.0      100.0    100.0      100.0    100.0

Cost of equipment sales....      58.1       58.2       57.3       53.4       51.1     55.8       55.3     57.0
Cost of services...........      13.7       12.4       13.3       12.3       12.2     11.6       12.8      8.6
                                -----      -----      -----      -----      -----    -----      -----    -----
Total cost of goods sold...      71.9       70.7       70.6       65.7       63.3     67.4       68.1     65.6
                                -----      -----      -----      -----      -----    -----      -----    -----
  Gross margin.............      28.1       29.3       29.4       34.3       36.7     32.6       31.9     34.4
                                -----      -----      -----      -----      -----    -----      -----    -----

Operating expenses:
  Sales and marketing......       8.7        8.2        7.2        6.4        9.8      8.2        7.7      8.7
  Research and
    development............       6.9        7.4        8.3        8.7        8.0      7.4        6.5      7.7
  General and
    administrative.........       9.3        7.3        7.1        9.6        9.3      7.4        7.6      5.6
  Goodwill and intangible
    amortization...........       0.8        0.7        0.8        1.1        0.7      0.6        0.6      0.6
 Restructuring charge......       0.0        3.1        0.4       (0.4)       0.0      0.0        0.0      1.1
                                -----      -----      -----      -----      -----    -----      -----    -----

    Total operating
      expenses.............      25.7       26.8       23.8       25.3       27.8     23.6       22.4     23.7
                                -----      -----      -----      -----      -----    -----      -----    -----

Operating income...........       2.4        2.5        5.6        9.0        8.9      9.0        9.5     10.7
                                -----      -----      -----      -----      -----    -----      -----    -----
Other income (expense), net       0.4        0.0        0.1        0.0        0.3      0.1        0.4      0.3
Interest expense...........       1.6        1.2        1.0        1.2        0.6      0.3        0.2      0.1
                                -----      -----      -----      -----      -----    -----      -----    -----

Income before taxes and
  minority interest........      1.2         1.3        4.7        7.8        8.6      8.8        9.7     10.9

Income tax expense (benefit)     0.0         0.0        0.0        0.7        0.0      0.0        0.0    (20.8)
Minority interest..........      0.3        (0.1)       0.1        0.2        0.2      0.2        0.0      0.2
Net income...................     0.9%       1.4%       4.6%       6.9%       8.4%     8.6%       9.7%    31.5%
                               =======    =======    =======    =======    =======   =======    =======  =======




                                      -33-



         The Company's quarterly equipment revenues have been on an upward trend
over the past eight quarters primarily do to improvements in CNE revenues in the
equipment segment of the business. Quarterly CNE revenues in fiscal 2004 grew
due to increased unit sales of DSL products offset in part by lower sales prices
per unit. NSA revenues decreased in fiscal 2004 and fiscal 2003 due primarily to
the recession in the telecommunications industry. Conference Plus service
revenues decreased in first two quarters of fiscal 2003 due to the slowing
economy and the loss of one large customer. Service revenue increased in the
final two quarters of fiscal 2003 and fiscal 2004 due to increased call minutes.
The increase in teleconferencing minutes was due in part to customers choosing
to hold meetings using teleconference services instead of traveling because of
war and health concerns around traveling to locations with outbreaks of
communicable diseases and terrorist threats.

         Gross margin as a percentage of revenue has varied from quarter to
quarter. The September 30, 2002 equipment segment gross margin was positively
effected by $2.2 million as the Company was able to sell modem inventory that
was reserved as excess and obsolete based on the estimated technological life of
the modems at March 31, 2002. The June 30, 2003 equipment gross margin included
a one-time product royalty of $1.7 million. The September 30, 2003 equipment
gross margin included a $1.2 million expense to settle a customer contract
obligation. The December 31, 2003 service gross margin was negatively impacted
by a $775,000 charge recorded as a result of an early contract termination
penalty of a long distance contract. The improvement in equipment segment gross
margin in fiscal 2003 and 2004 was primarily due to reduced per unit material,
labor, handling costs and overhead costs in the CNE products resulting from
increased unit sales offset in part by decreased revenue per unit. The March
2004 equipment margin was also positively impacted by the $875,000 contract
settlement that had no corresponding cost of sales. The Company believes
continued pricing pressures affecting its equipment segment could adversely
impact sales prices and margins in the future. It is the Company's strategy to
offset the effects of these anticipated price reductions with continued cost
reductions and efficiencies within manufacturing.

         Operating expenses increased in the fiscal 2004 quarters compared to
fiscal 2003 primarily due to increased spending in sales and marketing and to a
lesser extent increased spending in engineering. As a percentage of revenue,
operating expenses increased in the last three quarters of fiscal 2002 due to
goodwill impairment and restructuring charges taken during the quarters. During
fiscal 2003, quarterly operating expenses remained relatively flat except for
the fourth quarter, which was impacted by the Company recording a $1.7 million
bonus for selected employees and profit sharing contribution expense for all
employees offset by a $782,000 reduction in warranty reserves in its equipment
segment.

         The Company expects to continue to experience significant fluctuations
in quarterly results of operations. The Company believes that fluctuations in
quarterly results may cause the market price of the Class A Common Stock to
fluctuate, perhaps substantially. Factors which have had an influence on and may
continue to influence the Company's results of operations in a particular
quarter include the size and timing of customer orders and subsequent shipments,
customer order deferrals in anticipation of new products, timing of product
introductions or enhancements by the Company or its competitors, market
acceptance of new products, technological changes in the telecommunications
industry, competitive pricing pressures, accuracy of customer forecasts of
end-user demand, write-offs for obsolete inventory, changes in the Company's
operating expenses, personnel changes, foreign currency fluctuations, changes in
the mix of products sold, quality control of products sold, disruption in
sources of supply, regulatory changes, capital spending, delays of payments by
customers, working capital deficits and general economic conditions. Sales to
the Company's customers typically involve long approval and procurement cycles
and can involve large purchase commitments. Accordingly, cancellation or
deferral of one or a small number of orders could cause significant fluctuations
in the Company's quarterly results of operations. As a result, the Company
believes that period-to-period comparisons of its results of operations are not
necessarily meaningful and should not be relied upon as indications of future
performance.

         Because the Company generally ships products within a short period
after receipt of an order, the Company typically does not have a material
backlog of unfilled orders, and revenues in any quarter are substantially
dependent on orders booked in that quarter. The Company's expense levels are
based in large part on anticipated future revenues and are relatively fixed in
the short-term. Therefore, the Company may be unable to adjust spending in a
timely manner to compensate for any unexpected shortfall of orders. Accordingly,
any significant shortfall of demand in relation to the Company's expectations or
any material delay of customer orders would have an almost immediate adverse
impact on the Company's business and results of operations and profitability.


                                      -34-


LIQUIDITY AND CAPITAL RESOURCES

         At March 31, 2004, the Company had $11.2 million in cash and cash
equivalents consisting primarily of federal government agency instruments and
the highest rated grade corporate commercial paper. At March 31, 2004, the
Company had nothing outstanding and $23.7 million available under its secured
revolving credit facility.

         On March 31, 2004, the Company had a revolving credit facility that
provided for maximum borrowings of up to $30 million. The term on the credit
facility expires on June 30, 2006. This asset based revolving credit facility
provides for total borrowings based upon 85% of eligible accounts receivable and
30% of eligible inventory not to exceed $5.2 million as of March 31, 2004. The
$5.2 million inventory limitation is reduced by $0.1 million on the first day of
each month. The amount available under the revolving credit facility at March
31, 2004 was $23.7 million. Borrowings under this facility provide for the
interest to be paid by the Company at the prime rate or Libor rate plus 2.5%.
This credit facility contains covenants regarding EBITDA, tangible net worth and
maximum capital expenditures. The Company was in compliance with these covenants
on March 31, 2004 and expects to comply with these covenants for the term of the
debt.

         On May 30, 2002, the Company signed two subordinated promissory notes
with Solectron Technology SDN BHD. One note in the amount of $5.0 million is for
the payment of inventory held by Solectron that the Company was committed to
buy. The second note in the amount of $16.6 million is for the payment of
accounts payable and accrued interest. Both notes require a weekly principal and
monthly interest payment and are payable over 2.3 years. The notes bear interest
at the prime rate plus 2.5%. As of March 31, 2004, a total of $2.6 million was
outstanding under these notes. The Company expects to have this debt paid off by
June 30, 2004.

         In connection with the Company's management changes implemented at its
subsidiary Conference Plus, Inc., in fiscal year 2003, the Company purchased
3.2% of the outstanding shares of common stock of Conference Plus, Inc. from
former officers of Conference Plus, Inc. for approximately $1.6 million. The
purchase price was based upon the minority interest value set forth in the
annual appraisal of Conference Plus, Inc. that was completed by an independent
financial advisor. As of March 31, 2004, there was $626,000 outstanding under
these notes.

                  The Company's operating activities used cash of $13.3 million
in fiscal 2002 and generated cash of $22.7 million and $27.7 million in fiscal
2003 and 2004, respectively. Cash used by operations in fiscal 2002 resulted
primarily from net losses and reductions in accounts payable in the equipment
segment offset in part by net income in the services segment, non-cash
depreciation and amortization and decreased inventory in the equipment segment.
The decrease of inventory resulted from using inventory in fiscal 2002 that was
on hand at the end of fiscal 2001. The decrease in accounts payable resulted
from converting accounts payable to vendor debt in the equipment segment. Cash
generated by operations in fiscal 2003 resulted primarily from net income,
non-cash depreciation and amortization in both segments and reductions in
inventory offset in part by reductions in accounts payable in the equipment
segment. The inventory reductions were achieved by selling products throughout
the year that were in inventory at March 31, 2002. Cash generated by operations
in fiscal 2004 resulted primarily from net income, non-cash depreciation and
amortization and tax benefit received from the exercise of employee stock
options in both segments and was offset in part by the increase in deferred tax
assets and inventories.

         Capital expenditures in fiscal 2002, 2003 and 2004 were $9.2 million,
$3.4 million and $5.3 million, respectively. In fiscal 2003, $0.6 million of
capital expenditures were financed through leases. The equipment segment capital
expenditures in fiscal 2002, 2003, and 2004 were $2.3 million, $1.9 million and
$4.0 million, respectively. The capital expenditures in the equipment segment
were primarily for machinery and research and development equipment purchases.
The services segment capital expenditures in fiscal 2002, 2003 and 2004 were
$6.9 million, $1.5 million and $1.3 million, respectively. These expenditures
were primarily for teleconference bridge equipment.

         At March 31, 2004 the Company's principle sources of liquidity were
$11.2 million of cash and the secured revolving credit facility under which the
Company was eligible to borrow up to an additional $23.7 million based upon
receivables and inventory levels. Cash in excess of operating requirements, if
any, will be used to pay down debt or invested on a short-term basis in federal
government agency instruments and the highest rated grade commercial paper. The
Company believes its future cash requirements for the next twelve months will be
satisfied by cash generated from operations and its current credit facility.


                                      -35-



Future obligations and commitments consisted of the following:



                                                           Payments due by fiscal year
                               -------------------------------------------------------------------------------------
(in thousands)                   2005        2006        2007       2008       2009     Thereafter      Total
- -----------------------------  ----------  ----------  ---------  ---------  ---------  ------------  -----------
                                                                                     
Debt and capital leases.....      $3,416       $ 326       $ --       $ --       $ --          $ --       $3,742
Purchase obligations              29,361       4,304      2,125        266         --            --       36,056
Future minimum lease
   payments for operating
   leases...................       3,810       3,258      3,075      3,067      2,910        20,458       36,578
                               ----------  ----------  ---------  ---------  ---------  ------------  -----------
Future obligations and
   commitments..............     $36,587      $7,888     $5,200     $3,333     $2,910       $20,458      $76,376
                               ==========  ==========  =========  =========  =========  ============  ===========


         Purchase obligations consist of raw materials in the equipment segment
and local and long distance telephone service commitments in the service segment
that arise in the normal course of business operations.

         The Company had net deferred tax assets of approximately $79.7 million
at March 31, 2004. The Company has recorded a valuation allowance reserve of
$35.9 million to reduce the recorded net deferred tax asset to $43.8 million.

         The net operating loss carryforwards begin to expire in 2012.
Realization of deferred tax assets associated with the Company's future
deductible temporary differences, net operating loss carryforwards and tax
credit carryforwards is dependent upon generating sufficient taxable income
prior to their expiration. The benefit for income taxes of $12.9 million for
fiscal year 2004 resulted from a current tax provision of $5.7 million and a
reduction of deferred tax assets of $4.4 million offset by a reduction in the
valuation allowance against the deferred tax assets in the amount of $23.0
million. The Company reduced the valuation allowance in the fourth quarter of
fiscal 2004 to reflect the $4.4 million reduction in the deferred tax asset and
to reflect management's belief, based in part on the Company's return to
profitable operations in fiscal 2003 and 2004, that it is more likely than not
an additional $18.6 million of these deferred tax assets will be realized
through the generation of future taxable income. Estimates of future taxable
income are comprised of a tax planning strategy and a three year estimate of
future income that will be generated by operations less tax differences
including expected stock option deductions. The tax planning strategy involves
the potential sale of the Company's 91.5% subsidiary Conference Plus, Inc. The
Company based its estimate of the value of Conference Plus Inc. on the fiscal
2003 independent valuation updated for current future expected cash flows.
Management periodically evaluates the recoverability of the deferred tax assets
and will adjust the valuation allowance against deferred tax assets accordingly.

         There are no off balance sheet arrangements.


ITEM 7A  QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK

         Westell is subject to certain market risks, including foreign currency
and interest rates. The Company has foreign subsidiaries in the United Kingdom
and Ireland that develop and sell products and services in those respective
countries. The Company is exposed to potential gains and losses from foreign
currency fluctuations affecting net investments and earnings denominated in
foreign currencies. Market risk is estimated as the potential decrease in pretax
earnings resulting from a hypothetical decrease in the ending exchange rate of
10%. If such a decrease occurred, the Company would incur approximately $400,000
in additional other expense based on the ending intercompany balance outstanding
at March 31, 2004 The Company's future primary exposure is to changes in
exchange rates for the U.S. dollar versus the British pound and the Euro.

         As of March 31, 2004, the balance in the cumulative foreign currency
translation adjustment account, which is a component of stockholders' equity,
was an unrealized loss of $485,000.



                                      -36-


         The Company does not have significant exposure to interest rate risk
related to its debt obligations, which are primarily U.S. Dollar denominated.
The Company's market risk is the potential loss arising from adverse changes in
interest rates. The Company's debt consists primarily of a floating-rate bank
line-of credit and subordinated term notes. Market risk is estimated as the
potential decrease in pretax earnings resulting from a hypothetical increase in
interest rates of 10% (i.e. from approximately 6.3% to approximately 6.9%)
average interest rate on the Company's debt. If such an increase occurred, the
Company would incur approximately $74,000 per annum in additional interest
expense based on the average debt borrowed during the twelve months ended March
31, 2004. The Company does not feel such additional expense is significant. The
Company does not currently use any derivative financial instruments relating to
the risk associated with changes in interest rates.


ITEM 8     FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

         The Company's Consolidated Financial Statements required by Item 8,
together with the reports thereon of the independent auditors set forth on pages
44-64 of this report. The Consolidated Financial Statement schedule listed under
Item 15(a)2, is set forth on page 64 of this report and should be read in
conjunction with the financial statements.

ITEM 9.    CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
           FINANCIAL DISCLOSURE.

         None

ITEM 9A.  CONTROLS AND PROCEDURES


             Our Chief Executive Officer and Chief Financial Officer have
concluded, based on their evaluation as of the end of the period covered by this
report, that the Company's disclosure controls and procedures are effective in
all material respects in ensuring that information required to be disclosed in
the reports that we file or submit under the Securities Exchange Act of 1934 is
recorded, processed, summarized and reported, within the time periods specified
in the Securities and Exchange Commission's rules and forms. There have been no
significant changes in the Company's internal controls over financial reporting
or in other factors that could significantly affect these controls subsequent to
the date of the previous mentioned evaluation.

                                    PART III

ITEM 10.   DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

(a)      Directors of the Company

         The information required by this Item is set forth in registrant's
         Proxy Statement for the Annual Meeting of Stockholders to be held in
         September 2004 under the caption "Election of Directors and Section
         16(a). Beneficial Ownership Reporting Compliance " which information is
         incorporated herein by reference.

(b)      Executive officers of the Company

         The information required by this Item is set forth in registrant's
         Proxy Statement for the Annual Meeting of Stockholders to be held in
         September 2004 under the caption "Executive Officers," which
         information is incorporated herein by reference.

(c)      The Company has determined that the members of the Audit Committee each
qualify as an "audit committee financial expert" as defined by Item 401(h) of
the Regulation S-K and that each of them is "independent" as the term is used in
the Item 7(d)(3)(iv) of Schedule 14A under the Securities Act of 1934 as amended
except for Mel Simon who is not independent. The Audit Committee will be
reconstituted with entirely independent members prior to the Annual Meeting of
Stockholders to be held in September 2004.

                                      -37-


         CODE OF BUSINESS CONDUCT

         We have adopted a Code of Business Conduct within the meaning of Item
406(b) of Regulation S-K. This Code of Business Conduct applies to our principal
executive officer, principal financial officer and principal accounting officer.
The Company has filed a copy of this Code of Business Conduct at Exhibit 14.1 to
this Form 10-K. This Code of Business Conduct is also publicly available on our
website at www.westell.com. The Company intends to post on its website any
amendments to, or waivers from its Code of Business Conduct applicable to senior
financial executives.


ITEM 11.  EXECUTIVE COMPENSATION

         The information required by this Item is set forth in registrant's
Proxy Statement for the Annual Meeting of Stockholders to be held in September
2004 under the caption "Compensation of Directors and Executive Officers," and
"Report of the Compensation Committee of the Board of Directors," which
information is incorporated herein by reference.

ITEM 12.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND
          RELATED STOCKHOLDER MATTERS

         The information required by this Item is set forth in registrant's
Proxy Statement for the Annual Meeting of Stockholders to be held in September
2004 under the caption "Ownership of the Capital Stock of the Company," which
information is incorporated herein by reference. The "Equity Compensation Plan
Information" required by Item 201(d) of Form 10-K is set forth in Item 5 of this
form 10-K.

ITEM 13.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

         The information required by this Item is set forth in registrant's
Proxy Statement for the Annual Meeting of Stockholders to be held in September
2004 under the caption "Certain Relationships and Related Transactions," which
information is incorporated herein by reference.

ITEM 14.  PRINCIPAL ACCOUNTANTS FEES AND SERVICES

         The information required by this item is incorporated herein by
reference to the section entitled "Fees to the Company's Auditors" in our Proxy
Statement for the annual meeting to be held in September 2004.


                                     PART IV

ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K

         (a)      (1)      Financial Statements
                           --------------------

                           The consolidated financial statements of Westell
                           Technologies, Inc. at March 31, 2004 and 2003 and for
                           each of the three fiscal years in the period ended
                           March 31, 2004, together with the Report of
                           Independent Auditors, are set forth on pages 47
                           through 68 of this Report.

                           The supplemental financial information listed and
                           appearing hereafter should be read in conjunction
                           with the consolidated financial statements included
                           in the report.

                  (2)      Financial Statement Schedule
                           ----------------------------

                           The following are included in Part IV of this Report
                           for each of the years ended March 31, 2002, 2003 and
                           2004 as applicable:

                           Schedule II - Valuation and Qualifying Accounts -
                           page 68


                                      -38-


                           Financial statement schedules not included in this
                           report have been omitted either because they are not
                           applicable or because the required information is
                           shown in the consolidated financial statements or
                           notes thereto, included in this report.

                  (3)      Exhibits
                           --------

                           3.1      Amended and Restated Certificate of
                                    Incorporation, as amended (incorporated
                                    herein by reference to Exhibit 3.12 to the
                                    Company's Quarterly Report on Form 10-Q for
                                    the quarter ended December 31, 2001).
                           3.2      Amended and Restated By-laws laws
                                    (incorporated by reference to Exhibit 3.1 to
                                    the Company's Annual Report on Form 10-K for
                                    the year ended March 31, 2001).
                           4.1      Form of Stock Purchase Warrant dated April
                                    15, 1999 by and among Westell Technologies,
                                    Inc., Castle Creek Technology Partners LLC
                                    (409,091 shares), Marshall Capital
                                    Management, Inc. (272,727 shares), and
                                    Capital Ventures International (227,273
                                    shares) (incorporated herein by reference to
                                    Westell Technologies, Inc.'s Report on Form
                                    8-K dated April 20, 1999).
                           4.2      Amended and Restated Certificate of
                                    Incorporation, as amended (See exhibit 3.1).
                           4.3      Amended and Restated By-laws (see Exhibit
                                    3.2).
                           4.4      Form of Warrant granted to certain Penny
                                    family trusts on June 29, 2001 (incorporated
                                    herein be reference to Exhibit 10.21 to the
                                    Company's Annual Report on Form 10-K for the
                                    year ended March 31, 2001).
                           9.1      Voting Trust Agreement dated February 23,
                                    1994, as amended (incorporated herein by
                                    reference to Exhibit 9.1 to Westell
                                    Technologies, Inc.'s Registration Statement
                                    on Form S-1, as amended, Registration No.
                                    33-98024).
                           10.1     Intentionally omitted.
                           10.2     Stock Transfer Restriction Agreement entered
                                    into by members of the Penny family, as
                                    amended, (incorporated herein by reference
                                    to Exhibits 10.4 and 10.16 to Westell
                                    Technologies, Inc.'s Registration Statement
                                    on Form S-1, as amended, Registration No.
                                    33-98024).
                           10.3     Form of Registration Rights Agreement among
                                    the Company and Robert C. Penny III and
                                    Melvin J. Simon, as trustees of the Voting
                                    Trust dated February 23, 1994 (incorporated
                                    herein by reference to Exhibit 10.5 to
                                    Westell Technologies, Inc.'s Registration
                                    Statement on Form S-1, as amended,
                                    Registration No. 33-98024).
                           *10.4    1995 Stock Incentive Plan (incorporated
                                    herein by reference to Exhibit 10.6 to
                                    Westell Technologies, Inc.'s Registration
                                    Statement on Form S-1, as amended,
                                    Registration No. 33-98024).
                           *10.5    Employee Stock Purchase Plan (incorporated
                                    herein by reference to Exhibit 10.7 to
                                    Westell Technologies, Inc.'s Registration
                                    Statement on Form S-1, as amended,
                                    Registration No. 33-98024).
                           *10.6    Teltrend Inc. 1995 Stock Option Plan.
                                    (incorporated by reference to the Teltrend,
                                    Inc.'s Registration Statement on Form S-1,
                                    as amended (Registration No. 33-91104),
                                    originally filed with the Securities and
                                    Exchange Commission April 11, 1995)
                           *10.7    Teltrend Inc. 1996 Stock Option Plan
                                    (incorporated by reference to the Teltrend
                                    Inc.'s Quarterly Report on Form 10-Q for the
                                    quarterly period ended April 26, 1997).
                           *10.8    Teltrend Inc. 1997 Non-Employee Director
                                    Stock Option Plan (incorporated by reference
                                    to the Teltrend Inc.'s Definitive Proxy
                                    Statement for the Annual Meeting of
                                    Stockholders held on December 11, 1997).
                           *10.9    Deferred Compensation Arrangement between
                                    Westell Technologies, Inc. and E. Van
                                    Cullens (incorporated by reference to the
                                    like numbered exhibit to the Company's
                                    Annual Report on Form 10-K for the year
                                    ended March 31, 2003).
                           *10.10   Severance Agreement between Conference Plus,
                                    Inc. and Tim Reedy (incorporated by
                                    reference to the like numbered exhibit to
                                    the Company's Annual Report on Form 10-K for
                                    the year ended March 31, 2003).


                                      -39-


                           10.11    Lease dated September 25, 1995 between
                                    Westell-Meridian LLC and Westell, Inc.
                                    (incorporated herein by reference to Exhibit
                                    10.11 to Westell Technologies, Inc.'s
                                    Registration Statement on Form S-1, as
                                    amended, Registration No. 33-98024)
                           10.12    Amended and Restated Loan and Security
                                    Agreement dated August 31, 2000 among
                                    LaSalle National Bank, Harris Bank National
                                    Association, Westell Technologies, Inc.,
                                    Westell, Inc., Westell International, Inc.,
                                    Conference Plus, Inc. and Teltrend, Inc.
                                    (incorporated by reference to the like
                                    numbered exhibit to Company's Annual Report
                                    on Form 10-K for the year ended March 31,
                                    2001).
                           10.14    Intentionally omitted.
                           10.15    Revolving Note dated as of June 29, 2001
                                    payable to LaSalle National Bank and made by
                                    Westell Technologies, Inc., Westell, Inc.,
                                    Westell International, Inc., Conference
                                    Plus, Inc. and Teltrend, Inc. (incorporated
                                    by reference to the like numbered exhibit to
                                    Company's Annual Report on Form 10-K for the
                                    year ended March 31, 2001).
                           10.16    Amended and Restated Loan and Security
                                    Agreement dated June 29, 2001 among LaSalle
                                    National Bank, Westell Technologies, Inc.,
                                    Westell, Inc., Westell International, Inc.,
                                    Conference Plus, Inc. and Teltrend, Inc.
                                    (incorporated by reference to the like
                                    numbered exhibit to Company's Annual Report
                                    on Form 10-K for the year ended March 31,
                                    2001).
                           10.17    Lease for Three National Plaza at Woodfield
                                    dated December 24, 1991 by and between the
                                    First National Bank of Boston, as Trustee
                                    pursuant to that certain Pooling and
                                    Security Agreement dated April 1, 1988, and
                                    Conference Plus, Inc., as amended and
                                    modified. (incorporated herein by reference
                                    to Exhibit 10.17 to the Company's Form 10-K
                                    for fiscal year ended March 31, 1996).
                           10.18    Lease dated December 10, 1993 between
                                    LaSalle National Trust, N.A., as Trustee
                                    under Trust Agreement dated August 1, 1979,
                                    known as Trust No. 101293, and Westell
                                    Incorporated, as amended and modified
                                    (incorporated herein by reference to the
                                    exhibit of equal number to the Company's
                                    Form 10-K for fiscal year ended March 31,
                                    1996).
                           10.19    Amendment to Amended and Restated Loan and
                                    Security Agreement dated February 15, 2001
                                    among LaSalle National Bank, Harris Trust
                                    and Savings Bank, Westell Technologies,
                                    Inc., Westell, Inc., Westell International,
                                    Inc., Conference Plus, Inc., and Teltrend,
                                    Inc. (incorporated by reference to Exhibit
                                    10.1 to the Company's Form 10-Q for the
                                    period ended December 31, 2000).
                           10.20    Amendment to Amended and Restated Loan and
                                    Security Agreement dated April 13, 2001
                                    among LaSalle National Bank, Harris Trust
                                    and Savings Bank, Westell Technologies,
                                    Inc., Westell, Inc., Westell International,
                                    Inc., Conference Plus, Inc., and Teltrend,
                                    Inc. (incorporated by reference to Exhibit
                                    10.18 to the Company's Report on Form 8-K
                                    filed on April 17, 2001).
                           10.21    Sixth Amendment to the Amended and Restated
                                    Loan and Security Agreement dated as of June
                                    29, 2001 among LaSalle National Bank, Harris
                                    Trust and Savings Bank, the Company,
                                    Westell, Inc., Westell International, Inc.,
                                    Conference Plus, Inc. and Teltrend,
                                    Inc.(incorporated by reference to Exhibit
                                    10.21 to the Company's Annual Report on Form
                                    10-K for the year ended March 31, 2002).
                           10.22    Amendment To Amended And Restated Loan And
                                    Security Agreement dated as of October 30,
                                    2001, among LaSalle Bank National
                                    Association, Westell Technologies, Inc.,
                                    Westell International, Inc., Conference
                                    Plus, Inc. and Teltrend, Inc. (incorporated
                                    herein by reference to Exhibit 10.22 to the
                                    Company's Quarterly Report on Form 10-Q for
                                    the quarter ended September 30, 2001).
                           *10.23   Severance Agreement date June 28, 2001, by
                                    and between Westell, Inc and E. Van Cullens
                                    (incorporated herein by reference to Exhibit
                                    10.23 to the Company's Quarterly Report on
                                    Form 10-Q for the quarter ended September
                                    30, 2001).


                                      -40-


                           *10.24   Employment Letter dated June 28, 2001
                                    between Westell Technologies, Inc. and E.
                                    Van Cullens (incorporated herein by
                                    reference to Exhibit 10.24 to the Company's
                                    Quarterly Report on Form 10-Q for the
                                    quarter ended September 30, 2001).
                           10.25     Seventh Amendment to the Amended and
                                    Restated Loan and Security Agreement dated
                                    as of June 26, 2003 among LaSalle National
                                    Bank, the Company, Westell, Inc, Westell
                                    International, Inc. Conference Plus, Inc.
                                    and Teltrend, Inc. (incorporated by
                                    reference to Exhibit 10.25 to the Company's
                                    Annual Report on Form 10-K for the year
                                    ended March 31, 2003).
                           14.1     Code of Business Conduct
                           21.1     Subsidiaries of the Registrant (incorporated
                                    by reference to Exhibit 21.1 to the
                                    Company's Annual Report on Form 10-K for the
                                    year ended March 31, 2001).
                           23.1     Consent of Ernst & Young LLP.
                           31.1     Certification of the Chief Executive Officer
                                    pursuant to Section 302 of Sarbanes-Oxley
                                    Act of 2002
                           31.2     Certification of the Chief Financial Officer
                                    pursuant to Section 302 of Sarbanes-Oxley
                                    Act of 2002
                           32.1     Certification of the Chief Executive Officer
                                    and Chief Financial Officer pursuant to
                                    Section 906 of Sarbanes-Oxley Act of 2002




                       *Management contract or compensatory plan or arrangement.

   (b)     Reports filed on Form 8-K
           -------------------------






          July 3, 2003   Transcript of interview of Chief Financial Officer with
                         CNBC on June 30, 2003.

          May 21, 2003   Press release announcing earnings results for the
                         quarter and year ended March 31, 2003.


   (c)     Exhibits
           --------

              The exhibits filed as part of this Annual Report on Form 10-K are
as specified in Item 14(a)(3) herein.

   (d)     Financial Statement Schedules
           -----------------------------

              The financial statement schedules filed as part of this Annual
              Report on Form 10-K are as specified in Item 14(a)(2) herein.



                                      -41-





                                   SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized on June 14, 2004.

                                            WESTELL TECHNOLOGIES, INC.

                                            By  /s/ E. Van Cullens
                                                --------------------
                                            E. Van Cullens
                                            President, Chief Executive Officer


Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the registrant and
in the capacities and on June 14, 2004.

               Signature                                Title
               ---------                                -----


/s/  E. Van Cullens                     President, Chief Executive Officer and
- --------------------------------------  Director
         E. Van Cullens                 (Principal Executive Officer)

/s/ John W. Seazholtz                   Chairman of the Board of Directors
- --------------------------------------
          John W. Seazholtz

/s/ Melvin J. Simon                     Director
- --------------------------------------
           Melvin J. Simon

/s/ Nicholas C. Hindman, Sr.            Chief Financial Officer, Treasurer and
- --------------------------------------  Senior Vice President
         Nicholas C. Hindman, Sr.       (Principal Financial Officer and
                                        Principal Accounting Officer)

/s/ Robert C. Penny III                 Director
- --------------------------------------
          Robert C. Penny III

/s/ Paul A. Dwyer                       Director
- --------------------------------------
          Paul A. Dwyer

/s/ Roger L. Plummer                    Director
- --------------------------------------
            Roger L. Plummer

/s/ Bernard F. Sergesketter             Director
- --------------------------------------
           Bernard F. Sergesketter

/s/ Eileen A. Kamerick                  Director
- --------------------------------------
           Eileen A. Kamerick

                                      -42-





                   INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
                             AND SUPPLEMENTARY DATA


Item                                                                       Page
- ----                                                                       ----
Consolidated Financial Statements:
Report of Independent Auditors..........................................     44
Consolidated Balance Sheets -- March 31, 2003 and 2004..................     45
Consolidated Statements of Operations for the years ended March 31,
        2002, 2003 and 2004.............................................     47
Consolidated Statements of Stockholders' Equity for the years ended
        March 31, 2002, 2003 and 2004...................................     48
Consolidated Statements of Cash Flows for the years ended March 31,
        2002, 2003 and 2004.............................................     49
Notes to Consolidated Financial Statements..............................     50


Financial Statement Schedule:

Schedule II -- Valuation and Qualifying Accounts........................     64



                                      -43-





             Report of Independent Registered Public Accounting Firm


To the Board of Directors and the Stockholders
Westell Technologies, Inc.

We have audited the accompanying consolidated balance sheets of Westell
Technologies, Inc. and subsidiaries as of March 31, 2004 and 2003, and the
related consolidated statements of operations, shareholders' equity, and cash
flows for each of the three years in the period ended March 31, 2004. Our audit
also included the financial statement schedule listed in the Index at Item
15(a)(2). These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of Westell
Technologies, Inc. and subsidiaries at March 31, 2004 and 2003, and the
consolidated results of their operations and their cash flows for each of the
three years in the period ended March 31, 2004, in conformity with U.S.
generally accepted accounting principles. Also, in our opinion, the related
financial statement schedule when considered in relation to the basic financial
statements taken as a whole presents fairly in all material respects the
information set forth therein.

As discussed in Note 1 to the consolidated financial statements, in year 2003
the Company changed its method of accounting for goodwill and other intangibles.

/s/ERNST & YOUNG LLP
Ernst & Young LLP


Chicago, Illinois
May 7, 2004


                                      -44-





                                     WESTELL TECHNOLOGIES, INC. AND SUBSIDIARIES

                                             CONSOLIDATED BALANCE SHEETS



                                                       ASSETS


                                                                                                   March 31,
                                                                                                   ---------
                                                                                              2003         2004
                                                                                              ----         ----
                                                                                                (in thousands)
                                                                                                
Current assets:
  Cash and cash equivalents..............................................................$    11,474  $   11,241
  Accounts receivable (net of allowance of $905,000 and $662,000, respectively)..........     22,633      23,807
  Inventories............................................................................     11,843      16,075
  Prepaid expenses and other current assets..............................................      1,532       2,340
  Intangibles, net.......................................................................      1,455       1,455
  Deferred income tax asset..............................................................      2,300      7,200
                                                                                           ---------   ---------

           Total current assets..........................................................     51,237      62,118

Property and equipment:
  Machinery and equipment................................................................     42,819      42,462
  Office, computer and research equipment................................................     25,301      23,414
  Leasehold improvements.................................................................      7,731       7,832
                                                                                           ---------   ---------
                                                                                              75,851      73,708

  Less accumulated depreciation and amortization.........................................     55,417      56,099
                                                                                           ---------   ---------

    Property and equipment, net..........................................................     20,434      17,609

Goodwill ................................................................................      6,990       6,990
Intangibles, net.........................................................................      6,953       5,499

Deferred income tax asset and other assets...............................................     23,860      37,565
                                                                                          ----------  ----------

           Total assets..................................................................  $ 109,474   $ 129,781
                                                                                           =========   =========




               The accompanying notes are an integral part of these Consolidated Financial Statements.




                                      -45-





                                     WESTELL TECHNOLOGIES, INC. AND SUBSIDIARIES

                                             CONSOLIDATED BALANCE SHEETS

                                          LIABILITIES AND STOCKHOLDERS' EQUITY



                                                                                                    March 31,
                                                                                                    ---------
                                                                                              2003         2004
                                                                                              ----         ----
                                                                                                (in thousands)
                                                                                                  
Current liabilities:
  Accounts payable.......................................................................   $ 11,802    $ 14,163
  Accrued expenses.......................................................................     10,775      10,105
  Accrued compensation...................................................................      4,487       6,808
  Current portion of long-term debt and notes payable....................................     17,057       3,416
                                                                                            --------    --------

           Total current liabilities.....................................................     44,121      34,492

Long-term debt...........................................................................     17,760         326

Other long-term liabilities..............................................................      2,462       1,201

           Total liabilities.............................................................     64,343      36,019
                                                                                            --------    --------

Minority Interest........................................................................      1,638       1,997
                                                                                            --------    --------

Stockholders' equity:
Class A common stock, par $0.01..........................................................        460         532
  Authorized -- 109,000,000 shares
  Issued and outstanding - 45,966,440 at March 31, 2003 and
    53,226,058 at March 31, 2004
Class B common stock, par $0.01..........................................................        190         147
  Authorized -- 25,000,000 shares
  Issued and outstanding -- 19,014,869 at March 31, 2003 and
    14,741,872  at March 31, 2004
Preferred stock, par $0.01...............................................................        --          --
  Authorized -- 1,000,000 shares
  Issued and outstanding -- none
Deferred compensation....................................................................        46          --
Additional paid-in capital...............................................................    364,661     378,390
Treasury stock at cost 93,000 shares.....................................................       (247)       (247)
Cumulative translation adjustment........................................................       (168)       (485)
Accumulated deficit......................................................................   (321,449)   (286,572)
                                                                                            --------    --------

      Total stockholders' equity.........................................................     43,493      91,765
                                                                                            --------    --------

           Total liabilities and stockholders' equity....................................$   109,474   $ 129,781
                                                                                         ===========  ==========


               The accompanying notes are an integral part of these Consolidated Financial Statements.



                                      -46-





                       WESTELL TECHNOLOGIES, INC. AND SUBSIDIARIES

                           CONSOLIDATED STATEMENTS OF OPERATIONS



                                                                        Fiscal Year Ended March 31,
                                                                     ---------------------------------
                                                                       2002       2003        2004
                                                                       ----       ----        ----
                                                                             (in thousands,
                                                                         except per share data)

                                                                                      
Equipment revenue ................................................   $ 191,302    $ 168,216    $ 190,440
Service revenue ..................................................      48,521       41,805       45,299
                                                                     ---------    ---------    ---------
   Total revenues ................................................     239,823      210,021      235,739
                                                                     ---------    ---------    ---------

Cost of equipment sales ..........................................     162,262      121,349      129,265
Inventory reserve adjustments ....................................      13,900       (2,200)         148
Cost of services .................................................      29,631       27,112       26,585
                                                                     ---------    ---------    ---------
   Total cost of goods sold ......................................     205,793      146,261      155,998
                                                                     ---------    ---------    ---------

    Gross margin .................................................      34,030       63,760       79,741
                                                                     ---------    ---------    ---------
Operating expenses:
  Sales and marketing ............................................      19,883       16,017       20,242
  Research and development .......................................      22,444       16,483       17,385
  General and administrative .....................................      24,028       17,513       17,506
  Goodwill and intangible amortization ...........................      25,560        1,766        1,455
  Goodwill and intangible impairment .............................      97,500         --           --
  Restructuring charge ...........................................       6,258        1,678          698
                                                                     ---------    ---------    ---------

     Total operating expenses ....................................     195,673       53,457       57,286
                                                                     ---------    ---------    ---------

Operating income (loss) ..........................................    (161,643)      10,303       22,455
Other income, net ................................................         172          262          615
Interest expense .................................................      (5,564)      (2,648)        (743)
                                                                     ---------    ---------    ---------

Income (loss) before taxes and minority interest .................    (167,035)       7,917       22,327
Income tax expense (benefit) .....................................        --            372      (12,923)
Minority interest ................................................         394          271          373
                                                                     ---------    ---------    ---------
Net income (loss).................................................   $(167,429)   $   7,274    $  34,877
                                                                     =========    =========    =========

Net income (loss) per common share:
  Basic ..........................................................   $   (2.60)   $    0.11    $    0.52
                                                                     =========    =========    =========
  Diluted ........................................................   $   (2.60)   $    0.11    $    0.49
                                                                     =========    =========    =========

Weighted average number of common shares:
  Basic ..........................................................      64,317       64,925       66,858
                                                                     =========    =========    =========
  Diluted ........................................................      64,317       65,126       70,667
                                                                     =========    =========    =========




          The accompanying notes are an integral part of these Consolidated Financial Statements.




                                      -47-





                                     WESTELL TECHNOLOGIES, INC. AND SUBSIDIARIES

                                   CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY




                                     Common   Common    Additional  Cumulative                                      Total
                    Comprehensive    Stock    Stock     Paid-in     Translation    Deferred  Accum.    Treasury  Stockholders'
                  Income (loss)      Class A  Class B   Capital     Adjustment      Comp.    Deficit    Stock      Equity
                  -------------      -------  -------   -------     ----------      -----    -------    -----      ------
                                                                (in thousands)

                                                                                        
Balance, March 31, 2001                425      190      357,684           (34)        854    (161,294)      --     197,825
Net loss.............   $ (167,429)     --       --           --            --          --    (167,429)      --    (167,429)
    Translation adjustment      16      --       --           --            16          --          --       --          16
                        ----------
Total Comprehensive loss        $ (167,413)
                                ==========
Issuance of Class A Common
    Stock ...........                   33       --        5,844            --          --          --       --       5,877
Options Exercised....                            --           10            --          --          --       --          10
 Shares sold under Employee
     Stock Purchase Plan                 1       --          151            --          --          --       --         152
Treasury stock.......                   --       --           --            --          --          --     (247)       (247)
Deferred Compensation                   --       --          877            --        (808)         --       --          69
                                 --------- ---------   ---------      --------   ---------  ----------  -------   ---------

Balance, March 31, 2002          $     459 $    190    $ 364,566      $    (18)  $      46  $ (328,723) $  (247)  $   36,273
                                 --------- ---------   ---------      --------   ---------  ----------  -------   ---------
Net income...........      $ 7,274      --       --           --            --          --       7,274       --       7,274
    Translation adjustment    (150)     --       --           --          (150)         --          --       --        (150)
                           -------
Total Comprehensive income $ 7,124
                           =======
Options Exercised....                    1      --            95            --          --          --       --          96

Balance, March 31, 2003          $     460 $    190    $ 364,661       $  (168)  $      46  $ (321,449) $  (247)  $  43,493
                                 --------- ---------   ---------      --------   ---------  ----------  -------   ---------

Net income...........     $ 34,877       --      --           --            --          --      34,877       --      34,877
    Translation adjustment    (317)              --           --          (317)         --          --       --       ( 317)
                          --------
Total Comprehensive income$ 34,560
                          --------
Deferred Compensation                   --       --           --            --         (46)         --       --         (46)
Class B Stock Converted to
      class A Stock..                   43      (43)          --            --          --          --       --          --
Options and warrants exercised
     including tax benefit              29       --       13,729            --          --          --       --      13,758


Balance, March 31, 2004         $      532 $    147     $378,390       $  (485)   $     -- $  (286,572) $  (247)  $  91,765
                                 --------- ---------   ---------      --------   ---------  ----------  -------   ---------



               The accompanying notes are an integral part of these Consolidated Financial Statements.




                                      -48-





                                     WESTELL TECHNOLOGIES, INC. AND SUBSIDIARIES

                                        CONSOLIDATED STATEMENTS OF CASH FLOWS



                                                                                     Fiscal Year Ended March 31,
                                                                                 ----------------------------------
                                                                                   2002       2003        2004
                                                                                   ----       ----        ----
                                                                                         (in thousands)
                                                                                               
Cash flows from operating activities:
  Net income (loss)........................................................... $(167,429)   $  7,274    $ 34,877
  Reconciliation of net income (loss) to net cash (used in) provided by
     operating activities:
       Depreciation and amortization .........................................    40,222      13,318       9,324
       Goodwill and intangible impairment ....................................    97,500        --          --
       Deferred taxes ........................................................       350         230     (18,585)
       Deferred compensation .................................................      (807)       --          --
       Restructuring .........................................................     1,216      (1,368)       (916)
       Loss on sale of fixed assets and asset impairment .....................     2,014         824         191
       Minority interest .....................................................       394         271         373
       Tax benefit received on stock option exercise .........................      --          --         5,506
       Other .................................................................       (71)        200        --
  Change in assets and liabilities:
     Accounts receivable .....................................................     9,656       2,483      (1,491)
     Inventories .............................................................    54,894       6,363      (4,232)
     Prepaid expenses and other current assets ...............................       (44)        637        (433)
     Other assets ............................................................      (164)       (523)       (395)
     Accounts payable and accrued expenses ...................................   (48,762)     (9,078)      1,155
     Accrued compensation ....................................................    (2,313)      2,113       2,321
                                                                               ---------    --------    --------

          Net cash (used in) provided by operating activities ................   (13,344)     22,744      27,695
                                                                               ---------    --------    --------

Cash flows from investing activities:
   Purchases of property and equipment .......................................    (9,205)     (2,766)     (5,311)
   Proceeds from sale of equipment ...........................................        62       1,977          75
   Purchase of subsidiary stock ..............................................      --          (459)       (532)
                                                                               ---------    --------    --------

          Net cash used in investing activities ..............................    (9,143)     (1,248)     (5,768)
                                                                                --------    --------    --------

Cash flows from financing activities:
   Net borrowing (repayment) under revolving promissory notes ................    (2,310)     (6,134)    (19,956)
   Borrowing of long-term debt and leases payable ............................    24,890       1,724        --
   Repayment of long-term debt and leases payable ............................      (479)    (12,363)    (10,587)
   Proceeds from issuance of Common Stock ....................................     6,668          96       8,206
                                                                               ---------    --------    --------

          Net cash provided by (used in) financing activities ................    28,769     (16,677)    (22,337)
                                                                               ---------    --------    --------

Effect of exchange rate changes on cash ......................................      --           (32)        177
                                                                                                        --------
          Net increase (decrease) in cash and cash equivalents ...............     6,282       4,787        (233)
Cash and cash equivalents, beginning of period ...............................       405       6,687      11,474
                                                                               ---------    --------    --------

Cash and cash equivalents, end of period .....................................  $  6,687    $ 11,474    $ 11,241
                                                                                ========    ========    ========

               The accompanying notes are an integral part of these Consolidated Financial Statements.




                                      -49-



                   WESTELL TECHNOLOGIES, INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:

         Description of Business

         Westell Technologies, Inc. (the "Company") is a holding company. Its
wholly owned subsidiaries, Westell, Inc. and Teltrend LLC , design, manufacture
and distribute telecommunications equipment which is sold primarily to major
telephone companies. Conference Plus, Inc., a 91.5%-owned subsidiary, provides
teleconferencing, multipoint video conferencing, broadcast fax and web
teleconferencing services to various customers.

         Principals of Consolidation

         The accompanying consolidated financial statements include the accounts
of the Company and its subsidiaries. All significant intercompany accounts and
transactions have been eliminated in consolidation.

         Cash and Cash Equivalents

         Cash and cash equivalents generally consist of cash, certificates of
deposit, time deposits, commercial paper, short-term government obligations and
other money market instruments. The Company invests its excess cash in deposits
with major financial institutions, in government securities and the highest
grade commercial paper of companies from a variety of industries. These
securities have original maturity dates not exceeding three months. Such
investments are stated at cost, which approximates fair value, and are
considered cash equivalents for purposes of reporting cash flows.

         Inventories

         Inventories are stated at the lower of first-in, first-out (FIFO) cost
or market. The components of inventories are as follows:



                                                                                              March 31,
                                                                                              ---------
                                                                                        2003         2004
                                                                                        ----         ----
                                                                                          (in thousands)

                                                                                          
        Raw materials..............................................................  $ 9,340     $12,374
        Work in process............................................................        4          14
        Finished goods.............................................................    7,945       8,051
        Reserve for excess and obsolete inventory and net realizable value.........   (5,446)      (4,364)
                                                                                     --------     --------

                                                                                     $11,843     $16,075
                                                                                     =======     =======


         During the fiscal year ended March 31, 2003, gross margin was
positively effected by $2.2 million as the Company was able to sell modem
inventory which had been reserved as excess and obsolete based on the estimated
technological life of the modems at March 31, 2002. Accrued purchase commitments
totaled $91,000 and $259,000 at March 31, 2003 and March 31, 2004, respectively.

         Property and Equipment

         Property and equipment are stated at cost. Depreciation is provided
over the estimated useful lives of the assets which range from 2 to 10 years
using the straight-line method for financial reporting purposes and accelerated
methods for tax purposes. Leasehold improvements are amortized over the lives of
the respective leases, or the useful life of the asset, whichever is shorter.
Depreciation expense was $14.7 million, $11.6 million and $7.9 million for
fiscal 2002, 2003 and 2004, respectively.


                                      -50-


         Goodwill and Intangibles

         On April 1, 2002, the Company adopted the Financial Accounting
Standards Board Statements of Financial Accounting Standards (FASB) No. 141,
Business Combinations, and No. 142, Goodwill and Other Intangible Assets. SFAS
No. 142 eliminates the amortization of goodwill and other indefinite-lived
intangibles. SFAS No. 142 requires that these assets be reviewed for impairment
at least annually. Other intangible assets will continue to be amortized over
their useful lives. The Company determined that there has been no impairment of
goodwill since the adoption of this Statement. The following table discloses pro
forma results for net income and earnings per share had FASB No. 142 been
applied in fiscal 2002.

                                                   Fiscal year ended
                                                   -------------------
(In thousands, except per share amounts)                 2002
                                                   ---------------

Reported net loss.............................         $(167,429)
Add back: Goodwill amortization...............            12,473
                                                   ---------------
Pro forma net loss............................         $(154,956)
                                                   ===============

Reported basic and diluted loss per share.....            $(2.60)
Add back: Goodwill amortization per share.....               .19
                                                   ---------------
Pro forma basic and diluted loss per share....            $(2.41)
                                                   ===============

         Goodwill increased by $1.1 million during fiscal 2003 due to the
purchase of common stock of the Conference Plus, Inc. subsidiary in the telecom
operating segment. All other goodwill and intangibles relates to the telecom
equipment operating segment. Goodwill amortization expense in fiscal year 2002
was $12.5 million.

         The Company has finite lived intangible assets with an original
carrying value, impairment expense, accumulated amortization and net carrying
value of $32.9 million, $3.4 million, $21.1 million and $8.4 million at March
31, 2003, and $32.9 million, $3.4 million, $22.5 million and $7.0 million at
March 31, 2004. These intangibles are being amortized over a period of 5 to 7
years. Finite lived intangible amortization included in expense was $13.1
million, $1.8 million and $1.5 million in fiscal year 2002, 2003 and 2004
respectively. The estimated amortization expense for the next three years is
$1.5 million per year and $1.3 million per year for the fourth and fifth years.

         On an ongoing basis, the Company reviews intangible assets and other
long-lived assets other than goodwill for impairment whenever events and
circumstances indicate that carrying amounts may not be recoverable. If such
events or changes in circumstances occur, the Company will recognize an
impairment loss if the undiscounted future cash flows expected to be generated
by the asset are less than the carrying value of the related asset. The
impairment loss would adjust the asset to its fair value.

         Due to the restructuring the Company implemented in fiscal 2002 and
expected market conditions in the network interface unit and low speed digital
data products portion of the business acquired with the Teltrend acquisition in
2000, it became apparent that the goodwill related to Teltrend acquisition was
impaired. In accordance with its policies, the Company completed evaluations of
the fair value of the Teltrend long-lived assets (including goodwill) during
March 31, 2002 and reported a non-cash charge of $97.5 million to reduce the
carrying value of recorded goodwill and intangibles to their estimated fair
value.


         Revenue Recognition

         Revenue is recognized when title has passed to the customer. On certain
sales contracts where new products are built to customer specifications, revenue
is not recognized until the customer has tested and determined it to function as
intended.

         The Company's product return policy allows customers to return unused
equipment for partial credit if the equipment is currently being manufactured.
Credit is not offered on returned products that are no longer manufactured. The
Company has recorded a reserve for returns that is not significant.


                                      -51-


         The Company's subsidiary Conference Plus, Inc. recognizes revenue for
conference calls and other services upon completion of the conference call or
services.


         Product Warranties

         Most of the Company's products carry a limited warranty ranging from
one to seven years. The Company accrues for estimated warranty costs as products
are shipped. The warranty expense and the related accrual are not significant to
the consolidated financial statements.


         Research and Development Costs

         Engineering and product development costs are charged to expense as
incurred.


         Stock Based Compensation

         The Company has elected to follow Accounting Principle Board Opinion
No. 25 "Accounting for Stock Issued to Employees" (APB No. 25) and related
interpretations in accounting for its employee stock options and awards. Under
APB No. 25, employee stock options are valued using the intrinsic method, and no
compensation expense is recognized since the exercise price of the options
equals or is greater than the fair market value of the underlying stock as of
the date of the grant. The following table shows the effect on net income (loss)
and earnings (loss) per share if the Company had applied the fair value
recognition provisions of FASB Statement NO. 123, "Accounting for Stock Based
Compensation."


                                                  Fiscal year ended March 31,
                                            (in thousands except per share data)
                                             2002            2003         2004
                                         --------------  -----------  ----------
Net income (loss), as reported..........    $(167,429)       $7,274      $34,877
Deduct:  Total stock based employee
compensation expense determined under
fair value based method for all awards,
net of the related tax effect...........        10,695        3,599        3,017
                                         --------------  -----------  ----------
Pro forma net income (loss).............    $(178,124)       $3,675      $31,860
                                         ==============  ===========  ==========

Basic as reported.......................       $(2.60)        $0.11        $0.52
Basic Pro forma.........................       $(2.77)        $0.06        $0.48
Diluted as reported.....................       $(2.60)        $0.11        $0.49
Diluted Pro forma.......................       $(2.77)        $0.06        $0.45

See Note 8 for further discussion of the Company's option plans.




                                      -52-


         Supplemental Cash Flow Disclosures

         The following represents supplemental disclosures to the consolidated
statements of cash flows:

                                                       March 31,
                                          ---------------------------
                                          2002       2003        2004
                                          ----       ----        ----
                                                (in thousands)
Cash paid for:
          Interest...................    $ 2,653    $ 6,406    $1,721
          Income taxes...............         17        375       132


         Disclosures about Fair Value of Financial Instruments

         The following methods and assumptions were used to estimate the fair
value of each class of financial instrument held by the Company:

                  Cash and cash equivalents, trade receivables and trade
         payables: the carrying amounts approximate fair value because of the
         short maturity of these items.

                  Revolving promissory notes and installment notes payable: due
         to the floating interest rate on these obligations, the carrying
         amounts approximate fair value.


         Use of Estimates

         The preparation of financial statements in conformity with accounting
principles generally accepted in the United States requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and revenue and expenses during the period reported.
Actual results could differ from those estimates. Estimates are used when
accounting for the allowance for uncollectable accounts receivable, net
realizable value of inventory, product warranty accrued, depreciation, employee
benefit plans cost, income taxes, and contingencies, among other things.


         Foreign Currency Translation

         The financial position and the results of operations of the Company's
foreign subsidiaries are measured using local currency as the functional
currency. Assets and liabilities of these subsidiaries are translated at the
exchange rate in effect at the end of each period. Income statement accounts are
translated at the average rate of exchange prevailing during the period.
Translation adjustments arising from differences in exchange rates from period
to period are included in the foreign currency translation adjustment account in
stockholders' equity.

         The Company records transaction gains or losses within Other income
(expense), net for fluctuations on foreign currency rates on accounts receivable
and cash and for fluctuations on foreign currency rates on intercompany accounts
anticipated by management to be settled in the foreseeable future.


         Computation of Net Loss Per Share

         The computation of basic earnings per share is computed using the
weighted average number of common shares outstanding during the period. Diluted
earnings per share includes the number of additional common shares that would
have been outstanding if dilutive potential common shares had been issued. The
effect of this computation on the number of outstanding shares is antidilutive
for the period ended March 31, 2002 and therefore the net loss per basic and
diluted earnings per share are the same.


                                      -53-


         New Accounting Pronouncements

         In January 2003, the FASB issued Interpretation No. 46, Consolidation
of Variable Interest Entities, an Interpretation of Accounting Research Bulletin
(ARB) No. 51 (FIN 46), which requires variable interest entities (commonly
referred to as SPEs) to be consolidated by the primary beneficiary of the entity
if certain criteria are met. FIN 46 is effective immediately for all new
variable interest entities created or acquired after January 31, 2003. For
variable interest entities created or acquired prior to February 1, 2003, the
provisions of FIN 46 will become effective in the Company's fourth quarter of
fiscal year 2004. The Company has not identified any variable interest entities.

         In April 2003, the FASB issued Statement of Financial Accounting
Standards No. 149, Amendment of Statement 133 on Derivative Instruments and
Hedging Activities. This statement amends and clarifies financial accounting and
reporting for derivative instruments, including certain derivative instruments
embedded in other contracts. FASB No. 149 is effective for contracts entered
into or modified after June 30, 2003. The Company has adopted this statement and
did not have any items to report. The adoption had no effect on the Company's
financial statements.

          In May 2003, the FASB issued Statement of Financial Accounting
Standards No. 150, Accounting or Certain Financial Instruments with
Characteristics of both Liabilities and Equity. The Company does not have any
financial instruments that apply therefore the adoption of this statement did
not have a material effect on the Company's financial statements.


         Change in Accounting Principle
         See Goodwill and intangible discussed previously for the change in
accounting principle required by the adoption of SFAS No. 141 and 142.


         Reclassification of Accounts

         Certain prior year amounts have been reclassified in order to conform
to the current-year presentation.


NOTE 2. REVOLVING CREDIT AGREEMENTS:

         On March 31, 2003 the Company had a loan agreement that provided for a
$5 million non-amortizing term loan and a $30 million asset based revolving
credit facility, both due June 30, 2003. The asset based revolving credit
facility, which was secured by substantially all assets of the Company, provided
for total borrowings based upon 85% of eligible accounts receivable and 30% of
eligible inventory not to exceed $6.4 million as of March 31, 2003. The $6.4
million inventory limitation is reduced by $0.1 million on the first day of each
month. Borrowings under this facility provided for the interest to be paid by
the Company at the prime rate plus 1%. The term loan was secured by, among other
things, a security interest in certain collateral granted by certain
stockholders consisting of trusts of Robert C. Penny III and other family
members who were participants to the amended revolving credit facility. The
credit facility required the revolving loan to be paid in full before any
payments were applied to the term loan. This credit facility contained covenants
regarding EBITDA, tangible net worth and maximum capital expenditures. On March
31, 2003, the Company had $5.0 million outstanding under its term loan and $15.0
million outstanding and $8.1 available under its secured revolving credit
facility.

         On June 26, 2003, the Company amended the revolving credit facility.
The amendment removed the $5 million non-amortizing term loan as well as the
security interest granted by certain stockholders consisting of trusts of Robert
C. Penny III and other family members. The $30 million asset based revolving
credit facility remains in place and is due on June 30, 2006. Borrowings under
this facility provide for the interest to be paid by the Company at the prime
rate or Libor rate plus 2.5%. The Company paid a $300,000 restructuring fee to
the lenders in connection with this amendment to the credit facility in June
2003. The amendment provides for covenants regarding EBITDA and tangible net
worth which the Company was in compliance at March 31, 2004 and expects to be in
compliance for the term of the debt. No amounts were outstanding at March 31,
2004. Amounts available under the revolving credit facility at March 31, 2004
are $23.7 million.


                                      -54-


NOTE 3. LONG-TERM DEBT AND NOTES PAYABLE:

         Long-term debt and notes payable consists of the following:

                                                                     March 31,
                                                                     ---------
                                                                2003       2004
                                                                ----       ----
                                                                  (in thousands)
Capitalized lease obligations secured by related equipment..  $  1,314   $   485
Revolving Promissory note payable...........................    14,956       --
Term notes payable to a bank................................     5,000        --
Term notes payable..........................................     1,158       626
Vendor notes payable........................................    12,389     2,631
                                                                ------   -------

                                                                34,817     3,742

        Less current portion................................   (17,057)    3,416
                                                              ---------  -------

                                                               $17,760   $   326
                                                               =======   =======

         Future maturities of long-term debt at March 31, 2004 are as follows
(in thousands):

        2005..............................................    $3,416
        2006..............................................       326
                                                             --------

                                                              $3,742
                                                              ======

         On May 30, 2002, the Company signed two subordinated vendor notes with
Solectron Technology SDN BHD. One note in the amount of $5.0 million is for the
payment of inventory held by Solectron that the Company was committed to buy.
The second note in the amount of $16.6 million is for the payment of accounts
payable and accrued interest. Both notes require a weekly principal and monthly
interest payment and are payable over 2.3 years. A third subordinated secured
vendor note in the amount of $1.3 million made by the Company and payable to
Solectron Technology SDN BHD was entered into on June 3, 2002 and is payable
monthly over one year. This note was part of the settlement of litigation with
Celsian Technologies, Inc. All three notes bear interest at the prime rate plus
2.5%. At March 31, 2003 and 2004 there was $12.4 million and $2.6 million
outstanding under these notes respectively.

         In connection with the Company's management changes implemented at its
subsidiary Conference Plus, Inc., in fiscal year 2003, the Company purchased
3.2% of the outstanding shares of common stock of Conference Plus, Inc. from
former officers of Conference Plus Inc. for approximately $1.6 million. The
purchase price was based upon the minority interest value set forth in the
annual appraisal of Conference Plus Inc. obtained by the Company that is
completed by an independent financial advisor. The Company issued term notes
payable bearing an interest rate of 3.5% per annum to be paid over a one to
three year term to finance this stock purchase. At March 31, 2003 and 2004 there
was $1.2 million and $626,000 outstanding under these notes respectively.


NOTE 4. CONVERTIBLE DEBENTURES AND WARRANTS:

         In April 1999, the Company completed a subordinated secured convertible
debenture private placement totaling $20 million. In connection with the
financing, the Company issued five-year warrants for approximately 909,000
shares of Class A Common stock at an exercise price equal to $8.921 per share,
which was approximately 140% of the initial conversion price of the debentures.
These warrants were determined to have a fair market value of $1 million.
Subsequently, in December 1999, the Company repriced the warrants from $8.921 to
$5.92 per share and, due to this debt modification, increased the value of the
warrants by approximately $838,000. The total value of the warrants,
approximately $1.8 million, was recorded as a debt discount in the March 31,
2000 consolidated balance sheet and was being amortized over the life of the
convertible debentures of five years. This unamortized amount was recorded to
equity on a pro rata basis as debentures converted in fiscal 2000 and 2001. In
fiscal 2004, 527,000 warrants were exercised. The Company issued 97,310 shares
of stock relating to this cashless exercise. The remaining warrants, which
expire on April 15, 2004, were exercised in April 2004.



                                      -55-


         On June 29, 2001, in consideration of a guarantee given by several
shareholders to support the credit facility, the Company granted warrants to
purchase 512,820 shares of Class A common stock at an exercise price of $1.95
per share. The warrants are exercisable at any time until June 29, 2006. The
total value of the warrants, approximately $46,000, was recorded as expense. As
of March 31, 2004, all of these warrants were outstanding.


NOTE 5. INCOME TAXES:

         The Company utilizes the liability method of accounting for income
taxes and deferred taxes are determined based on the differences between the
financial statements and tax basis of assets and liabilities given the
provisions of the enacted tax laws. The income taxes charged to net income are
summarized as follows:

                                              Fiscal Year Ended March 31,
                                            ------------------------------
                                             2002       2003        2004
                                             ----       ----        ----
                                                   (in thousands)
        Federal:
          Current.......................    $   --   $     372   $ 5,203
          Deferred......................        --         --    (17,080)
                                            -------    -------   ---------

                                                --         372    (11,877)
                                           --------   --------   ---------

        State:
          Current.......................        --          --       459
          Deferred......................        --          --     (1,505)
                                             ------     ------   ---------

                                                --          --    (1,046)
                                            -------     ------ -----------

             Total......................   $    --     $   372  $(12,923)
                                           ========    =======  ==========

         The Company utilizes the flow-through method to account for tax
credits. In fiscal 2002, 2003 and 2004, the Company generated approximately
$846,000, $0 and $0, respectively, of tax credits.

         The statutory federal income tax rate is reconciled to the Company's
effective income tax rates below:



                                                              Fiscal Year Ended March 31,
                                                              ---------------------------
                                                              2002        2003       2004
                                                              ----        ----       ----

                                                                           
        Statutory federal income tax rate...............      (34.0)%     34.0%     34.0%
        Meals and entertainment.........................        0.1        0.7       0.4
        State income tax, net of federal tax effect.....       (4.9)       4.9       3.1
        Income tax credits recognized...................       (0.3)      (2.3)     --
        Valuation allowance.............................       10.5      (40.1)    (95.0)
        Goodwill amortization...........................      28.5         6.1       1.4
        Other...........................................        0.1        1.6      (1.8)
                                                             ------    -------    -------

                                                                0.0%       4.9%    (57.9)%
                                                           =========   ========   ========




                                      -56-


Components of the net deferred income tax asset are as follows:



                                                                            March 31,
                                                                            ---------
                                                                      2003         2004
                                                                      ----         ----

                                                                        (in thousands)
                                                                              
        Deferred income tax assets:
          Allowance for doubtful accounts........................     $  329        $207
          Alternative minimum tax credit.........................        575         575
          Research and development credit carryforward...........      4,589       4,589
          Compensation accruals..................................        854         898
          Inventory reserves.....................................      3,014       2,172
          Warranty reserve.......................................        500         548
          Net operating loss carryforward........................     70,437      67,014
          Property...............................................      1,264       1,382
          Other..................................................      2,705      2,415
                                                                     -------  ----------
                                                                      84,267     79,800
        Deferred income tax liabilities:
          Property and equipment.................................        111          92
          Other..................................................          9          8
                                                                  ----------  ----------
                                                                        120          100

           Valuation allowance...................................   (58,932)    (35,900)
                                                                  ----------  ----------
             Net deferred income tax asset....................... $  25,215     $43,800
                                                                  ==========  ==========



         In the fourth quarter of fiscal 2004, the Company reduced the valuation
allowance in the amount of $23.0 million based on management's belief that it is
more likely than not that deferred tax assets will be realized through the
generation of future taxable income. The Company generated taxable income in
fiscal year 2004 and projects future taxable income to be able to use a portion
of net operating loss carryforwards and therefore management believes this
evidence supports the recognition of deferred tax assets and thus the reduction
of the valuation allowance. Estimates of future taxable income are comprised of
a tax planning strategy and a three year estimate of future income that will be
generated by operations less tax differences including expected stock option
deductions. The tax planning strategy involves the potential sale of the
Company's 91.5% subsidiary Conference Plus, Inc. The Company based its estimate
of the value of Conference Plus Inc. on the fiscal 2003 independent valuation
updated for current future expected cash flows. Management periodically
evaluates the recoverability of the deferred tax assets and will adjust the
valuation allowance against deferred tax assets accordingly.

         The Company has approximately $5.2 million in income tax credit
carryforwards and a tax benefit of $67.0 million related to a net operating loss
carryforward that is available to offset taxable income in the future. The tax
credit carryforwards begin to expire in 2008 and the net operating loss
carryforward begins to expire in 2012.

         Included in the valuation allowance against deferred tax assets as of
March 31, 2004 is approximately $8.6 million pertaining to net operating loss
carryforwards resulting from the exercise of stock options. When and if these
deferred taxes are realized, the tax benefit from the reversal of the valuation
allowance will be accounted for as a credit to additional paid-in capital rather
than a reduction of income tax expense.


NOTE 6. COMMITMENTS:

         The Company leases an 185,000 square foot corporate facility in Aurora,
Illinois to house manufacturing, engineering, sales, marketing and
administration pursuant to a lease that runs through 2017.

         The Company also has lease commitments to lease other office and
warehouse facilities at various locations. All of the leases require the Company
to pay utilities, insurance and real estate taxes on the facilities. In
addition, the Company has leases for manufacturing equipment, computer
equipment, photocopiers and autos. Total rent expense was $6.7 million, $7.1
million and $4.0 million for 2002, 2003, and 2004, respectively.


                                      -57-


     Total minimum future rental payments at March 31, 2004 are as follows (in
thousands):

        2005...........................................   $3,810
        2006...........................................     3,258
        2007...........................................     3,075
        2008...........................................     3,067
        2009...........................................     2,910
        Thereafter.....................................    20,458
                                                          -------

                                                          $36,578
                                                          =======


NOTE 7. CAPITAL STOCK AND STOCK RESTRICTION AGREEMENTS:

Capital Stock Activity:

         The Board of Directors has the authority to issue up to 1,000,000
shares of preferred stock in one or more series and to fix the rights,
preferences, privileges and restrictions thereof, including dividend rights,
conversion rights, voting rights, terms of redemption, liquidation preferences,
sinking fund terms and the number of shares constituting any series or the
designation of such series, without any further vote or action by stockholders.

Stock Restriction Agreements:

         The members of the Penny family (major stockholders) have a Stock
Transfer Restriction Agreement which prohibits, with limited exceptions, such
members from transferring their Class A Common Stock or Class B Common Stock
acquired prior to November 30, 1995, without first offering such stock to the
other members of the Penny family. A total of 18,824,908 shares of Common Stock
are subject to this Stock Transfer Restriction Agreement.


Shares issued and outstanding:

The following table summarizes Common Stock transactions for fiscal years 2002,
2003 and 2004.



                                                              Common Stock
                                                            Shares Issued
                                                                 and
                                                            Outstanding        Treasury
                                                     Class A        Class B     Stock
                                                     -------        -------     -----
                                                              (in thousands)

                                                        
Balance, March 31, 2001............................   42,473        19,015          --
Issuance of Class A Common Stock ..................    3,315            --          --
Options Exercised..................................        5            --          --
 Shares sold under Employee Stock Purchase Plan....      114            --          --
Treasury stock.....................................       --            --         (93)
                                                     -------       -------      ------
Balance, March 31, 2002............................   45,907        19,015         (93)

Issuance of Class A Common Stock ..................       --            --          --
Options Exercised..................................       59            --          --
 Shares sold under Employee Stock Purchase Plan....       --            --          --
Treasury stock.....................................       --            --          --
                                                     -------      --------      ------
Balance, March 31, 2003............................   45,966        19,015         (93)

Issuance of Class A Common Stock ..................       --            --          --
Options Exercised..................................    2,889            --          --
Class B stock converted to Class A.................    4,274        (4,274)         --
Warrants Exercised.................................       97          --            --
                                                     -------     ---------      ------
Balance, March 31, 2004............................   53,226        14,742         (93)
                                                     =======     =========      ======




                                      -58-



NOTE 8. EMPLOYEE BENEFIT PLANS:

         401(k) Benefit Plan:

         The Company sponsors a 401(k) benefit plan (the "Plan") which covers
substantially all of its employees. The Plan is a salary reduction plan that
allows employees to defer up to 15% of wages subject to Internal Revenue Service
limits. The Plan also allows for Company discretionary and matching
contributions. The Company provided for discretionary and matching contributions
to the Plan totaling approximately $487,000, $926,000 and $1.2 million for
fiscal 2002, 2003 and 2004, respectively.


         Employee Stock Purchase Plan:

         The Company maintains a stock purchase plan that allows participating
employees to purchase, through payroll deductions, shares of the Company's Class
A Common Stock for 85% of the average of the high and low reported sales prices
at specified dates. Under the stock purchase plan, 217,950 shares are
authorized. As of March 31, 2002 no shares were available for issuance.

         Employee Stock Incentive Plan:

         In October 1995, the Company adopted a stock incentive plan (SIP plan)
that permits the issuance of Class A Common Stock, restricted shares of Class A
Common Stock, nonqualified stock options and incentive stock options to purchase
Class A Common Stock, performance awards and stock appreciation rights to
selected employees, officers, non-employee directors of the Company and advisory
board members and consultants. No stock awards were issued in fiscal 2002, 2003
or 2004.

         During March 2000, as part of the Teltrend aquisition, the Company
adopted the following three stock options plans (collectively the "three adopted
option plans"): Teltrend Inc. 1995 Stock Option Plan (the "1995 Stock Option
Plan"), Teltrend Inc. 1996 Stock Option Plan (the "1996 Stock Option Plan"), and
Teltrend Inc. 1997 Non-Employee Director Stock Option Plan (the "1997 Director
Option Plan"). Under both the 1995 and 1996 Stock Option Plans nonqualified
stock options were granted to key employees. Nonqualified stock options were
granted to Non-Employee Directors under the 1997 Director Option Plan.


                                      -59-


         Under the Company's SIP, the 1995 Stock Option Plan, the 1996 Stock
Option Plan, and the 1997 Director Option Plan ("all stock plans"), 13,000,000
shares were authorized and there were 818,875 shares available for further
issuance at March 31, 2004. The stock option activity under all stock plans is
as follows:

                                                Outstanding    Weighted Average
                                                  Options       Exercise Price
                                                  -------       --------------

        Outstanding at March 31, 2001......      7,359,328         $  9.37

                  Granted..................      5,726,973            1.94
                  Exercised................        (5,000)           2.12
                  Expired..................         --              --
                  Canceled.................    (3,863,173)            7.35
                                             -------------        --------
        Outstanding at March 31, 2002......      9,218,128         $  5.61

                  Granted..................      3,181,671            2.01
                  Exercised................       (59,375)           1.50
                  Expired..................         --              --
                  Canceled.................      (807,625)            6.08
                                               -----------        --------
        Outstanding at March 31, 2003......     11,532,799         $  4.60
                  Granted..................      1,326,100            7.01
                  Exercised................    (2,889,311)            2.84
                  Expired..................       --               --
                  Canceled.................      (432,903)           6.82
                                               -----------      ----------
        Outstanding at March 31, 2004......      9,536,685         $  5.37



         The exercise price of the stock options granted is generally
established at the market price on the date of the grant. The Company has
reserved Class A Common Stock for issuance upon exercise of these options
granted.

         During fiscal 2002, the Company granted 30,000 stock options to
non-employee advisory board members or consultants. Compensation expense of
$23,871 was recognized for the issuance of these non-employee stock options
under Statement of Financial Accounting Standards No. 123 "Accounting for
Stock-Based Compensation" FAS 123 for fiscal 2002 . In fiscal year 2003 and
fiscal year 2004 there were no non-employee grants.

          In computing the fair value of stock options granted as disclosed in
Note 1, the fair value of each option is estimated on the date of grant based on
the Black-Scholes option pricing model. The estimate assumes, among other
things, a risk-free interest rate of 2.8% for fiscal years 2003 and 2004 and
6.5% for fiscal year 2002 and no dividend yield; expected volatility of 98% for
fiscal years 2003 and 2004 and 73% for fiscal year 2002 and an expected life of
7 years. A majority of the options granted to employees in fiscal 2002 vest
ratably over two to five years. In fiscal year 2003, approximately half of the
options issued vest upon the earlier of the achievement of company and
individual goals established or 8 years. The majority of the remaining options
issued in fiscal year 2003 vest over five years. The weighted average fair value
of the options granted during the years ended March 31, 2002, 2003 and 2004 were
$1.94, $2.01 and $7.01, respectively.


                                      -60-


The following table summarizes information about all stock options outstanding
as of March 31, 2004:



                                         Options Outstanding                                Options Exercisable
                                         -------------------                                -------------------

      Range of            Number                               Weighted-           Number            Weighted
      Exercise        Outstanding at        Remaining           Average        Exercisable at         Average
       Prices             3/31/04              Life         Exercise Price         3/31/04        Exercise Price
    ------------    --------------------------------------  --------------   -------------------  --------------

                                                                                        
      $ 1.07-1.57        2,389,456             7.79 yrs            $1.34             528,138           $1.32
        1.60-2.19        1,941,690             7.22 yrs             2.01             937,431            2.00
        2.21-5.03        2,353,484             7.06 yrs             4.18             824,649            4.34
       5.09-15.69        1,980,230             6.18 yrs             7.48             768,303            7.60
      15.72-36.18          871,825             6.00 yrs            22.31             831,035           22.32
                    --------------     ----------------  ---------------   -----------------   -------------

      $1.07-36.18        9,536,685             7.00 yrs            $5.37           3,889,556           $7.85




NOTE 9. SEGMENT AND RELATED INFORMATION:

         Operating Segments:
         -------------------

         Westell's reportable segments are strategic business units that offer
different products and services. They are managed separately because each
business requires different technology and market strategy. They consist of:

         1)      A telecommunications equipment manufacturer of local loop
                 access products, and
         2)      A multi-point telecommunications service bureau specializing in
                 audio teleconferencing, multi-point video conferencing,
                 broadcast fax and multimedia teleconference services.

Performance of these segments is evaluated utilizing, revenue, operating income
and total asset measurements. The accounting policies of the segments are the
same as those described in the summary of significant accounting policies.
Segment information for the fiscal years ended March 31, are as follows:

                                            Telecom      Telecom    Consolidated
                                           Equipment     Services       Total
                                           ---------     --------       -----
2002
      Revenues .........................  $ 191,302    $  48,521   $ 239,823
      Operating income (loss) ..........   (166,063)       4,420    (161,643)
      Depreciation and amortization ....     35,847        4,375      40,222
      Total assets .....................    105,969       20,184     126,153

2003
      Revenues .........................  $ 168,216    $  41,805   $ 210,021
      Operating income .................      8,001        2,302      10,303
      Depreciation and amortization ....      8,843        4,475      13,318
      Total assets .....................     86,702       22,772     109,474

2004
      Revenues .........................  $ 190,440    $  45,299   $ 235,739
      Operating income .................     16,564        5,891      22,455
      Depreciation and amortization ....      5,345        3,979       9,324
      Total assets .....................    109,493       20,288     129,781


Reconciliation of operating (loss) for the reportable segments to income (loss)
before income taxes:


                                      -61-




                                                                     Fiscal Year Ended March 31,
                                                                2002             2003           2004
                                                                ----             ----           ----

                                                                                    
Operating income (loss)...................................  $ (161,643)       $ 10,303       $22,455
Other income, net.........................................         172             262           615
Interest expense..........................................      (5,564)         (2,648)         (743)
                                                            ----------        --------       -------

Income (loss) before income taxes and minority interest...  $ (167,035)        $ 7,917       $ 22,327
                                                            ===========        =======       ========


         Enterprise-wide Information:
         ----------------------------

         The Company's revenues are primarily generated in the United States.
More than 90% of all revenues were generated in the United States in fiscal
years 2002, 2003 and 2004.

Significant Customers and Concentration of Credit:

         The Company is dependent on certain major telephone companies that
represent more than 10% of the total revenue. Sales to major customers and
successor companies that exceed 10% of total revenue are as follows:

                                                         Fiscal Year Ended
                                                                 March 31,
                                                     ---------------------------
                                                    2002       2003      2004
                                                    ----       ----      ----
        Verizon...............................      43.2%      42.5%     42.8%
        SBC...................................      14.9       15.2      13.1
        BellSouth.............................       0.7       13.9      18.0

         Major telephone companies comprise a significant portion of the
Company's trade receivables. Receivables from major customers that exceed 10% of
total accounts receivable balance are as follows:

                                                       Fiscal Year Ended
                                                            March 31,
                                                            ---------
                                                        2003        2004
                                                        ----        ----
        Verizon..................................       50.3%       47.6%
        BellSouth................................        9.8        11.7
        SBC......................................       22.7        10.5

         Geographic Information

         The Company's financial information by geographic area was as follows
for the years ended March 31:

                                             Domestic   International     Total
                                             --------   -------------     -----
                                                       (in thousands)
2002
        Revenue............................$ 224,341    $ 15,482      $ 239,823
        Operating loss..................... (161,513)       (130)      (161,643)
        Identifiable assets................  124,045       2,108        126,153

2003
        Revenue............................$ 198,771    $ 11,250      $ 210,021
        Operating income (loss)............   11,511      (1,208)        10,303
        Identifiable assets................  106,591       2,883        109,474

2004
        Revenue............................$ 229,422    $  6,317     $ 235,739
        Operating income (loss)............   25,261      (2,806)        22,455
        Identifiable assets................  127,188       2,593        129,781

         International identifiable assets and operating loss are related to
Westell Ltd., which is located in the United Kingdom and Conference Plus Global
Services, Ltd., which is located in Dublin Ireland.


                                      -62-


NOTE 10. RESTRUCTURING CHARGE:

         The Company recognized a restructuring charge of $6.3 million in fiscal
year 2002. These charges included personnel, facility and certain development
contract costs. The purpose of the fiscal 2002 restructuring plan was to
decrease costs primarily by a workforce reduction of approximately 200 employees
and to realign the Company's cost structure with the Company's anticipated
business outlook. During fiscal year 2003, a portion of a leased facility
previously vacated was sublet resulting in a reversal of $0.9 million of
facility lease costs accrued in fiscal 2002. As of March 31, 2004 all of these
restructuring costs had been paid.

         The Company recognized a net restructuring expense of $1.7 million in
fiscal 2003 consisting of a charge of $2.6 million offset by the $0.9 million
described above. This charge included personnel and facility costs related
primarily to the closing of a Conference Plus, Inc. facility and personnel and
facility charges at Westell Limited. Approximately 25 employees were impacted by
these reorganizations. As of March 31, 2004, the Company paid approximately $1.3
million of these accrued restructuring costs leaving a balance of $1.3 million.

         The Company recognized a restructuring expense of $698,000 in fiscal
2004. This restructuring resulted from discontinuing a product at Westell
Limited. The result was a workforce reduction of approximately 14 employees.
None of these costs had been paid as of March 31, 2004.

The restructuring charges and their utilization are summarized as follows:



                    Accrued                     Accrued       2003           Accrued                      Accrued
(Dollars in            at                          at      Charged              at                           at
thousands)         March 31      2002     2002  March 31   net of      2003  March 31      2004     2004  March
                     2001     Charged  Utilized   2002     reversal Utilized   2003     Charged  Utilized 31 2004
- ------------------ ---------- -------- -------- ---------- -------- -------- ---------- -------- -------- ---------
                                                                                
Employee costs.......$ 2,602  $ 4,066  $ 4,629    $ 2,039   $1,120   $2,390      $ 769     $698     $769      $698
Legal, other and
facility costs.......    395    2,191      412      2,174      552      650      2,076       --      845     1,231
- ------------------ ---------- -------- -------- ---------- -------- -------- ---------- -------- -------- ---------
Total................$ 2,997  $ 6,257  $ 5,041    $ 4,213  $ 1,671  $ 3,040    $ 2,845     $698   $1,614    $1,929
================== ========== ======== ======== ========== ======== ======== ========== ======== ======== =========



NOTE 11. OTHER INCOME, NET:

         Other income, net for the years ended March 31, 2002, 2003 and 2004 was
primarily due to interest income and unrealized gains and losses on intercompany
balances denominated in foreign currency.

NOTE 12.  EARNINGS PER SHARE



                                                                       Year ended March 31,
                                                       ------------------------------------------------
Dollars in thousands, except per share amounts             2002             2003              2004
                                                       -------------    --------------    -------------
                                                                                      
BASIC EARNINGS (LOSS) PER SHARE:
Net income (loss)                                       $ (167,429)           $ 7,274          $34,877
Average basic shares outstanding                             64,317            64,925           66,858
Basic net income (loss) per share                          $ (2.60)            $ 0.11            $0.52

DILUTED EARNINGS (LOSS) PER SHARE:
Net income (loss)                                       $ (167,429)           $ 7,274          $34,877
Average diluted shares outstanding                           64,317            64,925           66,858
    Effect of dilutive securities: stock options                  -               201            3,809
       and  warrants
                                                     ---------------    --------------    -------------
                                                             64,317            65,126           70,667
                                                     ---------------    --------------    -------------
Diluted net income (loss) per share                        $ (2.60)            $ 0.11            $0.49





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                                     WESTELL TECHNOLOGIES, INC. AND SUBSIDIARIES



                                  SCHEDULE II -- VALUATION AND QUALIFYING ACCOUNTS

                                           ACCOUNTS RECEIVABLE ALLOWANCES
                                                   (IN THOUSANDS)



                                                                2002       2003        2004
                                                                ----       ----        ----

                                                                             
Balance at beginning of year...............................   $1,363      $1,531      $ 905
Provision for doubtful accounts............................      971         623        179
Write-offs of doubtful accounts, net of recoveries.........     (803)     (1,249)      (422)

Balance at end of year.....................................   $1,531       $  905    $  662
                                                              ======       ======    ========






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