<PAGE>   1
    As filed with the Securities and Exchange Commission on April 29, 1999

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

                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                  FORM S-8/S-3
                             REGISTRATION STATEMENT
 (Including registration of shares for resale by means of a Form S-3 Prospectus)
                                      Under
                           THE SECURITIES ACT OF 1933

                                   HI/FN, INC.
               (Exact name of issuer as specified in its charter)

              DELAWARE                              33-0732700
     (State of Incorporation)            (IRS Employer Identification No.)

                              750 University Avenue
                           Los Gatos, California 95032
                    (Address of principal executive offices)

                           1996 EQUITY INCENTIVE PLAN
                            (Full title of the plan)

                               Raymond J. Farnham
                       Chief Executive Officer hi/fn, inc.
                              750 University Avenue
                           Los Gatos, California 95032
                     (Name and address of agent for service)

                                 (408) 399-3500
          (Telephone number, including area code, of agent for service)

                                    Copy to:

                             Steven E. Bochner, Esq.
                        WILSON SONSINI GOODRICH & ROSATI
                               650 Page Mill Road
                        Palo Alto, California 94304-1050

                         CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
=============================================================================================================
                                                      AMOUNT        PROPOSED MAXIMUM            AMOUNT OF
           TITLE OF SECURITIES                         TO BE         OFFERING PRICE           REGISTRATION
            TO BE REGISTERED                        REGISTERED        PER SHARE(1)                 FEE
-------------------------------------------------------------------------------------------------------------
<S>                                                  <C>                  <C>                    <C>
Common Stock, par value $0.001 per share
  Issued under 1996 Equity Incentive Plan            41,543           $1,726,630.94             $481.00
=============================================================================================================
</TABLE>

(1) The price of $41.56 per share, which was the average of the high and low
    prices of the Registrant's Common Stock on the Nasdaq National Market on
    April 26, 1999, is set forth solely for the purpose of calculating the
    registration fee in accordance with Rule 457(c) of the Securities Act of
    1933, as amended.

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


<PAGE>   2


                                EXPLANATORY NOTE


   This Registration Statement on Form S-8/S-3 ("Registration Statement") is
being filed pursuant to General Instruction E to Form S-8 for the purpose of
registering these additional shares of Common Stock, which have been issued
under hi/fn, inc.'s 1996 Equity Incentive Plan and are of the same class of
Common Stock for which a registration statement on Form S-8 (Registration No.
333-68917) and a registration statement on Form S-8/S-3 (Registration No.
333-69149) relating to such 1996 Equity Incentive Plan are effective. The
contents of hi/fn, inc.'s Registration Statement on Form S-8 (Registration No.
333-68917) and hi/fn, inc.'s registration statement on Form S-8/S-3
(Registration No. 333-69149) are hereby incorporated by reference. An aggregate
of 41,543 shares are being registered hereby; the remaining 465,898 shares were
registered on the Registration Statement on Form S-8/S-3 (Registration No.
333-69149) filed on December 17, 1998.











                                       2

<PAGE>   3


                                RESALE PROSPECTUS

                                   HI/FN, INC.

                      UP TO 507,441 SHARES OF COMMON STOCK

         WHICH THE SELLING STOCKHOLDERS MAY RESELL UNDER THIS PROSPECTUS


                                ----------------


   The stockholders of hi/fn, inc. ("hi/fn" or the "Company") listed below may
offer and resell up to 507,441 shares of hi/fn common stock under this
prospectus, for their own accounts. The Company will not receive any proceeds
from the sale of the shares.

   The Company issued these shares to the selling stockholders under the
Company's 1996 Equity Incentive Plan.

   The selling stockholders may offer their hi/fn common stock through public or
private transactions, at prevailing market prices or at privately negotiated
prices. Such future prices are not currently known.

   The Company's common stock is quoted on the Nasdaq National Market under the
symbol "HIFN." The last reported sale price of the Common Stock of hi/fn on the
Nasdaq National Market on April 27, 1999 was $48.0625.



                       CONSIDER CAREFULLY THE RISK FACTORS
                     BEGINNING ON PAGE 3 IN THIS PROSPECTUS.

                                ----------------

NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR PASSED UPON THE
ADEQUACY OR ACCURACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.

                                ----------------

                  The date of this prospectus is April 28, 1999











                                       3

<PAGE>   4


                                TABLE OF CONTENTS

<TABLE>
<CAPTION>
                                                                                PAGE
                                                                                ----
         <S>                                                                    <C>
         hi/fn                                                                   2
         Forward-Looking Statements                                              2
         Risk Factors                                                            3
         Selling Stockholders                                                    8
         Plan of Distribution                                                   10
         Information Incorporated by Reference                                  11
         Where to Find More Information About hi/fn                             12
         Indemnification and the SEC's Position on Enforceability               12
</TABLE>


                                      HI/FN

   The Company's principal executive offices are located at 750 University
Avenue, Los Gatos, California 95302. The telephone number at that location is
(408) 399-3500.

   We design, develop and market high-performance multi-protocol packet
processors -- semiconductor devices designed to enable secure, high-bandwidth
network connectivity and efficient storage of business information. Our packet
processor products perform the computation-intensive tasks of compression and
encryption/compression and public key cryptography, providing our customers with
high-performance, interoperable implementations of a wide variety of
industry-standard networking and storage protocols. Our products are used in
networking and storage equipment like routers, and back-up storage devices.

   In this prospectus, unless indicated otherwise, "hi/fn," the "Company," "we,"
"us" and "our" refer to hi/fn, inc.


                           FORWARD-LOOKING STATEMENTS

   This prospectus and the documents incorporated herein by reference contain
forward-looking statements. The Company bases these statements on its current
expectations, estimates and projections about its industry. Either the beliefs
of management, or assumptions made by management, form the basis for those
expectations, estimates and projections. The safe harbor created by Section 27A
of the Securities Act of 1933, as amended (the "Securities Act") and Section 21E
of the Securities Exchange Act of 1934, as amended (the "Exchange Act")
generally protects the Company and the selling stockholders from liability for
these statements. You can often recognize such forward-looking statements by
words such as "anticipates," "expects," "intends," "plans," "believes," "seeks,"
"estimates," variations of such words, and similar expressions.

   These forward-looking statements do not guarantee future performance and are
subject to risks, uncertainties and assumptions that are difficult to predict.
The Risk Factors section following this paragraph sets forth some of such risks
and uncertainties. The documents incorporated by reference may also set forth
risks and uncertainties. These risks and uncertainties could cause actual
results to differ materially and adversely from those discussed in the
forward-looking statements. The Company undertakes no obligation to publicly
update any of these forward-looking statements to reflect new information or
future events.


                                  RISK FACTORS

   You should carefully consider the risks described below before making an
investment decision. The risks and uncertainties described below are not the
only ones facing our company. Additional risks and uncertainties not presently
known to us or that we currently deem immaterial may also impair our operations.
If any of the following risks actually occur, our business, financial condition
or results of operations could suffer. In such case, the trading price of our
Common Stock could decline, and you may lose all or part of your investment.

   This prospectus also contains forward-looking statements that involve risks
and uncertainties. Our actual results could differ materially from those
anticipated in these forward-looking statements as a result of certain factors,
including the risks faced by us described below and elsewhere in this
prospectus.





                                       4
<PAGE>   5

WE HAVE A LIMITED OPERATING HISTORY AS AN INDEPENDENT COMPANY.

   On August 14, 1996, we were incorporated by Stac, which transferred its
semiconductor business to us in exchange for shares of our Preferred Stock and
Common Stock. Because we are a relatively new company with a limited operating
history, we may experience financial and other difficulties as we attempt to
grow our business. For example, to expand our business we are increasing our
research and development and other operating expenses. This increase in expenses
will negatively affect our financial performance unless we are able to sustain
and grow revenues. In making an investment decision, you should evaluate this
risk, as well as the other difficulties and uncertainties frequently encountered
by early stage companies that operate in competitive markets. If we are not able
to evolve and expand our business, we may not remain profitable and therefore
may not be able to sustain a viable business.

OUR OPERATING RESULTS MAY FLUCTUATE SIGNIFICANTLY.

   Our operating results have fluctuated significantly in the past and we expect
that they will continue to fluctuate in the future. This fluctuation is a result
of a variety of factors including the following:

   o General business conditions in our markets as well as global economic
     uncertainty;

   o Reductions in demand for our customers' products;

   o The timing and amount of orders we receive from our customers;

   o Cancellations or delays of customer product orders;

   o Any new product introductions by us or our competitors;

   o Our suppliers increasing costs or changing the delivery of products to us;

   o Increased competition or reductions in the prices that we are able to
     charge;

   o The variety of the products that we sell as well as seasonal demand for our
     products; and

   o The availability of manufacturing capacity necessary to make our products.

   Our revenues and operating results depend upon the amount and timing of
customer orders that we receive in a given quarter. In the past we have
recognized a substantial portion of our revenues in the last month of a quarter.
If this trend continues, any failure or delay to fulfill orders by the end of a
particular quarter will harm our business, financial condition and results of
operations. As a result of these and other factors, we believe that
period-to-period comparisons of our historical results or operations are not a
good predictor of our future performance. If our future operating results are
below the expectations of stock market analysts, our stock price may decline.


WE DEPEND UPON A SMALL NUMBER OF CUSTOMERS.

   Quantum Corporation ("Quantum") accounted for approximately 61% and 70%,
respectively, of our revenues in fiscal 1998 and 1997. Quantum is not under any
binding obligation to order from us. If our sales to Quantum decline, our
business, financial condition and results of operations could suffer. We expect
that our most significant customers in the future could be different from our
largest customers today for a number of reasons, including customers' deployment
schedules and budget considerations. As a result, we believe we may experience
significant fluctuations in our results of operations on a quarterly and an
annual basis.

   Limited numbers of network and storage equipment vendors account for a
majority of packet processor purchases in their respective markets. In
particular, the market for network equipment that would include packet
processors, such as routers, remote access concentrators and firewalls, is
dominated by a few large vendors, including Ascend Communications, Inc., Cisco
Systems, Inc., Lucent Technologies Inc., Nortel Networks, Inc. and 3Com
Corporation. As a result, our future success will depend upon our ability to
establish and maintain relationships with these companies. If these network
equipment vendors do not incorporate our packet processors into their products,
our business, financial condition and results of operations could suffer.





                                       5
<PAGE>   6

OUR BUSINESS DEPENDS UPON THE DEVELOPMENT OF THE PACKET PROCESSOR MARKET.

Our prospects are dependent upon the acceptance of packet processors as an
alternative to other technology traditionally utilized by network and storage
equipment vendors. Many of our current and potential customers have substantial
technological capabilities and financial resources and currently develop
internally the application specific integrated circuit components and program
the general purpose microprocessors utilized in their products as an alternative
to our packet processors. These customers may in the future continue to rely on
these solutions or may determine to develop or acquire components, technologies
or packet processors that are similar to, or that may be substituted for, our
products. In order to be successful we must anticipate market trends and the
price, performance and functionality requirements of such network and storage
equipment vendors and must successfully develop and manufacture products that
meet their requirements. In addition, we must make products available to these
large customers on a timely basis and at competitive prices. If orders from
customers are cancelled, decreased or delayed, or if we fail to obtain
significant orders from new customers, or if any significant customer delays or
fails to pay, our business, financial condition and results of operations could
suffer.

OUR BUSINESS DEPENDS UPON THE CONTINUED GROWTH AND OUR PENETRATION OF THE
VIRTUAL PRIVATE NETWORK MARKET.

   We want to be a leading supplier of packet processors that implement the
network security protocols necessary to support the deployment of virtual
private networks. In making an investment decision, you should consider the
possibility that this market, which is still emerging, may not grow or that our
products may not successfully serve this market. Our ability to generate
significant revenue in the virtual private network market will depend upon,
among other things, the following:

   o Our ability to demonstrate the benefits of our technology to distributors,
     original equipment manufacturers and end users; and

   o The increased use of the Internet by businesses as replacements for, or
     enhancements to, their private networks.

   If we are unable to penetrate the virtual private network market, or if that
market fails to develop, our business, financial condition and results of
operations could suffer.

WE FACE RISKS ASSOCIATED WITH EVOLVING INDUSTRY STANDARDS AND RAPID
TECHNOLOGICAL CHANGE.

   The markets in which we compete are characterized by rapidly changing
technology, frequent product introductions and evolving industry standards. Our
performance depends on a number of factors, including our ability to do the
following:

   o Properly identify emerging target markets and related technological trends;

   o Develop and maintain competitive products;

   o Enhance our products by adding innovative features that differentiate our
     products from those of competitors;

   o Bring products to market on a timely basis at competitive prices; and

   o Respond effectively to new technological changes or new product
     announcements by others.

   Our past success has been dependent in part upon our ability to develop
products that have been selected for design into new products of leading
equipment manufacturers. However, the development of our packet processors is
complex and, from time to time, we have experienced delays in completing the
development and introduction of new products. We may not be able to adhere to
our new product design and introduction schedules and our products may not be
accepted in the market at favorable prices, if at all.

   In evaluating new product decisions, we must anticipate future demand for
product features and performance characteristics, as well as available
supporting technologies, manufacturing capacity, competitive product offerings
and industry standards. We must also continue to make significant investments in
research and development in order to continue to enhance the performance and
functionality of our products to keep pace with competitive products and
customer demands for improved performance, features and functionality. The
technical innovations required for us to remain competitive are complicated and
require a significant amount of time and money. We may experience substantial
difficulty in introducing new products and we may be unable to offer
enhancements to existing products on a timely or cost-effective basis, if at
all. For instance, the performance of our encryption/compression and public key
processors depends upon the integrity of our security technology. If any
significant advances in overcoming cryptographic systems are made, then the
security of our





                                       6
<PAGE>   7

encryption/compression and public key processors will be reduced or eliminated
unless we are able to develop further technical innovations that adequately
enhance the security of these products. Our inability to develop and introduce
new products or enhancements directed at new industry standards could harm our
business, financial condition and results of operations.


OUR MARKETS ARE HIGHLY COMPETITIVE.

   We compete in markets that are intensely competitive and are expected to
become more competitive as current competitors expand their product offerings
and new competitors enter the market. The markets in which we compete are
subject to frequent product introductions with improved price-performance
characteristics, rapid technological change, and the continued emergence of new
industry standards. Our products compete with offerings from companies such as
Analog Devices, Inc., Information Resource Engineering Inc., International
Business Machines Corporation ("IBM"), Rainbow Technologies, Inc. and VLSI
Technology, Inc. In 1994, Stac entered into two license agreements with IBM in
which Stac granted IBM the right to use, but not sublicense, our patented
compression technology in IBM hardware and software products. Stac also entered
into a license agreement with Microsoft Corporation ("Microsoft") in 1994
whereby Stac granted Microsoft the right to use, but not sublicense, our
compression technology in their software products. We expect significant future
competition from major domestic and international semiconductor suppliers.
Several established electronics and semiconductor suppliers have recently
entered, or expressed an interest to enter, the network equipment market. We
also may face competition from suppliers of products based on new or emerging
technologies. Furthermore, many of our existing and potential customers
internally develop solutions which attempt to perform all or a portion of the
functions performed by our products.

   A key element of our packet processor architecture is our encryption
technology. In order to export our encryption-related products, we must obtain a
license from the U.S. Department of Commerce. Foreign competitors that are not
subject to similar requirements have an advantage over us in their ability to
rapidly respond to the requests of customers in the global market.

   Many of our current and prospective competitors offer broader product lines
and have significantly greater financial, technical, manufacturing and marketing
resources than us. As a result, they may be able to adapt more quickly to new or
emerging technologies and changes in customer requirements or to devote greater
resources to promote the sale of their products. In particular, companies such
as Intel Corporation, Lucent Technologies Inc., Motorola, Inc., National
Semiconductor Corporation and Texas Instruments Incorporated have a significant
advantage over us given their relationships with many of our customers, their
extensive marketing power and name recognition and their much greater financial
resources. In addition, current and potential competitors may decide to
consolidate, lower the prices of their products or bundle their products with
other products. Any of the above would significantly and negatively impact our
ability to compete and obtain or maintain market share. If we are unable to
successfully compete against our competitors, our business, results of
operations and financial condition will suffer.

   We believe that the important competitive factors in our markets are the
following:

   o Performance;

   o Price;

   o The time that is required to develop a new product or enhancements to
     existing products;

   o The ability to achieve product acceptance with major network and storage
     equipment vendors;

   o The support that exists for new network and storage standards;

   o Features and functionality;

   o Adaptability of products to specific applications;

   o Reliability; and

   o Technical service and support as well as effective intellectual property
     protection.

   If we are unable to successfully develop and market products that compete
with those of other suppliers, our business, financial condition and results of
operations could be harmed. In addition, we must compete for the services of
qualified distributors and sales





                                       7
<PAGE>   8

representatives. To the extent that our competitors offer distributors or sales
representatives more favorable terms, these distributors and sales
representatives may decline to carry, or discontinue carrying, our products. Our
business, financial condition and results of operations could be harmed by any
failure to maintain and expand our distribution network. See "Business --
Competition."


OUR BUSINESS DEPENDS UPON THE GROWTH OF THE NETWORK EQUIPMENT AND STORAGE
EQUIPMENT MARKETS.

   Our success is largely dependent upon continued growth in the market for
network security equipment, such as routers, remote access concentrators,
switches, broadband access equipment, security gateways, firewalls and network
interface cards. In addition, our success depends upon storage equipment vendors
incorporating our packet processors into their systems. The network security
equipment market has in the past and may in the future fluctuate significantly
based upon numerous factors, including the lack of industry standards, adoption
of alternative technologies, changes in capital spending levels and general
economic conditions. We are unable to determine the rate or extent to which
these markets will grow, if at all. Any decrease in the growth of the network or
storage equipment markets or a decline in demand for our products could harm our
business, financial condition and results of operations.


OUR OPERATING RESULTS HAVE BEEN SUBSTANTIALLY DEPENDENT ON ONE PRODUCT FAMILY.

   Historically, substantially all of our revenue has come from sales of our
compression processor products which accounted for 84%, 88% and 89% of revenue
in the fiscal years ended September 30, 1998, 1997 and 1996. A significant
decline in revenue from our compression processor products, which is not
adequately replaced by increased sales of our encryption/compression and public
key processors, would harm our business, financial condition and results of
operations.


OUR SUCCESS DEPENDS UPON PROTECTING OUR INTELLECTUAL PROPERTY.

   Our proprietary technology is critical to our future success. We rely in part
on patent, trade secret, trademark, maskwork and copyright law to protect our
intellectual property. We own 12 United States patents and four foreign patents.
We also have two pending patent applications in Japan. Our patents and patent
applications cover various aspects of our compression technology and have
expiration dates ranging from 2006 to 2013. Patents may not issue under our
current or future patent applications, and the patents issued under such patent
applications could be invalidated, circumvented or challenged. In addition,
third parties could make infringement claims against us in the future. Such
infringement claims could result in costly litigation. We may not prevail in any
such litigation or be able to license any valid and infringed patents from third
parties on commercially reasonable terms, if at all. Regardless of the outcome,
an infringement claim would likely result in substantial cost and diversion of
our resources. Any infringement claim or other litigation against us or by us
could harm our business, financial condition and results of operations. The
patents issued to us may not be adequate to protect our proprietary rights, to
deter misappropriation or to prevent an unauthorized third party from copying
our technology, designing around the patents we own or otherwise obtaining and
using our products, designs or other information. In addition, others could
develop technologies that are similar or superior to our technology.

   We also claim copyright protection for certain proprietary software and
documentation. We attempt to protect our trade secrets and other proprietary
information through agreements with our customers, employees and consultants,
and through other security measures. However, our efforts may not be successful.
Furthermore, the laws of certain countries in which our products are or may be
manufactured or sold may not protect our products and intellectual property. See
"Business -- Intellectual Property."


THE LENGTH OF TIME IT TAKES TO DEVELOP OUR PRODUCTS AND MAKE A SALE TO OUR
CUSTOMERS MAY IMPAIR OUR OPERATING RESULTS.

   Our customers typically take a long time to evaluate our products. In fact,
it usually takes our customers three to six months or more to test our products
with an additional nine to 18 months or more before they commence significant
production of equipment incorporating our products. As a result of this lengthy
sales cycle, we may experience a delay between increasing expenses for research
and development and sales and marketing efforts, on the one hand, and the
generation of higher revenues, if any, on the other hand. In addition, the
delays inherent in such a lengthy sales cycle raise additional risks of customer
decisions to cancel or change product plans, which could result in the loss of
anticipated sales. Our business, financial condition and results of operations
could suffer if customers reduce or delay orders or choose not to release
products using our technology.


WE DEPEND UPON INDEPENDENT MANUFACTURERS AND LIMITED SOURCES OF SUPPLY.

   We rely on subcontractors to manufacture, assemble and test our packet
processors. We currently subcontract our semiconductor manufacturing to Atmel
Corporation, Motorola, Inc. and Toshiba Corporation. Since we depend upon
independent manufacturers, we do





                                       8
<PAGE>   9

not directly control product delivery schedules or product quality. None of our
products are manufactured by more than one supplier. Since the semiconductor
industry is highly cyclical, foundry capacity has been very limited at times in
the past and may become limited in the future.

   We depend on our suppliers to deliver sufficient quantities of finished
products to us in a timely manner. We place orders on a purchase order basis and
do not have long-term volume purchase agreements with any of our suppliers. As a
result, our suppliers may allocate production capacity to other products while
reducing deliveries to us on short notice. For example, in June 1995, one of our
suppliers delayed the delivery of one of our products. As a result, we switched
production of the product to a new manufacturer. This caused a three month delay
in shipments to customers. We also experienced yield and test anomalies on a
different product manufactured by another subcontractor that could have
interrupted our customer shipments. In this case, the manufacturer was able to
correct the problem in a timely manner and customer shipments were not affected.
The delay and expense associated with qualifying a new supplier or foundry and
commencing volume production can result in lost revenue, reduced operating
margins and possible harm to customer relationships. The steps required for a
new manufacturer to begin production of a semiconductor product include:

   o Adapting our product design, if necessary, to the new manufacturer's
     process;

   o Creating a new mask set to manufacture the product;

   o Having the new manufacturer prepare sample products so we can verify the
     product specification; and

   o Providing sample products to customers for qualification.

   In general, it takes from three to six months for a new manufacturer to begin
full-scale production of one of our products. We could have similar or more
protracted problems in the future with existing or new suppliers.

   Toshiba Corporation manufactures products for us in plants located in Asia.
To date, the financial and stock market dislocations that have occurred in the
Asian financial markets have not harmed our business. However, present or future
dislocations or other international business risks, such as currency exchange
fluctuations or recessions, could force us to seek new suppliers. We must place
orders approximately 12 to 14 weeks in advance of expected delivery. This limits
our ability to react to fluctuations in demand for our products, and could cause
us to have an excess or a shortage of inventory of a particular product. In
addition, if global semiconductor manufacturing capacity does not increase as
quickly as demand, foundries could allocate available capacity to larger
customers or customers with long-term supply contracts. If we cannot obtain
adequate foundry capacity at acceptable prices, or our supply is interrupted or
delayed, our product revenues could decrease or our cost of revenues could
increase. This could harm our business, financial condition and results of
operations.

   We regularly consider using smaller semiconductor dimensions for each of our
products to reduce costs. We have begun to decrease the dimensions in our new
product designs, and believe that we must do so to remain competitive. We may
have difficulty decreasing the dimensions of our products since, in the future,
we may change our supply arrangements to assume more product manufacturing
responsibilities. We may subcontract for wafer manufacturing, assembly and test
rather than purchase finished products. However, there are additional risks
associated with manufacturing, including variances in production yields, the
ability to obtain adequate test and assembly capacity at reasonable cost and
other general risks associated with the manufacture of semiconductors. We may
also enter into volume purchase agreements that require us to commit to minimum
purchase levels and which may require up-front investments. If we fail to
effectively assume greater manufacturing responsibilities or manage volume
purchase arrangements, our business, financial condition and results of
operations will suffer. See "Business -- Manufacturing."

NETWORK AND STORAGE EQUIPMENT PRICES TYPICALLY DECREASE.

   Average selling prices in the networking, storage and semiconductor
industries have rapidly declined due to many factors, including:

   o Rapidly changing technologies;

   o Price-performance enhancements; and

   o Product obsolescence.





                                       9
<PAGE>   10

   The decline in the average selling prices of our products may cause
substantial fluctuations in our operating results. We anticipate that the
average selling prices of our products will decrease in the future due to
product introductions by our competitors, price pressures from significant
customers and other factors. Therefore, we must continue to develop and
introduce new products that incorporate features which we can sell at higher
prices. If we fail to do so, our revenues and gross margins could decline, which
would harm our business, financial condition and results of operations.


WE FACE PRODUCT RETURN, PRODUCT LIABILITY AND PRODUCT DEFECT RISKS.

   Complex products such as ours frequently contain errors, defects and bugs
when first introduced or as new versions are released. We have discovered such
errors, defects and bugs in the past. Delivery of products with production
defects or reliability, quality or compatibility problems could hinder market
acceptance of our products. This could damage our reputation and harm our
ability to attract and retain customers. Errors, defects or bugs could also
cause interruptions, delays or a cessation of sales to our customers. We would
have to expend significant capital and resources to remedy these problems.
Errors, defects or bugs could be discovered in our new products after we begin
commercial production of them, despite testing by us and our suppliers and
customers. This could result in additional development costs, loss of, or delays
in, market acceptance, diversion of technical and other resources from our other
development efforts, claims by our customers or others against us or the loss of
credibility with our current and prospective customers. Any such event would
harm our business, financial condition and results of operations.


WE FACE ORDER AND SHIPMENT UNCERTAINTIES.

   We generally make our sales under individual purchase orders that may be
canceled or deferred by customers on short notice without significant penalty,
if any. Cancellation or deferral of product orders could cause us to hold excess
inventory, which could harm our profit margins and restrict our ability to fund
our operations. We recognize revenue upon shipment of products to our customers,
net of an allowance for estimated returns. An unanticipated level of returns
could harm our business, financial condition and results of operations.


WE DEPEND UPON KEY PERSONNEL.

   Our success greatly depends on the continued contributions of our key
management and other personnel, many of whom would be difficult to replace. We
do not have employment contracts with any of our key personnel, nor do we
maintain any key man life insurance on any of our personnel. Several members of
our management team have joined us in the last 12 months. It may be difficult
for us to integrate new members of our management team. We must also attract and
retain experienced and highly skilled engineering, sales and marketing and
managerial personnel. Competition for such personnel is intense in the
geographic areas and market segments in which we compete, and we may not be
successful in hiring and retaining such people. If we lose the services of any
key personnel, or cannot attract or retain qualified personnel, particularly
engineers, our business, financial condition and results of operations could
suffer. In addition, companies in technology industries whose employees accept
positions with competitors have in the past claimed that their competitors have
engaged in unfair competition or hiring practices. We could receive such claims
in the future as we seek to hire qualified personnel. These claims could result
in material litigation. We could incur substantial costs in defending against
any such claims, regardless of their merits.


OUR RAPID GROWTH MAY STRAIN OUR OPERATIONS.

   We have experienced a period of rapid growth and expansion which has placed,
and continues to place, a significant strain on our resources. To accommodate
this growth, we must implement a variety of new and upgraded operational and
financial systems, procedures and controls, including the improvement of the
accounting and other internal management systems which were provided by Stac.
This may require substantial management effort, and our efforts to do so may not
be successful. In addition, we have had to hire additional employees to
accommodate this growth and our product development activities. This has
resulted in increased responsibilities for our management. Our systems,
procedures and controls may not be adequate to support our operations. If we
fail to improve our operational, financial and management information systems,
or to hire, train, motivate or manage our employees, our business, financial
condition and results of operations could suffer.


OUR PRODUCTS ARE SUBJECT TO EXPORT RESTRICTIONS.

   The encryption algorithms embedded in our products are a key element of our
packet processor architecture. These products are subject to U.S. Department of
Commerce export control restrictions. Our network equipment customers may only
export products incorporating encryption technology if they obtain an export
license. These U.S. export laws also prohibit the export of encryption products
to a number





                                       10
<PAGE>   11

of countries deemed by the U.S. to be hostile. U.S. export regulations regarding
the export of encryption technology require either a transactional export
license or the granting of Department of Commerce commodity jurisdiction. These
restrictions may make foreign competitors facing less stringent controls on
their products more competitive in the global market than our network equipment
customers. The U.S. government may not approve any pending or future export
license requests. In addition, the list of products and countries for which
export approval is required, and the regulatory policies with respect thereto,
could be revised, and laws limiting the domestic use of encryption could be
enacted. The sale of our packet processors could be harmed by the failure of our
network equipment customers to obtain the required licenses or by the costs of
compliance.


WE FACE RISKS ASSOCIATED WITH OUR INTERNATIONAL BUSINESS ACTIVITIES.

   We sell most of our products to customers in the United States. If our
international sales increase, we may encounter risks inherent in international
operations. All of our international sales to date are denominated in U.S.
dollars. As a result, if the value of the U.S. dollar increases relative to
foreign currencies, our products could become less competitive in international
markets. We also obtain some of our manufacturing, assembly and test services
from suppliers located outside the United States. International business
activities could be limited or disrupted by any of the following:

   o The imposition of governmental controls;

   o Export license requirements;

   o Restrictions on the export of technology;

   o Currency exchange fluctuations;

   o Political instability;

   o Financial and stock market dislocations;

   o Trade restrictions; and

   o Changes in tariffs.

   Demand for our products also could be harmed by seasonality of international
sales and economic conditions in our primary overseas markets. These
international factors could harm future sales of our products to international
customers and our business, financial condition and results of operations in
general.


YEAR 2000 ISSUES MAY HARM OUR BUSINESS.

   Many existing computer systems and applications, and other control devices,
use only two digits to identify a year. These programs were designed without
considering the impact of the upcoming change in the century. If not corrected,
many computer software applications could fail or create erroneous results by,
at or beyond the year 2000. We utilize software, computer technology and other
services internally developed and provided by third-party vendors that may fail
due to the Year 2000 phenomenon, such as financial systems (including accounts
payable and payroll modules), customer services, networks and telecommunications
equipment and end products. We rely on external systems of business enterprises
such as customers, suppliers, financial organizations, and on governmental
entities, both domestic and international, for accurate exchange of data. Even
if our internal systems are not materially affected by Year 2000 issues, we
could be affected by disruptions in the operation of entities with which we
interact. Despite our efforts to address the Year 2000 impact on our internal
systems and business operations, this impact could disrupt our business and our
business, financial condition and results of operations could suffer. Our
efforts to address this issue are described in more detail in "Management's
Discussion and Analysis of Financial Condition and Results of Operations -- Year
2000 Issues."

   Customers' purchasing plans could be affected by Year 2000 issues as they may
need to expend significant resources to correct their existing systems. This
situation may result in reduced funds available to purchase our products.

WE FACE RISKS ASSOCIATED WITH ACQUISITIONS.



                                       11
<PAGE>   12


   We continually evaluate strategic acquisitions of businesses and technologies
that would complement our product offerings or enhance our market coverage or
technological capabilities. We are not currently negotiating any acquisitions,
but we may make acquisitions in the future. Future acquisitions could be
effected without stockholder approval, and could cause us to dilute shareholder
equity, incur debt and contingent liabilities and amortize acquisition expenses
related to goodwill and other intangible assets, any of which could harm our
operating results and/or the price of our Common Stock.
Acquisitions entail numerous risks, including:

   o Difficulties in assimilating acquired operations, technologies and
     products;

   o Diversion of management's attention from other business concerns;

   o Risks of entering markets in which we have little or no prior experience;
     and

   o Loss of key employees of acquired organizations.

   We may not be able to successfully integrate businesses, products,
technologies or personnel that we acquire. If we fail to do so, our business,
financial condition and results of operations could suffer.

   In addition, if we are a party to a transaction or series of transactions
that result in 50% or more of our outstanding stock being transferred to one or
more persons, the IRS may claim that our spin-off from Stac was a taxable event
to Stac and its stockholders. Under the Tax Allocation and Indemnity Agreement
that we entered into with Stac, we may be obligated to pay the taxes of Stac if
we caused the spin-off to be a taxable event. Our cash flows, business,
financial condition and results of operations would suffer if we became liable
for any such tax liability. See "Recent Spin-Off and Relationship with Stac."


THE CYCLICALITY OF THE SEMICONDUCTOR INDUSTRY MAY HARM OUR BUSINESS.

   The semiconductor industry has experienced significant downturns and wide
fluctuations in supply and demand. The industry has also experienced significant
fluctuations in anticipation of changes in general economic conditions. This has
caused significant variances in product demand, production capacity and rapid
erosion of average selling prices. Industry-wide fluctuations in the future
could harm our business, financial condition and results of operations.


WE FACE CERTAIN RISKS AS A RESULT OF OUR SPIN-OFF FROM STAC.

   On December 8, 1998, Stac received a private letter ruling from the Internal
Revenue Service ("IRS") stating, among other things, that the distribution of
our Common Stock held by Stac on December 16, 1998 to Stac stockholders would
not result in recognition of taxable income or gain to Stac or its stockholders
under Section 355 of the Internal Revenue Code of 1986, as amended ("Code")
(except to the extent of cash received in lieu of fractional shares). A tax
ruling, while generally binding upon the IRS, is subject to certain factual
representations and assumptions. If the factual representations and assumptions
made by Stac were incorrect in a material respect, the rights of taxpayers to
rely on a tax ruling or Stac's ability to rely on the tax opinion would be
jeopardized.

   If the distribution were not to constitute a tax-free spin-off, then Stac
would be treated as recognizing a taxable gain equal to the difference between
(i) the fair market value of our Common Stock that was distributed to Stac
stockholders on December 16, 1998 and (ii) Stac's adjusted basis of such Common
Stock. In addition, under the consolidated tax return rules of the Code, each
member of Stac's consolidated group (including Hi/fn) would be severally liable
for such tax liability. Furthermore, in connection with the spin-off we entered
into a Tax Allocation and Indemnity Agreement with Stac whereby each of us
agreed that if either party took actions after the spin-off that caused Section
355(e) of the Code to apply to Hi/fn's Common Stock, then whichever party first
caused Section 355(e) of the Code to apply to Hi/fn's Common Stock would be
obligated to bear all taxes of Stac resulting from such action. Under recently
enacted Section 355(e) of the Code, if the spin-off were considered to be part
of a plan or series of related transactions (a "Plan") in which, after the
spin-off, a 50% or greater interest in Hi/fn or Stac was acquired by one or more
persons, the IRS would claim that the spin-off was taxable at the corporate
level. Although neither we nor Stac believes the spin-off is part of a Plan to
effect a 50% change in ownership of either Hi/fn or Stac, the IRS has issued no
guidance on the definition of a Plan and for the first two years following the
spin-off, any cumulative 50% change of ownership within the two-year period will
be rebuttably presumed to be the result of a Plan. Our cash flows, business,
financial condition and results of operations would suffer if we became liable
for any such tax liability. See "Recent Spin-Off and Relationship with Stac."


MANAGEMENT AND CERTAIN STOCKHOLDERS CAN EXERCISE SIGNIFICANT
INFLUENCE OVER HI/FN.





                                       12
<PAGE>   13

   The present executive officers and directors and certain other stockholders
will beneficially own approximately 28% of our outstanding Common Stock
immediately following this offering. These stockholders, if acting together,
would be able to significantly influence all matters requiring approval of our
stockholders, including the election of directors and the approval of mergers or
other business combination transactions. See "Principal and Selling
Stockholders."


FUTURE SALES OF SHARES COULD AFFECT OUR STOCK PRICE.

If our stockholders sell substantial amounts of our Common Stock (including
shares issued upon the exercise of outstanding options) in the public market
following this offering, the market price of our Common Stock could fall. Such
sales also might make it more difficult for us to sell equity securities in the
future at a time and price we deem appropriate. Upon completion of this
offering, we will have outstanding 8,156,781 shares of Common Stock (based upon
shares outstanding as of December 31, 1998) assuming no exercise of the
underwriters' over-allotment option and no exercise of outstanding options after
December 31, 1998. Of these shares, 6,560,893 are currently eligible for sale in
the public market. After the lock-up agreements with the underwriters expire 120
days from the date of this prospectus (or earlier if the underwriters terminate
the lock-up agreements before the lock-up period ends), an additional 1,595,888
shares will be eligible for public sale, subject to the volume limitations and
other conditions of Rule 144. These share numbers exclude 1,545,887 shares
subject to outstanding stock options and 947,262 shares reserved for future
issuance under our stock plans as of December 31, 1998.


OUR STOCK PRICE MAY BE VOLATILE.

   The market price of our Common Stock has fluctuated in the past and is likely
to fluctuate in the future. In addition, the securities markets have experienced
significant price and volume fluctuations and the market prices of the
securities of technology-related companies including networking, storage and
semiconductor companies have been especially volatile. Such fluctuations can
result from:

   o Quarterly variations in operating results;

   o Announcements of new products by us or our competitors;

   o The gain or loss of significant customers;

   o Changes in analysts' estimates;

   o Short-selling of our Common Stock; and

   o Events affecting other companies that investors deem to be comparable to
     us.

   Investors may be unable to resell their shares of our Common Stock at or
above the offering price. In the past, companies that have experienced
volatility in the market price of their stock have been the object of securities
class action litigation. If we were the object of securities class action
litigation, it could result in substantial costs and a diversion of management's
attention and resources. See "Price Range of Common Stock."


OUR CERTIFICATE OF INCORPORATION AND BYLAWS AND DELAWARE LAW CONTAIN PROVISIONS
THAT COULD DISCOURAGE A TAKEOVER.

   Our Certificate of Incorporation and Bylaws contain provisions which may
discourage takeover attempts, including transactions in which stockholders might
receive a premium for their shares. This may limit stockholders' ability to
approve a transaction that stockholders may think is in their best interests.
Such provisions include:

   o A requirement that certain procedures must be followed before matters can
     be proposed for consideration at meetings of our stockholders;

   o The ability of the Board of Directors to fix the rights and preferences of
     and issue 10,000,000 shares of Preferred Stock without stockholder action;
     and

   o A classified Board of Directors.





                                       13
<PAGE>   14

   Provisions of the Delaware General Corporation Law also restrict certain
business combinations with interested stockholders. The provisions of our
Certificate of Incorporation and Bylaws and of Delaware law are intended to
encourage potential acquirers to negotiate with us and allow the Board the
opportunity to consider alternative proposals in the interest of maximizing
stockholder value. However, such provisions may also discourage acquisition
proposals or delay or prevent a change in control, which could harm our stock
price. See "Description of Capital Stock."

   In addition, if we are a party to a transaction or series of transactions
that result in 50% or more of our outstanding stock being transferred to one or
more persons, the IRS may claim that our spin-off from Stac was a taxable event
to Stac and its stockholders. Under the Tax Allocation and Indemnity Agreement
that we entered into with Stac, we may be obligated to pay the taxes of Stac if
we caused the spin-off to be a taxable event. Our cash flows, business,
financial condition and results of operations would suffer if we became liable
for any such tax liability. See "Recent Spin-Off and Relationship with Stac."


MANAGEMENT HAS BROAD DISCRETION IN THE USE OF PROCEEDS.

   After repaying the $5.0 million short-term loan we received from Stac prior
to our spin-off from Stac, we plan to use the proceeds from this offering
primarily for working capital and general corporate purposes. Therefore, we will
have discretion as to how we will spend the proceeds, which could be in ways
with which the stockholders may not agree. We cannot predict that the proceeds
will be invested to yield a favorable return. See "Use of Proceeds."


WE DO NOT PLAN TO PAY CASH DIVIDENDS ON OUR COMMON STOCK.

   We intend to retain any future earnings to finance the growth and development
of our business. We no not plan to pay cash dividends in the foreseeable future.
See "Dividend Policy."



                              SELLING STOCKHOLDERS

The selling stockholders acquired beneficial ownership of all the shares listed
below through stock options granted under the Company's 1996 Equity Incentive
Plan. The following table shows, in each case as of December 16, 1998:

   o the name of each selling stockholder;

   o how many shares the selling stockholder beneficially owns;

   o how many shares the selling stockholder can resell under this prospectus;
     and

   o assuming a selling stockholder sells all shares listed next to his or her
     name, how many shares the selling stockholder will beneficially own after
     completion of the offering.

   The Company may amend or supplement this prospectus from time to time in the
future to update or change this list of selling stockholders and shares which
may be resold.

<TABLE>
<CAPTION>
                                                 SHARES WHICH MAY
                                   SHARES          BE SOLD UNDER
                                BENEFICIALLY            THIS               SHARES BENEFICIALLY OWNED
     SELLING STOCKHOLDER          OWNED(1)           PROSPECTUS                  AFTER OFFERING
     -------------------        ------------     ----------------          -------------------------
<S>                                <C>                 <C>                           <C>
       Darren Bell(2)               7,291               3,125                        4,166
       Mark Birman(2)              35,000              35,000                            0
        John Brown(2)               6,927               5,104                        1,823
      Chih-Ming Chen(2)             6,000               4,666                        1,334
   Jeffrey Chrzanowski(3)           2,108               2,108                            0
        Ian C. Clark                  100                 100                            0
      Jennifer C. Clark               100                 100                            0
      Kimberly M. Clark               100                 100                            0
</TABLE>





                                       14
<PAGE>   15

<TABLE>
<S>                                <C>                 <C>                           <C>
       Timothy Clark(2)             2,356               2,356                            0
     Collmeyer Family Trust        93,750              93,750                            0
    Stephen Craig Collmeyer        18,750              18,750                            0
     Stephen A. Farnow(5)          47,076              39,750                        7,326
      Sandra Ferguson(2)            1,666                 100                        1,566
       Robert Friend(2)             5,624               4,375                        1,249
      Jonathan Levitt(3)            2,500               2,500                            0
        Robert Lutz(2)             21,232               5,000                       16,232
          Davis Ly(3)               1,875               1,875                            0
     Robert A. Monsour(6)          56,250              56,250                            0
       Alexandria Moore                10                  10                            0
      Chase Mathew Moore               10                  10                            0
         Dominic Moore                 10                  10                            0
        J. Hunter Moore                10                  10                            0
        Karla Moore (3)               312                 312                            0
     Barbara S. Newlon(2)           2,291                 500                        1,791
       Cheryl Poland(3)            16,862              16,862                            0
     Quantum College Trust         75,000              75,000                            0
      Cheryl Anne Sankary          18,750              18,750                            0
      Michael Scruggs(2)           12,135               4,687                        7,448
        Amy Lea Smiley             18,750              18,750                            0
      William Tanksley(2)           1,750                 758                          992
        Kathryn Walker             12,500              12,500                            0
Paul Walker and Leslie Walker,     11,432               9,800                        1,632
       Joint Tenants(2)
     William R. Walker(7)          25,000              25,000                            0
    Dale and Anita Waltz(2)        27,083              12,500                       14,583
      Brandon James Waluk              52                  52                            0
      Dominique Waluk(2)            2,356               1,939                          417
       Jan Michael Waluk               52                  52                            0
        Ann Wehling(3)                750                 750                            0
          Susan White              12,500              12,500                            0
        Walt Wolman(2)             11,626               5,016                        6,610
         Dixon Wong(2)             28,125              16,664                       11,461
</TABLE>

---------------

(1) The Company has calculated the number and percentage of shares each selling
    stockholder "beneficially owns" in accordance with Rule 13d-3 under the
    Exchange Act. Beneficial ownership as defined in Rule 13d-3 does not
    necessarily indicate beneficial ownership for any other purpose. Under Rule
    13d-3, a person beneficially owns all shares as to which they have either
    sole or shared voting power or sole or shared investment power, as well as
    all shares which they have the right to acquire within 60 days of the
    calculation date by exercising any stock option or other right. Since the
    list above speaks as of April 15, 1999, beneficial ownership therefore
    includes all shares which the selling stockholder has the right to acquire
    within 60 days of April 15, 1999 (i.e. on or before June 14, 1999).

(2) As of the date of this prospectus, the selling stockholder is employed by
    the Company.

(3) The selling stockholder was previously employed by the Company.

(4) As of the date of this prospectus, Mr. Farnow serves as the Company's Vice
    President of Operations.

(5) As of the date of this prospectus, Mr. Monsour serves as the Company's Vice
    President of Marketing.





                                       15
<PAGE>   16

(6) As of the date of this prospectus, Mr. Walker serves as the Company's Vice
    President of Finance, Chief Financial Officer and Secretary.

(7) The selling stockholder received shares by means of a gift.


                              PLAN OF DISTRIBUTION

   The Company has been advised by the selling stockholders that they intend to
sell all or a portion of the shares offered hereby from time to time in the
Nasdaq National Market and that sales will be made at prices prevailing in the
Nasdaq National Market at the times of such sales. The selling stockholders may
also make private sales directly or through a broker or brokers, who may act as
agent or as principal. Further, the selling stockholders may choose to dispose
of the shares offered hereby by gift to a third party or as a donation to a
charitable or other non-profit entity. In connection with any sales, the selling
stockholders and any brokers participating in such sales may be deemed to be
underwriters within the meaning of the Securities Act.

   Any broker-dealer participating in such transactions as agent may receive
commissions from the selling stockholders (and, if such broker acts as agent for
the purchaser of such shares, from such purchaser). Broker-dealers may agree
with the selling stockholders to sell a specified number of shares at a
stipulated price per share, and, to the extent such a broker-dealer is unable to
do so acting as agent for the selling stockholders, to purchase as principal any
unsold shares at the price required to fulfill the broker-dealer commitment to
the selling stockholders. Broker-dealers who acquire shares as principal may
thereafter resell such shares from time to time in transactions (which may
involve crosses and block transactions and which may involve sales to and
through other broker-dealers, including transactions of the nature described
above) in the over-the-counter market, in negotiated transactions or otherwise
at market prices prevailing at the time of sale or at negotiated prices, and in
connection with such resales may pay to or receive from the purchasers of such
shares commissions computed as described above.

   The Company has advised the selling stockholders that Regulation M
promulgated under the Exchange Act may apply to sales in the market and has
informed them of the possible need for delivery of copies of this prospectus.
The selling stockholders may indemnify any broker-dealer that participates in
transactions involving the sale of the shares against certain liabilities,
including liabilities arising under the Securities Act. Any commissions paid or
any discounts or concessions allowed to any such broker-dealers, and, if any
such broker-dealers purchase shares as principal, any profits received on the
resale of such shares, may be deemed to be underwriting discounts and
commissions under the Securities Act.

   Upon the Company's being notified by the selling stockholders that any
material arrangement has been entered into with a broker-dealer for the sale of
shares through a cross or block trade, a supplemental prospectus will be filed
under Rule 424(c) under the Securities Act, setting forth the name of the
participating broker-dealer(s), the number of shares involved, the price at
which such shares were sold by the selling stockholders, the commissions paid or
discounts or concessions allowed by the selling stockholders to such
broker-dealer(s), and where applicable, that such broker-dealer(s) did not
conduct any investigation to verify the information set out in this prospectus.

   Any securities covered by this prospectus which qualify for sale pursuant to
Rules 144 and 701 under the Securities Act may be sold under Rule 144 rather
than pursuant to this prospectus. In general, under Rule 144 as currently in
effect, a person (or persons whose shares are aggregated), including any person
who may be deemed to be an "affiliate" of the Company, is entitled to sell
within any three month period "restricted shares" beneficially owned by him or
her in an amount that does not exceed the greater of (i) 1% of the then
outstanding shares of Common Stock or (ii) the average weekly trading volume in
shares of Common Stock during the four calendar weeks preceding such sale,
provided that at least one year has elapsed since such shares were acquired from
the Company or an affiliate of the Company. Sales are also subject to certain
requirements as to the manner of sale, notice and availability of current public
information regarding the Company. However, a person who has not been an
"affiliate" of the Company at any time within three months prior to the sale is
entitled to sell his or her shares without regard to the volume limitations or
other requirements of Rule 144, provided that at least one year has elapsed
since such shares were acquired from the Company or an affiliate of the Company.
In general, under Rule 701 as currently in effect, any employee, consultant or
advisor of the Company who purchases shares from the Company in connection with
a compensatory stock or option plan or other written agreement related to
compensation is eligible to resell such shares in reliance on Rule 144, but
without compliance with certain restrictions contained in Rule 144.

   There can be no assurance that the selling stockholders will sell any or all
of the shares of Common Stock offered hereunder.





                                       16
<PAGE>   17

                            INFORMATION INCORPORATED BY REFERENCE

   This prospectus incorporates by reference the following documents and
information, all of which the Company has filed in the past with the Securities
and Exchange Commission ("SEC"):

o  hi/fn's Registration Statement on Form 10 (File No. 0-24765) filed December
   8, 1998.

o  hi/fn's Registration Statement on Form S-8 (Registration No. 333-68917) filed
   December 15, 1998.

o  hi/fn's Registration Statement on Form S-8/S-3 (Registration No. 333-69149)
   filed December 17, 1999.

o  hi/fn's Quarterly Report on Form 10-Q filed February 16, 1999.

o  hi/fn's Registration Statement on Form S-3 (File No. 333-72537) filed
   February 17, 1999 as declared effective on March 25, 1999.


   Unless the Company has filed a post-effective amendment to the registration
statement under the Securities Act which contains this prospectus indicating
that all of the shares have been sold or which deregisters all shares then
remaining unsold, all documents which the Company subsequently files under
Section 13(a), 13(c), 14 or 15(d) of the Exchange Act shall be deemed to be
incorporated by reference in this prospectus and to be part of this prospectus
from the date of filing of such documents.

   The Company will provide without charge to each person to whom a copy of this
prospectus is delivered, upon written or oral request, a copy of the information
that has been or may be incorporated by reference in this prospectus. Direct any
request for such copies by writing or telephoning us at the following address:
hi/fn, inc., 750 University Avenue, Los Gatos, California 95032; the telephone
number is (408) 399-3500.


                   WHERE TO FIND MORE INFORMATION ABOUT HI/FN

   The Company is required to file special reports, proxy statements and other
information with the SEC. You may read and copy any document we file at the
SEC's public reference room at 450 Fifth Street, NW, Washington, D.C. 20549.
Please call the SEC at 1-800-SEC-0330 for further information on the operation
of the public reference room. Our SEC filings are also available to the public
from the SEC's Web site at http://www.sec.gov.

   This prospectus contains information concerning the Company and the sale of
its Common Stock by the Selling Stockholders, but does not contain all the
information set forth in the Registration Statement on Form S-8/S-3 which the
Company has filed with the SEC under the Securities Act. Statements made in this
Prospectus as to the contents of any referenced contract, agreement or other
document are not necessarily complete, and such statement shall be deemed
qualified in its entirety by reference thereto. The Registration Statement,
including various exhibits, may be obtained upon payment of the fee prescribed
by the SEC, or may be examined without charge at the SEC's office in Washington,
D.C.


            INDEMNIFICATION AND THE SEC'S POSITION ON ENFORCEABILITY

   Section 145 of the Delaware General Corporation Law authorizes a court to
award, or a corporation's Board of Directors to grant, indemnity to directors
and officers. This may under certain circumstances include indemnification for
liabilities arising under the Securities Act as well as for expenses incurred in
that regard. The Company's Certificate of Incorporation and Bylaws provide for
the indemnification of present and former directors, officers, employees and
agents of the Company to the maximum extent permitted by the Delaware General
Corporation Law. The Company has also entered into, or will enter into,
Indemnification Agreements with its officers and directors.

   Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers or persons controlling the Company
pursuant to the foregoing provisions, the Company has been informed that in the
opinion of the SEC such indemnification is against public policy as expressed in
the Securities Act and is therefore unenforceable.





                                       17
<PAGE>   18

                                   HI/FN, INC.

                       REGISTRATION STATEMENT ON FORM S-8

                                     PART II

                 INFORMATION REQUIRED IN REGISTRATION STATEMENT

ITEM 1. INCORPORATION OF DOCUMENTS BY REFERENCE.

        All documents subsequently filed by the Company pursuant to Sections
13(a), 13(c), 14 and 15(d) of the Exchange Act, prior to the filing of a
post-effective amendment which indicates that all securities registered have
been sold or which deregisters all securities then remaining unsold, shall be
deemed to be incorporated by reference in this Registration Statement and to be
part hereof from the date of filing of such documents.

        The following documents and information previously filed with the
Securities and Exchange Commission by hi/fn, inc. (the "Company") are hereby
incorporated by reference in this Registration Statement:

        (1) The Company's Registration Statement Form 10 filed on August 7,
            1998, as amended.

        (2) The Company's Registration Statement on Form S-8 (File No.
            333-68917) filed on December 15, 1998.

        (3) The Company's Registration Statement on Form S-8/S-3 (File No.
            333-69149) filed on December 17, 1998.

        (4) The Company's Quarterly Report on Form 10-Q filed on February 16,
            1999.

        (5) The Company's Registration Statement on Form S-3 (File No.
            333-72537) filed February 17, 1999 and declared effective on March
            25, 1999.

















                                       18


<PAGE>   19

                                   SIGNATURES


   Pursuant to the requirements of the Securities Act of 1933, as amended, the
Company, hi/fn, inc., a corporation organized and existing under the laws of the
State of Delaware, certifies that it has reasonable grounds to believe that it
meets all of the requirements for filing on Form S-8/S-3 and has duly caused
this Registration Statement to be signed on its behalf by the undersigned,
thereunto duly authorized, in the City of Los Gatos, State of California, on
this 28th day of April, 1999.



                                      hi/fn, inc.


                                      By: /s/ Raymond J. Farnham
                                         -----------------------------------
                                          Raymond J. Farnham
                                          President and Chief Executive Officer



















                                       19

<PAGE>   20

                                POWER OF ATTORNEY


   KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints Raymond J. Farnham and William R. Walker, and
each of them, as his or her attorney-in-fact, with full power of substitution in
each, for him or her in any and all capacities to sign any amendments to this
Registration Statement on Form S-8/S-3, and to file the same, with exhibits
thereto and other documents in connection therewith, with the Securities and
Exchange Commission, hereby ratifying and confirming all that said
attorney-in-fact, or his substitutes, may do or cause to be done by virtue
hereof.

   Pursuant to the requirements of the Securities Act of 1933, as amended, this
Registration Statement has been signed below by the following persons in the
capacities and on the dates indicated.

<TABLE>
<CAPTION>

               SIGNATURE                                  TITLE                                DATE
               ---------                                  -----                                ----

<S>                                      <C>                                              <C>
/s/ Raymond J. Farnham                   President and Chief Executive Officer            April 28, 1999
------------------------------------     (Principal Executive Officer), Director
Raymond J. Farnham                       and Chairman of the Board


/s/ William R. Walker                    Vice President of Finance and Chief              April 28, 1999
------------------------------------     Financial Officer (Principal Financial and
William R. Walker                        Accounting Officer) and Secretary


/s/ Douglas L. Whiting                   Chief Technology Officer and Director            April 28, 1999
------------------------------------
Douglas L. Whiting


/s/ Taher Elgamal                                      Director                           April 28, 1999
------------------------------------
Taher Elgamal, Ph.D.


/s/ Robert W. Johnson                                  Director                           April 28, 1999
------------------------------------
Robert W. Johnson


/s/ Albert E. Sisto                                    Director                           April 28, 1999
------------------------------------
Albert E. Sisto
</TABLE>










                                       20


<PAGE>   21

                                INDEX TO EXHIBITS



<TABLE>
<CAPTION>
                                                                              SEQUENTIALLY
EXHIBIT                                                                         NUMBERED
NUMBER                                 DESCRIPTION                                PAGE
-------                                -----------                            -------------
<S>        <C>                                                                  <C>
  5.1      Opinion of Counsel as to legality of securities being registered

 23.1      Consent of Independent Accountants

 23.2      Consent of Counsel (contained in Exhibit 5.1)

 24.1      Power of Attorney (see Page II-3)
</TABLE>























                                       21
[{"type": "S-8", "sequence": "1", "description": "FORM S-8", "secsgml_size_bytes": 76064}]
{"company-data": {"conformed-name": "HI/FN INC", "cik": "0001065246", "assigned-sic": "3674", "irs-number": "330732700", "state-of-incorporation": "DE", "fiscal-year-end": "0930"}, "filing-values": {"form-type": "S-8", "act": "33", "file-number": "333-77331", "film-number": "99604672"}, "business-address": {"street1": "2105 HAMILTON AVE", "street2": "STE 230", "city": "SAN JOSE", "state": "CA", "zip": "95125", "phone": "4085588066"}, "mail-address": {"street1": "2105 HAMILTON AVE", "street2": "STE 230", "city": "SAN JOSE", "state": "CA", "zip": "95125"}}
1
    As filed with the Securities and Exchange Commission on April 29, 1999

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

                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                  FORM S-8/S-3
                             REGISTRATION STATEMENT
 (Including registration of shares for resale by means of a Form S-3 Prospectus)
                                      Under
                           THE SECURITIES ACT OF 1933

                                   HI/FN, INC.
               (Exact name of issuer as specified in its charter)

              DELAWARE                              33-0732700
     (State of Incorporation)            (IRS Employer Identification No.)

                              750 University Avenue
                           Los Gatos, California 95032
                    (Address of principal executive offices)

                           1996 EQUITY INCENTIVE PLAN
                            (Full title of the plan)

                               Raymond J. Farnham
                       Chief Executive Officer hi/fn, inc.
                              750 University Avenue
                           Los Gatos, California 95032
                     (Name and address of agent for service)

                                 (408) 399-3500
          (Telephone number, including area code, of agent for service)

                                    Copy to:

                             Steven E. Bochner, Esq.
                        WILSON SONSINI GOODRICH & ROSATI
                               650 Page Mill Road
                        Palo Alto, California 94304-1050

                         CALCULATION OF REGISTRATION FEE
=============================================================================================================
                                                      AMOUNT        PROPOSED MAXIMUM            AMOUNT OF
           TITLE OF SECURITIES                         TO BE         OFFERING PRICE           REGISTRATION
            TO BE REGISTERED                        REGISTERED        PER SHARE(1)                 FEE
-------------------------------------------------------------------------------------------------------------
Common Stock, par value $0.001 per share
  Issued under 1996 Equity Incentive Plan            41,543           $1,726,630.94             $481.00
=============================================================================================================
(1) The price of $41.56 per share, which was the average of the high and low
    prices of the Registrant's Common Stock on the Nasdaq National Market on
    April 26, 1999, is set forth solely for the purpose of calculating the
    registration fee in accordance with Rule 457(c) of the Securities Act of
    1933, as amended.

================================================================================
2

                                EXPLANATORY NOTE

   This Registration Statement on Form S-8/S-3 ("Registration Statement") is
being filed pursuant to General Instruction E to Form S-8 for the purpose of
registering these additional shares of Common Stock, which have been issued
under hi/fn, inc.'s 1996 Equity Incentive Plan and are of the same class of
Common Stock for which a registration statement on Form S-8 (Registration No.
333-68917) and a registration statement on Form S-8/S-3 (Registration No.
333-69149) relating to such 1996 Equity Incentive Plan are effective. The
contents of hi/fn, inc.'s Registration Statement on Form S-8 (Registration No.
333-68917) and hi/fn, inc.'s registration statement on Form S-8/S-3
(Registration No. 333-69149) are hereby incorporated by reference. An aggregate
of 41,543 shares are being registered hereby; the remaining 465,898 shares were
registered on the Registration Statement on Form S-8/S-3 (Registration No.
333-69149) filed on December 17, 1998.

                                       2
3

                                RESALE PROSPECTUS

                                   HI/FN, INC.

                      UP TO 507,441 SHARES OF COMMON STOCK

         WHICH THE SELLING STOCKHOLDERS MAY RESELL UNDER THIS PROSPECTUS

                                ----------------

   The stockholders of hi/fn, inc. ("hi/fn" or the "Company") listed below may
offer and resell up to 507,441 shares of hi/fn common stock under this
prospectus, for their own accounts. The Company will not receive any proceeds
from the sale of the shares.

   The Company issued these shares to the selling stockholders under the
Company's 1996 Equity Incentive Plan.

   The selling stockholders may offer their hi/fn common stock through public or
private transactions, at prevailing market prices or at privately negotiated
prices. Such future prices are not currently known.

   The Company's common stock is quoted on the Nasdaq National Market under the
symbol "HIFN." The last reported sale price of the Common Stock of hi/fn on the
Nasdaq National Market on April 27, 1999 was $48.0625.

                       CONSIDER CAREFULLY THE RISK FACTORS
                     BEGINNING ON PAGE 3 IN THIS PROSPECTUS.

                                ----------------

NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR PASSED UPON THE
ADEQUACY OR ACCURACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.

                                ----------------

                  The date of this prospectus is April 28, 1999

                                       3
4

                                TABLE OF CONTENTS
PAGE
                                                                                ----
hi/fn                                                                   2
         Forward-Looking Statements                                              2
         Risk Factors                                                            3
         Selling Stockholders                                                    8
         Plan of Distribution                                                   10
         Information Incorporated by Reference                                  11
         Where to Find More Information About hi/fn                             12
         Indemnification and the SEC's Position on Enforceability               12
HI/FN

   The Company's principal executive offices are located at 750 University
Avenue, Los Gatos, California 95302. The telephone number at that location is
(408) 399-3500.

   We design, develop and market high-performance multi-protocol packet
processors -- semiconductor devices designed to enable secure, high-bandwidth
network connectivity and efficient storage of business information. Our packet
processor products perform the computation-intensive tasks of compression and
encryption/compression and public key cryptography, providing our customers with
high-performance, interoperable implementations of a wide variety of
industry-standard networking and storage protocols. Our products are used in
networking and storage equipment like routers, and back-up storage devices.

   In this prospectus, unless indicated otherwise, "hi/fn," the "Company," "we,"
"us" and "our" refer to hi/fn, inc.

                           FORWARD-LOOKING STATEMENTS

   This prospectus and the documents incorporated herein by reference contain
forward-looking statements. The Company bases these statements on its current
expectations, estimates and projections about its industry. Either the beliefs
of management, or assumptions made by management, form the basis for those
expectations, estimates and projections. The safe harbor created by Section 27A
of the Securities Act of 1933, as amended (the "Securities Act") and Section 21E
of the Securities Exchange Act of 1934, as amended (the "Exchange Act")
generally protects the Company and the selling stockholders from liability for
these statements. You can often recognize such forward-looking statements by
words such as "anticipates," "expects," "intends," "plans," "believes," "seeks,"
"estimates," variations of such words, and similar expressions.

   These forward-looking statements do not guarantee future performance and are
subject to risks, uncertainties and assumptions that are difficult to predict.
The Risk Factors section following this paragraph sets forth some of such risks
and uncertainties. The documents incorporated by reference may also set forth
risks and uncertainties. These risks and uncertainties could cause actual
results to differ materially and adversely from those discussed in the
forward-looking statements. The Company undertakes no obligation to publicly
update any of these forward-looking statements to reflect new information or
future events.

                                  RISK FACTORS

   You should carefully consider the risks described below before making an
investment decision. The risks and uncertainties described below are not the
only ones facing our company. Additional risks and uncertainties not presently
known to us or that we currently deem immaterial may also impair our operations.
If any of the following risks actually occur, our business, financial condition
or results of operations could suffer. In such case, the trading price of our
Common Stock could decline, and you may lose all or part of your investment.

   This prospectus also contains forward-looking statements that involve risks
and uncertainties. Our actual results could differ materially from those
anticipated in these forward-looking statements as a result of certain factors,
including the risks faced by us described below and elsewhere in this
prospectus.

                                       4
5

WE HAVE A LIMITED OPERATING HISTORY AS AN INDEPENDENT COMPANY.

   On August 14, 1996, we were incorporated by Stac, which transferred its
semiconductor business to us in exchange for shares of our Preferred Stock and
Common Stock. Because we are a relatively new company with a limited operating
history, we may experience financial and other difficulties as we attempt to
grow our business. For example, to expand our business we are increasing our
research and development and other operating expenses. This increase in expenses
will negatively affect our financial performance unless we are able to sustain
and grow revenues. In making an investment decision, you should evaluate this
risk, as well as the other difficulties and uncertainties frequently encountered
by early stage companies that operate in competitive markets. If we are not able
to evolve and expand our business, we may not remain profitable and therefore
may not be able to sustain a viable business.

OUR OPERATING RESULTS MAY FLUCTUATE SIGNIFICANTLY.

   Our operating results have fluctuated significantly in the past and we expect
that they will continue to fluctuate in the future. This fluctuation is a result
of a variety of factors including the following:

   o General business conditions in our markets as well as global economic
     uncertainty;

   o Reductions in demand for our customers' products;

   o The timing and amount of orders we receive from our customers;

   o Cancellations or delays of customer product orders;

   o Any new product introductions by us or our competitors;

   o Our suppliers increasing costs or changing the delivery of products to us;

   o Increased competition or reductions in the prices that we are able to
     charge;

   o The variety of the products that we sell as well as seasonal demand for our
     products; and

   o The availability of manufacturing capacity necessary to make our products.

   Our revenues and operating results depend upon the amount and timing of
customer orders that we receive in a given quarter. In the past we have
recognized a substantial portion of our revenues in the last month of a quarter.
If this trend continues, any failure or delay to fulfill orders by the end of a
particular quarter will harm our business, financial condition and results of
operations. As a result of these and other factors, we believe that
period-to-period comparisons of our historical results or operations are not a
good predictor of our future performance. If our future operating results are
below the expectations of stock market analysts, our stock price may decline.

WE DEPEND UPON A SMALL NUMBER OF CUSTOMERS.

   Quantum Corporation ("Quantum") accounted for approximately 61% and 70%,
respectively, of our revenues in fiscal 1998 and 1997. Quantum is not under any
binding obligation to order from us. If our sales to Quantum decline, our
business, financial condition and results of operations could suffer. We expect
that our most significant customers in the future could be different from our
largest customers today for a number of reasons, including customers' deployment
schedules and budget considerations. As a result, we believe we may experience
significant fluctuations in our results of operations on a quarterly and an
annual basis.

   Limited numbers of network and storage equipment vendors account for a
majority of packet processor purchases in their respective markets. In
particular, the market for network equipment that would include packet
processors, such as routers, remote access concentrators and firewalls, is
dominated by a few large vendors, including Ascend Communications, Inc., Cisco
Systems, Inc., Lucent Technologies Inc., Nortel Networks, Inc. and 3Com
Corporation. As a result, our future success will depend upon our ability to
establish and maintain relationships with these companies. If these network
equipment vendors do not incorporate our packet processors into their products,
our business, financial condition and results of operations could suffer.

                                       5
6

OUR BUSINESS DEPENDS UPON THE DEVELOPMENT OF THE PACKET PROCESSOR MARKET.

Our prospects are dependent upon the acceptance of packet processors as an
alternative to other technology traditionally utilized by network and storage
equipment vendors. Many of our current and potential customers have substantial
technological capabilities and financial resources and currently develop
internally the application specific integrated circuit components and program
the general purpose microprocessors utilized in their products as an alternative
to our packet processors. These customers may in the future continue to rely on
these solutions or may determine to develop or acquire components, technologies
or packet processors that are similar to, or that may be substituted for, our
products. In order to be successful we must anticipate market trends and the
price, performance and functionality requirements of such network and storage
equipment vendors and must successfully develop and manufacture products that
meet their requirements. In addition, we must make products available to these
large customers on a timely basis and at competitive prices. If orders from
customers are cancelled, decreased or delayed, or if we fail to obtain
significant orders from new customers, or if any significant customer delays or
fails to pay, our business, financial condition and results of operations could
suffer.

OUR BUSINESS DEPENDS UPON THE CONTINUED GROWTH AND OUR PENETRATION OF THE
VIRTUAL PRIVATE NETWORK MARKET.

   We want to be a leading supplier of packet processors that implement the
network security protocols necessary to support the deployment of virtual
private networks. In making an investment decision, you should consider the
possibility that this market, which is still emerging, may not grow or that our
products may not successfully serve this market. Our ability to generate
significant revenue in the virtual private network market will depend upon,
among other things, the following:

   o Our ability to demonstrate the benefits of our technology to distributors,
     original equipment manufacturers and end users; and

   o The increased use of the Internet by businesses as replacements for, or
     enhancements to, their private networks.

   If we are unable to penetrate the virtual private network market, or if that
market fails to develop, our business, financial condition and results of
operations could suffer.

WE FACE RISKS ASSOCIATED WITH EVOLVING INDUSTRY STANDARDS AND RAPID
TECHNOLOGICAL CHANGE.

   The markets in which we compete are characterized by rapidly changing
technology, frequent product introductions and evolving industry standards. Our
performance depends on a number of factors, including our ability to do the
following:

   o Properly identify emerging target markets and related technological trends;

   o Develop and maintain competitive products;

   o Enhance our products by adding innovative features that differentiate our
     products from those of competitors;

   o Bring products to market on a timely basis at competitive prices; and

   o Respond effectively to new technological changes or new product
     announcements by others.

   Our past success has been dependent in part upon our ability to develop
products that have been selected for design into new products of leading
equipment manufacturers. However, the development of our packet processors is
complex and, from time to time, we have experienced delays in completing the
development and introduction of new products. We may not be able to adhere to
our new product design and introduction schedules and our products may not be
accepted in the market at favorable prices, if at all.

   In evaluating new product decisions, we must anticipate future demand for
product features and performance characteristics, as well as available
supporting technologies, manufacturing capacity, competitive product offerings
and industry standards. We must also continue to make significant investments in
research and development in order to continue to enhance the performance and
functionality of our products to keep pace with competitive products and
customer demands for improved performance, features and functionality. The
technical innovations required for us to remain competitive are complicated and
require a significant amount of time and money. We may experience substantial
difficulty in introducing new products and we may be unable to offer
enhancements to existing products on a timely or cost-effective basis, if at
all. For instance, the performance of our encryption/compression and public key
processors depends upon the integrity of our security technology. If any
significant advances in overcoming cryptographic systems are made, then the
security of our

                                       6
7

encryption/compression and public key processors will be reduced or eliminated
unless we are able to develop further technical innovations that adequately
enhance the security of these products. Our inability to develop and introduce
new products or enhancements directed at new industry standards could harm our
business, financial condition and results of operations.

OUR MARKETS ARE HIGHLY COMPETITIVE.

   We compete in markets that are intensely competitive and are expected to
become more competitive as current competitors expand their product offerings
and new competitors enter the market. The markets in which we compete are
subject to frequent product introductions with improved price-performance
characteristics, rapid technological change, and the continued emergence of new
industry standards. Our products compete with offerings from companies such as
Analog Devices, Inc., Information Resource Engineering Inc., International
Business Machines Corporation ("IBM"), Rainbow Technologies, Inc. and VLSI
Technology, Inc. In 1994, Stac entered into two license agreements with IBM in
which Stac granted IBM the right to use, but not sublicense, our patented
compression technology in IBM hardware and software products. Stac also entered
into a license agreement with Microsoft Corporation ("Microsoft") in 1994
whereby Stac granted Microsoft the right to use, but not sublicense, our
compression technology in their software products. We expect significant future
competition from major domestic and international semiconductor suppliers.
Several established electronics and semiconductor suppliers have recently
entered, or expressed an interest to enter, the network equipment market. We
also may face competition from suppliers of products based on new or emerging
technologies. Furthermore, many of our existing and potential customers
internally develop solutions which attempt to perform all or a portion of the
functions performed by our products.

   A key element of our packet processor architecture is our encryption
technology. In order to export our encryption-related products, we must obtain a
license from the U.S. Department of Commerce. Foreign competitors that are not
subject to similar requirements have an advantage over us in their ability to
rapidly respond to the requests of customers in the global market.

   Many of our current and prospective competitors offer broader product lines
and have significantly greater financial, technical, manufacturing and marketing
resources than us. As a result, they may be able to adapt more quickly to new or
emerging technologies and changes in customer requirements or to devote greater
resources to promote the sale of their products. In particular, companies such
as Intel Corporation, Lucent Technologies Inc., Motorola, Inc., National
Semiconductor Corporation and Texas Instruments Incorporated have a significant
advantage over us given their relationships with many of our customers, their
extensive marketing power and name recognition and their much greater financial
resources. In addition, current and potential competitors may decide to
consolidate, lower the prices of their products or bundle their products with
other products. Any of the above would significantly and negatively impact our
ability to compete and obtain or maintain market share. If we are unable to
successfully compete against our competitors, our business, results of
operations and financial condition will suffer.

   We believe that the important competitive factors in our markets are the
following:

   o Performance;

   o Price;

   o The time that is required to develop a new product or enhancements to
     existing products;

   o The ability to achieve product acceptance with major network and storage
     equipment vendors;

   o The support that exists for new network and storage standards;

   o Features and functionality;

   o Adaptability of products to specific applications;

   o Reliability; and

   o Technical service and support as well as effective intellectual property
     protection.

   If we are unable to successfully develop and market products that compete
with those of other suppliers, our business, financial condition and results of
operations could be harmed. In addition, we must compete for the services of
qualified distributors and sales

                                       7
8

representatives. To the extent that our competitors offer distributors or sales
representatives more favorable terms, these distributors and sales
representatives may decline to carry, or discontinue carrying, our products. Our
business, financial condition and results of operations could be harmed by any
failure to maintain and expand our distribution network. See "Business --
Competition."

OUR BUSINESS DEPENDS UPON THE GROWTH OF THE NETWORK EQUIPMENT AND STORAGE
EQUIPMENT MARKETS.

   Our success is largely dependent upon continued growth in the market for
network security equipment, such as routers, remote access concentrators,
switches, broadband access equipment, security gateways, firewalls and network
interface cards. In addition, our success depends upon storage equipment vendors
incorporating our packet processors into their systems. The network security
equipment market has in the past and may in the future fluctuate significantly
based upon numerous factors, including the lack of industry standards, adoption
of alternative technologies, changes in capital spending levels and general
economic conditions. We are unable to determine the rate or extent to which
these markets will grow, if at all. Any decrease in the growth of the network or
storage equipment markets or a decline in demand for our products could harm our
business, financial condition and results of operations.

OUR OPERATING RESULTS HAVE BEEN SUBSTANTIALLY DEPENDENT ON ONE PRODUCT FAMILY.

   Historically, substantially all of our revenue has come from sales of our
compression processor products which accounted for 84%, 88% and 89% of revenue
in the fiscal years ended September 30, 1998, 1997 and 1996. A significant
decline in revenue from our compression processor products, which is not
adequately replaced by increased sales of our encryption/compression and public
key processors, would harm our business, financial condition and results of
operations.

OUR SUCCESS DEPENDS UPON PROTECTING OUR INTELLECTUAL PROPERTY.

   Our proprietary technology is critical to our future success. We rely in part
on patent, trade secret, trademark, maskwork and copyright law to protect our
intellectual property. We own 12 United States patents and four foreign patents.
We also have two pending patent applications in Japan. Our patents and patent
applications cover various aspects of our compression technology and have
expiration dates ranging from 2006 to 2013. Patents may not issue under our
current or future patent applications, and the patents issued under such patent
applications could be invalidated, circumvented or challenged. In addition,
third parties could make infringement claims against us in the future. Such
infringement claims could result in costly litigation. We may not prevail in any
such litigation or be able to license any valid and infringed patents from third
parties on commercially reasonable terms, if at all. Regardless of the outcome,
an infringement claim would likely result in substantial cost and diversion of
our resources. Any infringement claim or other litigation against us or by us
could harm our business, financial condition and results of operations. The
patents issued to us may not be adequate to protect our proprietary rights, to
deter misappropriation or to prevent an unauthorized third party from copying
our technology, designing around the patents we own or otherwise obtaining and
using our products, designs or other information. In addition, others could
develop technologies that are similar or superior to our technology.

   We also claim copyright protection for certain proprietary software and
documentation. We attempt to protect our trade secrets and other proprietary
information through agreements with our customers, employees and consultants,
and through other security measures. However, our efforts may not be successful.
Furthermore, the laws of certain countries in which our products are or may be
manufactured or sold may not protect our products and intellectual property. See
"Business -- Intellectual Property."

THE LENGTH OF TIME IT TAKES TO DEVELOP OUR PRODUCTS AND MAKE A SALE TO OUR
CUSTOMERS MAY IMPAIR OUR OPERATING RESULTS.

   Our customers typically take a long time to evaluate our products. In fact,
it usually takes our customers three to six months or more to test our products
with an additional nine to 18 months or more before they commence significant
production of equipment incorporating our products. As a result of this lengthy
sales cycle, we may experience a delay between increasing expenses for research
and development and sales and marketing efforts, on the one hand, and the
generation of higher revenues, if any, on the other hand. In addition, the
delays inherent in such a lengthy sales cycle raise additional risks of customer
decisions to cancel or change product plans, which could result in the loss of
anticipated sales. Our business, financial condition and results of operations
could suffer if customers reduce or delay orders or choose not to release
products using our technology.

WE DEPEND UPON INDEPENDENT MANUFACTURERS AND LIMITED SOURCES OF SUPPLY.

   We rely on subcontractors to manufacture, assemble and test our packet
processors. We currently subcontract our semiconductor manufacturing to Atmel
Corporation, Motorola, Inc. and Toshiba Corporation. Since we depend upon
independent manufacturers, we do

                                       8
9

not directly control product delivery schedules or product quality. None of our
products are manufactured by more than one supplier. Since the semiconductor
industry is highly cyclical, foundry capacity has been very limited at times in
the past and may become limited in the future.

   We depend on our suppliers to deliver sufficient quantities of finished
products to us in a timely manner. We place orders on a purchase order basis and
do not have long-term volume purchase agreements with any of our suppliers. As a
result, our suppliers may allocate production capacity to other products while
reducing deliveries to us on short notice. For example, in June 1995, one of our
suppliers delayed the delivery of one of our products. As a result, we switched
production of the product to a new manufacturer. This caused a three month delay
in shipments to customers. We also experienced yield and test anomalies on a
different product manufactured by another subcontractor that could have
interrupted our customer shipments. In this case, the manufacturer was able to
correct the problem in a timely manner and customer shipments were not affected.
The delay and expense associated with qualifying a new supplier or foundry and
commencing volume production can result in lost revenue, reduced operating
margins and possible harm to customer relationships. The steps required for a
new manufacturer to begin production of a semiconductor product include:

   o Adapting our product design, if necessary, to the new manufacturer's
     process;

   o Creating a new mask set to manufacture the product;

   o Having the new manufacturer prepare sample products so we can verify the
     product specification; and

   o Providing sample products to customers for qualification.

   In general, it takes from three to six months for a new manufacturer to begin
full-scale production of one of our products. We could have similar or more
protracted problems in the future with existing or new suppliers.

   Toshiba Corporation manufactures products for us in plants located in Asia.
To date, the financial and stock market dislocations that have occurred in the
Asian financial markets have not harmed our business. However, present or future
dislocations or other international business risks, such as currency exchange
fluctuations or recessions, could force us to seek new suppliers. We must place
orders approximately 12 to 14 weeks in advance of expected delivery. This limits
our ability to react to fluctuations in demand for our products, and could cause
us to have an excess or a shortage of inventory of a particular product. In
addition, if global semiconductor manufacturing capacity does not increase as
quickly as demand, foundries could allocate available capacity to larger
customers or customers with long-term supply contracts. If we cannot obtain
adequate foundry capacity at acceptable prices, or our supply is interrupted or
delayed, our product revenues could decrease or our cost of revenues could
increase. This could harm our business, financial condition and results of
operations.

   We regularly consider using smaller semiconductor dimensions for each of our
products to reduce costs. We have begun to decrease the dimensions in our new
product designs, and believe that we must do so to remain competitive. We may
have difficulty decreasing the dimensions of our products since, in the future,
we may change our supply arrangements to assume more product manufacturing
responsibilities. We may subcontract for wafer manufacturing, assembly and test
rather than purchase finished products. However, there are additional risks
associated with manufacturing, including variances in production yields, the
ability to obtain adequate test and assembly capacity at reasonable cost and
other general risks associated with the manufacture of semiconductors. We may
also enter into volume purchase agreements that require us to commit to minimum
purchase levels and which may require up-front investments. If we fail to
effectively assume greater manufacturing responsibilities or manage volume
purchase arrangements, our business, financial condition and results of
operations will suffer. See "Business -- Manufacturing."

NETWORK AND STORAGE EQUIPMENT PRICES TYPICALLY DECREASE.

   Average selling prices in the networking, storage and semiconductor
industries have rapidly declined due to many factors, including:

   o Rapidly changing technologies;

   o Price-performance enhancements; and

   o Product obsolescence.

                                       9
10

   The decline in the average selling prices of our products may cause
substantial fluctuations in our operating results. We anticipate that the
average selling prices of our products will decrease in the future due to
product introductions by our competitors, price pressures from significant
customers and other factors. Therefore, we must continue to develop and
introduce new products that incorporate features which we can sell at higher
prices. If we fail to do so, our revenues and gross margins could decline, which
would harm our business, financial condition and results of operations.

WE FACE PRODUCT RETURN, PRODUCT LIABILITY AND PRODUCT DEFECT RISKS.

   Complex products such as ours frequently contain errors, defects and bugs
when first introduced or as new versions are released. We have discovered such
errors, defects and bugs in the past. Delivery of products with production
defects or reliability, quality or compatibility problems could hinder market
acceptance of our products. This could damage our reputation and harm our
ability to attract and retain customers. Errors, defects or bugs could also
cause interruptions, delays or a cessation of sales to our customers. We would
have to expend significant capital and resources to remedy these problems.
Errors, defects or bugs could be discovered in our new products after we begin
commercial production of them, despite testing by us and our suppliers and
customers. This could result in additional development costs, loss of, or delays
in, market acceptance, diversion of technical and other resources from our other
development efforts, claims by our customers or others against us or the loss of
credibility with our current and prospective customers. Any such event would
harm our business, financial condition and results of operations.

WE FACE ORDER AND SHIPMENT UNCERTAINTIES.

   We generally make our sales under individual purchase orders that may be
canceled or deferred by customers on short notice without significant penalty,
if any. Cancellation or deferral of product orders could cause us to hold excess
inventory, which could harm our profit margins and restrict our ability to fund
our operations. We recognize revenue upon shipment of products to our customers,
net of an allowance for estimated returns. An unanticipated level of returns
could harm our business, financial condition and results of operations.

WE DEPEND UPON KEY PERSONNEL.

   Our success greatly depends on the continued contributions of our key
management and other personnel, many of whom would be difficult to replace. We
do not have employment contracts with any of our key personnel, nor do we
maintain any key man life insurance on any of our personnel. Several members of
our management team have joined us in the last 12 months. It may be difficult
for us to integrate new members of our management team. We must also attract and
retain experienced and highly skilled engineering, sales and marketing and
managerial personnel. Competition for such personnel is intense in the
geographic areas and market segments in which we compete, and we may not be
successful in hiring and retaining such people. If we lose the services of any
key personnel, or cannot attract or retain qualified personnel, particularly
engineers, our business, financial condition and results of operations could
suffer. In addition, companies in technology industries whose employees accept
positions with competitors have in the past claimed that their competitors have
engaged in unfair competition or hiring practices. We could receive such claims
in the future as we seek to hire qualified personnel. These claims could result
in material litigation. We could incur substantial costs in defending against
any such claims, regardless of their merits.

OUR RAPID GROWTH MAY STRAIN OUR OPERATIONS.

   We have experienced a period of rapid growth and expansion which has placed,
and continues to place, a significant strain on our resources. To accommodate
this growth, we must implement a variety of new and upgraded operational and
financial systems, procedures and controls, including the improvement of the
accounting and other internal management systems which were provided by Stac.
This may require substantial management effort, and our efforts to do so may not
be successful. In addition, we have had to hire additional employees to
accommodate this growth and our product development activities. This has
resulted in increased responsibilities for our management. Our systems,
procedures and controls may not be adequate to support our operations. If we
fail to improve our operational, financial and management information systems,
or to hire, train, motivate or manage our employees, our business, financial
condition and results of operations could suffer.

OUR PRODUCTS ARE SUBJECT TO EXPORT RESTRICTIONS.

   The encryption algorithms embedded in our products are a key element of our
packet processor architecture. These products are subject to U.S. Department of
Commerce export control restrictions. Our network equipment customers may only
export products incorporating encryption technology if they obtain an export
license. These U.S. export laws also prohibit the export of encryption products
to a number

                                       10
11

of countries deemed by the U.S. to be hostile. U.S. export regulations regarding
the export of encryption technology require either a transactional export
license or the granting of Department of Commerce commodity jurisdiction. These
restrictions may make foreign competitors facing less stringent controls on
their products more competitive in the global market than our network equipment
customers. The U.S. government may not approve any pending or future export
license requests. In addition, the list of products and countries for which
export approval is required, and the regulatory policies with respect thereto,
could be revised, and laws limiting the domestic use of encryption could be
enacted. The sale of our packet processors could be harmed by the failure of our
network equipment customers to obtain the required licenses or by the costs of
compliance.

WE FACE RISKS ASSOCIATED WITH OUR INTERNATIONAL BUSINESS ACTIVITIES.

   We sell most of our products to customers in the United States. If our
international sales increase, we may encounter risks inherent in international
operations. All of our international sales to date are denominated in U.S.
dollars. As a result, if the value of the U.S. dollar increases relative to
foreign currencies, our products could become less competitive in international
markets. We also obtain some of our manufacturing, assembly and test services
from suppliers located outside the United States. International business
activities could be limited or disrupted by any of the following:

   o The imposition of governmental controls;

   o Export license requirements;

   o Restrictions on the export of technology;

   o Currency exchange fluctuations;

   o Political instability;

   o Financial and stock market dislocations;

   o Trade restrictions; and

   o Changes in tariffs.

   Demand for our products also could be harmed by seasonality of international
sales and economic conditions in our primary overseas markets. These
international factors could harm future sales of our products to international
customers and our business, financial condition and results of operations in
general.

YEAR 2000 ISSUES MAY HARM OUR BUSINESS.

   Many existing computer systems and applications, and other control devices,
use only two digits to identify a year. These programs were designed without
considering the impact of the upcoming change in the century. If not corrected,
many computer software applications could fail or create erroneous results by,
at or beyond the year 2000. We utilize software, computer technology and other
services internally developed and provided by third-party vendors that may fail
due to the Year 2000 phenomenon, such as financial systems (including accounts
payable and payroll modules), customer services, networks and telecommunications
equipment and end products. We rely on external systems of business enterprises
such as customers, suppliers, financial organizations, and on governmental
entities, both domestic and international, for accurate exchange of data. Even
if our internal systems are not materially affected by Year 2000 issues, we
could be affected by disruptions in the operation of entities with which we
interact. Despite our efforts to address the Year 2000 impact on our internal
systems and business operations, this impact could disrupt our business and our
business, financial condition and results of operations could suffer. Our
efforts to address this issue are described in more detail in "Management's
Discussion and Analysis of Financial Condition and Results of Operations -- Year
2000 Issues."

   Customers' purchasing plans could be affected by Year 2000 issues as they may
need to expend significant resources to correct their existing systems. This
situation may result in reduced funds available to purchase our products.

WE FACE RISKS ASSOCIATED WITH ACQUISITIONS.

                                       11
12

   We continually evaluate strategic acquisitions of businesses and technologies
that would complement our product offerings or enhance our market coverage or
technological capabilities. We are not currently negotiating any acquisitions,
but we may make acquisitions in the future. Future acquisitions could be
effected without stockholder approval, and could cause us to dilute shareholder
equity, incur debt and contingent liabilities and amortize acquisition expenses
related to goodwill and other intangible assets, any of which could harm our
operating results and/or the price of our Common Stock.
Acquisitions entail numerous risks, including:

   o Difficulties in assimilating acquired operations, technologies and
     products;

   o Diversion of management's attention from other business concerns;

   o Risks of entering markets in which we have little or no prior experience;
     and

   o Loss of key employees of acquired organizations.

   We may not be able to successfully integrate businesses, products,
technologies or personnel that we acquire. If we fail to do so, our business,
financial condition and results of operations could suffer.

   In addition, if we are a party to a transaction or series of transactions
that result in 50% or more of our outstanding stock being transferred to one or
more persons, the IRS may claim that our spin-off from Stac was a taxable event
to Stac and its stockholders. Under the Tax Allocation and Indemnity Agreement
that we entered into with Stac, we may be obligated to pay the taxes of Stac if
we caused the spin-off to be a taxable event. Our cash flows, business,
financial condition and results of operations would suffer if we became liable
for any such tax liability. See "Recent Spin-Off and Relationship with Stac."

THE CYCLICALITY OF THE SEMICONDUCTOR INDUSTRY MAY HARM OUR BUSINESS.

   The semiconductor industry has experienced significant downturns and wide
fluctuations in supply and demand. The industry has also experienced significant
fluctuations in anticipation of changes in general economic conditions. This has
caused significant variances in product demand, production capacity and rapid
erosion of average selling prices. Industry-wide fluctuations in the future
could harm our business, financial condition and results of operations.

WE FACE CERTAIN RISKS AS A RESULT OF OUR SPIN-OFF FROM STAC.

   On December 8, 1998, Stac received a private letter ruling from the Internal
Revenue Service ("IRS") stating, among other things, that the distribution of
our Common Stock held by Stac on December 16, 1998 to Stac stockholders would
not result in recognition of taxable income or gain to Stac or its stockholders
under Section 355 of the Internal Revenue Code of 1986, as amended ("Code")
(except to the extent of cash received in lieu of fractional shares). A tax
ruling, while generally binding upon the IRS, is subject to certain factual
representations and assumptions. If the factual representations and assumptions
made by Stac were incorrect in a material respect, the rights of taxpayers to
rely on a tax ruling or Stac's ability to rely on the tax opinion would be
jeopardized.

   If the distribution were not to constitute a tax-free spin-off, then Stac
would be treated as recognizing a taxable gain equal to the difference between
(i) the fair market value of our Common Stock that was distributed to Stac
stockholders on December 16, 1998 and (ii) Stac's adjusted basis of such Common
Stock. In addition, under the consolidated tax return rules of the Code, each
member of Stac's consolidated group (including Hi/fn) would be severally liable
for such tax liability. Furthermore, in connection with the spin-off we entered
into a Tax Allocation and Indemnity Agreement with Stac whereby each of us
agreed that if either party took actions after the spin-off that caused Section
355(e) of the Code to apply to Hi/fn's Common Stock, then whichever party first
caused Section 355(e) of the Code to apply to Hi/fn's Common Stock would be
obligated to bear all taxes of Stac resulting from such action. Under recently
enacted Section 355(e) of the Code, if the spin-off were considered to be part
of a plan or series of related transactions (a "Plan") in which, after the
spin-off, a 50% or greater interest in Hi/fn or Stac was acquired by one or more
persons, the IRS would claim that the spin-off was taxable at the corporate
level. Although neither we nor Stac believes the spin-off is part of a Plan to
effect a 50% change in ownership of either Hi/fn or Stac, the IRS has issued no
guidance on the definition of a Plan and for the first two years following the
spin-off, any cumulative 50% change of ownership within the two-year period will
be rebuttably presumed to be the result of a Plan. Our cash flows, business,
financial condition and results of operations would suffer if we became liable
for any such tax liability. See "Recent Spin-Off and Relationship with Stac."

MANAGEMENT AND CERTAIN STOCKHOLDERS CAN EXERCISE SIGNIFICANT
INFLUENCE OVER HI/FN.

                                       12
13

   The present executive officers and directors and certain other stockholders
will beneficially own approximately 28% of our outstanding Common Stock
immediately following this offering. These stockholders, if acting together,
would be able to significantly influence all matters requiring approval of our
stockholders, including the election of directors and the approval of mergers or
other business combination transactions. See "Principal and Selling
Stockholders."

FUTURE SALES OF SHARES COULD AFFECT OUR STOCK PRICE.

If our stockholders sell substantial amounts of our Common Stock (including
shares issued upon the exercise of outstanding options) in the public market
following this offering, the market price of our Common Stock could fall. Such
sales also might make it more difficult for us to sell equity securities in the
future at a time and price we deem appropriate. Upon completion of this
offering, we will have outstanding 8,156,781 shares of Common Stock (based upon
shares outstanding as of December 31, 1998) assuming no exercise of the
underwriters' over-allotment option and no exercise of outstanding options after
December 31, 1998. Of these shares, 6,560,893 are currently eligible for sale in
the public market. After the lock-up agreements with the underwriters expire 120
days from the date of this prospectus (or earlier if the underwriters terminate
the lock-up agreements before the lock-up period ends), an additional 1,595,888
shares will be eligible for public sale, subject to the volume limitations and
other conditions of Rule 144. These share numbers exclude 1,545,887 shares
subject to outstanding stock options and 947,262 shares reserved for future
issuance under our stock plans as of December 31, 1998.

OUR STOCK PRICE MAY BE VOLATILE.

   The market price of our Common Stock has fluctuated in the past and is likely
to fluctuate in the future. In addition, the securities markets have experienced
significant price and volume fluctuations and the market prices of the
securities of technology-related companies including networking, storage and
semiconductor companies have been especially volatile. Such fluctuations can
result from:

   o Quarterly variations in operating results;

   o Announcements of new products by us or our competitors;

   o The gain or loss of significant customers;

   o Changes in analysts' estimates;

   o Short-selling of our Common Stock; and

   o Events affecting other companies that investors deem to be comparable to
     us.

   Investors may be unable to resell their shares of our Common Stock at or
above the offering price. In the past, companies that have experienced
volatility in the market price of their stock have been the object of securities
class action litigation. If we were the object of securities class action
litigation, it could result in substantial costs and a diversion of management's
attention and resources. See "Price Range of Common Stock."

OUR CERTIFICATE OF INCORPORATION AND BYLAWS AND DELAWARE LAW CONTAIN PROVISIONS
THAT COULD DISCOURAGE A TAKEOVER.

   Our Certificate of Incorporation and Bylaws contain provisions which may
discourage takeover attempts, including transactions in which stockholders might
receive a premium for their shares. This may limit stockholders' ability to
approve a transaction that stockholders may think is in their best interests.
Such provisions include:

   o A requirement that certain procedures must be followed before matters can
     be proposed for consideration at meetings of our stockholders;

   o The ability of the Board of Directors to fix the rights and preferences of
     and issue 10,000,000 shares of Preferred Stock without stockholder action;
     and

   o A classified Board of Directors.

                                       13
14

   Provisions of the Delaware General Corporation Law also restrict certain
business combinations with interested stockholders. The provisions of our
Certificate of Incorporation and Bylaws and of Delaware law are intended to
encourage potential acquirers to negotiate with us and allow the Board the
opportunity to consider alternative proposals in the interest of maximizing
stockholder value. However, such provisions may also discourage acquisition
proposals or delay or prevent a change in control, which could harm our stock
price. See "Description of Capital Stock."

   In addition, if we are a party to a transaction or series of transactions
that result in 50% or more of our outstanding stock being transferred to one or
more persons, the IRS may claim that our spin-off from Stac was a taxable event
to Stac and its stockholders. Under the Tax Allocation and Indemnity Agreement
that we entered into with Stac, we may be obligated to pay the taxes of Stac if
we caused the spin-off to be a taxable event. Our cash flows, business,
financial condition and results of operations would suffer if we became liable
for any such tax liability. See "Recent Spin-Off and Relationship with Stac."

MANAGEMENT HAS BROAD DISCRETION IN THE USE OF PROCEEDS.

   After repaying the $5.0 million short-term loan we received from Stac prior
to our spin-off from Stac, we plan to use the proceeds from this offering
primarily for working capital and general corporate purposes. Therefore, we will
have discretion as to how we will spend the proceeds, which could be in ways
with which the stockholders may not agree. We cannot predict that the proceeds
will be invested to yield a favorable return. See "Use of Proceeds."

WE DO NOT PLAN TO PAY CASH DIVIDENDS ON OUR COMMON STOCK.

   We intend to retain any future earnings to finance the growth and development
of our business. We no not plan to pay cash dividends in the foreseeable future.
See "Dividend Policy."

                              SELLING STOCKHOLDERS

The selling stockholders acquired beneficial ownership of all the shares listed
below through stock options granted under the Company's 1996 Equity Incentive
Plan. The following table shows, in each case as of December 16, 1998:

   o the name of each selling stockholder;

   o how many shares the selling stockholder beneficially owns;

   o how many shares the selling stockholder can resell under this prospectus;
     and

   o assuming a selling stockholder sells all shares listed next to his or her
     name, how many shares the selling stockholder will beneficially own after
     completion of the offering.

   The Company may amend or supplement this prospectus from time to time in the
future to update or change this list of selling stockholders and shares which
may be resold.
SHARES WHICH MAY
                                   SHARES          BE SOLD UNDER
                                BENEFICIALLY            THIS               SHARES BENEFICIALLY OWNED
     SELLING STOCKHOLDER          OWNED(1)           PROSPECTUS                  AFTER OFFERING
     -------------------        ------------     ----------------          -------------------------
Darren Bell(2)               7,291               3,125                        4,166
       Mark Birman(2)              35,000              35,000                            0
        John Brown(2)               6,927               5,104                        1,823
      Chih-Ming Chen(2)             6,000               4,666                        1,334
   Jeffrey Chrzanowski(3)           2,108               2,108                            0
        Ian C. Clark                  100                 100                            0
      Jennifer C. Clark               100                 100                            0
      Kimberly M. Clark               100                 100                            0
14
15
Timothy Clark(2)             2,356               2,356                            0
     Collmeyer Family Trust        93,750              93,750                            0
    Stephen Craig Collmeyer        18,750              18,750                            0
     Stephen A. Farnow(5)          47,076              39,750                        7,326
      Sandra Ferguson(2)            1,666                 100                        1,566
       Robert Friend(2)             5,624               4,375                        1,249
      Jonathan Levitt(3)            2,500               2,500                            0
        Robert Lutz(2)             21,232               5,000                       16,232
          Davis Ly(3)               1,875               1,875                            0
     Robert A. Monsour(6)          56,250              56,250                            0
       Alexandria Moore                10                  10                            0
      Chase Mathew Moore               10                  10                            0
         Dominic Moore                 10                  10                            0
        J. Hunter Moore                10                  10                            0
        Karla Moore (3)               312                 312                            0
     Barbara S. Newlon(2)           2,291                 500                        1,791
       Cheryl Poland(3)            16,862              16,862                            0
     Quantum College Trust         75,000              75,000                            0
      Cheryl Anne Sankary          18,750              18,750                            0
      Michael Scruggs(2)           12,135               4,687                        7,448
        Amy Lea Smiley             18,750              18,750                            0
      William Tanksley(2)           1,750                 758                          992
        Kathryn Walker             12,500              12,500                            0
Paul Walker and Leslie Walker,     11,432               9,800                        1,632
       Joint Tenants(2)
     William R. Walker(7)          25,000              25,000                            0
    Dale and Anita Waltz(2)        27,083              12,500                       14,583
      Brandon James Waluk              52                  52                            0
      Dominique Waluk(2)            2,356               1,939                          417
       Jan Michael Waluk               52                  52                            0
        Ann Wehling(3)                750                 750                            0
          Susan White              12,500              12,500                            0
        Walt Wolman(2)             11,626               5,016                        6,610
         Dixon Wong(2)             28,125              16,664                       11,461
---------------

(1) The Company has calculated the number and percentage of shares each selling
    stockholder "beneficially owns" in accordance with Rule 13d-3 under the
    Exchange Act. Beneficial ownership as defined in Rule 13d-3 does not
    necessarily indicate beneficial ownership for any other purpose. Under Rule
    13d-3, a person beneficially owns all shares as to which they have either
    sole or shared voting power or sole or shared investment power, as well as
    all shares which they have the right to acquire within 60 days of the
    calculation date by exercising any stock option or other right. Since the
    list above speaks as of April 15, 1999, beneficial ownership therefore
    includes all shares which the selling stockholder has the right to acquire
    within 60 days of April 15, 1999 (i.e. on or before June 14, 1999).

(2) As of the date of this prospectus, the selling stockholder is employed by
    the Company.

(3) The selling stockholder was previously employed by the Company.

(4) As of the date of this prospectus, Mr. Farnow serves as the Company's Vice
    President of Operations.

(5) As of the date of this prospectus, Mr. Monsour serves as the Company's Vice
    President of Marketing.

                                       15
16

(6) As of the date of this prospectus, Mr. Walker serves as the Company's Vice
    President of Finance, Chief Financial Officer and Secretary.

(7) The selling stockholder received shares by means of a gift.

                              PLAN OF DISTRIBUTION

   The Company has been advised by the selling stockholders that they intend to
sell all or a portion of the shares offered hereby from time to time in the
Nasdaq National Market and that sales will be made at prices prevailing in the
Nasdaq National Market at the times of such sales. The selling stockholders may
also make private sales directly or through a broker or brokers, who may act as
agent or as principal. Further, the selling stockholders may choose to dispose
of the shares offered hereby by gift to a third party or as a donation to a
charitable or other non-profit entity. In connection with any sales, the selling
stockholders and any brokers participating in such sales may be deemed to be
underwriters within the meaning of the Securities Act.

   Any broker-dealer participating in such transactions as agent may receive
commissions from the selling stockholders (and, if such broker acts as agent for
the purchaser of such shares, from such purchaser). Broker-dealers may agree
with the selling stockholders to sell a specified number of shares at a
stipulated price per share, and, to the extent such a broker-dealer is unable to
do so acting as agent for the selling stockholders, to purchase as principal any
unsold shares at the price required to fulfill the broker-dealer commitment to
the selling stockholders. Broker-dealers who acquire shares as principal may
thereafter resell such shares from time to time in transactions (which may
involve crosses and block transactions and which may involve sales to and
through other broker-dealers, including transactions of the nature described
above) in the over-the-counter market, in negotiated transactions or otherwise
at market prices prevailing at the time of sale or at negotiated prices, and in
connection with such resales may pay to or receive from the purchasers of such
shares commissions computed as described above.

   The Company has advised the selling stockholders that Regulation M
promulgated under the Exchange Act may apply to sales in the market and has
informed them of the possible need for delivery of copies of this prospectus.
The selling stockholders may indemnify any broker-dealer that participates in
transactions involving the sale of the shares against certain liabilities,
including liabilities arising under the Securities Act. Any commissions paid or
any discounts or concessions allowed to any such broker-dealers, and, if any
such broker-dealers purchase shares as principal, any profits received on the
resale of such shares, may be deemed to be underwriting discounts and
commissions under the Securities Act.

   Upon the Company's being notified by the selling stockholders that any
material arrangement has been entered into with a broker-dealer for the sale of
shares through a cross or block trade, a supplemental prospectus will be filed
under Rule 424(c) under the Securities Act, setting forth the name of the
participating broker-dealer(s), the number of shares involved, the price at
which such shares were sold by the selling stockholders, the commissions paid or
discounts or concessions allowed by the selling stockholders to such
broker-dealer(s), and where applicable, that such broker-dealer(s) did not
conduct any investigation to verify the information set out in this prospectus.

   Any securities covered by this prospectus which qualify for sale pursuant to
Rules 144 and 701 under the Securities Act may be sold under Rule 144 rather
than pursuant to this prospectus. In general, under Rule 144 as currently in
effect, a person (or persons whose shares are aggregated), including any person
who may be deemed to be an "affiliate" of the Company, is entitled to sell
within any three month period "restricted shares" beneficially owned by him or
her in an amount that does not exceed the greater of (i) 1% of the then
outstanding shares of Common Stock or (ii) the average weekly trading volume in
shares of Common Stock during the four calendar weeks preceding such sale,
provided that at least one year has elapsed since such shares were acquired from
the Company or an affiliate of the Company. Sales are also subject to certain
requirements as to the manner of sale, notice and availability of current public
information regarding the Company. However, a person who has not been an
"affiliate" of the Company at any time within three months prior to the sale is
entitled to sell his or her shares without regard to the volume limitations or
other requirements of Rule 144, provided that at least one year has elapsed
since such shares were acquired from the Company or an affiliate of the Company.
In general, under Rule 701 as currently in effect, any employee, consultant or
advisor of the Company who purchases shares from the Company in connection with
a compensatory stock or option plan or other written agreement related to
compensation is eligible to resell such shares in reliance on Rule 144, but
without compliance with certain restrictions contained in Rule 144.

   There can be no assurance that the selling stockholders will sell any or all
of the shares of Common Stock offered hereunder.

                                       16
17

                            INFORMATION INCORPORATED BY REFERENCE

   This prospectus incorporates by reference the following documents and
information, all of which the Company has filed in the past with the Securities
and Exchange Commission ("SEC"):

o  hi/fn's Registration Statement on Form 10 (File No. 0-24765) filed December
   8, 1998.

o  hi/fn's Registration Statement on Form S-8 (Registration No. 333-68917) filed
   December 15, 1998.

o  hi/fn's Registration Statement on Form S-8/S-3 (Registration No. 333-69149)
   filed December 17, 1999.

o  hi/fn's Quarterly Report on Form 10-Q filed February 16, 1999.

o  hi/fn's Registration Statement on Form S-3 (File No. 333-72537) filed
   February 17, 1999 as declared effective on March 25, 1999.

   Unless the Company has filed a post-effective amendment to the registration
statement under the Securities Act which contains this prospectus indicating
that all of the shares have been sold or which deregisters all shares then
remaining unsold, all documents which the Company subsequently files under
Section 13(a), 13(c), 14 or 15(d) of the Exchange Act shall be deemed to be
incorporated by reference in this prospectus and to be part of this prospectus
from the date of filing of such documents.

   The Company will provide without charge to each person to whom a copy of this
prospectus is delivered, upon written or oral request, a copy of the information
that has been or may be incorporated by reference in this prospectus. Direct any
request for such copies by writing or telephoning us at the following address:
hi/fn, inc., 750 University Avenue, Los Gatos, California 95032; the telephone
number is (408) 399-3500.

                   WHERE TO FIND MORE INFORMATION ABOUT HI/FN

   The Company is required to file special reports, proxy statements and other
information with the SEC. You may read and copy any document we file at the
SEC's public reference room at 450 Fifth Street, NW, Washington, D.C. 20549.
Please call the SEC at 1-800-SEC-0330 for further information on the operation
of the public reference room. Our SEC filings are also available to the public
from the SEC's Web site at http://www.sec.gov.

   This prospectus contains information concerning the Company and the sale of
its Common Stock by the Selling Stockholders, but does not contain all the
information set forth in the Registration Statement on Form S-8/S-3 which the
Company has filed with the SEC under the Securities Act. Statements made in this
Prospectus as to the contents of any referenced contract, agreement or other
document are not necessarily complete, and such statement shall be deemed
qualified in its entirety by reference thereto. The Registration Statement,
including various exhibits, may be obtained upon payment of the fee prescribed
by the SEC, or may be examined without charge at the SEC's office in Washington,
D.C.

            INDEMNIFICATION AND THE SEC'S POSITION ON ENFORCEABILITY

   Section 145 of the Delaware General Corporation Law authorizes a court to
award, or a corporation's Board of Directors to grant, indemnity to directors
and officers. This may under certain circumstances include indemnification for
liabilities arising under the Securities Act as well as for expenses incurred in
that regard. The Company's Certificate of Incorporation and Bylaws provide for
the indemnification of present and former directors, officers, employees and
agents of the Company to the maximum extent permitted by the Delaware General
Corporation Law. The Company has also entered into, or will enter into,
Indemnification Agreements with its officers and directors.

   Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers or persons controlling the Company
pursuant to the foregoing provisions, the Company has been informed that in the
opinion of the SEC such indemnification is against public policy as expressed in
the Securities Act and is therefore unenforceable.

                                       17
18

                                   HI/FN, INC.

                       REGISTRATION STATEMENT ON FORM S-8

                                     PART II

                 INFORMATION REQUIRED IN REGISTRATION STATEMENT

ITEM 1. INCORPORATION OF DOCUMENTS BY REFERENCE.

        All documents subsequently filed by the Company pursuant to Sections
13(a), 13(c), 14 and 15(d) of the Exchange Act, prior to the filing of a
post-effective amendment which indicates that all securities registered have
been sold or which deregisters all securities then remaining unsold, shall be
deemed to be incorporated by reference in this Registration Statement and to be
part hereof from the date of filing of such documents.

        The following documents and information previously filed with the
Securities and Exchange Commission by hi/fn, inc. (the "Company") are hereby
incorporated by reference in this Registration Statement:

        (1) The Company's Registration Statement Form 10 filed on August 7,
            1998, as amended.

        (2) The Company's Registration Statement on Form S-8 (File No.
            333-68917) filed on December 15, 1998.

        (3) The Company's Registration Statement on Form S-8/S-3 (File No.
            333-69149) filed on December 17, 1998.

        (4) The Company's Quarterly Report on Form 10-Q filed on February 16,
            1999.

        (5) The Company's Registration Statement on Form S-3 (File No.
            333-72537) filed February 17, 1999 and declared effective on March
            25, 1999.

                                       18
19

                                   SIGNATURES

   Pursuant to the requirements of the Securities Act of 1933, as amended, the
Company, hi/fn, inc., a corporation organized and existing under the laws of the
State of Delaware, certifies that it has reasonable grounds to believe that it
meets all of the requirements for filing on Form S-8/S-3 and has duly caused
this Registration Statement to be signed on its behalf by the undersigned,
thereunto duly authorized, in the City of Los Gatos, State of California, on
this 28th day of April, 1999.

                                      hi/fn, inc.

                                      By: /s/ Raymond J. Farnham
                                         -----------------------------------
                                          Raymond J. Farnham
                                          President and Chief Executive Officer

                                       19
20

                                POWER OF ATTORNEY

   KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints Raymond J. Farnham and William R. Walker, and
each of them, as his or her attorney-in-fact, with full power of substitution in
each, for him or her in any and all capacities to sign any amendments to this
Registration Statement on Form S-8/S-3, and to file the same, with exhibits
thereto and other documents in connection therewith, with the Securities and
Exchange Commission, hereby ratifying and confirming all that said
attorney-in-fact, or his substitutes, may do or cause to be done by virtue
hereof.

   Pursuant to the requirements of the Securities Act of 1933, as amended, this
Registration Statement has been signed below by the following persons in the
capacities and on the dates indicated.
SIGNATURE                                  TITLE                                DATE
               ---------                                  -----                                ----
/s/ Raymond J. Farnham                   President and Chief Executive Officer            April 28, 1999
------------------------------------     (Principal Executive Officer), Director
Raymond J. Farnham                       and Chairman of the Board

/s/ William R. Walker                    Vice President of Finance and Chief              April 28, 1999
------------------------------------     Financial Officer (Principal Financial and
William R. Walker                        Accounting Officer) and Secretary

/s/ Douglas L. Whiting                   Chief Technology Officer and Director            April 28, 1999
------------------------------------
Douglas L. Whiting

/s/ Taher Elgamal                                      Director                           April 28, 1999
------------------------------------
Taher Elgamal, Ph.D.

/s/ Robert W. Johnson                                  Director                           April 28, 1999
------------------------------------
Robert W. Johnson

/s/ Albert E. Sisto                                    Director                           April 28, 1999
------------------------------------
Albert E. Sisto
20
21

                                INDEX TO EXHIBITS
SEQUENTIALLY
EXHIBIT                                                                         NUMBERED
NUMBER                                 DESCRIPTION                                PAGE
-------                                -----------                            -------------
5.1      Opinion of Counsel as to legality of securities being registered

 23.1      Consent of Independent Accountants

 23.2      Consent of Counsel (contained in Exhibit 5.1)

 24.1      Power of Attorney (see Page II-3)
21