content: <PAGE>
  
                        SECURITIES AND EXCHANGE COMMISSION
  
                              Washington, D.C. 20549
  
                                     FORM 8-K
  
                  CURRENT REPORT PURSUANT TO SECTION 13 OR 15(D)
                      OF THE SECURITIES EXCHANGE ACT OF 1934
  
  Date of Report (Date of earliest event reported)           July 18, 2000
                                                  --------------------------------
  
                             EFFICIENT NETWORKS, INC.
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              (Exact name of registrant as specified in its charter)
  
  
                Delaware                    0-26473           75-2486865
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       (State or other jurisdiction       (Commission        (IRS Employer
           of incorporation                File Number)       Identification No.)
  
  
            4849 Alpha Road, Dallas, Texas                      75244
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       (Address of principal executive offices)               (Zip Code)
  
  Registrant's telephone number, including area code   (972) 852-1000
                                                    ------------------------------
  
  
                                        N/A
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           (Former name or former address, if changed since last report)
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  ITEM  5.  OTHER EVENTS.
  
       BUSINESS
  
       Efficient Networks, Inc., a Delaware corporation and the Registrant herein
  ("Efficient Networks," "Efficient" or the "Company"), hereby updates the
  previously reported description of the general development of its business,
  which will be superceded and restated in its entirety by the filing of the
  Company's Annual Report on Form 10-K for the fiscal year ended June 30, 2000, as
  follows:
  
                                      BUSINESS
  
       Efficient Networks is a worldwide developer and supplier of high-speed
  digital subscriber line customer premises equipment, or CPE, for the broadband
  access market.  Our DSL solutions enable telecommunications and other
  communication network service providers to provide high-speed, cost-effective
  broadband access services over the existing copper wire telephone
  infrastructure.  On December 17, 1999 Efficient completed the acquisition of
  FlowPoint Corporation, a provider of advanced broadband routers for deployment
  at customer premises.  Additionally, on May 22, 2000, Efficient completed the
  acquisition of Network Telesystems, Inc., a leading provider of broadband client
  services software. We believe there is significant demand for high-speed
  broadband access, especially among business users and consumers who have found
  current solutions to be inadequate or too expensive.  We therefore focus on
  developing and producing single- and multiple-user DSL customer premises
  equipment for small- to medium-size businesses, branch offices of large
  corporations and consumers.  Our DSL products enable applications such as high-
  speed Internet access, electronic commerce, remote access, telecommuting and
  extensions of corporate networks to branch offices.
  
  Industry Background
  
  The Growing Need for High-Speed Broadband Communications
  
       The amount of data being carried over the Internet and private
  communications networks has grown dramatically and is expected to continue to
  grow as the number of users accessing these networks increases.  The increase in
  the quantity of data being carried over the Internet and private networks is
  also being driven by the broadening range of activities for which these networks
  are being used.  In order to enhance their reach to customers and suppliers,
  businesses are increasingly engaging in mission-critical Internet-based
  applications, such as electronic commerce, supply chain management, Web hosting,
  and global marketing and customer support.  Businesses also increasingly use the
  Internet to create secure data networks known as virtual private networks among
  corporate sites, remote offices and telecommuters.  By utilizing the Internet,
  businesses can streamline internal operations by facilitating employee
  communications, e-mail, file sharing, and research and analysis.  Consumers are
  also increasingly accessing the Internet to communicate, collect and publish
  bandwidth intensive information, conduct retail purchases, and access online
  entertainment.  These growing network-dependent activities require the
  transmission of large
  
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  amounts of data, which in turn, requires high-speed broadband data access
  services for end users to obtain the data reliably and within practical time
  constraints.
  
  Traditional Access Solutions are Inadequate
  
       To meet the growing demand for high-speed, high-bandwidth data
  transmission, network service providers have installed high-bandwidth fiber
  optic transmission equipment, high-speed switches and core routers in the
  Internet backbone and in interoffice networks.  While this network backbone is
  capable of delivering data at very high speeds, an access bottleneck exists
  between the ends of these fiber optic networks at telephone companies' central
  offices and the end users' premises.  The copper line connections between the
  central office and the end user are commonly known as the "last mile."  Last
  mile connections are typically made via dial-up analog or integrated services
  digital network, commonly known as ISDN, modems over the copper infrastructure
  that was originally built to transmit analog voice signals.  Data transmission
  speed, otherwise known as bandwidth, is typically expressed in bits per second.
  Along the fiber optic network backbone, data moves at speeds up to 2.5 billion
  bits per second, or 2.5 Gbps, while analog modems transmit data at rates up to
  56.6 thousand bits per second, or 56.6 Kbps, and most ISDN modems transmit at
  rates up to 128 Kbps.  Even at ISDN speeds, several minutes are often required
  to access a media rich Website, and several hours may be required to transfer or
  download large files.  During this time, the telephone line cannot be used for
  any other purpose.  This bottleneck frustrates end users and limits the
  capability of network service providers to deliver applications such as
  efficient Internet access, multimedia entertainment, real-time telecommuting and
  branch office internetworking.
  
       In an effort to provide greater bandwidth, telecommunications network
  service providers have traditionally deployed T1 services.  A T1 line is a high-
  capacity, dedicated telecommunications line which can support data transmissions
  rates of up to 1.5 million bits per second, or 1.5 Mbps, which is roughly 25
  times the speed of analog modems.  Although T1 services have helped fill the
  need for broadband access for large businesses, network service providers have
  generally been unable to offer T1 services to small businesses, remote offices,
  telecommuters and consumers as a result of the complexity and high costs of
  deployment.  Because analog and ISDN modem technology fails to satisfy the
  bandwidth needs of end users, and T1 access is prohibitively expensive, network
  service providers continue to seek alternatives for providing cost-effective
  broadband access to both businesses and consumers.  Additionally, the continued
  growth in both the number of analog modem users and their time spent connected
  to the Internet congests many network service providers' networks while
  providing them with little or no additional revenue.
  
  Competition is Driving Rapid DSL Deployment
  
       Until recently, the incumbent local exchange carriers such as Ameritech,
  Bell Atlantic, BellSouth, GTE, Pacific Bell, Southwestern Bell and US West, were
  the exclusive operators of the last mile.  Since analog dialup modems, ISDN and
  T1 services offered over the incumbent local exchange carriers' networks did not
  adequately satisfy the demand for cost-effective broadband access for a majority
  of users, alternative solutions were developed such as broadband wireless and
  cable access.  The deployment of these alternative broadband solutions is now
  pressuring incumbent local exchange carriers to deliver cost-effective broadband
  access to their customers.
  
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       In addition, the Federal Telecommunications Act of 1996 intensified the
  competitive environment because that Act requires incumbent local exchange
  carriers to lease portions of their networks, including the last mile, to
  competitive local exchange carriers.  As a result, many new companies, long
  distance telephone companies and Internet service providers have applied for and
  been granted regulatory approval for competitive local exchange carrier status.
  Leading competitive local exchange carriers, including Covad Communications, MCI
  WorldCom, NorthPoint Communications, Rhythms NetConnections and Sprint, are now
  deploying high-speed services over the copper infrastructure owned by the
  incumbent local exchange carriers.  In response to these competitive pressures
  and in an effort to increase revenues and maintain their existing customer base,
  incumbent local exchange carriers are now beginning to commit the resources
  necessary to deploy cost-effective, high-speed data services over their existing
  copper infrastructure.
  
       Similar dynamics are occurring internationally.  The growth in Internet
  use, telecommunications deregulation and competition from alternative broadband
  access technologies have caused foreign telephone network service providers to
  commit similar resources to broadband access deployment.
  
       Incumbent local exchange carriers, competitive local exchange carriers and
  foreign telephone network service providers are deploying DSL technology as the
  cost-effective broadband access solution.  DSL technology utilizes sophisticated
  data modulation techniques to achieve high-speed data transmission 100 times
  faster than analog modems over existing copper telephone wires.  The equipment
  needed to enable a DSL link generally consists of two pieces, one in the network
  operator's central office and one at the premises of the business or consumer.
  The central office equipment is often called a DSL access multiplexer, commonly
  known as a DSLAM, which aggregates data traffic from multiple DSL links into a
  common link to a fiber optic network backbone.  The CPE and the DSLAM must also
  interoperate with the rest of the equipment in a given network.  DSL can enable
  cost-effective, high-speed data transmission from the premises of a business or
  consumer into a DSL network operator's central office where existing high-
  capacity networks can then carry data to a destination across an Internet or
  other service provider's network.
  
       The market for DSL services is expanding rapidly.  All major U.S. incumbent
  local exchange carriers have begun to offer DSL services to their customers
  directly and through Internet service providers.  For example, in October 1999,
  SBC Communications announced a $6 billion initiative to make DSL service
  available to an estimated 77 million Americans by the end of 2002.  In addition,
  competitive local exchange carriers are aggressively deploying DSL service.  For
  instance, Covad Communications first announced the availability of its DSL
  services in the San Francisco Bay Area in December 1997.  By the end of 1998,
  Covad's service was available to over 6 million businesses and homes in five
  major metropolitan areas, and by the end of 2000, Covad expects to be able to
  offer DSL service to over 40% of U.S. homes and 45% of U.S. businesses.
  
  Existing Customer Premises Solutions are Constraining DSL Deployment
  
       As these and other network service providers are deploying DSL services,
  they are encountering several challenges.  In particular, interoperability still
  presents substantial technical challenges despite recent industry efforts to
  standardize the various implementations of DSL.  Service providers are actively
  seeking DSL CPE solutions that offer seamless end-to-end
  
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  interoperability within their networks. End-to-end interoperability requires
  that DSL solutions be compatible with the customer's computer hardware,
  operating systems, networking equipment and software, the CPE and DSLAM, and the
  switching and routing equipment in the service providers' network. Network
  service providers face additional challenges in deployment and maintenance,
  because DSL services are typically targeted at branch offices, small businesses
  or individuals where no particular level of networking expertise can be assumed.
  Therefore, to implement rapid and widespread DSL deployment, it is of primary
  importance that DSL CPE provides for simple and cost-effective installation and
  maintenance.
  
  The Efficient Solution
  
       Efficient designs and manufactures the SpeedStream family of DSL CPE and
  related software as part of an overall solution for high-speed remote access and
  data transmission.  The SpeedStream product line comprises a broad set of access
  products, including cost-effective single user modems, sophisticated routers for
  businesses, integrated access devices for combined voice and data service, and
  software products supporting high speed access. Our solutions enable DSL
  deployment, ensure end-to-end interoperability and provide for efficient and
  cost-effective installation and maintenance.
  
       Enable DSL Deployments.  Efficient enables network service providers to
  rapidly and cost-effectively deploy DSL services, thereby allowing them to
  quickly capture market share in today's intensely competitive environment.
  Efficient's products are specifically targeted to small- to medium-size
  companies and consumers for applications such as high-speed Internet access, and
  to large corporations for applications such as remote access, telecommuting and
  extensions of corporate networks to branch offices.  By offering a variety of
  DSL CPE categories that support DSL types compatible with a diverse set of DSL
  services, we can provide network service providers with a wide range of options.
  We can also reduce operational complexity for network service providers by
  offering a single point of contact for training and support for their DSL CPE.
  
       Ensure End-To-End Interoperability.  Efficient's DSL solutions offer
  seamless interoperability from the customer's computer through the service
  providers' network.  To ensure this interoperability, Efficient leverages our
  core technology expertise in combination with our relationships with network
  service providers, such as Ameritech, Bell Atlantic, BellSouth, Covad
  Communications, Cable and Wireless HKT, Singapore Telecom and TeleDanmark.  We
  also work closely with other network equipment vendors, such as ADC
  Telecommunications, Advanced Fibre Communications, Alcatel, Copper Mountain
  Networks, Ericsson, Lucent Technologies, Nokia, Nortel Networks and Siemens.
  Since these industry leaders recognize that end-to-end interoperability is a
  necessary requirement for full scale DSL deployment, network equipment vendors
  have provided us with early releases of their systems and technologies so that
  we can ensure that our products will seamlessly interoperate with their systems.
  Our relationships with network service providers and network equipment vendors
  enable us to maintain and use one of the most complete DSL interoperability test
  labs in the industry.  In addition, Efficient actively participates in
  developing industry-wide standards to continue to facilitate end-to-end
  interoperability.
  
       Provide for Efficient and Cost-Effective Installation.  Efficient offers a
  full suite of easily installable DSL solutions, including DSL CPE that provides
  routing and bridging capabilities which
  
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  connect seamlessly into multiple user environments using a standard networking
  architecture called Ethernet. For single user environments, Efficient provides
  internal DSL CPE installed directly into the end user's computer and external
  CPE that connect to the end user's computer by simply plugging into the
  computer's universal serial bus (USB) port or Ethernet port. Efficient's
  internal and universal serial bus modems are supported by Efficient's pre-
  configurable software which allows the network service provider to configure the
  CPE for a particular network before the CPE is sent out into the field. Pre-
  configuration of the CPE obviates the cost and time associated with having
  installers perform these configuration activities with each end-user
  installation.
  
       Provide for Cost-Effective Maintenance.  Efficient offers network service
  providers our Advanced Status software, a troubleshooting and diagnostic tool.
  With Advanced Status software, a network service provider's customer support
  technician can walk an end user through the diagnostic process over the
  telephone.  This allows the network service provider to easily monitor, diagnose
  and often remotely fix the customer's problems quickly, which can substantially
  reduce the network service provider's customer support costs.  In the event that
  a technician needs to be dispatched, Advanced Status provides easy diagnosis and
  facilitates on-site repair.
  
  The Efficient Strategy
  
       Our objective is to be the leading worldwide provider of high-performance
  DSL broadband access customer premises equipment for businesses, remote offices,
  telecommuters and consumers.  Key elements of our strategy include the
  following:
  
       Capitalize upon our Early Market Acceptance by Network Service Providers.
  We intend to leverage our products' early market acceptance to extend our market
  share.  We have been focused on the high-speed network connectivity market for
  six years and specifically on the DSL market for three years.  Our DSL CPE
  products have been deployed by Ameritech, Bell Atlantic, BellSouth, Covad
  Communications, Cable and Wireless HKT, Pacific Bell, Singapore Telecom,
  Southwestern Bell, TeleDanmark and several other network service providers.  We
  work closely with each network service provider, in most cases providing
  customized software or product packages, as well as dedicated training and
  support services.  A number of other network service providers have begun to
  test our CPE solutions.  We intend to build upon this early acceptance of our
  products to become the primary provider of DSL CPE to both existing and new
  network service providers as they deploy their DSL networks.
  
       Leverage Strategic Relationships with Network Equipment Vendors.  We intend
  to leverage both current and future relationships to continue to promote
  Efficient in the industry, extend our sales capabilities, increase our volume
  distribution, and build brand awareness.  We believe successful deployment of
  DSL necessitates close working relationships with network equipment vendors.
  Since most network equipment vendors do not have complete DSL CPE solutions,
  they typically bundle and sell their network equipment with third-party CPE
  solutions.  We have established relationships with ADC Telecommunications, AFC,
  Alcatel, Copper Mountain Networks, Ericsson, Lucent, Nokia, Nortel Networks and
  Siemens, among others.
  
       Continued Development of Broadband Access CPE.  We intend to continue
  developing DSL CPE products that enhance the features of our current line as
  well as create new bundled voice and
  
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  data access products. We are developing new products based on different physical
  interfaces, advanced functionality such as integrated voice and data capability,
  enhanced routing and bridging capabilities, and additional software packages and
  features. . We are continually pursuing techniques to reduce product costs. In
  developing new technologies and products, we benefit from our relationships with
  key industry leaders that offer early visibility into market requirements and
  deployment trends.
  
       Broaden Distribution Channels.  We plan to extend our distribution channels
  to meet the growing demand for broadband access solutions.  When we first
  deployed our current generation DSL products, we initially targeted incumbent
  local exchange carriers and network equipment providers in order to secure large
  contracts, establish credibility in the marketplace and strengthen key network
  service provider relationships.  We have since built a direct sales force to
  target competitive local exchange carriers, foreign telephone network service
  providers and Internet service providers as well.  Moreover, we are developing
  alternative distribution channels such as telephone company--aligned
  distributors, traditional two-tier distribution partners, third-party
  integrators, and retail partners.  To this end, we have recently signed
  agreements with lnnotrac, Nortel Supply and Sprint North Supply, three leading
  telephone company--aligned distributors.  We are also expanding our global
  presence by extending our international direct sales force, securing additional
  international value-added resellers and establishing retail sales abroad.
  Finally, we have established a separate sales force whose emphasis is on
  Internet Service Providers that deploy broadband services using DSL access.
  This sales force increases awareness of our company and products, and provides
  training, collateral and sales incentives for broadband Internet Service
  Providers.
  
       Build the Efficient Brand Name.  In addition to increasing brand awareness
  with network service providers and network equipment vendors, we believe it is
  critical to establish brand awareness and differentiation from our competitors
  with end customers through superior performance, ease of use and customer
  service.  We plan to continue building brand awareness of Efficient and
  SpeedStream to identify us as the leading provider of DSL CPE solutions.  All of
  our DSL products, even when deployed by network service providers, carry the
  Efficient and SpeedStream brand names. In addition, we plan to increase our
  investments in a broad range of marketing programs, including active trade show
  participation, advertising in print publications, direct marketing, and Web-
  based marketing.
  
       Leverage Strategic Acquisitions to Complement Product & Technology
  Offerings.  In 1999 we acquired FlowPoint Corporation to add advanced broadband
  routers to our product line for the customer premises equipment market. Products
  from FlowPoint incorporate a broad range of DSL technologies, including ADSL,
  SDSL and IDSL.  FlowPoint also brings expertise in frame-based customer premises
  equipment as well in the emerging voice-over-DSL market, and has provided us
  with several new customer relationships.  We also recently acquired Network
  TeleSystems, Inc., (NTS), which supplies a popular client software package to
  broadband Internet Service Providers worldwide.  We intend to pursue strategic
  acquisitions in the future as we identify companies or products that will
  complement our current product offerings and expand our addressable customer
  base.
  
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  Products
  
       Efficient has developed the SpeedStream family of DSL products that enables
  broadband access for businesses and consumers.  Our products are designed to
  support a number of computer environments, DSL implementations, and network
  architectures.  Our asymmetric DSL, or ADSL, products provide transmission
  speeds of up to 8 Mbps in the downstream direction from the network to the end
  user, and up to 1 Mbps in the upstream direction.  Our symmetric DSL, or SDSL,
  products provide equal upstream and downstream speeds of up to 2.3 Mbps.  Our
  SpeedStream products are separated into these product categories:
  
          .  3000 SeriesDesigned for the single user and installable into a
             peripheral component interface, or PCI, bus slot within a personal
             computer.
  
          .  4000 SeriesDesigned for the single user and connected to a personal
             computer through a universal serial bus port.
  
          .  5200 SeriesDesigned to provide simple, zero-setup DSL access for
             multiple users through an Ethernet port.
  
          .  5600 SeriesDesigned to provide basic routing capabilities for a
             telecommuter or a small office or home office environment.
  
          .  5700, 5800 Series - Broadband routers that provide a comprehensive
             feature set for a small business or a corporate branch office.
  
          .  7400, 7800, 8600 Series - Integrated access devices that support
             both high speed data services and multi-line voice services over a
             single broadband interface.
  
          .  Client software - Software packages that enable broadband access for
             end users, in conjunction with SpeedStream customer premises products
             or otherbroadband devices.
  
       Efficient also provides a full suite of pre-configuration and diagnostic
  software tools.  Our pre-configuration software enables network service
  providers to architect scalable DSL services and ensures rapid and reliable
  installation while reducing or eliminating the need for on-site configuration.
  Our diagnostic and troubleshooting software, Advanced Status, is designed to
  reduce a network service provider's expense associated with ongoing maintenance
  and repair.  Our broadband client software also provides a significant
  diagnostic function for service providers.  We believe that these software
  capabilities can reduce the overall expense for DSL service deployment and
  maintenance.
  
  The SpeedStream 3000 Series
  
       The SpeedStream 3000 Series consists of internal modems that provide high-
  speed asymmetric DSL connectivity for a personal computer.  This product family
  comprises several distinct products, each designed for compatibility with
  specific DSLAMs from various network equipment vendors.  The SpeedStream 3000
  Series incorporates the following features:
  
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          .  Installs into any peripheral component interface bus slot;
  
          .  Supports pre-configuration using Efficient software for easy setup;
  
          .  Includes Efficient Advanced Status diagnostic software tools for
             rapid error diagnosis and correction;
  
          .  Supports prevalent data encapsulation standards to ensure network
             interoperability with Internet Protocol and ATM networking equipment;
  
          .  Provides ATM functionality that enables reliable data transmission;
  
          .  Offers remote management capability; and
  
          .  Support for a broad range of Microsoft Windows operating systems.
  
  The SpeedStream 4000 Series
  
       The SpeedStream 4000 Series consists of external modems that provide high-
  speed asymmetric DSL connectivity through a personal computer's universal serial
  bus port.  This product family comprises several distinct products, each
  designed for compatibility with specific DSLAMs from various network equipment
  vendors.  The SpeedStream 4000 Series incorporates the following features:
  
          .  Attaches externally via a personal computer's universal serial bus
             port;
  
          .  Supports pre-configuration using Efficient software for easy setup;
  
          .  Includes Efficient Advanced Status diagnostic software tools for
             rapid error diagnosis and correction;
  
          .  Supports prevalent data encapsulation standards to ensure network
             interoperability with Internet Protocol and ATM networking equipment;
  
          .  Provides ATM functionality that enables reliable data transmission;
  
          .  Offers remote management capability; and
  
          .  Supports a broad range of Microsoft Windows operating systems.
  
  The SpeedStream 5200 Series
  
       The SpeedStream 5200 Series provides high-speed remote ADSL or SDSL
  connectivity for one or more personal computers, workstations or other network
  devices over a standard networking architecture called Ethernet.  This product
  family comprises multiple products designed to interoperate with DSLAMs from
  various network equipment vendors.  The SpeedStream 5200 Series incorporates the
  following features:
  
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          .  Facilitates cost-effective DSL connectivity for multiple users via
             a standard Ethernet port;
  
          .  Provides zero setup installation, reducing the time required for
             installation;
  
          .  Pre-configures for rapid network deployment;
  
          .  Supports prevalent data encapsulation standards to ensure network
             interoperability with Internet Protocol and ATM networking equipment;
             and
  
          .  Provides ATM functionality that enables reliable data transmission.
  
  The SpeedStream 5600 Series
  
       The SpeedStream 5600 Series provides high-speed remote DSL connectivity for
  one or more personal computers, workstations or other network devices over a
  standard networking architecture called Ethernet.  This product family comprises
  multiple products designed to interoperate with DSLAMs from various network
  equipment vendors.  Routing features help provide security, and make more
  effective use of network bandwidth.  The SpeedStream 5600 Series incorporates
  the following features:
  
          .  Facilitates DSL connectivity for multiple users via a standard
             Ethernet port;
  
          .  Provides routing or bridging capabilities for a telecommuting or
             small office/home office environment;
  
          .  Pre-configures for rapid network deployment;
  
          .  Supports prevalent data encapsulation standards to ensure network
             interoperability with Internet Protocol and ATM networking equipment;
  
          .  Provides ATM functionality that enables reliable data transmission;
             and
  
          .  Offers remote management capabilities.
  
  The SpeedStream 5700 and 5800 Series
  
       SpeedStream 5700 and 5800 Series routers provide high-speed remote
  connectivity for one or more personal computers, workstations or other network
  devices over a standard networking architecture called Ethernet.  These routers
  support three different types of DSL, plus several non-DSL interfaces that can
  enhance existing DSL modems. Our 5700 and 5800 Series routers incorporate the
  following features:
  
          .  Facilitate DSL connectivity for multiple users via a standard,
             integrated Ethernet hub;
  
          .  Provide routing and bridging capabilities for a small business or
             branch office environment;
  
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          .  Pre-configureable for rapid network deployment;
  
          .  Support prevalent data encapsulation standards to ensure network
             interoperability with Internet Protocol and ATM or packet-based
             networking equipment;
  
          .  Support enhanced security and virtual private network capabilities;
  
          .  Provide ATM or packet-based functionality that enables reliable data
             transmission; and
  
          .  Offer remote management capabilities.
  
  The SpeedStream 7400, 7800, 8600 Series
  
       The SpeedStream 7400, 7800 and 8600 Series Integrated Access Devices (IADs)
  support high-speed data services and multi-line voice services simultaneously
  over a shared DSL interface. By using a single broadband connection and a single
  access device, a carrier's costs are often reduced, while their revenue
  potential per customer is increased.  Our IAD product line comprises multiple
  products designed to support a variety of voice lines, and to interoperate with
  DSLAMs from various network equipment vendors.  The SpeedStream IADs incorporate
  the following features:
  
          .  Facilitates cost-effective DSL connectivity for multiple users via
             a standard Ethernet port;
  
          .  Pre-configures for rapid network deployment;
  
          .  Supports prevalent data encapsulation standards to ensure network
             interoperability with Internet Protocol and ATM networking equipment;
  
          .  Provides ATM functionality that enables reliable data transmission;
  
          .  Supports four (7400), eight (7800) or up to 24 (8600) voice
             interfaces for connection to an end user's telephony equipment; and
  
          .  Supports modular addition of new voice and data interfaces (8600).
  
  Client Software
  
       All of our SpeedStream DSL products for single personal computer
  environments support the ability to be pre-configured for specific DSL networks.
  SpeedStream Software allows a network service provider to select configuration
  settings for the CPE that match its specific network.  This CPE pre-
  configuration allows a network operator the flexibility to choose network
  settings unique to the network's service offerings, without requiring an end
  user or an installation technician to individually configure each unit.  Thus,
  by setting the attributes for DSL, ATM and data encapsulation prior to
  installation of the CPE, the speed of DSL equipment installation is increased.
  We believe that this ability to pre-configure DSL CPE provides cost savings for
  network service
  
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  providers and allows them to scale their DSL service offerings
  rapidly and reliably.  We also offer broadband client software that supports a
  commonly used remote access protocol known as the Point-to-Point Protocol over
  Ethernet (PPPoE).  This client capability allows Internet Service Providers to
  take advantage of their existing systems for user authentication, address
  management and billing.
  
  Advanced Status Software
  
       All SpeedStream DSL products for single-user environments include embedded
  diagnostic and troubleshooting software called Advanced Status.  During normal
  network conditions, the end user is unaware that this software is operating.
  However, if network degradation or failure occurs, a customer service
  representative can work with the end user to diagnose and isolate problems with
  the DSL link, the CPE or the network itself.  Advanced Status software provides
  information such as status indications and performance statistics for DSL, ATM
  and packet communication layers.  This information helps identify problems and
  determine whether they must be solved at the central office or the customer
  premises.  Our broadband client software also provides status and diagnostic
  information that help service providers rapidly identify and resolve problems
  for their customers.  These software components minimize the need to send a
  technician to the customer premises and speeds troubleshooting and repair.  We
  believe that our client software reduces the overall expense of DSL service.
  
  Products under Development
  
       Efficient continually develops new products, and enhances existing
  products.   Significant areas of new development include:
  
          .  Integrated access devices that enable simultaneous data and multi-
             line voice services over a single, shared DSL connection.
  
          .  New routing platforms and software feature sets, intended for use in
             business and enterprise applications.
  
          .  Client software, to enable rapid deployment and diagnosis of
             broadband services, to enhance end user security, and to assist in
             ongoing management of the services.
  
          .  Cost reductions and performance enhancements, intended to improve
             overall profitability and performance of our products.
  
  Technology
  
       Efficient designs and manufactures DSL CPE as part of an overall solution
  for high-speed remote access and data transmission.  Efficient's SpeedStream
  family of DSL CPE includes products intended for a single user such as a
  telecommuter, as well as for multiple users within branch offices or small
  businesses. Efficient integrates a diverse set of technologies and expertise,
  primarily in the following areas:
  
          .  DSL System Architecture
  
                                         12
  <PAGE>
  
          .  Asynchronous Transfer Mode and Data Encapsulation Techniques
  
          .  Software
  
          .  Application Specific Integrated Circuit Design
  
          .  Routing and Bridging
  
          .  Integrated Voice and Data
  
  DSL System Architecture Expertise
  
       We structure our product architectures to consist of highly modular blocks
  of hardware and software.  By utilizing our expertise in developing multiple
  products with diverse types of DSL technology, we have developed a core set of
  hardware and software designs.  Consequently, it is a relatively straightforward
  activity to restructure the components and develop a new SpeedStream product.
  Similarly, as new features are developed, they can be made available across a
  number of products all based upon common components.  This design modularity
  helps Efficient respond quickly to new market requirements.
  
       Our product architectures use Efficient's proprietary application specific
  integrated circuits, or ASICS, as well as chipsets from third-party suppliers.
  We believe that the use of our application specific integrated circuits in
  conjunction with these third-party chipsets has advantages for CPE performance
  and cost.  Because DSL signals operate across a broad frequency range, circuits
  must be carefully designed to ensure that high performance is achieved without
  disrupting other equipment in the end user's home or office (such as
  televisions).  We believe that our techniques for DSL circuit design, component
  selection and layout, emissions shielding and certification testing result in
  high-performance products that meet a broad range of emissions and safety
  certifications mandated by the Federal Communications Commission, international
  regulatory bodies, consumer safety laboratories and network operators.
  
  Asynchronous Transfer Mode and Data Encapsulation Techniques Expertise
  
       Our SpeedStream CPE products employ our own ATM hardware and software
  technology.  ATM technology enables multiple communication sessions to occur
  simultaneously and bursty packet traffic to coexist with delay-sensitive traffic
  such as voice or video information.  In order to allow this data to be carried
  across an ATM network, it must be formatted into fixed-size ATM cells, a
  technique known as data encapsulation.  ATM and data encapsulation permit a
  common network infrastructure to offer diverse services.  There are numerous
  data encapsulation techniques which network service providers, Internet service
  providers or other network operators may implement.
  
       We have been able to implement these numerous ATM and data encapsulation
  techniques because of our prior experience in designing, manufacturing, and
  commercializing ATM LAN equipment.  Key pieces of silicon and software
  technology were reused from these products to enable rapid development of our
  SpeedStream CPE.  We believe that this intellectual property, as
  
                                         13
  <PAGE>
  
  well as the ATM networking expertise associated with it, represents one of our
  key competitive advantages.
  
  Software Expertise
  
       Our software engineers have expertise in developing code that addresses the
  needs of network service providers.  Our modular software architecture enables
  reuse of much of our software code across products.  This modularity also
  enables rapid development of new products.  Our knowledge of network operation
  and architectures and data encapsulation techniques allows us to write software
  that ensures that our products are interoperable with other network equipment
  vendors' products.  In addition, our understanding of various operating systems
  and personal computer environments allows us to create software that provides
  for trouble-free installation and network maintenance.  Our software engineers
  also design, build and operate comprehensive testing environments to ensure not
  only that our products are interoperable, but also offer high performance.
  
       Efficient has developed a suite of software for our single-user SpeedStream
  products that enables communication in a personal computer environment.  This
  software is commonly called a "driver" and allows application software, such as
  e-mail or a Web browser, to send and receive data over the DSL network link,
  just as it would over a modem or a LAN connection.  By building upon software
  source code and skills developed for ATM LAN products, Efficient is able to
  support a number of diverse personal computer environments.  To date, Efficient
  has leveraged our software expertise to develop and release high-performance,
  rapidly installing drivers for our SpeedStream 3000 and 4000 Series products.
  This software is interoperable with numerous brands and models of personal
  computers, and with several diverse versions of the Microsoft Windows operating
  system.
  
       In addition, Efficient works closely with network service providers to
  create software specific to their networks, which allows them to rapidly and
  reliably deploy and maintain DSL service.
  
  Application Specific Integrated Circuit Design Expertise
  
       Efficient has developed custom application specific integrated circuits
  that enable high-speed ATM networking using peripheral component interface or
  universal serial bus attachments.  Our application specific integrated circuits
  provide high-speed interfaces to the personal computer and also perform several
  ATM functions, including segmentation and reassembly functions whereby variable
  length packets are converted into fixed size ATM cells.  They also perform
  traffic shaping functions that control the flow of data from the end user's
  equipment into the service provider's network.  The use of custom application
  specific integrated circuits allows us to better control the cost of our
  products and helps ensure their performance and interoperability with diverse
  brands of personal computers and network equipment.
  
  Routing and Bridging Expertise
  
       Efficient's multi-user products offer a shared Ethernet port for local
  attachment to a computer network and an ATM DSL port for transmission and
  receipt of data across a DSL interface.  A bridging device forwards Ethernet
  packets between the product's Ethernet port and its ATM DSL
  
                                         14
  <PAGE>
  
  port based on addresses contained in the Ethernet packets. Efficient's Ethernet
  bridging products examine addressing information in each packet to determine
  whether it should be forwarded between the local Ethernet port and the ATM DSL
  port. Our bridging CPE requires little or no configuration, thereby reducing the
  network service provider's installation expense. Because all packet forwarding
  decisions are made independently of the network protocol carried by the Ethernet
  packets, our bridging CPE can support numerous network types, including older
  LAN environments such as Novell's IPX or Apple's AppleTalk, as well as networks
  based on the Internet Protocol.
  
       Routers are able to perform much more complex functions than those
  performed by bridges including restricting certain types of data from entering
  the network and directing data flow based on dynamically assigned Internet
  protocol addresses.  Efficient's routing products forward Internet Protocol
  packets based upon addressing information contained in the packet header.
  Support for several different methods of ATM data encapsulation helps ensure
  network interoperability.  Efficient's routing products provide features that
  enhance security and ease network administration for end users, such as packet
  filtering, which prevents unwanted access to local servers or other private
  resources, and a technique known as network address translation, which masks the
  presence of local computers from other computers on the Internet.  Our routing
  products also implement an address management technique called the dynamic host
  configuration protocol that automates the assignment of Internet protocol
  addresses to computers attached locally to the router.  The network address
  translation and dynamic host configuration protocol features of our routing
  products can help minimize address interoperability issues, and may be able to
  accelerate deployment of DSL services.
  
       Efficient's routing products include a complete suite of management
  capabilities that enable local and remote troubleshooting as well as upgrades to
  system configuration or software.  This is important as DSL is a complex
  technology typically intended for a technologically unsophisticated user base.
  We believe that our products' combination of management capabilities which can
  be accessed either locally or remotely can help reduce the cost of network
  administration for DSL network service providers.
  
  Integrated Voice and Data Expertise
  
       Efficient's integrated access products provide data services such as
  routing and bridging, as well as multi-line voice services, over a shared DSL
  connection.  The combination of voice services along with data services
  increases the complexity of the products significantly.  Efficient builds upon
  the ATM, DSL and data expertise gained from our data-only products, and employs
  a further level of expertise to provide high performance analog and digital
  voice designs.  We believe that the additional complexity of the resulting
  integrated access products represents a barrier to entry for many of our
  competitors.
  
  Customers
  
       Sales of our CPE have been to two main classes of customers: network
  equipment vendors who supply DSL central office equipment and DSL network
  service providers.  Network equipment vendors include our products as an element
  of a complete solution offered to their network service provider customers.  In
  many cases, several different network equipment vendors specify our
  
                                         15
  <PAGE>
  
  products as the preferred or bundled CPE in response to bid requests issued by a
  network service provider for complete DSL access solutions. Network service
  providers will then provide the CPE to end users for access to their DSL
  network. In some cases, we sell CPE to the network equipment vendor for resale
  as part of a bundled solution to the network service provider. In other cases,
  we sell directly to the network service provider.
  
  Strategic Relationships
  
       We believe that establishing relationships with leaders in DSL technology
  and services is critical to our success.  Accordingly, we have formed strategic
  relationships and, in some cases, entered into joint development agreements with
  network service providers, network equipment vendors and developers of DSL
  semiconductor technology.  We are also pursuing strategic relationships to
  ensure that high-volume distribution channels are in place for our products.
  
  Network Service Providers
  
       Ameritech.  Efficient has entered into an agreement to provide DSL CPE to
  Ameritech.  We have worked closely with the technical and product management
  staff responsible for DSL service
  
                                         16
  <PAGE>
  
  deployment at Ameritech. We have also provided early software releases of new
  products to Ameritech, and have provided Ameritech with training for both
  customer service and field support.
  
       Bell Atlantic.  Efficient has entered into an agreement to provide DSL CPE
  to Bell Atlantic.  Two of our SpeedStream products are offered by Bell Atlantic
  as CPE options for their Infospeed DSL service.  Efficient has developed custom
  hardware and software to help enable Bell Atlantic's DSL deployment, and we have
  provided them with training for both customer service and field support.
  
       BellSouth. Efficient has entered into a supply agreement with BellSouth,
  providing DSL CPE for their broadband service offering.  Efficient has also
  engaged in joint promotion programs with BellSouth for DSL CPE.
  
       Covad Communications.  Efficient has worked closely with Covad to tune the
  feature sets of several of our SpeedStream DSL products to their network
  requirements.  Covad purchases SDSL, ADSL and IDSL products from Efficient,
  including routers, bridges and USB modems.  We are also involved in discussions
  with Covad about our next-generation integrated access products.  In addition,
  on June 28, 1999, we issued a $5.0 million convertible promissory note to Covad,
  which converted into 497,663 shares of common stock upon completion of our
  initial public offering in July 1999.
  
       Hanaro Telecom.  Hanaro is a competitive network service provider in Korea
  actively engaged in DSL deployment.  Hanaro offers DSL services for consumer,
  academic and business applications.  Efficient has worked closely with Hanaro to
  enable rapid deployment of its DSL service using our SpeedStream CPE.
  
       SBC Communications.  Efficient provides our SpeedStream CPE for DSL
  services offered through SBC's Southwestern Bell, Pacific Bell and Ameritech
  subsidiaries.  We have provided training for their installation and customer
  service personnel, and have worked with their certification and test staff to
  demonstrate new SpeedStream DSL products.
  
       Singapore Telecom.  Efficient has worked closely with SingTel to provide
  customized software with our CPE that is unique to SingTel's advanced Magix DSL
  service.  We are involved in discussions with SingTel with respect to the
  evolution of SingTel's network architecture and service offerings.  SingTel has
  consistently volunteered to work with us to test our new products.
  
  Network Equipment Vendors
  
       Alcatel.  Efficient and Alcatel have established a joint agreement for CPE
  that is interoperable with Alcatel's DSLAM as well as their Litespan digital
  loop carrier.  many of our DSL products employ Alcatel's DSL chipsets and
  software.
  
       Nokia.  Efficient and Nokia have entered into a purchase and distribution
  agreement whereby we supply our SpeedStream 3000 PCI and 4000 USB products.
  Under the provisions of this agreement, Nokia resells our products along with
  its EKSOS family of DSL equipment and their SpeedLink DSLAM.
  
                                         17
  <PAGE>
  
       Nortel Networks.  Efficient has an agreement to supply Nortel with DSL CPE
  that is interoperable with Nortel's Universal Edge 9000 access product, and
  their IMAS DSLAM.  Nortel offers the Universal Edge 9000 to both new and
  existing customers as an upgrade for both Nortel's DMS voice switches and its
  access node digital loop carriers.  Based on this relationship, we are involved
  in discussions with Nortel on next-generation products.
  
       Siemens.  Siemens is an investor in Efficient.  We have worked with Siemens
  to establish compatibility between Efficient's DSL CPE and Siemens' XpressLink D
  DSLAM, as well as the DSL interfaces for Siemens' installed base of voice
  switches.  Anthony T. Maher, who is a member of the board of Siemens AG
  Information and Communication Networks, joined our board of directors in April
  1999.
  
  Developers of DSL Semiconductor Technology
  
       Alcatel Microelectronics.  Many of our products use asymmetric DSL
  technology from Alcatel Microelectronics.  Efficient is one of Alcatel's largest
  customers for DSL chipsets.  The two companies work closely on the design of
  next-generation DSL products.
  
       Texas Instruments Incorporated.  Texas Instruments is an investor in
  Efficient.  Some SpeedStream products under development use asymmetric DSL and
  voice processing technology from Texas Instruments.  We have licensed pieces of
  our ATM silicon and software to Texas Instruments, and have assisted in the
  development of reference designs for application of Texas Instruments'
  asymmetric DSL components.  Texas Instruments has provided us with access to its
  asymmetric DSL components at most favored prices.  Texas Instruments also
  fabricates one of our ATM application specific integrated circuits and has
  provided introductions for Efficient to personal computer manufacturers who are
  searching for sources of DSL CPE.
  
  Telephone Company--Aligned Distributors
  
       Sprint North Supply.  Sprint North Supply is a primary supplier of
  telecommunications equipment to Sprint.  Many other network service providers
  also purchase networking products from Sprint North Supply.  Efficient has
  entered into a distribution agreement with Sprint North Supply that enables it
  to carry selected members of our SpeedStream product family.
  
       Nortel Supply.  Nortel Supply is a distributor of Nortel and other network
  equipment vendors' products.  Through our agreement with Nortel Supply,
  Efficient leverages Nortel Supply's worldwide distribution capabilities.
  
                                         18
  <PAGE>
  
       Innotrac.  Innotrac is a distributor of consumer telecommunications
  equipment for several incumbent local exchange carriers, including BellSouth.
  Efficient, Innotrac and BellSouth jointly promote BellSouth's DSL services with
  Efficient's SpeedStream CPE.  Efficient and Innotrac also work together to
  create customized product packages and documentation for major network service
  providers.  We believe that we can leverage Innotrac's relationship with several
  incumbent local exchange carriers, as well as Innotrac's experience in
  distributing products in high volume.
  
  Manufacturing
  
       We outsource the assembly and testing of products and printed circuit
  boards to turnkey contract manufacturers.  Currently, ACT Manufacturing, Inc.
  manufactures the majority of our products at its facility in Hermasillo, Mexico.
  Several of our routing products are manufactured by PEMSTAR, Inc. at its San
  Jose, California facility.  Efficient also contracts with Xetel, Inc. for the
  manufacturing of its ATM LAN products and a portion of our DSL products at its
  facility in Dallas, Texas.  Each of these manufacturers are certified by the
  International Standards Organization for manufacturing and design processes.
  Efficient plans to engage an additional contract manufacturer to meet our
  anticipated manufacturing requirements and to continue reducing the cost of our
  products.
  
       Efficient has a limited in-house manufacturing capability.  We have
  complete capabilities for final test, packaging and shipping of our products.
  We perform comprehensive inspection tests and use statistical process controls
  to assure the reliability and quality of our products.  Our manufacturing
  engineers design and build all test procedures and fixtures for our products.
  We integrate these manufacturing tests with the contract manufacturers' build
  processes.  Our manufacturing personnel work with our design engineers to ensure
  that the test environment remains current as DSL technology evolves.  We also
  perform warranty and repair work at our Dallas facility.
  
       Efficient's engineers design custom application specific integrated
  circuits that are incorporated into the majority of our products.  Efficient
  contracts with silicon manufacturers to fabricate the application specific
  integrated circuits for prototype testing.  We perform design verification and
  simulation testing at our facilities.  After successful completion of these
  tests, Texas Instruments, Samsung Semiconductor and VLSI Technology manufacture
  our application specific integrated circuits in volume on a turnkey basis.  We
  purchase only packaged and tested application specific integrated circuits.
  
       Other than our application specific integrated circuits, we try to use
  standard parts and components whenever possible.  We currently purchase certain
  key parts and components from sole-source suppliers such as Alcatel
  Microelectronics, Analog Devices, Conexant Systems and Texas Instruments.
  
  Sales and Marketing
  
       Since 1996, Efficient has worked closely with network equipment vendors
  that supply DSL-based central office equipment.  These vendors offer our
  SpeedStream products to network service providers as part of a complete,
  interoperable DSL solution.  We engage in joint sales
  
                                         19
  <PAGE>
  
  activities with our partners and regularly provide them with collateral
  materials to enable their sales forces to promote our products. Our
  relationships with network equipment vendors result in introductions to large
  network service providers. In many cases, with DSL interoperability assured by
  Efficient and our partners, network service providers choose to purchase CPE
  directly from Efficient.
  
       Efficient also works closely with network service providers to ensure that
  our CPE is matched to their DSL service offerings.  Initial discussions with
  network service providers generally involve our sales, marketing and business
  development personnel who work to communicate the strengths of our company and
  our products.  Detailed responses to request for purchase documents are
  submitted to network service providers, often by both Efficient and one or more
  network equipment vendors.  We also frequently provide informal consulting or
  recommendations on network design, architecture and management for our
  customers.
  
       Next, at the network service provider's request, we engage in a technical
  certification process involving our system engineers who work in a lab
  environment, in some cases for days or weeks, with their counterparts from the
  network service provider.  We frequently provide informal consultation on
  network deployment and testing as well as customized training for network
  service providers.  In some cases, we create special software releases or
  product combinations for major network service providers.  Efficient typically
  creates and delivers customized training courses and curricula for our largest
  customers, to ensure that their installation and support personnel are effective
  in satisfying end users' needs.  While the actual sale and distribution of CPE
  varies network by network, this initial relationship-building stage is critical
  in every case.  We believe that it is difficult to provide CPE into DSL service
  offerings without these close relationships with network service providers.
  
       We engage in a variety of marketing activities to build brand awareness.
  We issue press releases concerning significant product releases, partnerships
  and network design wins.  We also conduct briefings for analysts and members of
  the press.  We participate in a number of industry trade shows and pursue
  speaking engagements at related events.  Efficient uses direct mail campaigns to
  increase awareness of our company and our products among Internet service
  providers, who are increasingly active in introducing customers to DSL services.
  We also engage in joint marketing programs with selected Internet service
  providers whose DSL services employ our CPE.  Our broad goals are to continue to
  increase the awareness of Efficient as a company, and of our DSL CPE product
  line brand, SpeedStream.
  
       As the scope of our marketing efforts expands, our Website continues to be
  a strategic resource in disseminating information to interested parties.  Our
  Website also plays an active role in collecting sales leads, working remotely
  with partners and key customers, and performing customer support.  In the
  future, we believe that our Website may become an important tool for direct
  sales of our products.
  
  Research and Development
  
       We believe that our future success depends on our ability to adapt to the
  rapidly changing communications environment, maintain our significant expertise
  in core technologies, and continue
  
                                         20
  <PAGE>
  
  meeting and anticipating our customers' needs. We continually review and
  evaluate technological changes affecting the telecommunications market and
  invest substantially in applications-based research and development. We are
  committed to an ongoing program of new product development that combines
  internal development efforts with joint ventures and licensing or marketing
  arrangements relating to new products and technologies from outside sources.
  
       Efficient's core research and development activities are focused on both
  hardware and software technologies.  In our hardware development activities, we
  possess significant expertise in application specific integrated circuits
  development, analog and mixed signal hardware design, ATM architecture and bus
  architectures, such as peripheral component interface and universal serial bus.
  In software development, Efficient has particular strengths in data networking
  protocols and operating systems, device driver development and traffic
  management, and techniques for advanced routing and systems management.  We have
  significant expertise with hardware and software technology for analog and
  digital voice encoding, compression, transmission and switching techniques as
  well.
  
       To enable successful deployment of DSL services, our CPE must be
  interoperable with the DSLAM, ATM switching equipment and other networking
  equipment from multiple vendors.  In our development efforts, we leverage our
  relationships with prominent DSLAM vendors to ensure DSL interoperability.  The
  continued development and use of our own industry-tested application specific
  integrated circuits and software ensure ATM switching interoperability.  In
  addition, our support for a number of protocol stacks provides data
  encapsulation interoperability with routers at Internet service providers or
  within corporate networks.  Finally, integrated voice and data products require
  a high degree of interoperability with other voice networking products.
  Efficient has a solid understanding of the end-to-end technologies in use, and
  we actively work to ensure interoperability while using technology that we
  control.  Our design verification procedures include testing in complex network
  environments created in our laboratories that simulate end-to-end network
  architectures used in DSL service deployments.  We believe that our stringent
  design verification and test procedures allow us to provide cost-effective,
  high-performance DSL CPE that minimizes the technology risk for network
  operators.
  
       Most of the technology associated with Efficient's SpeedStream products
  continues to evolve. Asymmetric DSL supports high frequency digital data
  transmission simultaneously with analog voice signals on a single copper phone
  line, but digital data and analog voice have the capability to disrupt one
  another.  One common method of minimizing this disruption is to electrically
  separate the voice signals from the data signals using a circuit known as a
  filter or a "splitter."  At present, the use of a splitter often requires a
  network technician or the end user to install the device using hand tools and to
  modify phone wiring inside a home or business.  We are currently researching
  analog filtering circuit technology and are working with other companies to
  enable filter designs that can be installed without tools or changes to interior
  wiring.
  
       Another future technology involves ATM switched virtual circuits.  Switched
  virtual circuits create a dedicated connection between two points of a network.
  Current ATM/DSL deployments typically use permanent virtual circuits to create
  these dedicated connections.  Permanent virtual circuits must be created
  manually, while switched virtual circuits employ software to automatically
  create a circuit across the ATM network without manual intervention.  Some
  network operators have
  
                                         21
  <PAGE>
  
  expressed a concern that DSL deployments may not scale rapidly if permanent
  virtual circuits are employed. Switched virtual circuit implementations are
  complex and may represent a technology barrier for competitors. Efficient has
  sold ATM LAN products supporting switched virtual circuits for several years. We
  believe we are well suited to help enable large-scale DSL deployments as network
  operators demand support for switched virtual circuits.
  
  Competition
  
       The network equipment industry is highly competitive, and we believe that
  competition may increase substantially as the introduction of new technologies,
  deployment of broadband networks and potential regulatory changes create new
  opportunities for established and emerging companies.  In addition, a number of
  our competitors and potential competitors have significantly greater financial
  and other resources than us which may enable them to more aptly meet new
  competitive opportunities.  We compete directly with other providers of DSL CPE
  including 3Com Corporation, Alcatel, Cisco Systems, Intel, Netopia, Westell
  Technology, Xpeed, Zyxel among others.  Many of our industry partners
  manufacture DSL customer premises products that compete directly or indirectly
  with ours.  Our integrated access products will compete with both existing
  competitors, and with new competitors such as Vina Technologies, Adtran,
  Woodwind Communications and 2Wire.  Furthermore, DSL as a technology for
  deploying broadband connections is competing with alternative technologies
  including ISDN, T1, broadband wireless and cable solutions.
  
       The rapid technological developments within the network equipment industry
  results in frequent changes to our group of competitors.  The principal
  competitive factors in our market include:
  
          .  Industry relationships with network service providers and network
             equipment vendors;
  
          .  product reliability, performance and interoperability;
  
          .  product features;
  
          .  product availability;
  
          .  price;
  
          .  ability to distribute products;
  
          .  ease of installation and use;
  
          .  technical support and customer service; and
  
          .  brand recognition.
  
       We believe we are successfully addressing each of these competitive
  factors.  Nonetheless, we expect to face increasing competitive pressures from
  both current and future competitors in the markets we serve.
  
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  <PAGE>
  
  Intellectual Property
  
       We rely on a combination of copyright, patent, trademark, trade secret and
  other intellectual property laws, nondisclosure agreements and other protective
  measures to protect our proprietary rights.  We also utilize unpatented
  proprietary know-how and trade secrets and employ various methods to protect our
  trade secrets and know-how.  To date, we have been granted six U.S. patents with
  counterpart patents pending in threeinternational jurisdictions and have an
  additional six U.S. patent applications pending.
  
       Although we employ a variety of intellectual property in the development
  and manufacturing of our products, we believe that none of our intellectual
  property is individually critical to our current operations.  However, taken as
  a whole, we believe our intellectual property rights are significant and that
  the loss of all or a substantial portion of such rights could have a material
  adverse effect on our results of operations.  There can be no assurance that our
  intellectual property protection measures will be sufficient to prevent
  misappropriation of our technology.  In addition, the laws of many foreign
  countries do not protect our intellectual properties to the same extent as the
  laws of the United States.  From time to time, we may desire or be required to
  renew or to obtain licenses from others in order to further develop and market
  commercially viable products effectively.  There can be no assurance that any
  necessary licenses will be available on reasonable terms.
  
       We have registered the trademarks "Efficient Networks" and "SpeedStream."
  "Advanced Status" and "ProfileBuilder" are also our trademarks.  All other
  trademarks or service marks appearing in this prospectus are trademarks or
  service marks of the respective companies that use them.
  
  Employees
  
       As of June 30, 2000, we employed approximately 443 full-time employees,
  including 193 in engineering. Most of our employees are located in the United
  States with several sales employees located in The Netherlands, Singapore,
  China, Canada and Brazil.  None of our employees is represented by collective
  bargaining agreements, and management considers relations with our employees to
  be good.
  
  Properties
  
       We currently operate primarily out of our facility in Dallas, Texas.  Our
  primary executive, sales and marketing, and research and development activities
  are conducted out of a 125,000 square foot facility under a lease expiring in
  2010. In addition, in connection with the acquisition of FlowPoint, we entered
  into an agreement with Cabletron to permit us to retain, for a transitional
  period, the space being used by the FlowPoint employees at a Cabletron facility
  in Santa Clara, California.  We expect to lease space to relocate the FlowPoint
  operations with the NTS operations to another facility in Los Gatos, CA in the
  first half of fiscal 2001.  We lease an approximately 2,500 square foot facility
  in Amsterdam, The Netherlands for our European operations.  This lease expires
  in 2004.  For our Asian operations, we lease an approximately 1,450 square foot
  facility in Singapore.  This lease expires in 2002.
  
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  <PAGE>
  
  Legal Proceedings
  
       Efficient is not a party to any material legal proceedings.
  
         This document may include forward-looking statements within the meaning
  of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the
  Securities Exchange Act of 1934, as amended.  Actual results could differ
  materially from those projected in the forward-looking statements as a result of
  the risk factors set forth in the Registrant's Forms 10-K and 10-Q reports.
  
         UNAUDITED FINANCIAL RESULTS FOR FOURTH QUARTER AND FISCAL YEAR   ENDED
  JUNE 30, 2000
  
       On July 18, 2000, the Company reported its unaudited financial results for
  the quarter and fiscal year ended June 30, 2000.
  
       Attached hereto as Exhibit 99.1 and incorporated herein by reference are
  the Company's Unaudited Consolidated Statements of Operations and Consolidated
  Balance Sheets for the three months ended June 30, 2000 and the fiscal year
  ended June 30, 2000.  The operating results for any periods are not necessarily
  indicative of results for an subsequent period.
  
  Item 7.    FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION
             AND EXHIBITS.
  
        (c)  EXHIBITS.
  
  <TABLE>
  <CAPTION>
         Exhibit No.                                            Description
  --------------------------  --------------------------------------------------------------------------------
  <S>                         <C>
             99.1             Unaudited Consolidated Financial Statements for Registrant's fiscal quarter and
                              year ended June 30, 2000.
  </TABLE>
  
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  <PAGE>
  
                                     SIGNATURE
  
       Pursuant to the requirements of the Securities Exchange Act of 1934, the
  Registrant has duly caused this report to be signed on its behalf by the
  undersigned hereunto duly authorized.
  
                                      EFFICIENT NETWORKS, INC.
  
  
  
                                      By       /s/ Jill S. Manning
                                          -------------------------
  
                                      Name:  Jill S. Manning
                                      Title: Vice President, Secretary and Chief
                                             Financial Officer
  
                                      Date:  July 20, 2000
  <PAGE>
  
                             EFFICIENT NETWORKS, INC.
  
                            Current Report on Form 8-K
  
                                 INDEX TO EXHIBITS
  
  
  <TABLE>
  <CAPTION>
         Exhibit No.                                            Description
  --------------------------  --------------------------------------------------------------------------------
  <S>                         <C>
             99.1             Unaudited Consolidated Financial Statements for Registrant's fiscal quarter and
                              year ended June 30, 2000.
  </TABLE>
metadata_documents: [{"type": "8-K", "sequence": "1", "filename": "0001.txt", "description": "CURRENT REPORT ON FORM 8-K", "secsgml_size_bytes": 72124}]
metadata_filer: {"company-data": {"conformed-name": "EFFICIENT NETWORKS INC", "cik": "0001085061", "assigned-sic": "4899", "irs-number": "752486865", "state-of-incorporation": "DE", "fiscal-year-end": "0630"}, "filing-values": {"form-type": "8-K", "act": "34", "file-number": "000-26473", "film-number": "676007"}, "business-address": {"street1": "4849 ALPHA RD", "street2": "SUITE 1200", "city": "DALLAS", "state": "TX", "zip": "75244", "phone": "9729913884"}, "mail-address": {"street1": "4201 SPRING VALLEY ROAD", "street2": "SUITE 1200", "city": "DALLAS", "state": "TX", "zip": "75244"}}
text: SECURITIES AND EXCHANGE COMMISSION
  
                              Washington, D.C. 20549
  
                                     FORM 8-K
  
                  CURRENT REPORT PURSUANT TO SECTION 13 OR 15(D)
                      OF THE SECURITIES EXCHANGE ACT OF 1934
  
  Date of Report (Date of earliest event reported)           July 18, 2000
                                                  --------------------------------
  
                             EFFICIENT NETWORKS, INC.
  --------------------------------------------------------------------------------
              (Exact name of registrant as specified in its charter)
  
                Delaware                    0-26473           75-2486865
  --------------------------------------------------------------------------------
       (State or other jurisdiction       (Commission        (IRS Employer
           of incorporation                File Number)       Identification No.)
  
            4849 Alpha Road, Dallas, Texas                      75244
  --------------------------------------------------------------------------------
       (Address of principal executive offices)               (Zip Code)
  
  Registrant's telephone number, including area code   (972) 852-1000
                                                    ------------------------------
  
                                        N/A
  --------------------------------------------------------------------------------
           (Former name or former address, if changed since last report)
  ITEM  5.  OTHER EVENTS.
  
       BUSINESS
  
       Efficient Networks, Inc., a Delaware corporation and the Registrant herein
  ("Efficient Networks," "Efficient" or the "Company"), hereby updates the
  previously reported description of the general development of its business,
  which will be superceded and restated in its entirety by the filing of the
  Company's Annual Report on Form 10-K for the fiscal year ended June 30, 2000, as
  follows:
  
                                      BUSINESS
  
       Efficient Networks is a worldwide developer and supplier of high-speed
  digital subscriber line customer premises equipment, or CPE, for the broadband
  access market.  Our DSL solutions enable telecommunications and other
  communication network service providers to provide high-speed, cost-effective
  broadband access services over the existing copper wire telephone
  infrastructure.  On December 17, 1999 Efficient completed the acquisition of
  FlowPoint Corporation, a provider of advanced broadband routers for deployment
  at customer premises.  Additionally, on May 22, 2000, Efficient completed the
  acquisition of Network Telesystems, Inc., a leading provider of broadband client
  services software. We believe there is significant demand for high-speed
  broadband access, especially among business users and consumers who have found
  current solutions to be inadequate or too expensive.  We therefore focus on
  developing and producing single- and multiple-user DSL customer premises
  equipment for small- to medium-size businesses, branch offices of large
  corporations and consumers.  Our DSL products enable applications such as high-
  speed Internet access, electronic commerce, remote access, telecommuting and
  extensions of corporate networks to branch offices.
  
  Industry Background
  
  The Growing Need for High-Speed Broadband Communications
  
       The amount of data being carried over the Internet and private
  communications networks has grown dramatically and is expected to continue to
  grow as the number of users accessing these networks increases.  The increase in
  the quantity of data being carried over the Internet and private networks is
  also being driven by the broadening range of activities for which these networks
  are being used.  In order to enhance their reach to customers and suppliers,
  businesses are increasingly engaging in mission-critical Internet-based
  applications, such as electronic commerce, supply chain management, Web hosting,
  and global marketing and customer support.  Businesses also increasingly use the
  Internet to create secure data networks known as virtual private networks among
  corporate sites, remote offices and telecommuters.  By utilizing the Internet,
  businesses can streamline internal operations by facilitating employee
  communications, e-mail, file sharing, and research and analysis.  Consumers are
  also increasingly accessing the Internet to communicate, collect and publish
  bandwidth intensive information, conduct retail purchases, and access online
  entertainment.  These growing network-dependent activities require the
  transmission of large
  
                                         2
  amounts of data, which in turn, requires high-speed broadband data access
  services for end users to obtain the data reliably and within practical time
  constraints.
  
  Traditional Access Solutions are Inadequate
  
       To meet the growing demand for high-speed, high-bandwidth data
  transmission, network service providers have installed high-bandwidth fiber
  optic transmission equipment, high-speed switches and core routers in the
  Internet backbone and in interoffice networks.  While this network backbone is
  capable of delivering data at very high speeds, an access bottleneck exists
  between the ends of these fiber optic networks at telephone companies' central
  offices and the end users' premises.  The copper line connections between the
  central office and the end user are commonly known as the "last mile."  Last
  mile connections are typically made via dial-up analog or integrated services
  digital network, commonly known as ISDN, modems over the copper infrastructure
  that was originally built to transmit analog voice signals.  Data transmission
  speed, otherwise known as bandwidth, is typically expressed in bits per second.
  Along the fiber optic network backbone, data moves at speeds up to 2.5 billion
  bits per second, or 2.5 Gbps, while analog modems transmit data at rates up to
  56.6 thousand bits per second, or 56.6 Kbps, and most ISDN modems transmit at
  rates up to 128 Kbps.  Even at ISDN speeds, several minutes are often required
  to access a media rich Website, and several hours may be required to transfer or
  download large files.  During this time, the telephone line cannot be used for
  any other purpose.  This bottleneck frustrates end users and limits the
  capability of network service providers to deliver applications such as
  efficient Internet access, multimedia entertainment, real-time telecommuting and
  branch office internetworking.
  
       In an effort to provide greater bandwidth, telecommunications network
  service providers have traditionally deployed T1 services.  A T1 line is a high-
  capacity, dedicated telecommunications line which can support data transmissions
  rates of up to 1.5 million bits per second, or 1.5 Mbps, which is roughly 25
  times the speed of analog modems.  Although T1 services have helped fill the
  need for broadband access for large businesses, network service providers have
  generally been unable to offer T1 services to small businesses, remote offices,
  telecommuters and consumers as a result of the complexity and high costs of
  deployment.  Because analog and ISDN modem technology fails to satisfy the
  bandwidth needs of end users, and T1 access is prohibitively expensive, network
  service providers continue to seek alternatives for providing cost-effective
  broadband access to both businesses and consumers.  Additionally, the continued
  growth in both the number of analog modem users and their time spent connected
  to the Internet congests many network service providers' networks while
  providing them with little or no additional revenue.
  
  Competition is Driving Rapid DSL Deployment
  
       Until recently, the incumbent local exchange carriers such as Ameritech,
  Bell Atlantic, BellSouth, GTE, Pacific Bell, Southwestern Bell and US West, were
  the exclusive operators of the last mile.  Since analog dialup modems, ISDN and
  T1 services offered over the incumbent local exchange carriers' networks did not
  adequately satisfy the demand for cost-effective broadband access for a majority
  of users, alternative solutions were developed such as broadband wireless and
  cable access.  The deployment of these alternative broadband solutions is now
  pressuring incumbent local exchange carriers to deliver cost-effective broadband
  access to their customers.
  
                                         3
  In addition, the Federal Telecommunications Act of 1996 intensified the
  competitive environment because that Act requires incumbent local exchange
  carriers to lease portions of their networks, including the last mile, to
  competitive local exchange carriers.  As a result, many new companies, long
  distance telephone companies and Internet service providers have applied for and
  been granted regulatory approval for competitive local exchange carrier status.
  Leading competitive local exchange carriers, including Covad Communications, MCI
  WorldCom, NorthPoint Communications, Rhythms NetConnections and Sprint, are now
  deploying high-speed services over the copper infrastructure owned by the
  incumbent local exchange carriers.  In response to these competitive pressures
  and in an effort to increase revenues and maintain their existing customer base,
  incumbent local exchange carriers are now beginning to commit the resources
  necessary to deploy cost-effective, high-speed data services over their existing
  copper infrastructure.
  
       Similar dynamics are occurring internationally.  The growth in Internet
  use, telecommunications deregulation and competition from alternative broadband
  access technologies have caused foreign telephone network service providers to
  commit similar resources to broadband access deployment.
  
       Incumbent local exchange carriers, competitive local exchange carriers and
  foreign telephone network service providers are deploying DSL technology as the
  cost-effective broadband access solution.  DSL technology utilizes sophisticated
  data modulation techniques to achieve high-speed data transmission 100 times
  faster than analog modems over existing copper telephone wires.  The equipment
  needed to enable a DSL link generally consists of two pieces, one in the network
  operator's central office and one at the premises of the business or consumer.
  The central office equipment is often called a DSL access multiplexer, commonly
  known as a DSLAM, which aggregates data traffic from multiple DSL links into a
  common link to a fiber optic network backbone.  The CPE and the DSLAM must also
  interoperate with the rest of the equipment in a given network.  DSL can enable
  cost-effective, high-speed data transmission from the premises of a business or
  consumer into a DSL network operator's central office where existing high-
  capacity networks can then carry data to a destination across an Internet or
  other service provider's network.
  
       The market for DSL services is expanding rapidly.  All major U.S. incumbent
  local exchange carriers have begun to offer DSL services to their customers
  directly and through Internet service providers.  For example, in October 1999,
  SBC Communications announced a $6 billion initiative to make DSL service
  available to an estimated 77 million Americans by the end of 2002.  In addition,
  competitive local exchange carriers are aggressively deploying DSL service.  For
  instance, Covad Communications first announced the availability of its DSL
  services in the San Francisco Bay Area in December 1997.  By the end of 1998,
  Covad's service was available to over 6 million businesses and homes in five
  major metropolitan areas, and by the end of 2000, Covad expects to be able to
  offer DSL service to over 40% of U.S. homes and 45% of U.S. businesses.
  
  Existing Customer Premises Solutions are Constraining DSL Deployment
  
       As these and other network service providers are deploying DSL services,
  they are encountering several challenges.  In particular, interoperability still
  presents substantial technical challenges despite recent industry efforts to
  standardize the various implementations of DSL.  Service providers are actively
  seeking DSL CPE solutions that offer seamless end-to-end
  
                                         4
  interoperability within their networks. End-to-end interoperability requires
  that DSL solutions be compatible with the customer's computer hardware,
  operating systems, networking equipment and software, the CPE and DSLAM, and the
  switching and routing equipment in the service providers' network. Network
  service providers face additional challenges in deployment and maintenance,
  because DSL services are typically targeted at branch offices, small businesses
  or individuals where no particular level of networking expertise can be assumed.
  Therefore, to implement rapid and widespread DSL deployment, it is of primary
  importance that DSL CPE provides for simple and cost-effective installation and
  maintenance.
  
  The Efficient Solution
  
       Efficient designs and manufactures the SpeedStream family of DSL CPE and
  related software as part of an overall solution for high-speed remote access and
  data transmission.  The SpeedStream product line comprises a broad set of access
  products, including cost-effective single user modems, sophisticated routers for
  businesses, integrated access devices for combined voice and data service, and
  software products supporting high speed access. Our solutions enable DSL
  deployment, ensure end-to-end interoperability and provide for efficient and
  cost-effective installation and maintenance.
  
       Enable DSL Deployments.  Efficient enables network service providers to
  rapidly and cost-effectively deploy DSL services, thereby allowing them to
  quickly capture market share in today's intensely competitive environment.
  Efficient's products are specifically targeted to small- to medium-size
  companies and consumers for applications such as high-speed Internet access, and
  to large corporations for applications such as remote access, telecommuting and
  extensions of corporate networks to branch offices.  By offering a variety of
  DSL CPE categories that support DSL types compatible with a diverse set of DSL
  services, we can provide network service providers with a wide range of options.
  We can also reduce operational complexity for network service providers by
  offering a single point of contact for training and support for their DSL CPE.
  
       Ensure End-To-End Interoperability.  Efficient's DSL solutions offer
  seamless interoperability from the customer's computer through the service
  providers' network.  To ensure this interoperability, Efficient leverages our
  core technology expertise in combination with our relationships with network
  service providers, such as Ameritech, Bell Atlantic, BellSouth, Covad
  Communications, Cable and Wireless HKT, Singapore Telecom and TeleDanmark.  We
  also work closely with other network equipment vendors, such as ADC
  Telecommunications, Advanced Fibre Communications, Alcatel, Copper Mountain
  Networks, Ericsson, Lucent Technologies, Nokia, Nortel Networks and Siemens.
  Since these industry leaders recognize that end-to-end interoperability is a
  necessary requirement for full scale DSL deployment, network equipment vendors
  have provided us with early releases of their systems and technologies so that
  we can ensure that our products will seamlessly interoperate with their systems.
  Our relationships with network service providers and network equipment vendors
  enable us to maintain and use one of the most complete DSL interoperability test
  labs in the industry.  In addition, Efficient actively participates in
  developing industry-wide standards to continue to facilitate end-to-end
  interoperability.
  
       Provide for Efficient and Cost-Effective Installation.  Efficient offers a
  full suite of easily installable DSL solutions, including DSL CPE that provides
  routing and bridging capabilities which
  
                                         5
  connect seamlessly into multiple user environments using a standard networking
  architecture called Ethernet. For single user environments, Efficient provides
  internal DSL CPE installed directly into the end user's computer and external
  CPE that connect to the end user's computer by simply plugging into the
  computer's universal serial bus (USB) port or Ethernet port. Efficient's
  internal and universal serial bus modems are supported by Efficient's pre-
  configurable software which allows the network service provider to configure the
  CPE for a particular network before the CPE is sent out into the field. Pre-
  configuration of the CPE obviates the cost and time associated with having
  installers perform these configuration activities with each end-user
  installation.
  
       Provide for Cost-Effective Maintenance.  Efficient offers network service
  providers our Advanced Status software, a troubleshooting and diagnostic tool.
  With Advanced Status software, a network service provider's customer support
  technician can walk an end user through the diagnostic process over the
  telephone.  This allows the network service provider to easily monitor, diagnose
  and often remotely fix the customer's problems quickly, which can substantially
  reduce the network service provider's customer support costs.  In the event that
  a technician needs to be dispatched, Advanced Status provides easy diagnosis and
  facilitates on-site repair.
  
  The Efficient Strategy
  
       Our objective is to be the leading worldwide provider of high-performance
  DSL broadband access customer premises equipment for businesses, remote offices,
  telecommuters and consumers.  Key elements of our strategy include the
  following:
  
       Capitalize upon our Early Market Acceptance by Network Service Providers.
  We intend to leverage our products' early market acceptance to extend our market
  share.  We have been focused on the high-speed network connectivity market for
  six years and specifically on the DSL market for three years.  Our DSL CPE
  products have been deployed by Ameritech, Bell Atlantic, BellSouth, Covad
  Communications, Cable and Wireless HKT, Pacific Bell, Singapore Telecom,
  Southwestern Bell, TeleDanmark and several other network service providers.  We
  work closely with each network service provider, in most cases providing
  customized software or product packages, as well as dedicated training and
  support services.  A number of other network service providers have begun to
  test our CPE solutions.  We intend to build upon this early acceptance of our
  products to become the primary provider of DSL CPE to both existing and new
  network service providers as they deploy their DSL networks.
  
       Leverage Strategic Relationships with Network Equipment Vendors.  We intend
  to leverage both current and future relationships to continue to promote
  Efficient in the industry, extend our sales capabilities, increase our volume
  distribution, and build brand awareness.  We believe successful deployment of
  DSL necessitates close working relationships with network equipment vendors.
  Since most network equipment vendors do not have complete DSL CPE solutions,
  they typically bundle and sell their network equipment with third-party CPE
  solutions.  We have established relationships with ADC Telecommunications, AFC,
  Alcatel, Copper Mountain Networks, Ericsson, Lucent, Nokia, Nortel Networks and
  Siemens, among others.
  
       Continued Development of Broadband Access CPE.  We intend to continue
  developing DSL CPE products that enhance the features of our current line as
  well as create new bundled voice and
  
                                         6
  data access products. We are developing new products based on different physical
  interfaces, advanced functionality such as integrated voice and data capability,
  enhanced routing and bridging capabilities, and additional software packages and
  features. . We are continually pursuing techniques to reduce product costs. In
  developing new technologies and products, we benefit from our relationships with
  key industry leaders that offer early visibility into market requirements and
  deployment trends.
  
       Broaden Distribution Channels.  We plan to extend our distribution channels
  to meet the growing demand for broadband access solutions.  When we first
  deployed our current generation DSL products, we initially targeted incumbent
  local exchange carriers and network equipment providers in order to secure large
  contracts, establish credibility in the marketplace and strengthen key network
  service provider relationships.  We have since built a direct sales force to
  target competitive local exchange carriers, foreign telephone network service
  providers and Internet service providers as well.  Moreover, we are developing
  alternative distribution channels such as telephone company--aligned
  distributors, traditional two-tier distribution partners, third-party
  integrators, and retail partners.  To this end, we have recently signed
  agreements with lnnotrac, Nortel Supply and Sprint North Supply, three leading
  telephone company--aligned distributors.  We are also expanding our global
  presence by extending our international direct sales force, securing additional
  international value-added resellers and establishing retail sales abroad.
  Finally, we have established a separate sales force whose emphasis is on
  Internet Service Providers that deploy broadband services using DSL access.
  This sales force increases awareness of our company and products, and provides
  training, collateral and sales incentives for broadband Internet Service
  Providers.
  
       Build the Efficient Brand Name.  In addition to increasing brand awareness
  with network service providers and network equipment vendors, we believe it is
  critical to establish brand awareness and differentiation from our competitors
  with end customers through superior performance, ease of use and customer
  service.  We plan to continue building brand awareness of Efficient and
  SpeedStream to identify us as the leading provider of DSL CPE solutions.  All of
  our DSL products, even when deployed by network service providers, carry the
  Efficient and SpeedStream brand names. In addition, we plan to increase our
  investments in a broad range of marketing programs, including active trade show
  participation, advertising in print publications, direct marketing, and Web-
  based marketing.
  
       Leverage Strategic Acquisitions to Complement Product & Technology
  Offerings.  In 1999 we acquired FlowPoint Corporation to add advanced broadband
  routers to our product line for the customer premises equipment market. Products
  from FlowPoint incorporate a broad range of DSL technologies, including ADSL,
  SDSL and IDSL.  FlowPoint also brings expertise in frame-based customer premises
  equipment as well in the emerging voice-over-DSL market, and has provided us
  with several new customer relationships.  We also recently acquired Network
  TeleSystems, Inc., (NTS), which supplies a popular client software package to
  broadband Internet Service Providers worldwide.  We intend to pursue strategic
  acquisitions in the future as we identify companies or products that will
  complement our current product offerings and expand our addressable customer
  base.
  
                                         7
  Products
  
       Efficient has developed the SpeedStream family of DSL products that enables
  broadband access for businesses and consumers.  Our products are designed to
  support a number of computer environments, DSL implementations, and network
  architectures.  Our asymmetric DSL, or ADSL, products provide transmission
  speeds of up to 8 Mbps in the downstream direction from the network to the end
  user, and up to 1 Mbps in the upstream direction.  Our symmetric DSL, or SDSL,
  products provide equal upstream and downstream speeds of up to 2.3 Mbps.  Our
  SpeedStream products are separated into these product categories:
  
          .  3000 SeriesDesigned for the single user and installable into a
             peripheral component interface, or PCI, bus slot within a personal
             computer.
  
          .  4000 SeriesDesigned for the single user and connected to a personal
             computer through a universal serial bus port.
  
          .  5200 SeriesDesigned to provide simple, zero-setup DSL access for
             multiple users through an Ethernet port.
  
          .  5600 SeriesDesigned to provide basic routing capabilities for a
             telecommuter or a small office or home office environment.
  
          .  5700, 5800 Series - Broadband routers that provide a comprehensive
             feature set for a small business or a corporate branch office.
  
          .  7400, 7800, 8600 Series - Integrated access devices that support
             both high speed data services and multi-line voice services over a
             single broadband interface.
  
          .  Client software - Software packages that enable broadband access for
             end users, in conjunction with SpeedStream customer premises products
             or otherbroadband devices.
  
       Efficient also provides a full suite of pre-configuration and diagnostic
  software tools.  Our pre-configuration software enables network service
  providers to architect scalable DSL services and ensures rapid and reliable
  installation while reducing or eliminating the need for on-site configuration.
  Our diagnostic and troubleshooting software, Advanced Status, is designed to
  reduce a network service provider's expense associated with ongoing maintenance
  and repair.  Our broadband client software also provides a significant
  diagnostic function for service providers.  We believe that these software
  capabilities can reduce the overall expense for DSL service deployment and
  maintenance.
  
  The SpeedStream 3000 Series
  
       The SpeedStream 3000 Series consists of internal modems that provide high-
  speed asymmetric DSL connectivity for a personal computer.  This product family
  comprises several distinct products, each designed for compatibility with
  specific DSLAMs from various network equipment vendors.  The SpeedStream 3000
  Series incorporates the following features:
  
                                         8
  .  Installs into any peripheral component interface bus slot;
  
          .  Supports pre-configuration using Efficient software for easy setup;
  
          .  Includes Efficient Advanced Status diagnostic software tools for
             rapid error diagnosis and correction;
  
          .  Supports prevalent data encapsulation standards to ensure network
             interoperability with Internet Protocol and ATM networking equipment;
  
          .  Provides ATM functionality that enables reliable data transmission;
  
          .  Offers remote management capability; and
  
          .  Support for a broad range of Microsoft Windows operating systems.
  
  The SpeedStream 4000 Series
  
       The SpeedStream 4000 Series consists of external modems that provide high-
  speed asymmetric DSL connectivity through a personal computer's universal serial
  bus port.  This product family comprises several distinct products, each
  designed for compatibility with specific DSLAMs from various network equipment
  vendors.  The SpeedStream 4000 Series incorporates the following features:
  
          .  Attaches externally via a personal computer's universal serial bus
             port;
  
          .  Supports pre-configuration using Efficient software for easy setup;
  
          .  Includes Efficient Advanced Status diagnostic software tools for
             rapid error diagnosis and correction;
  
          .  Supports prevalent data encapsulation standards to ensure network
             interoperability with Internet Protocol and ATM networking equipment;
  
          .  Provides ATM functionality that enables reliable data transmission;
  
          .  Offers remote management capability; and
  
          .  Supports a broad range of Microsoft Windows operating systems.
  
  The SpeedStream 5200 Series
  
       The SpeedStream 5200 Series provides high-speed remote ADSL or SDSL
  connectivity for one or more personal computers, workstations or other network
  devices over a standard networking architecture called Ethernet.  This product
  family comprises multiple products designed to interoperate with DSLAMs from
  various network equipment vendors.  The SpeedStream 5200 Series incorporates the
  following features:
  
                                         9
  .  Facilitates cost-effective DSL connectivity for multiple users via
             a standard Ethernet port;
  
          .  Provides zero setup installation, reducing the time required for
             installation;
  
          .  Pre-configures for rapid network deployment;
  
          .  Supports prevalent data encapsulation standards to ensure network
             interoperability with Internet Protocol and ATM networking equipment;
             and
  
          .  Provides ATM functionality that enables reliable data transmission.
  
  The SpeedStream 5600 Series
  
       The SpeedStream 5600 Series provides high-speed remote DSL connectivity for
  one or more personal computers, workstations or other network devices over a
  standard networking architecture called Ethernet.  This product family comprises
  multiple products designed to interoperate with DSLAMs from various network
  equipment vendors.  Routing features help provide security, and make more
  effective use of network bandwidth.  The SpeedStream 5600 Series incorporates
  the following features:
  
          .  Facilitates DSL connectivity for multiple users via a standard
             Ethernet port;
  
          .  Provides routing or bridging capabilities for a telecommuting or
             small office/home office environment;
  
          .  Pre-configures for rapid network deployment;
  
          .  Supports prevalent data encapsulation standards to ensure network
             interoperability with Internet Protocol and ATM networking equipment;
  
          .  Provides ATM functionality that enables reliable data transmission;
             and
  
          .  Offers remote management capabilities.
  
  The SpeedStream 5700 and 5800 Series
  
       SpeedStream 5700 and 5800 Series routers provide high-speed remote
  connectivity for one or more personal computers, workstations or other network
  devices over a standard networking architecture called Ethernet.  These routers
  support three different types of DSL, plus several non-DSL interfaces that can
  enhance existing DSL modems. Our 5700 and 5800 Series routers incorporate the
  following features:
  
          .  Facilitate DSL connectivity for multiple users via a standard,
             integrated Ethernet hub;
  
          .  Provide routing and bridging capabilities for a small business or
             branch office environment;
  
                                         10
  .  Pre-configureable for rapid network deployment;
  
          .  Support prevalent data encapsulation standards to ensure network
             interoperability with Internet Protocol and ATM or packet-based
             networking equipment;
  
          .  Support enhanced security and virtual private network capabilities;
  
          .  Provide ATM or packet-based functionality that enables reliable data
             transmission; and
  
          .  Offer remote management capabilities.
  
  The SpeedStream 7400, 7800, 8600 Series
  
       The SpeedStream 7400, 7800 and 8600 Series Integrated Access Devices (IADs)
  support high-speed data services and multi-line voice services simultaneously
  over a shared DSL interface. By using a single broadband connection and a single
  access device, a carrier's costs are often reduced, while their revenue
  potential per customer is increased.  Our IAD product line comprises multiple
  products designed to support a variety of voice lines, and to interoperate with
  DSLAMs from various network equipment vendors.  The SpeedStream IADs incorporate
  the following features:
  
          .  Facilitates cost-effective DSL connectivity for multiple users via
             a standard Ethernet port;
  
          .  Pre-configures for rapid network deployment;
  
          .  Supports prevalent data encapsulation standards to ensure network
             interoperability with Internet Protocol and ATM networking equipment;
  
          .  Provides ATM functionality that enables reliable data transmission;
  
          .  Supports four (7400), eight (7800) or up to 24 (8600) voice
             interfaces for connection to an end user's telephony equipment; and
  
          .  Supports modular addition of new voice and data interfaces (8600).
  
  Client Software
  
       All of our SpeedStream DSL products for single personal computer
  environments support the ability to be pre-configured for specific DSL networks.
  SpeedStream Software allows a network service provider to select configuration
  settings for the CPE that match its specific network.  This CPE pre-
  configuration allows a network operator the flexibility to choose network
  settings unique to the network's service offerings, without requiring an end
  user or an installation technician to individually configure each unit.  Thus,
  by setting the attributes for DSL, ATM and data encapsulation prior to
  installation of the CPE, the speed of DSL equipment installation is increased.
  We believe that this ability to pre-configure DSL CPE provides cost savings for
  network service
  
                                         11
  providers and allows them to scale their DSL service offerings
  rapidly and reliably.  We also offer broadband client software that supports a
  commonly used remote access protocol known as the Point-to-Point Protocol over
  Ethernet (PPPoE).  This client capability allows Internet Service Providers to
  take advantage of their existing systems for user authentication, address
  management and billing.
  
  Advanced Status Software
  
       All SpeedStream DSL products for single-user environments include embedded
  diagnostic and troubleshooting software called Advanced Status.  During normal
  network conditions, the end user is unaware that this software is operating.
  However, if network degradation or failure occurs, a customer service
  representative can work with the end user to diagnose and isolate problems with
  the DSL link, the CPE or the network itself.  Advanced Status software provides
  information such as status indications and performance statistics for DSL, ATM
  and packet communication layers.  This information helps identify problems and
  determine whether they must be solved at the central office or the customer
  premises.  Our broadband client software also provides status and diagnostic
  information that help service providers rapidly identify and resolve problems
  for their customers.  These software components minimize the need to send a
  technician to the customer premises and speeds troubleshooting and repair.  We
  believe that our client software reduces the overall expense of DSL service.
  
  Products under Development
  
       Efficient continually develops new products, and enhances existing
  products.   Significant areas of new development include:
  
          .  Integrated access devices that enable simultaneous data and multi-
             line voice services over a single, shared DSL connection.
  
          .  New routing platforms and software feature sets, intended for use in
             business and enterprise applications.
  
          .  Client software, to enable rapid deployment and diagnosis of
             broadband services, to enhance end user security, and to assist in
             ongoing management of the services.
  
          .  Cost reductions and performance enhancements, intended to improve
             overall profitability and performance of our products.
  
  Technology
  
       Efficient designs and manufactures DSL CPE as part of an overall solution
  for high-speed remote access and data transmission.  Efficient's SpeedStream
  family of DSL CPE includes products intended for a single user such as a
  telecommuter, as well as for multiple users within branch offices or small
  businesses. Efficient integrates a diverse set of technologies and expertise,
  primarily in the following areas:
  
          .  DSL System Architecture
  
                                         12
  .  Asynchronous Transfer Mode and Data Encapsulation Techniques
  
          .  Software
  
          .  Application Specific Integrated Circuit Design
  
          .  Routing and Bridging
  
          .  Integrated Voice and Data
  
  DSL System Architecture Expertise
  
       We structure our product architectures to consist of highly modular blocks
  of hardware and software.  By utilizing our expertise in developing multiple
  products with diverse types of DSL technology, we have developed a core set of
  hardware and software designs.  Consequently, it is a relatively straightforward
  activity to restructure the components and develop a new SpeedStream product.
  Similarly, as new features are developed, they can be made available across a
  number of products all based upon common components.  This design modularity
  helps Efficient respond quickly to new market requirements.
  
       Our product architectures use Efficient's proprietary application specific
  integrated circuits, or ASICS, as well as chipsets from third-party suppliers.
  We believe that the use of our application specific integrated circuits in
  conjunction with these third-party chipsets has advantages for CPE performance
  and cost.  Because DSL signals operate across a broad frequency range, circuits
  must be carefully designed to ensure that high performance is achieved without
  disrupting other equipment in the end user's home or office (such as
  televisions).  We believe that our techniques for DSL circuit design, component
  selection and layout, emissions shielding and certification testing result in
  high-performance products that meet a broad range of emissions and safety
  certifications mandated by the Federal Communications Commission, international
  regulatory bodies, consumer safety laboratories and network operators.
  
  Asynchronous Transfer Mode and Data Encapsulation Techniques Expertise
  
       Our SpeedStream CPE products employ our own ATM hardware and software
  technology.  ATM technology enables multiple communication sessions to occur
  simultaneously and bursty packet traffic to coexist with delay-sensitive traffic
  such as voice or video information.  In order to allow this data to be carried
  across an ATM network, it must be formatted into fixed-size ATM cells, a
  technique known as data encapsulation.  ATM and data encapsulation permit a
  common network infrastructure to offer diverse services.  There are numerous
  data encapsulation techniques which network service providers, Internet service
  providers or other network operators may implement.
  
       We have been able to implement these numerous ATM and data encapsulation
  techniques because of our prior experience in designing, manufacturing, and
  commercializing ATM LAN equipment.  Key pieces of silicon and software
  technology were reused from these products to enable rapid development of our
  SpeedStream CPE.  We believe that this intellectual property, as
  
                                         13
  well as the ATM networking expertise associated with it, represents one of our
  key competitive advantages.
  
  Software Expertise
  
       Our software engineers have expertise in developing code that addresses the
  needs of network service providers.  Our modular software architecture enables
  reuse of much of our software code across products.  This modularity also
  enables rapid development of new products.  Our knowledge of network operation
  and architectures and data encapsulation techniques allows us to write software
  that ensures that our products are interoperable with other network equipment
  vendors' products.  In addition, our understanding of various operating systems
  and personal computer environments allows us to create software that provides
  for trouble-free installation and network maintenance.  Our software engineers
  also design, build and operate comprehensive testing environments to ensure not
  only that our products are interoperable, but also offer high performance.
  
       Efficient has developed a suite of software for our single-user SpeedStream
  products that enables communication in a personal computer environment.  This
  software is commonly called a "driver" and allows application software, such as
  e-mail or a Web browser, to send and receive data over the DSL network link,
  just as it would over a modem or a LAN connection.  By building upon software
  source code and skills developed for ATM LAN products, Efficient is able to
  support a number of diverse personal computer environments.  To date, Efficient
  has leveraged our software expertise to develop and release high-performance,
  rapidly installing drivers for our SpeedStream 3000 and 4000 Series products.
  This software is interoperable with numerous brands and models of personal
  computers, and with several diverse versions of the Microsoft Windows operating
  system.
  
       In addition, Efficient works closely with network service providers to
  create software specific to their networks, which allows them to rapidly and
  reliably deploy and maintain DSL service.
  
  Application Specific Integrated Circuit Design Expertise
  
       Efficient has developed custom application specific integrated circuits
  that enable high-speed ATM networking using peripheral component interface or
  universal serial bus attachments.  Our application specific integrated circuits
  provide high-speed interfaces to the personal computer and also perform several
  ATM functions, including segmentation and reassembly functions whereby variable
  length packets are converted into fixed size ATM cells.  They also perform
  traffic shaping functions that control the flow of data from the end user's
  equipment into the service provider's network.  The use of custom application
  specific integrated circuits allows us to better control the cost of our
  products and helps ensure their performance and interoperability with diverse
  brands of personal computers and network equipment.
  
  Routing and Bridging Expertise
  
       Efficient's multi-user products offer a shared Ethernet port for local
  attachment to a computer network and an ATM DSL port for transmission and
  receipt of data across a DSL interface.  A bridging device forwards Ethernet
  packets between the product's Ethernet port and its ATM DSL
  
                                         14
  port based on addresses contained in the Ethernet packets. Efficient's Ethernet
  bridging products examine addressing information in each packet to determine
  whether it should be forwarded between the local Ethernet port and the ATM DSL
  port. Our bridging CPE requires little or no configuration, thereby reducing the
  network service provider's installation expense. Because all packet forwarding
  decisions are made independently of the network protocol carried by the Ethernet
  packets, our bridging CPE can support numerous network types, including older
  LAN environments such as Novell's IPX or Apple's AppleTalk, as well as networks
  based on the Internet Protocol.
  
       Routers are able to perform much more complex functions than those
  performed by bridges including restricting certain types of data from entering
  the network and directing data flow based on dynamically assigned Internet
  protocol addresses.  Efficient's routing products forward Internet Protocol
  packets based upon addressing information contained in the packet header.
  Support for several different methods of ATM data encapsulation helps ensure
  network interoperability.  Efficient's routing products provide features that
  enhance security and ease network administration for end users, such as packet
  filtering, which prevents unwanted access to local servers or other private
  resources, and a technique known as network address translation, which masks the
  presence of local computers from other computers on the Internet.  Our routing
  products also implement an address management technique called the dynamic host
  configuration protocol that automates the assignment of Internet protocol
  addresses to computers attached locally to the router.  The network address
  translation and dynamic host configuration protocol features of our routing
  products can help minimize address interoperability issues, and may be able to
  accelerate deployment of DSL services.
  
       Efficient's routing products include a complete suite of management
  capabilities that enable local and remote troubleshooting as well as upgrades to
  system configuration or software.  This is important as DSL is a complex
  technology typically intended for a technologically unsophisticated user base.
  We believe that our products' combination of management capabilities which can
  be accessed either locally or remotely can help reduce the cost of network
  administration for DSL network service providers.
  
  Integrated Voice and Data Expertise
  
       Efficient's integrated access products provide data services such as
  routing and bridging, as well as multi-line voice services, over a shared DSL
  connection.  The combination of voice services along with data services
  increases the complexity of the products significantly.  Efficient builds upon
  the ATM, DSL and data expertise gained from our data-only products, and employs
  a further level of expertise to provide high performance analog and digital
  voice designs.  We believe that the additional complexity of the resulting
  integrated access products represents a barrier to entry for many of our
  competitors.
  
  Customers
  
       Sales of our CPE have been to two main classes of customers: network
  equipment vendors who supply DSL central office equipment and DSL network
  service providers.  Network equipment vendors include our products as an element
  of a complete solution offered to their network service provider customers.  In
  many cases, several different network equipment vendors specify our
  
                                         15
  products as the preferred or bundled CPE in response to bid requests issued by a
  network service provider for complete DSL access solutions. Network service
  providers will then provide the CPE to end users for access to their DSL
  network. In some cases, we sell CPE to the network equipment vendor for resale
  as part of a bundled solution to the network service provider. In other cases,
  we sell directly to the network service provider.
  
  Strategic Relationships
  
       We believe that establishing relationships with leaders in DSL technology
  and services is critical to our success.  Accordingly, we have formed strategic
  relationships and, in some cases, entered into joint development agreements with
  network service providers, network equipment vendors and developers of DSL
  semiconductor technology.  We are also pursuing strategic relationships to
  ensure that high-volume distribution channels are in place for our products.
  
  Network Service Providers
  
       Ameritech.  Efficient has entered into an agreement to provide DSL CPE to
  Ameritech.  We have worked closely with the technical and product management
  staff responsible for DSL service
  
                                         16
  deployment at Ameritech. We have also provided early software releases of new
  products to Ameritech, and have provided Ameritech with training for both
  customer service and field support.
  
       Bell Atlantic.  Efficient has entered into an agreement to provide DSL CPE
  to Bell Atlantic.  Two of our SpeedStream products are offered by Bell Atlantic
  as CPE options for their Infospeed DSL service.  Efficient has developed custom
  hardware and software to help enable Bell Atlantic's DSL deployment, and we have
  provided them with training for both customer service and field support.
  
       BellSouth. Efficient has entered into a supply agreement with BellSouth,
  providing DSL CPE for their broadband service offering.  Efficient has also
  engaged in joint promotion programs with BellSouth for DSL CPE.
  
       Covad Communications.  Efficient has worked closely with Covad to tune the
  feature sets of several of our SpeedStream DSL products to their network
  requirements.  Covad purchases SDSL, ADSL and IDSL products from Efficient,
  including routers, bridges and USB modems.  We are also involved in discussions
  with Covad about our next-generation integrated access products.  In addition,
  on June 28, 1999, we issued a $5.0 million convertible promissory note to Covad,
  which converted into 497,663 shares of common stock upon completion of our
  initial public offering in July 1999.
  
       Hanaro Telecom.  Hanaro is a competitive network service provider in Korea
  actively engaged in DSL deployment.  Hanaro offers DSL services for consumer,
  academic and business applications.  Efficient has worked closely with Hanaro to
  enable rapid deployment of its DSL service using our SpeedStream CPE.
  
       SBC Communications.  Efficient provides our SpeedStream CPE for DSL
  services offered through SBC's Southwestern Bell, Pacific Bell and Ameritech
  subsidiaries.  We have provided training for their installation and customer
  service personnel, and have worked with their certification and test staff to
  demonstrate new SpeedStream DSL products.
  
       Singapore Telecom.  Efficient has worked closely with SingTel to provide
  customized software with our CPE that is unique to SingTel's advanced Magix DSL
  service.  We are involved in discussions with SingTel with respect to the
  evolution of SingTel's network architecture and service offerings.  SingTel has
  consistently volunteered to work with us to test our new products.
  
  Network Equipment Vendors
  
       Alcatel.  Efficient and Alcatel have established a joint agreement for CPE
  that is interoperable with Alcatel's DSLAM as well as their Litespan digital
  loop carrier.  many of our DSL products employ Alcatel's DSL chipsets and
  software.
  
       Nokia.  Efficient and Nokia have entered into a purchase and distribution
  agreement whereby we supply our SpeedStream 3000 PCI and 4000 USB products.
  Under the provisions of this agreement, Nokia resells our products along with
  its EKSOS family of DSL equipment and their SpeedLink DSLAM.
  
                                         17
  Nortel Networks.  Efficient has an agreement to supply Nortel with DSL CPE
  that is interoperable with Nortel's Universal Edge 9000 access product, and
  their IMAS DSLAM.  Nortel offers the Universal Edge 9000 to both new and
  existing customers as an upgrade for both Nortel's DMS voice switches and its
  access node digital loop carriers.  Based on this relationship, we are involved
  in discussions with Nortel on next-generation products.
  
       Siemens.  Siemens is an investor in Efficient.  We have worked with Siemens
  to establish compatibility between Efficient's DSL CPE and Siemens' XpressLink D
  DSLAM, as well as the DSL interfaces for Siemens' installed base of voice
  switches.  Anthony T. Maher, who is a member of the board of Siemens AG
  Information and Communication Networks, joined our board of directors in April
  1999.
  
  Developers of DSL Semiconductor Technology
  
       Alcatel Microelectronics.  Many of our products use asymmetric DSL
  technology from Alcatel Microelectronics.  Efficient is one of Alcatel's largest
  customers for DSL chipsets.  The two companies work closely on the design of
  next-generation DSL products.
  
       Texas Instruments Incorporated.  Texas Instruments is an investor in
  Efficient.  Some SpeedStream products under development use asymmetric DSL and
  voice processing technology from Texas Instruments.  We have licensed pieces of
  our ATM silicon and software to Texas Instruments, and have assisted in the
  development of reference designs for application of Texas Instruments'
  asymmetric DSL components.  Texas Instruments has provided us with access to its
  asymmetric DSL components at most favored prices.  Texas Instruments also
  fabricates one of our ATM application specific integrated circuits and has
  provided introductions for Efficient to personal computer manufacturers who are
  searching for sources of DSL CPE.
  
  Telephone Company--Aligned Distributors
  
       Sprint North Supply.  Sprint North Supply is a primary supplier of
  telecommunications equipment to Sprint.  Many other network service providers
  also purchase networking products from Sprint North Supply.  Efficient has
  entered into a distribution agreement with Sprint North Supply that enables it
  to carry selected members of our SpeedStream product family.
  
       Nortel Supply.  Nortel Supply is a distributor of Nortel and other network
  equipment vendors' products.  Through our agreement with Nortel Supply,
  Efficient leverages Nortel Supply's worldwide distribution capabilities.
  
                                         18
  Innotrac.  Innotrac is a distributor of consumer telecommunications
  equipment for several incumbent local exchange carriers, including BellSouth.
  Efficient, Innotrac and BellSouth jointly promote BellSouth's DSL services with
  Efficient's SpeedStream CPE.  Efficient and Innotrac also work together to
  create customized product packages and documentation for major network service
  providers.  We believe that we can leverage Innotrac's relationship with several
  incumbent local exchange carriers, as well as Innotrac's experience in
  distributing products in high volume.
  
  Manufacturing
  
       We outsource the assembly and testing of products and printed circuit
  boards to turnkey contract manufacturers.  Currently, ACT Manufacturing, Inc.
  manufactures the majority of our products at its facility in Hermasillo, Mexico.
  Several of our routing products are manufactured by PEMSTAR, Inc. at its San
  Jose, California facility.  Efficient also contracts with Xetel, Inc. for the
  manufacturing of its ATM LAN products and a portion of our DSL products at its
  facility in Dallas, Texas.  Each of these manufacturers are certified by the
  International Standards Organization for manufacturing and design processes.
  Efficient plans to engage an additional contract manufacturer to meet our
  anticipated manufacturing requirements and to continue reducing the cost of our
  products.
  
       Efficient has a limited in-house manufacturing capability.  We have
  complete capabilities for final test, packaging and shipping of our products.
  We perform comprehensive inspection tests and use statistical process controls
  to assure the reliability and quality of our products.  Our manufacturing
  engineers design and build all test procedures and fixtures for our products.
  We integrate these manufacturing tests with the contract manufacturers' build
  processes.  Our manufacturing personnel work with our design engineers to ensure
  that the test environment remains current as DSL technology evolves.  We also
  perform warranty and repair work at our Dallas facility.
  
       Efficient's engineers design custom application specific integrated
  circuits that are incorporated into the majority of our products.  Efficient
  contracts with silicon manufacturers to fabricate the application specific
  integrated circuits for prototype testing.  We perform design verification and
  simulation testing at our facilities.  After successful completion of these
  tests, Texas Instruments, Samsung Semiconductor and VLSI Technology manufacture
  our application specific integrated circuits in volume on a turnkey basis.  We
  purchase only packaged and tested application specific integrated circuits.
  
       Other than our application specific integrated circuits, we try to use
  standard parts and components whenever possible.  We currently purchase certain
  key parts and components from sole-source suppliers such as Alcatel
  Microelectronics, Analog Devices, Conexant Systems and Texas Instruments.
  
  Sales and Marketing
  
       Since 1996, Efficient has worked closely with network equipment vendors
  that supply DSL-based central office equipment.  These vendors offer our
  SpeedStream products to network service providers as part of a complete,
  interoperable DSL solution.  We engage in joint sales
  
                                         19
  activities with our partners and regularly provide them with collateral
  materials to enable their sales forces to promote our products. Our
  relationships with network equipment vendors result in introductions to large
  network service providers. In many cases, with DSL interoperability assured by
  Efficient and our partners, network service providers choose to purchase CPE
  directly from Efficient.
  
       Efficient also works closely with network service providers to ensure that
  our CPE is matched to their DSL service offerings.  Initial discussions with
  network service providers generally involve our sales, marketing and business
  development personnel who work to communicate the strengths of our company and
  our products.  Detailed responses to request for purchase documents are
  submitted to network service providers, often by both Efficient and one or more
  network equipment vendors.  We also frequently provide informal consulting or
  recommendations on network design, architecture and management for our
  customers.
  
       Next, at the network service provider's request, we engage in a technical
  certification process involving our system engineers who work in a lab
  environment, in some cases for days or weeks, with their counterparts from the
  network service provider.  We frequently provide informal consultation on
  network deployment and testing as well as customized training for network
  service providers.  In some cases, we create special software releases or
  product combinations for major network service providers.  Efficient typically
  creates and delivers customized training courses and curricula for our largest
  customers, to ensure that their installation and support personnel are effective
  in satisfying end users' needs.  While the actual sale and distribution of CPE
  varies network by network, this initial relationship-building stage is critical
  in every case.  We believe that it is difficult to provide CPE into DSL service
  offerings without these close relationships with network service providers.
  
       We engage in a variety of marketing activities to build brand awareness.
  We issue press releases concerning significant product releases, partnerships
  and network design wins.  We also conduct briefings for analysts and members of
  the press.  We participate in a number of industry trade shows and pursue
  speaking engagements at related events.  Efficient uses direct mail campaigns to
  increase awareness of our company and our products among Internet service
  providers, who are increasingly active in introducing customers to DSL services.
  We also engage in joint marketing programs with selected Internet service
  providers whose DSL services employ our CPE.  Our broad goals are to continue to
  increase the awareness of Efficient as a company, and of our DSL CPE product
  line brand, SpeedStream.
  
       As the scope of our marketing efforts expands, our Website continues to be
  a strategic resource in disseminating information to interested parties.  Our
  Website also plays an active role in collecting sales leads, working remotely
  with partners and key customers, and performing customer support.  In the
  future, we believe that our Website may become an important tool for direct
  sales of our products.
  
  Research and Development
  
       We believe that our future success depends on our ability to adapt to the
  rapidly changing communications environment, maintain our significant expertise
  in core technologies, and continue
  
                                         20
  meeting and anticipating our customers' needs. We continually review and
  evaluate technological changes affecting the telecommunications market and
  invest substantially in applications-based research and development. We are
  committed to an ongoing program of new product development that combines
  internal development efforts with joint ventures and licensing or marketing
  arrangements relating to new products and technologies from outside sources.
  
       Efficient's core research and development activities are focused on both
  hardware and software technologies.  In our hardware development activities, we
  possess significant expertise in application specific integrated circuits
  development, analog and mixed signal hardware design, ATM architecture and bus
  architectures, such as peripheral component interface and universal serial bus.
  In software development, Efficient has particular strengths in data networking
  protocols and operating systems, device driver development and traffic
  management, and techniques for advanced routing and systems management.  We have
  significant expertise with hardware and software technology for analog and
  digital voice encoding, compression, transmission and switching techniques as
  well.
  
       To enable successful deployment of DSL services, our CPE must be
  interoperable with the DSLAM, ATM switching equipment and other networking
  equipment from multiple vendors.  In our development efforts, we leverage our
  relationships with prominent DSLAM vendors to ensure DSL interoperability.  The
  continued development and use of our own industry-tested application specific
  integrated circuits and software ensure ATM switching interoperability.  In
  addition, our support for a number of protocol stacks provides data
  encapsulation interoperability with routers at Internet service providers or
  within corporate networks.  Finally, integrated voice and data products require
  a high degree of interoperability with other voice networking products.
  Efficient has a solid understanding of the end-to-end technologies in use, and
  we actively work to ensure interoperability while using technology that we
  control.  Our design verification procedures include testing in complex network
  environments created in our laboratories that simulate end-to-end network
  architectures used in DSL service deployments.  We believe that our stringent
  design verification and test procedures allow us to provide cost-effective,
  high-performance DSL CPE that minimizes the technology risk for network
  operators.
  
       Most of the technology associated with Efficient's SpeedStream products
  continues to evolve. Asymmetric DSL supports high frequency digital data
  transmission simultaneously with analog voice signals on a single copper phone
  line, but digital data and analog voice have the capability to disrupt one
  another.  One common method of minimizing this disruption is to electrically
  separate the voice signals from the data signals using a circuit known as a
  filter or a "splitter."  At present, the use of a splitter often requires a
  network technician or the end user to install the device using hand tools and to
  modify phone wiring inside a home or business.  We are currently researching
  analog filtering circuit technology and are working with other companies to
  enable filter designs that can be installed without tools or changes to interior
  wiring.
  
       Another future technology involves ATM switched virtual circuits.  Switched
  virtual circuits create a dedicated connection between two points of a network.
  Current ATM/DSL deployments typically use permanent virtual circuits to create
  these dedicated connections.  Permanent virtual circuits must be created
  manually, while switched virtual circuits employ software to automatically
  create a circuit across the ATM network without manual intervention.  Some
  network operators have
  
                                         21
  expressed a concern that DSL deployments may not scale rapidly if permanent
  virtual circuits are employed. Switched virtual circuit implementations are
  complex and may represent a technology barrier for competitors. Efficient has
  sold ATM LAN products supporting switched virtual circuits for several years. We
  believe we are well suited to help enable large-scale DSL deployments as network
  operators demand support for switched virtual circuits.
  
  Competition
  
       The network equipment industry is highly competitive, and we believe that
  competition may increase substantially as the introduction of new technologies,
  deployment of broadband networks and potential regulatory changes create new
  opportunities for established and emerging companies.  In addition, a number of
  our competitors and potential competitors have significantly greater financial
  and other resources than us which may enable them to more aptly meet new
  competitive opportunities.  We compete directly with other providers of DSL CPE
  including 3Com Corporation, Alcatel, Cisco Systems, Intel, Netopia, Westell
  Technology, Xpeed, Zyxel among others.  Many of our industry partners
  manufacture DSL customer premises products that compete directly or indirectly
  with ours.  Our integrated access products will compete with both existing
  competitors, and with new competitors such as Vina Technologies, Adtran,
  Woodwind Communications and 2Wire.  Furthermore, DSL as a technology for
  deploying broadband connections is competing with alternative technologies
  including ISDN, T1, broadband wireless and cable solutions.
  
       The rapid technological developments within the network equipment industry
  results in frequent changes to our group of competitors.  The principal
  competitive factors in our market include:
  
          .  Industry relationships with network service providers and network
             equipment vendors;
  
          .  product reliability, performance and interoperability;
  
          .  product features;
  
          .  product availability;
  
          .  price;
  
          .  ability to distribute products;
  
          .  ease of installation and use;
  
          .  technical support and customer service; and
  
          .  brand recognition.
  
       We believe we are successfully addressing each of these competitive
  factors.  Nonetheless, we expect to face increasing competitive pressures from
  both current and future competitors in the markets we serve.
  
                                         22
  Intellectual Property
  
       We rely on a combination of copyright, patent, trademark, trade secret and
  other intellectual property laws, nondisclosure agreements and other protective
  measures to protect our proprietary rights.  We also utilize unpatented
  proprietary know-how and trade secrets and employ various methods to protect our
  trade secrets and know-how.  To date, we have been granted six U.S. patents with
  counterpart patents pending in threeinternational jurisdictions and have an
  additional six U.S. patent applications pending.
  
       Although we employ a variety of intellectual property in the development
  and manufacturing of our products, we believe that none of our intellectual
  property is individually critical to our current operations.  However, taken as
  a whole, we believe our intellectual property rights are significant and that
  the loss of all or a substantial portion of such rights could have a material
  adverse effect on our results of operations.  There can be no assurance that our
  intellectual property protection measures will be sufficient to prevent
  misappropriation of our technology.  In addition, the laws of many foreign
  countries do not protect our intellectual properties to the same extent as the
  laws of the United States.  From time to time, we may desire or be required to
  renew or to obtain licenses from others in order to further develop and market
  commercially viable products effectively.  There can be no assurance that any
  necessary licenses will be available on reasonable terms.
  
       We have registered the trademarks "Efficient Networks" and "SpeedStream."
  "Advanced Status" and "ProfileBuilder" are also our trademarks.  All other
  trademarks or service marks appearing in this prospectus are trademarks or
  service marks of the respective companies that use them.
  
  Employees
  
       As of June 30, 2000, we employed approximately 443 full-time employees,
  including 193 in engineering. Most of our employees are located in the United
  States with several sales employees located in The Netherlands, Singapore,
  China, Canada and Brazil.  None of our employees is represented by collective
  bargaining agreements, and management considers relations with our employees to
  be good.
  
  Properties
  
       We currently operate primarily out of our facility in Dallas, Texas.  Our
  primary executive, sales and marketing, and research and development activities
  are conducted out of a 125,000 square foot facility under a lease expiring in
  2010. In addition, in connection with the acquisition of FlowPoint, we entered
  into an agreement with Cabletron to permit us to retain, for a transitional
  period, the space being used by the FlowPoint employees at a Cabletron facility
  in Santa Clara, California.  We expect to lease space to relocate the FlowPoint
  operations with the NTS operations to another facility in Los Gatos, CA in the
  first half of fiscal 2001.  We lease an approximately 2,500 square foot facility
  in Amsterdam, The Netherlands for our European operations.  This lease expires
  in 2004.  For our Asian operations, we lease an approximately 1,450 square foot
  facility in Singapore.  This lease expires in 2002.
  
                                         23
  Legal Proceedings
  
       Efficient is not a party to any material legal proceedings.
  
         This document may include forward-looking statements within the meaning
  of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the
  Securities Exchange Act of 1934, as amended.  Actual results could differ
  materially from those projected in the forward-looking statements as a result of
  the risk factors set forth in the Registrant's Forms 10-K and 10-Q reports.
  
         UNAUDITED FINANCIAL RESULTS FOR FOURTH QUARTER AND FISCAL YEAR   ENDED
  JUNE 30, 2000
  
       On July 18, 2000, the Company reported its unaudited financial results for
  the quarter and fiscal year ended June 30, 2000.
  
       Attached hereto as Exhibit 99.1 and incorporated herein by reference are
  the Company's Unaudited Consolidated Statements of Operations and Consolidated
  Balance Sheets for the three months ended June 30, 2000 and the fiscal year
  ended June 30, 2000.  The operating results for any periods are not necessarily
  indicative of results for an subsequent period.
  
  Item 7.    FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION
             AND EXHIBITS.
  
        (c)  EXHIBITS.
  Exhibit No.                                            Description
  --------------------------  --------------------------------------------------------------------------------
  99.1             Unaudited Consolidated Financial Statements for Registrant's fiscal quarter and
                              year ended June 30, 2000.
  24
  SIGNATURE
  
       Pursuant to the requirements of the Securities Exchange Act of 1934, the
  Registrant has duly caused this report to be signed on its behalf by the
  undersigned hereunto duly authorized.
  
                                      EFFICIENT NETWORKS, INC.
  
                                      By       /s/ Jill S. Manning
                                          -------------------------
  
                                      Name:  Jill S. Manning
                                      Title: Vice President, Secretary and Chief
                                             Financial Officer
  
                                      Date:  July 20, 2000
  EFFICIENT NETWORKS, INC.
  
                            Current Report on Form 8-K
  
                                 INDEX TO EXHIBITS
  Exhibit No.                                            Description
  --------------------------  --------------------------------------------------------------------------------
  99.1             Unaudited Consolidated Financial Statements for Registrant's fiscal quarter and
                              year ended June 30, 2000.