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Proc-Type: 2001,MIC-CLEAR
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<SEC-DOCUMENT>0001015402-02-000842.txt : 20020415
<SEC-HEADER>0001015402-02-000842.hdr.sgml : 20020415
ACCESSION NUMBER:		0001015402-02-000842
CONFORMED SUBMISSION TYPE:	10-Q
PUBLIC DOCUMENT COUNT:		2
CONFORMED PERIOD OF REPORT:	20020131
FILED AS OF DATE:		20020318

FILER:

	COMPANY DATA:	
		COMPANY CONFORMED NAME:			SBE INC
		CENTRAL INDEX KEY:			0000087050
		STANDARD INDUSTRIAL CLASSIFICATION:	COMPUTER COMMUNICATIONS EQUIPMENT [3576]
		IRS NUMBER:				941517641
		STATE OF INCORPORATION:			DE
		FISCAL YEAR END:			1031

	FILING VALUES:
		FORM TYPE:		10-Q
		SEC ACT:		1934 Act
		SEC FILE NUMBER:	000-08419
		FILM NUMBER:		02577526

	BUSINESS ADDRESS:	
		STREET 1:		4550 NORRIS CANYON ROAD
		CITY:			SAN RAMON
		STATE:			CA
		ZIP:			94583
		BUSINESS PHONE:		5103552000

	MAIL ADDRESS:	
		STREET 1:		4550 NORRIS CANYON RD
		CITY:			SAN RAMON
		STATE:			CA
		ZIP:			94583
</SEC-HEADER>
<DOCUMENT>
<TYPE>10-Q
<SEQUENCE>1
<FILENAME>doc1.txt
<TEXT>
                UNITED STATES SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                    FORM 10-Q

                                   (Mark one)

            [X]     Quarterly report pursuant to section 13 or 15(d)
                    of the Securities Exchange Act of 1934

                 FOR THE QUARTERLY PERIOD ENDED JANUARY 31, 2002

        [ ]     Transition report pursuant to section 13 or 15(d) of the
                       Securities and Exchange Act of 1934

               For the transition period from _______ to ________


                          Commission file number 0-8419
                                                 ------

                                    SBE, INC.
             ------------------------------------------------------
             (Exact name of registrant as specified in its charter)

                Delaware                                     94-1517641
     -----------------------------------                --------------------
     (State or other jurisdiction of                 (I.R.S.  Employer
     incorporation  or  organization)                   Identification  No.)


            2305 Camino Ramon, Suite 200, San Ramon, California 94583
            ---------------------------------------------------------
              (Address of principal executive offices and zip code)

                                 (925) 355-2000
              ----------------------------------------------------
              (Registrant's telephone number, including area code)

Indicate  by check mark whether Registrant (1) has filed all reports required to
be  filed  by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that Registrant was required
to  file such reports), and (2) has been subject to such filing requirements for
the  past  90  days.

                                Yes   X     No
                                     ---        ---

The number of shares of Registrant's Common Stock outstanding as of February 12,
2002  was  3,546,141.


                                      - 1 -
<PAGE>
                                    SBE, INC.

                       INDEX TO JANUARY 31, 2002 FORM 10-Q


PART  I     FINANCIAL  INFORMATION

     ITEM  1     Financial  Statements

     Condensed Consolidated Balance Sheets as of
        January 31, 2002 and October 31, 2001 . . . . . . . . . .    3

     Condensed Consolidated Statements of Operations for the
        three months ended January 31, 2002 and 2001. . . . . . .    4

     Condensed Consolidated Statements of Cash Flows for the
        three months ended January 31, 2002 and 2001. . . . . . .    5

     Notes to Condensed Consolidated Financial Statements . . . .    6

     ITEM 2     Management's Discussion and Analysis of Financial
                Condition and Results of Operations . . . . . . .    8

     ITEM 3     Quantitative and Qualitative Disclosures about
                Market Risk . . . . . . . . . . . . . . . . . . .   15


PART II     OTHER INFORMATION

     ITEM 5     Other Information . . . . . . . . . . . . . . . .   15

     ITEM 6     Exhibits and Reports on Form 8-K. . . . . . . . .  .15


SIGNATURES. . . . . . . . . . . . . . . . . . . . . . . . . . . .   16

EXHIBITS. . . . . . . . . . . . . . . . . . . . . . . . . . . . .   17


                                      - 2 -
<PAGE>
<TABLE>
<CAPTION>
PART  I.       FINANCIAL  INFORMATION
ITEM  1.     FINANCIAL  STATEMENTS

                                     SBE, INC.
                       CONDENSED CONSOLIDATED BALANCE SHEETS
                                  (In thousands)
                                    (Unaudited)

                                                       January 31,    October 31,
                                                          2002           2001
                                                      -------------  -------------
<S>                                                   <C>            <C>
Current assets:
     Cash and cash equivalents                        $      1,802   $      3,644
     Trade accounts receivable, net                          1,652            760
     Inventories                                             3,559          4,428
     Other                                                     393            464
                                                      -------------  -------------
          Total current assets                               7,406          9,296

Property, plant and equipment, net                           1,151          1,236
Capitalized software costs, net                                103             86
Other                                                          118             72
                                                      -------------  -------------
          Total assets                                $      8,778   $     10,690
                                                      =============  =============

LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
     Trade accounts payable                           $        606   $        545
     Accrued payroll and employee benefits                     197            343
     Accrued product warranties                                 35             56
     Other accrued expenses                                    152            757
     Current portion of refundable deposit                     447            ---
                                                      -------------  -------------
     Total current liabilities                               1,437          1,701

Refundable deposit                                           4,423          4,870
                                                      -------------  -------------

          Total liabilities                                  5,860          6,571
                                                      -------------  -------------

Stockholders' equity:
     Common stock                                           13,893         13,877
     Treasury stock                                           (409)          (409)
     Note receivable from stockholder                         (744)          (744)
     Accumulated deficit                                    (9,822)        (8,605)
                                                      -------------  -------------
          Total stockholders' equity                         2,918          4,119
                                                      -------------  -------------
          Total liabilities and stockholders' equity  $      8,778   $     10,690
                                                      =============  =============
</TABLE>


            See notes to condensed consolidated financial statements.


                                      - 3 -
<PAGE>
<TABLE>
<CAPTION>
                                    SBE, INC.
                 CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
                    (In thousands, except per share amounts)
                                   (Unaudited)

                                                           Three months ended
                                                              January  31,
                                                             2002      2001
                                                           --------  --------
<S>                                                        <C>       <C>
Net sales                                                  $ 1,283   $ 3,418

Cost of sales                                                  587     1,379
                                                           --------  --------

     Gross profit                                              696     2,039

Product research and development                               794     1,634

Sales and marketing                                            540       803

General and administrative                                     591       985
                                                           --------  --------

     Total operating expenses                                1,925     3,422
                                                           --------  --------

     Operating loss                                         (1,229)   (1,383)

Interest income                                                 11        70
                                                           --------  --------

     Net loss                                              $(1,218)  $(1,313)
                                                           ========  ========

Loss per share, basic and diluted                          $ (0.35)  $ (0.39)
                                                           ========  ========

Shares used in per share computations,
  Basic and diluted                                          3,457     3,331
                                                           ========  ========
</TABLE>

            See notes to condensed consolidated financial statements.


                                      - 4 -
<PAGE>
<TABLE>
<CAPTION>
                                    SBE, INC.
                 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                                  (In thousands)
                                   (Unaudited)

                                                               Three months ended
                                                                  January  31,
                                                               ------------------
                                                                 2002      2001
                                                               --------  --------
<S>                                                            <C>       <C>
Cash flows from operating activities:
     Net loss                                                  $(1,218)  $(1,313)
     Adjustments to reconcile net loss to net cash
     used in operating activities:
          Amortization of deferred stock compensation              ---         6
          Depreciation and amortization:
               Property and equipment                              199       215
               Capitalized software costs                           24        53
          Loss on disposal of equipment                             14         2
          Changes in operating assets and liabilities:
               Trade accounts receivable                          (892)    1,155
               Inventories                                         869      (475)
               Other assets                                         25       (21)
               Trade accounts payable                               61       496
               Other current liabilities                          (772)   (1,688)
               Other noncurrent liabilities                        ---       (15)
                                                               --------  --------
                    Net cash used in operating activities       (1,690)   (1,581)
                                                               --------  --------

Cash flows from investing activities:
     Purchases of property and equipment                          (126)     (109)
     Capitalized software costs                                    (42)      ---
                                                               --------  --------
                    Net cash used in investing activities         (168)     (109)
                                                               --------  --------

Cash flows from financing activities:
     Proceeds from stock plans                                      16        76
                                                               --------  --------
                    Net cash provided by financing activities       16        76
                                                               --------  --------

               Net decrease in cash and cash equivalents        (1,842)   (1,614)

Cash and cash equivalents at beginning of period                 3,644     5,311
                                                               --------  --------
Cash and cash equivalents at end of period                     $ 1,802   $ 3,697
                                                               ========  ========
</TABLE>

            See notes to condensed consolidated financial statements.


                                      - 5 -
<PAGE>
                                    SBE, INC.
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                   (UNAUDITED)

1.   INTERIM  PERIOD  REPORTING:

These  condensed  consolidated financial statements of SBE, Inc. (the "Company")
are  unaudited  and  include  all  adjustments,  consisting  of normal recurring
adjustments,  that  are,  in  the  opinion  of  management, necessary for a fair
presentation  of the financial position and results of operations and cash flows
for  the  interim  periods. The results of operations for the three months ended
January 31, 2002 are not necessarily indicative of expected results for the full
2002  fiscal  year.

Certain  information  and  footnote  disclosures normally contained in financial
statements  prepared in accordance with generally accepted accounting principles
have  been  condensed  or  omitted.  These  condensed  consolidated  financial
statements should be read in conjunction with the financial statements and notes
contained in the Company's Annual Report on Form 10-K for the year ended October
31,  2001.

The  Company incurred substantial losses and negative cash flows from operations
during  the  year ended October 31, 2001 and the quarter ended January 31, 2002.
During  fiscal 2001, management implemented a cost containment program to reduce
the  Company's  headcount, real estate needs and certain non-essential spending.
The  Company  anticipates  that  its  current  cash  balances and cash flow from
operations  will  be  sufficient  to meet its working capital needs for the next
twelve  months.  However,  the  Company  cannot  be  certain  that if additional
financing  is  required,  it  will  be available on acceptable terms, or at all.

MANAGEMENT  ESTIMATES

The  preparation  of  financial statements in conformity with generally accepted
accounting  principles  in  the  United States of America requires management to
make  estimates  and  assumptions that affect the reported amounts of assets and
liabilities  and  disclosure of contingent assets and liabilities at the date of
the  financial  statements  and  the  reported  amounts of revenues and expenses
during  the  reporting period. Actual results could differ from these estimates.
Significant  estimates  and  judgments made by management of the Company include
matters  such  as  collectibility  of  accounts  receivable,  realizability  of
inventories  and recoverability of capitalized software and deferred tax assets.

2.   INVENTORIES:

Inventories comprise the following (in thousands):

<TABLE>
<CAPTION>
                                   January 31,   October 31,
                                       2002          2001
                                   ------------  ------------
<S>                                <C>           <C>
              Finished goods       $      2,646  $      3,220
              Parts and materials           913         1,208
                                   ------------  ------------

                                   $      3,559  $      4,428
                                   ============  ============
</TABLE>


                                      - 6 -
<PAGE>
3.   RESTRUCTURING  COSTS:

The  following table sets forth an analysis of the components of the fiscal 2001
restructuring  reserve and the payments made against it during the quarter ended
January  31,  2002:

         Restructuring  reserve  at  October  31,  2001               $ 590
             Less:  Cash  paid  for  accrued  lease  costs             (588)
                                                                      ------
         Total  restructuring  costs  included  in other liabilities  $   2
                                                                      ======

4.   NET  LOSS  PER  SHARE:

Basic loss per common share for the three months ended January 31, 2002 and 2001
were  computed  by dividing net loss by the weighted average number of shares of
common  stock  outstanding.  Common stock equivalents for the three months ended
January  31, 2002 and 2001 were 393,521 and 208,101, respectively, and have been
excluded  from  shares  used in calculating diluted loss per share because their
effect  would  be  antidilutive.

5.   CONCENTRATION  OF  RISK:

In  the  first three months of fiscal 2002 and 2001, most of the Company's sales
were  attributable to sales of wireless communications products and were derived
from  a  limited  number of OEM customers.  Sales to Compaq Computer Corporation
accounted  for  33% and 36% of the Company's net sales in the first three months
of  fiscal 2002 and 2001, respectively.  Also, Compaq Computer accounted for 60%
and  10% of the Company's accounts receivable as of January 31, 2002 and October
31,  2001, respectively.  The Company expects that sales to Compaq Computer will
continue  to  constitute a substantial portion of the Company's net sales in the
remainder  of  fiscal  2002.  A  significant reduction in orders from any of the
Company's  OEM  customers,  particularly  Compaq Computer, could have a material
adverse  effect  on  the  Company's  business,  operating  results and financial
condition.

6.   LOAN  TO  OFFICER:

On  November  6,  1998, the Company made a loan to an officer and stockholder in
the  amount  of  $622,800  under  a two-year recourse promissory note bearing an
interest  rate  of 4.47% and collateralized by 145,313 shares of common stock of
the Company.  The loan was used to pay for the exercise of an option to purchase
139,400  shares  of  the Company's common stock and related taxes.  On April 16,
1999,  the  loan was increased to $743,800. The loan was extended for a one-year
term  under  the same terms and conditions on November 6, 2000.  On December 14,
2001,  the  note  was  amended,  restated and consolidated to extend the term to
December  2003 and to require certain mandatory repayments of principal of up to
$100,000 a year while the note is outstanding. The loan bears interest at a rate
of  2.48%  per  annum,  with interest due annually, and the entire amount of the
principal  is  due  in  December  2003.


                                      - 7 -
<PAGE>
ITEM  2.     MANAGEMENT'S  DISCUSSION  AND  ANALYSIS  OF FINANCIAL CONDITION AND
RESULTS  OF  OPERATIONS

FORWARD  LOOKING  STATEMENTS

The  following  Management's  Discussion and Analysis of Financial Condition and
Results of Operations contains forward-looking statements that involve risks and
uncertainties. Words such as "believes," "anticipates," "expects," "intends" and
similar expressions are intended to identify forward-looking statements, but are
not  the  exclusive means of identifying such statements.  Readers are cautioned
that the forward-looking statements reflect management's analysis only as of the
date  hereof,  and the Company assumes no obligation to update these statements.
Actual  events or results may differ materially from the results discussed in or
implied  by  the  forward-looking  statements.  Factors  that might cause such a
difference  include,  but  are not limited to, those risks and uncertainties set
forth  under  the  caption "Risk Factors" in the Company's Annual Report on Form
10-K for the fiscal year ended October 31, 2001. Such forward-looking statements
may  be  deemed to include information that is not historical, including without
limitation  statements  regarding:

     -    the  Company's  expectations  regarding  sales  to  Compaq Computer in
          fiscal  2002;
     -    the  belief that the market for telecommunications controller products
          is  growing;
     -    the  adequacy  of  anticipated  sources  of  cash  and planned capital
          expenditures;
     -    the  Company's  expectations  regarding  quarterly  operating  expense
          levels  and  gross  profit  for  fiscal  2002;
     -    the  effect  of  interest  rate  increases;
     -    trends  or  expectations  regarding  the  Company's  operations;
     -    the  concentration  of  the  Company's  customers;
     -    delays  in  testing  and  introducing  new  products;
     -    changes  in  product  demand;
     -    rapid  technology  changes;
     -    the  highly  competitive  market  in  which  SBE  operates;
     -    the  pricing and availability of equipment, materials and inventories;
     -    the  financial  stability  of  SBE's  contract  manufacturers;
     -    various  inventory  risks  due  to  market  conditions;
     -    delays  or  cancellation  of  customer  orders;  and
     -    the  entry  of  new  well-capitalized  competitors into SBE's markets.

The  following  discussion  should  be  read  in  conjunction with the Financial
Statements  and the Notes thereto included in Item 1 of this Quarterly Report on
Form  10-Q  and in the Company's Form 10-K for the fiscal year ended October 31,
2001.

OVERVIEW

SBE,  Inc.  designs,  markets,  sells  and  supports  high-speed  intelligent
communications  controller  and  software products for use in telecommunications
systems  worldwide.  Our  products  enable  both  traditional  and  emerging
telecommunications service providers to deliver advanced communications products
and  services, which we believe help these providers compete more effectively in
today's  highly  competitive  telecommunications  service  market.  Our products
include  WAN  interface adapters and high performance communications controllers
for  workstations,  media  gateways,  routers,  internet  access  devices,  home
location  registers  and  data  messaging  applications.


                                      - 8 -
<PAGE>
Our  business  is characterized by a concentration of sales to a small number of
original equipment manufacturers ("OEM") customers and, consequently, the timing
of  significant  orders  from  major  customers  and their product cycles causes
fluctuation in our operating results. Compaq Computer Corporation is the largest
of our customers and represented 34% of net sales in fiscal 2001.  If any of our
major customers, especially Compaq Computer, reduces orders for our products, we
could  lose  revenues  and  suffer  damage to our business reputation.  Sales to
Compaq  Computer  accounted  for  33% of our net sales in the three months ended
January  31,  2002  and 36% for the first three months of fiscal 2001. Orders by
our  OEM  customers  are  affected by factors such as new product introductions,
product  life cycles, inventory levels, manufacturing strategy, contract awards,
competitive  conditions  and  general  economic  conditions.

We  are  attempting to diversify our sales with the introduction of new products
that  are  targeted  at  large  growing  markets  within  the telecommunications
industry.  Our  Highwire  and  adapter  products  are  focused  on  the
telecommunications  applications market. We believe the growth in this market is
driven  by  the  convergence  of  traditional  wireline  and  wireless telephony
applications  with  the  Internet.  We cannot assure you that we will be able to
succeed  in  penetrating  this  market  and  diversifying  our sales. One of the
measures  of  future  sales  levels  the  Company  looks to are design wins. The
Company's  expectation  is  that  each  new  design  win  will generate at least
$400,000  in  annual  sales within 12 to 18 months of customer acceptance of our
product.  The  Company was awarded four design wins in the quarter ended January
31,  2002  compared to a total of three during the fiscal year ended October 31,
2001.  These four new design wins are for OEM product applications using our WAN
adapter  products  in  a diverse set of applications that include secure Virtual
Private Network ("VPN") routers, wireless Internet access, SS7 network analyzers
and  Voice  over  Internet  Protocol  ("VoIP")  gateways.

During the fiscal year ended October 31, 2001, the Company took aggressive steps
to  reduce  overall operating costs, including reducing headcount and relocating
our  engineering  and  headquarters  facilities.  Although  the  reduction  in
facilities-related  costs  will  not begin to be fully realized until the second
quarter  of  fiscal  2002, our overall operating expenses have been reduced from
$3.4  million  in the first quarter of fiscal 2001 to $1.9 million for the first
quarter  of  fiscal 2002, a 44% decrease. The Company continues to focus on cost
containment  and  monitors  its expense levels very closely. We expect quarterly
operating  expense  levels  to  be  maintained  at  the  current  levels for the
remainder  of  fiscal  2002.

CRITICAL  ACCOUNTING  POLICIES  AND  ESTIMATES

The  preparation  of  consolidated  financial  statements  in  conformity  with
generally  accepted  accounting  principles  in  the  United  States  of America
requires  management  to make estimates and assumptions that affect the reported
amounts  of  assets  and  liabilities  and  disclosure  of contingent assets and
liabilities  at the date of the financial statements and the reported amounts of
revenues  and  expenses  during  the  reporting  period.  Such estimates include
levels of reserves for doubtful accounts, obsolete inventory, warranty costs and
deferred  tax  assets.  Actual  results  could  differ  from  those  estimates.


                                      - 9 -
<PAGE>
The  Company's critical accounting policies and estimates include the following:

Revenue  Recognition:

The Company records product sales at the time of product shipment. The Company's
sales transactions are negotiated in U.S. dollars. The Company's agreements with
OEMs  such as Compaq Computer and Lockheed Martin; typically incorporate clauses
reflecting  the  following  understandings:

     -    all  prices  are  fixed  and  determinable  at  the  time  of  sale;
     -    collectibility  of  the sales prices is probable. The OEM is obligated
          to  pay  and such obligation is not contingent on the ultimate sale of
          the  OEM's  integrated  solution;
     -    the  OEM's obligation to the Company would not be changed in the event
          of  theft  or  physical  destruction  or  damage  of  the  product;
     -    the  Company  does  not  have  significant  obligations  for  future
          performance to directly bring about resale of the product by the OEMs;
          and
     -    there  is  no  contractual  right  of  return other than for defective
          products; the Company can reasonably estimate such returns and records
          a  warranty  reserve  at  the  point  of  shipment.

Warranty  Reserves:

The  Company  accrues  the estimated costs to be incurred in performing warranty
services  at the time of revenue recognition and shipment of the products to the
OEM's.  The  Company's  estimate of costs to service its warranty obligations is
based  on  historical  experience  and  expectation of future conditions. To the
extent  SBE  experiences  increased  warranty  claim activity or increased costs
associated  with  servicing  those  claims,  its  warranty accrual will increase
resulting  in  decreased  gross  margin.

Inventories:

Inventories  are  stated  at  the  lower  of cost, using the first-in, first-out
method,  or  market  value.  The  Company's  inventories include high-technology
parts  that  may  be  subject  to rapid technological obsolescence.  The Company
considers  technological  obsolescence in estimating required reserves to reduce
recorded amounts to market values. Such estimates could change in the future and
have  a  material adverse impact on the Company's financial position and results
of  operations.

Property  and  Equipment:

The  Company  reviews  property  and equipment for impairment whenever events or
changes  in  circumstances  indicate  the  carrying value of an asset may not be
recoverable.  In  performing  the  review  for recoverability, the Company would
estimate  the future cash flows expected to result from the use of the asset and
its  eventual  disposition.  The amount of the impairment loss, if any, would be
calculated based on the excess of the carrying amount of the asset over its fair
value.


                                     - 10 -
<PAGE>
Capitalized  Software  Costs:

Capitalized  software  costs  consist of costs to purchase software and costs to
internally  develop  software.  Capitalization of software costs begins upon the
establishment  of technological feasibility.  All capitalized software costs are
amortized  as  related  sales  are  recorded  on a per-unit basis with a minimum
amortization  based  on  a straight-line method over a two-year estimated useful
life.  The Company evaluates the estimated net realizable value of each software
product  and records provisions to the asset value of each product for which the
net  book  value  is  in  excess  of  the  net  realizable  value.

Refundable  Deposit:

A  refundable  deposit associated with a multi-year supply agreement with Compaq
Computer Corporation of $4.9 million was received in April 2001. Pursuant to the
supply  Compaq  Computer  has  agreed  to  purchase, and SBE has agreed to sell,
certain  hardware  components  which  SBE  manufactures.  The refundable deposit
represents  a one-time payment of cash to SBE from Compaq.  In the normal course
of  business  and pursuant to the terms of the supply agreement, SBE will refund
back  to Compaq certain dollar amounts according to milestones based on how many
units  SBE  has shipped to Compaq.  If Compaq chooses to terminate the agreement
prior  to reaching a specified milestone, SBE will refund to Compaq a set dollar
amount based on the number of units of SBE product purchased by Compaq since the
previous  milestone  reached  by  Compaq.  Upon  such  termination,  Compaq will
forfeit  any  remainder of the deposit not refunded pursuant to these terms.  If
the  supply  agreement  is terminated due to SBE's default, SBE will immediately
refund to Compaq any unrefunded portion of the deposit.  Upon termination by the
default  of Compaq, Compaq will forfeit any unrefunded portion of the deposit to
SBE. The Company expects to reach the first milestone under the supply agreement
during  the  fourth quarter of the current fiscal year and has included $447,000
of  the refundable deposit as a current liability. As future shipment milestones
are projected to be realized within the subsequent twelve month reporting period
the  payment  amount associated with that milestone is reclassified to a current
liability.

RESULTS  OF  OPERATIONS

The  following  table  sets  forth,  as  a percentage of net sales, consolidated
statements  of  operations  data for the three months ended January 31, 2002 and
2001.  These  operating  results are not necessarily indicative of our operating
results  for  any  future  period.


                                     - 11 -
<PAGE>
                                  THREE  MONTHS  ENDED
                                  --------------------
                                      JANUARY  31,
                                 ---------------------
                                    2002       2001
                                  ---------  ---------
Net sales                              100%       100%
Cost of sales                           46         40
                                  ---------  ---------
  Gross profit                          54         60
                                  ---------  ---------
Product research and development        62         48
Sales and marketing                     42         23
General and administrative              46         29
                                  ---------  ---------
  Total operating expenses             150        100
                                  ---------  ---------
  Operating loss                       (96)       (40)
Interest income                          1          2
                                  ---------  ---------
  Net loss                            (95)%      (38)%
                                  =========  =========

NET  SALES

Net sales for the first quarter of fiscal 2002 were $1.3 million, a 63% decrease
from the first quarter of fiscal 2001.  This decrease was primarily attributable
to  a  slowdown in demand from virtually all of our telecommunications customers
due  to  industry-wide adverse economic conditions. These conditions resulted in
our  customers  holding  excess  inventory  of  our  products.  As a result, our
customers cancelled or delayed many of their new design projects and new product
rollouts  which  have included our products. The Company also had lower sales of
custom  integrated  circuit  products  to our largest customer, Compaq Computer.
Sales  to Compaq Computer were $1.2 million in the first quarter of fiscal 2001,
compared  to  $438,000  for the first quarter of fiscal 2002, a 65% decrease. We
experienced a similar percentage decrease in the sales volume with a majority of
our  customers. Sales of our Adapter products decreased from $1.2 million in the
first  quarter  of  fiscal 2001 to $428,000 for the quarter just ended, or a 65%
decrease,  however,  sales  of our Highwire products increased from $127,000 for
the  first  quarter fiscal 2001 to $184,000 for the quarter just ended, or a 45%
increase.  Sales  to  Compaq Computer, primarily of VMEBus products, represented
33% of total sales for the quarter compared to 36% during the comparable quarter
in  fiscal  2001.  No  other  customer  accounted  for  over 10% of sales in the
three-month  period.

The Company's sales backlog at January 31, 2002 is $303,000. We expect a gradual
increase  in the quarterly sales volume over the remainder of fiscal 2002 as our
customers  deploy  existing excess inventory and gradually return to new product
design  and product rollout. However, since our sales are generally concentrated
with  a  small  group  of  OEM  customers,  we  could  experience  significant
fluctuations  in  our  quarterly  sales  volumes  due to a continued slowdown in
demand  from  telecommunications  customers  or  delays  in  the  rollout of new
products  by  our  customers.

GROSS  PROFIT

Gross  profit  as  a percentage of sales in the first quarter of fiscal 2002 was
54%,  and 60% during the first quarter of fiscal 2001.  The decrease from fiscal
2001 to fiscal 2002 was primarily attributable to reduced absorption rate of the
production  department  due  to  reduced  sales  volumes in the first quarter of


                                     - 12 -
<PAGE>
fiscal 2002. We expect our gross profit to remain in the range of 50% to 55% for
the  remainder  of  fiscal  2002.  However,  if  market and economic conditions,
particularly in the telecommunications sector, deteriorate or fail to recover as
expected,  gross  profit as a percentage of revenue may decline from the current
level.

PRODUCT  RESEARCH  AND  DEVELOPMENT

Product  research and development expenses were $794,000 in the first quarter of
fiscal  2002, a decrease of 51% from $1.6 million in the first quarter of fiscal
2001.  The  decrease  resulted  from  staff  reductions and a continued focus on
expense reductions in the engineering group during the third and fourth quarters
of  fiscal  2001.  We expect R&D spending to remain at or slightly below current
levels  as  we  continue  to focus on expense reductions during the remainder of
fiscal  2002.

SALES  AND  MARKETING

Sales and marketing expenses for the first quarter of fiscal 2002 were $540,000,
a  decrease  of  33%  from  $803,000  in  the first quarter of fiscal 2001.  The
decrease  is  primarily  due  to  lower  marketing program spending for products
already  introduced  during  previous  quarters,  but not yet fully available in
volume,  in  addition to the effect of headcount reductions during the third and
fourth  quarters  of  fiscal  2001.  We expect our quarterly sales and marketing
expenses  to  remain  at  this  level  for  the  remainder  of  fiscal  2002.

GENERAL  AND  ADMINISTRATIVE

General  and  administrative  expenses  were  $591,000  for the first quarter of
fiscal  2002,  a decrease of 40% from $1.0 million in the first quarter of 2001.
This  decrease  was due to the effect of reduced headcount and a continued focus
on  controlling  spending  in  response to lower revenue levels during the first
quarter  of  fiscal  2002.  In  future  periods,  we  expect  that  general  and
administrative expenses may decrease from current expenditure levels as overhead
levels  are  reduced  and  the  effect of the rent reduction associated with the
Company's  relocation  of  its  engineering and headquarters facilities is fully
realized.

INTEREST  INCOME

Interest  income  decreased  in  the  first quarter of fiscal 2002 from the same
period  in  fiscal  2001  due  to  lower  average  cash  balances.

NET  LOSS

As  a  result  of  the  factors  discussed above, we recorded a net loss of $1.2
million  in  the first quarter of fiscal 2002, as compared to a net loss of $1.3
million  in  the  first  quarter  of  fiscal  2001.


                                     - 13 -
<PAGE>
LIQUIDITY  AND  CAPITAL  RESOURCES

SBE's  liquidity is dependent on many factors, including sales volume, operating
profit and the efficiency of asset use and turnover. SBE's future liquidity will
be  affected  by,  among  other  things:

     -    the  actual  versus  anticipated  increase  is  sales of SBE products;
     -    ongoing  cost  control  actions  and  expenses, including for example,
          research  and  development  and  capital  expenditures;
     -    timing  of  product  shipments  which  occur primarily during the last
          month  of  the  quarter;
     -    the  gross  profit  margin;
     -    the  ability  to  raise  additional  capital,  if  necessary;  and
     -    the  ability  to  secure  credit  facilities,  if  necessary.

At  January  31,  2002,  SBE  had  cash and cash equivalents of $1.8 million, as
compared  to  $3.6  million  at  October 31, 2001.  In the first three months of
fiscal 2002, $1.7 million of cash was used in operating activities, primarily as
a  result of a $1.2 million net loss, a $892,000 increase in accounts receivable
and  a  $496,000  decrease  in  other current liabilities, partially offset by a
$869,000  decrease  in  inventories  and  a  $61,000  increase in trade accounts
payable.  The  increase  in  accounts receivable and decrease in inventories was
primarily  a result of a significant portion of the quarterly sales taking place
towards the end of the quarter in, addition to shipping $700,000 in inventory at
cost  to  Compaq  Computer  at  quarter-end  pursuant  to  a negotiated purchase
contract.  These  shipments,  at  cost,  were  not included in net sales for the
quarter  ended  January  31, 2002. The decrease in other current liabilities was
primarily  the  result  of the payment of certain restructuring costs related to
the  move  of the engineering and headquarters facility which was accrued in the
previous  fiscal  year. The increase in trade accounts payable was due primarily
to  purchases  of  components  and services from our contract manufacturers near
quarter-end.  Working  capital at January 31, 2002 was $6.0 million, as compared
to  $7.6  million  at  October  31,  2001.

In  the  first  three  months  of fiscal 2002, the Company purchased $126,000 of
fixed  assets,  consisting  primarily  of  tenant  improvements  for  its  new
engineering  and  headquarters  facility and computer and engineering equipment,
and  $42,000 of software costs were capitalized during the first three months of
2002.  Capital  expenditures  for  the  each of the remaining quarters of fiscal
2002  are  expected  to  be  lower  than  the  quarter  ended  January 31, 2002.

SBE  received  $16,000  in  the  first three months of fiscal 2002 from payments
related  to  common  stock  purchases made by employees pursuant to its employee
stock  purchase  plan.

Based  on  the  current operating plan, the Company anticipates that its current
cash  balances  and  cash  flow  from  operations will be sufficient to meet its
working capital needs for the next twelve months. We cannot assure you, however,
that  our current cash balances and cash flow from operations will be sufficient
to  meet  our  working  capital  needs for the next twelve months. If we require
additional  capital  resources to execute our operating plans, grow our business
or  acquire  complimentary technologies or businesses at any time in the future,
we  may  seek or be required to seek additional sources of funds though the sale
of  equity  or  debt  securities  or secure lines of credit or other third party
financing.  We  cannot assure you that there will be additional sources of funds
available  to us, or if available, would have reasonable terms. In addition, the
sale of additional equity securities by us will result in additional dilution to
our  stockholders.


                                     - 14 -
<PAGE>
CONTRACTUAL  OBLIGATIONS  AND  COMMERCIAL  COMMITMENTS:

SBE's only significant contractual obligations and commitments relate to certain
real estate operating leases for development and headquarters facilities and the
Supply  Agreement  with  Compaq  Computer,  ("CRITICAL  ACCOUNTING  POLICIES AND
ESTIMATES",  "Refundable  Deposits").

ITEM  3.     QUANTITATIVE  AND  QUALITATIVE  DISCLOSURES  ABOUT  MARKET  RISK

Our  cash  and  cash  equivalents  are subject to interest rate risk.  We invest
primarily  on  a short-term basis.  Our financial instrument holdings at January
31,  2002 were analyzed to determine their sensitivity to interest rate changes.
The  fair values of these instruments were determined by net present values.  In
our  sensitivity  analysis,  the  same  change in interest rate was used for all
maturities  and  all  other  factors  were  held  constant.  If  interest  rates
increased  by  10%,  the  expected effect on net losses related to our financial
instruments  would  be  immaterial.

PART  II.     OTHER  INFORMATION

ITEM  5.      OTHER  INFORMATION

On February 14, 2002, the Company received a deficiency notice from the staff of
the Nasdaq Stock Market that its common stock had failed to maintain the minimum
public  float level of $5.0 million required for continued listing on the Nasdaq
National  Market.  The Company meets all the listing requirements for the NASDAQ
Small  Cap  Market.  The  Company  is  currently  evaluating  all  options.

ITEM  6.      EXHIBITS  AND  REPORTS  ON  FORM  8-K

(a)     List  of  Exhibits:

        11.1     Statements  of  Computation  of  Net  Loss  per  Share

(b)     Reports  on  Form  8-K:

No  report on Form 8-K was filed by the Company during the quarter ended January
31,  2002.


                                     - 15 -
<PAGE>
                                   SIGNATURES



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  thereunto  duly  authorized,  on  March  16,  2002.


                                      SBE,  INC.
                                      ----------
                                      Registrant




                                      -----------------------------------
                                      David  W.  Brunton
                                      Chief Financial Officer, Vice President of
                                      Finance and Secretary (Principal Financial
                                      and  Accounting  Officer)


                                     - 16 -
<PAGE>

</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-11.1
<SEQUENCE>3
<FILENAME>doc2.txt
<TEXT>
<TABLE>
<CAPTION>
EXHIBIT  11.1


                                    SBE, INC.
                 STATEMENTS OF COMPUTATION OF NET LOSS PER SHARE
                    (In thousands, except per share amounts)
                                   (Unaudited)

                                              Three months ended
                                                 January  31,
                                              ------------------
                                                2002      2001
                                              --------  --------
<S>                                           <C>       <C>
BASIC

Weighted average number of
 common shares outstanding                      3,457     3,331
                                              --------  --------

Number of shares for computation of
 net loss per share                             3,457     3,331
                                              ========  ========

Net loss                                      $(1,218)  $(1,313)
                                              ========  ========

Net loss per share                            $ (0.35)  $ (0.39)
                                              ========  ========


DILUTED

Weighted average number of
common shares outstanding                       3,457     3,331

Shares issuable pursuant to options granted
 under stock option plans, less assumed
 repurchase at the average fair market value
 for the period                                    (a)       (a)
                                              --------  --------

Number of shares for computation of
 net loss per share                             3,457     3,331
                                              ========  ========

Net loss                                      $(1,218)  $(1,313)
                                              ========  ========

Net loss per share                            $ (0.35)  $ (0.39)
                                              ========  ========

<FN>
(a)  In loss periods, common share equivalents would have an antidilutive effect
     on  loss  per  share  and  therefore  have  been  excluded.
</TABLE>


                                     - 17 -
<PAGE>

</TEXT>
</DOCUMENT>
</SEC-DOCUMENT>
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